Wed, 11 Dec 2019

MISSISSAUGA, ON / ACCESSWIRE / April 15, 2019 / Redishred Capital Corp. (TSX-V: KUT)

Quarterly Earnings Call:

8:45am EST, April 16, 2019, Participant call in number is 1-800-319-4610

Annual Highlights:

Consolidated Highlights:

  • Total system sales (the revenues produced by all franchise, license and corporate locations) for 2018 were $40 million USD, increasing 17% over 2017. (Of the $40 million USD, $19 million USD or 47.5%was recurring revenue).
  • The Company generated revenue of $15 million CAD during 2018, growing 23% over 2017.
  • Consolidated EBITDA for 2018 was $3.5 million CAD, growing 12% over 2017.

Corporate Locations Highlights:

  • Revenues from corporate locations in 2018 were $12 million CAD, growing 29% over 2017.
  • Corporate locations EBITDA in 2018 were $4.4 million CAD, growing 23% over 2017.
  • The Company completed three acquisitions during the year for a total of $7.8 million CAD and one acquisition subsequent to year-end for an approximate total of $9.8 million CAD.
  • With the acquisition conducted on January 31, 2019, the Company has 9 corporate locations in the US.

Capital Management:

  • On July 26, 2018, the Company completed a private placement of 18,333,334 common shares of the Company at a price of $0.60 per common share for gross proceeds of $11 million CAD. The net proceeds of the private placement will be used to fund future growth initiatives including both acquisitions and organic growth.
  • The Company has strong liquidity ratios that are well within its financial covenants with its banking institution.

Fourth Quarter Highlights:

Consolidated Highlights:

  • Total system sales for Q4-2018 were $10.5 million USD, increased 30% over Q4-2017. (Of the $10.5 million USD, $5 million USD or 48%was recurring revenue).
  • The Company generated revenue of $4.6 million CAD during Q4-2018, growing 37% over Q4-2017.
  • Consolidated EBITDA for Q4-2018 was $1 million CAD, growing 28% over Q4-2017.

Management's Comments on the FY 2018

Jeffrey Hasham, the Company's Chief Executive Officer, noted 'Redishred made strong progress on its strategic initiatives in 2018. First priority has been to work with all locations on driving scheduled recurring revenue, and this category grew by 15% year over year on all locations and an impressive 13% on same locations. This category of revenue creates a consistent and durable revenue stream for the Company and its Franchisees. Furthermore the Company raised $11 million in a private placement in July, and immediately deployed $4 million of the funds to purchase Safe Shredding in New Jersey on October 1, 2018. This acquisition filled an important geographic hole in our footprint and has allowed us to fully service the greater New York City metro area. The acquisition is accretive to our cash flows, and the 4th quarter results are indicative of this. As always, these results across the Proshred system are a result of so many people working hard every day: our Franchisees, our Employees, the management team and our Board of Directors, and I would like to thank everyone for their contributions to Redishred's success.'

Financial Highlights:

For the 3 months ended
December 31
For the 12 months ended
December 31
(in 000's except as noted)
2018
2017(3)
% change
2018
2017(3)
% change
System Sales Performance - in USD
Total locations in the United States
30 29 3% 30 29 3%
System sales
10,576 8,145 30% $ 39,841 $ 34,070 17%
Percentage scheduled
48% 51% 47% 48%
Consolidated Operating Performance - in CAD
Revenue
4,638 3,376 37% $ 14,660 $ 11,946 23%
EBITDA(1)
993 774 28% $ 3,516 $ 3,145 12%
Operating Income(2)
634 512 24% $ 2,340 $ 2,176 8%
As a percentage of revenue
14% 15% (1)% 16% 18% (2)%
Operating Income per share fully diluted(4)
$ 0.01 $ 0.01 0% $ 0.041 $ 0.046 (11)%
Corporate Locations Performance - in CAD
Revenue
$ 3,608 $ 2,280 58% $ 12,015 $ 9,315 29%
EBITDA(1)
$ 1,169 $ 768 52% $ 4,409 $ 3,594 23%
Operating income(2)
$ 821 $ 522 57% $ 3,267 $ 2,650 23%
As a percentage of revenue
23% 23% 0% 27% 28% (1)%


(1) EBITDA is determined as revenue less operating costs.
(2) Operating income is determined as revenue less operating costs less depreciation related to tangible assets.
(3) Certain amounts have been restated with the adoption of the new accounting standard on a retrospective basis. Certain amounts have also been reclassified to conform to the current period's presentation.
(4) The Company completed a private placement of 18.3M common shares during the third quarter of 2018.

Capital Management - in CAD

As at December 31,
2018
2017
% change
Working capital
$ 7,288 $ 1,411 417%
Debt to total assets ratio
0.29 0.42 31%
Normalized Fixed Charge Coverage ratio - rolling 12 months
1.94 2.30 (16)%
Normalized Total Funded Debt to EBITDA ratio - rolling 12 months
1.69 1.28 32%


Stronger System
Sales driving both Royalty and Corporate Location Revenue

System sales increased due to the Company's continued focus on providing recurring scheduled service to small and medium sized enterprise clients. In addition, the Company continued to invest in marketing initiatives designed to capture one-time unscheduled revenue.

During 2018 Redishred's System Sales growth over 2017 was as follows:

Total System Sales increased by 17% (Same Store 16%)

By Service Type:

By Location Type:

Scheduled (recurring) increased by 13% (Same Store 13%)

Franchise location system sales increased by 15%

Unscheduled increased by 12% (Same Store 11%)

(Same Store 15%)

Recycling increased by 31% (Same Store 29%)

Corporate location system sales increased by 29% (Same Store 9%)


Franchise Operations

The Company's roots are founded in franchising and at December 31, 2018, the Company supported 22 franchisees across the United States. The franchise system continued to perform well in Q4-2018 with the following high level sales results (Note: same location system sales represent 100% of total system sales):

For the 3 months ended December 31
For the 12 months ended December 31
In USD
2018
2017
% Change
2018
2017
% Change
Total locations
22 22 0% 22 22 0%
Total system sales
$ 7,762,179 $ 6,356,292 22% $ 30,253,490 $ 26,325,089 15%
Total scheduled service sales
$ 3,770,504 $ 3,262,441 16% $ 14,342,072 $ 12,591,568 14%
Total unscheduled service sales
$ 2,189,952 $ 1,961,855 12% $ 9,422,525 $ 8,567,817 10%
Total recycling sales
$ 1,801,722 $ 1,131,996 59% $ 6,642,388 $ 5,165,704 29%


Corporate Operations

As of December 31, 2018, the Company operates 8 corporate locations in Syracuse, Albany, Milwaukee, New York City, Charlotte, Miami, Northern Virginia and North New Jersey. Subsequent to year-end, on January 31, 2019, the Company acquired its 9th corporate location, the Proshred Kansas City franchise. During the three months ended December 31, 2018, the corporate location revenues grew by 58% and EBITDA grew by 52% over the same comparative period. The Q4-2018 corporate location results include the first quarter of North New Jersey results post acquisition on October 1, 2018. Same store corporate locations grew sales by 22% and EBITDA grew by 18% over Q4-2017. There was a decline in EBITDA margin as a percentage of sales in Q4-2018 over Q4-2017 due to the investment in four additional salespeople and stronger management in our two largest locations.

The results of the acquisitions of Shred Con (purchased April 2, 2018), On Guard (purchased June 8, 2018) and North New Jersey (purchased October 1, 2018) are included under non-same corporate locations. Included in the total and non-same operating costs are consulting fees of $29,369 related to the North New Jersey transition.

In CAD, In 000's
Total Corporate Locations
Same Corporate Locations
Non-same Corporate Locations
For the 3 months ended December 31,
2018
2017
% Change
2018
2017
% Change
2018
2017
$ $ $ $ $ $
Revenue:
Shredding service
2,859 1,955 46% 2,231 1,955 14% 628 -
Recycling
749 325 130% 557 325 71% 192 -
Total revenue
3,608 2,280 58% 2,788 2,280 22% 820 -
Operating costs
2,438 1,512 61% 1,884 1,512 25% 554 -
EBITDA
1,170 768 52% 904 768 18% 266 -
% of revenue
32% 34% (2)% 32% 34% (2)% 32% -
Depreciation - tangible assets
349 246 42% 258 246 5% 91

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