Redishred Capital Corp. (“Redishred”, Or The “Company”) Announces Q3 2022 Results, with Record Organic and Consolidated Revenue, and Impressive Ebitda Growth

MISSISSAUGA, ON / ACCESSWIRE / November 29, 2022 / TSXV:KUT

Quarterly Earnings Call:

8:30am EST, November 30 2022, Participant call in number is 1-800-319-4610

Quarterly Highlights:

Consolidated Highlights:

• Consolidated EBITDA for Q3 2022 was $3.6 million CAD, growing 27% versus Q3 2021.

• The growth in consolidated EBITDA was driven by:

  • organic growth from increased bookings for existing and new customers;

  • growth from acquisitions completed in the past twelve months;

  • continued growth and scaling of operations, allowing for route densification and cost synergies; and

  • increased paper tonnage and continued favourable recycled paper prices, driven in part by increased paper baling opportunities from the American Shredding acquisition.

• The Company generated record revenue of $14.7 million CAD in Q3 2022, growing 50% versus Q3 2021 (47% constant currency growth - US Dollar is the constant currency).

Corporate Locations Highlights:

• Corporate location revenue for Q3 2022 was $14.1 million CAD in Q3 2022, growing by 52% (49% constant currency growth), versus Q3 2021.

• Corporate location EBITDA was $4.9 million CAD in Q3 2022, growing by 33% (27% constant currency growth), versus Q3 2021.

• Same corporate location EBITDA was $4.2 million CAD in Q3 2022, growing by 13% (9% constant currency growth), versus Q3 2021.

• Corporate location EBITDA margin decreased by 500 basis points to 35% in Q3 2022 versus Q3 2021, driven by higher input costs, including significantly higher fuel prices and driver costs. In response, the Company implemented prices increases part way through Q3 2022, the full benefit of which will not be realized until Q4 2022. The Company continues to identify and execute on further routing efficiencies from new customers.

Acquisitions

• On November 1, 2022, subsequent to Q3 2022, the Company acquired the assets of the Proshred Philadelphia business from its franchisee, for purchase consideration of $7.1 million USD paid on closing, and contingent consideration payable after one-year based on revenue, with a maximum earn-out of $0.9 million USD, and a paper earn-out payable over three-years based on the average price of paper, with a maximum earn-out of $0.8 million USD.

Capital Management:

• The Company generated $3.3 million CAD in cash from operations during Q3 2022.

• As at September 30, 2022, total debt to total assets improved 179 basis points from December 31, 2021.

• As at September 30, 2022, the Company has $11 million CAD in cash, $1 million CAD available on its operating line of credit, and $7 million CAD available on its non-revolving term loan.

Management's Comments on Q3 2022

Jeffrey Hasham, the Company's Chief Executive Officer, noted "The demand for shredding requirements continues to grow, and we grew organically as a result. This organic growth has been coupled with continued mergers and acquisitions in the shredding line of business. Our scanning business continued to perform well, with the growth versus Q3 2021 flat, due to the timing of new scanning project wins. Year-to-date revenue growth for Proscan was impressive and the pipeline of scanning projects remains strong. As in prior quarters, our e-waste business continues its growth trend. Lastly, on the revenue side, the Company continued to benefit from favorable paper prices, tonnage growth and increased baled paper volumes. From a cost perspective, our input costs continue to remain elevated, including higher fuel prices, higher truck and truck parts costs, and higher driver wages due to driver shortages. The Company also continued to face truck and truck part supply delays. In response to these rising costs, the Company implemented price increases across our corporate locations in Q3 2022. The Company also expects to realize further synergies from recently completed acquisitions, related to route densification and optimization that should help enhance future margins."

Mr. Hasham further noted "On the acquisition-front, on November 1, 2022, we completed the acquisition of the assets of Proshred Philadelphia from its franchisee. Our organic growth, commodity growth and M&A growth has translated into strong financial results, and I am pleased to report that Q3 2022 Corporate location EBITDA was $4.9 million Canadian, an increase of 33% from Q3 2021, and this, coupled with our franchise business, has driven consolidated EBITDA to $3.6 million Canadian. The result was driven by both higher EBITDA from our existing corporate store locations and our newest corporate locations. I would like to take this moment to thank all our employees, franchisees, management and board members for their continuing unwavering support and contributions during these challenging times. We have seen great results for the first nine months of 2022 and are focused on finishing 2022 off strong."

Financial Highlights:

		Three months ended September 30,												Nine months ended September 30,
In $000's		2022				2021				Change(1)				2022				2021				Change(1)
System Sales Growth - in USD
Total locations in the United States			30				30				0	%			30				30				0	%
Total system sales		$	18,388			$	13,538				38	%		$	53,746			$	37,037				45	%
% of scheduled sales			45	%			48	%							45	%			49	%
Consolidated Operating Growth - in CAD
Revenue		$	14,703			$	9,784				50	%		$	41,817			$	25,775				62	%
EBITDA		$	3,641			$	2,857				27	%		$	12,247			$	7,533				63	%
EBITDA margin			25	%			29	%		(400) bps					29	%			29	%		0 bps
EBITDA per weighted average share fully diluted		$	0.199			$	0.178				12	%		$	0.672			$	0.470				43	%
Operating income		$	2,014			$	1,709				18	%		$	7,896			$	4,274				85	%
Operating income margin			14	%			17	%		(300) bps					19	%			17	%		200bps
Operating income per weighted average share fully diluted		$	0.111			$	0.108				2	%		$	0.435			$	0.271				60	%
Government assistance not included in the above(2)			-			$	23				(100)	%			-			$	1,341				(100)	%
Corporate Location Growth - in CAD
Revenue		$	14,137			$	9,274				52	%		$	40,170			$	24,255				66	%
EBITDA		$	4,915			$	3,709				33	%		$	15,560			$	9,359				66	%
EBITDA margin			35	%			40	%		(500) bps					39	%			39	%		0 bps
Operating income		$	3,306			$	2,583				28	%		$	11,273			$	6,169				83	%
Operating income margin			23	%			28	%		(500) bps					28	%			25	%		300 bps
Operating income less net recycling		$	424			$	1,361				(69)	%		$	3,459			$	3,510				(1)	%

Capital Management - in CAD:
(In $000's)

As at September 30, and December 31,		2022				2021				Change (1)
Working capital		$	5,564			$	3,977				40	%
Debt to total assets ratio			0.47				0.49				(4)	%
Normalized Fixed Charge Coverage ratio - rolling 12 months			1.80				1.57				14	%
Normalized Total Funded Debt to EBITDA ratio - rolling 12 months			2.10				2.39				(12)	%

1. Change expressed as a percentage or basis point ("bp").

2. During Q1-2021, the Company qualified for the second round of the United States Paycheck Protection Program ("PPP") forgivable loans which was made available to eligible US businesses that have been affected by the COVD-19 pandemic. In Q4 2021, the full amount received was forgiven. The Company also qualified for the Canadian Emergency Wage Subsidy ("CEWS") in Canada.

Revenue Growth in Q3 2022

The Company achieved 50% total revenue growth and 47% total revenue growth in constant currency during Q3 2022 versus Q3 2021 primarily due to the following:

1. the acquisitions conducted during the last 12 months

2. the organic sales growth due to:

   1. the recovery of the economy and the easing of COVID-19 restrictions; and

   2. the addition of new client accounts.

3. Higher recycling revenue from increased tonnage and higher recycled paper prices.

Q3 2022 System Sales Continued to Grow

Shredding system sales in Q3 2022 grew versus Q3-2021, from both franchise and corporate location organic and acquisition related growth.

Franchise Operations

During Q3 2022, the Company supported 16 franchisees across the United States. The franchise system's high-level sales results are as follows:

		For the three months ended September 30,
In USD, In $000's		2022				2021				% Change
Total same locations			16				16				0	%
Total same location system sales		$	7,791			$	6,049				29	%
Total same location scheduled service sales		$	3,618			$	2,463				47	%
Total same location unscheduled service sales		$	2,327			$	1,914				22	%
Total same location recycling sales		$	1,846			$	895				106	%

Corporate Locations

Total corporate location revenue and EBITDA grew by 52% and 32%, respectively, in Q3 2022 versus Q3 2021 due to the acquisitions completed over the past twelve months, organic growth from same locations, and higher paper prices. Total EBITDA margin declined over this period to 35% in Q3 2022, driven by higher operational costs, including people, fuel and truck repairs.

During Q3-2022, same corporate location shredding revenue grew 15% over Q3 2021. The Company also continued to manage its same location direct and administrative costs, resulting in same corporate location EBITDA growth of 13% compared to Q3 2021.

For the three months ended September 30, 2022		Quarter-over-year growth				Constant currency Quarter-over-quarter growth
Same Corporate Locations:
Total Revenue			25	%			20	%
EBITDA			13	%			9	%
Operating Income			18	%			13	%
Total Corporate Locations:
Total Revenue			52	%			47	%
EBITDA			33	%			27	%
Operating Income			28	%			23	%

Redishred Capital Corp., Tuesday, November 29, 2022, Press release picture

Note 1: During Q3-2022, acquisition/vendor-related consulting fees of $211 (Q3-2021 - $101) are included in the total and non-same corporate location operating costs.

Corporate Locations Trend:

		2022												2021																2020
In $000's, in CAD			Q3				Q2				Q1				Q4				Q3				Q2				Q1				Q4
Revenue ($)			14,137				14,038				11,995				9,946				9,274				8,177				6,805				5,572
Quarter over quarter % change			1	%			17	%			21	%			7	%			13	%			20	%			22	%			(9)	%
EBITDA ($)			4,915				5,717				4,929				3,003				3,709				3,249				2,403				1,528
Quarter over quarter % change			(14)	%			16	%			64	%			(19)	%			14	%			35	%			57	%			(27)	%

Community and Social Commitment

Our locations under the PROSHRED^® banner conduct numerous community shredding events. These events provide an opportunity for our clients, clients' employees, local businesses and local residents to ensure their personal and confidential materials are securely destroyed. In addition to helping to reduce identity theft, several of these events allow for donations to various not-for-profit organizations. PROSHRED^® is also proud that 100% of the shredded material is recycled, as our continued goal is to foster the use of fewer trees in the production of all paper products. Future community shredding event locations can be found at our website, www.proshred.com. Our annual national Shred Cancer event was held in June of 2022 at various Proshred locations. These events are held to raise research funds for the American Institute for Cancer Research ("AICR"). It is our goal as a Company and Franchise System to support AICR in their endeavor to prevent cancer and possibly cure this disease. So far, PROSHRED^® has raised over USD$205,000 for this cause. Please visit www.proshred.com/aicr for more information on this effort.

Non-IFRS Measures

There are measures included in this press release that do not have a standardized meaning under International Financial Reporting Standards ("IFRS") and therefore may not be comparable to similarly titled measures presented by other publicly traded companies. The Company includes these measures as a means of measuring financial performance of the Company.

• Total System Sales are sales generated by franchisees, licensees and corporately operated locations. The system sales generated by franchisees and licensees drive the Company's royalties. The system sales generated by corporate locations are included in the Company's revenue.

• Shredding System Sales are sales generated from customers with regular recurring service referred to as scheduled sales and sales generated from customers who have one-time requirements for information destruction referred to as unscheduled sales. Shredding system sales do not include recycling sales, electronic waste sales and scanning sales. Shredding system sales include sales generated by franchisees, licensees and corporately operated locations.

• Same Location for system sales, royalty fees and corporate operational results are indicators of performance of franchisees, licensees and corporately operated locations that have been in the system for equivalent periods in both the current period and the comparative period.

• Consolidated EBITDA is defined as earnings before interest, taxes, depreciation and amortization. Consolidated EBITDA also excludes government assistance, re-measurements of contingent consideration, and foreign exchange gains and losses. A reconciliation between net income and consolidated EBITDA is provided below.

• Consolidated Operating Income is defined as revenues less all operating expenses, including depreciation on tangible assets. Amortization for intangible assets has not been included in this calculation. A reconciliation between net income and consolidated operating income is provided below.

• Consolidated Operating Income less Net Interest Expense is defined as consolidated operating income including interest income and expense. A reconciliation between net income and consolidated operating income less net interest expense is provided below.

• Corporate Location EBITDA is defined as earnings for corporately operated locations before interest, taxes, depreciation and amortization and also excludes items identified under the definition of Consolidated EBITDA above.

• Corporate Location Operating Income is the income generated by corporately operated locations. The operating income generated is inclusive of depreciation on tangible assets, including trucks, right-of-use-assets and secure collection containers. It does not include amortization related to intangibles assets and interest expense.

• Corporate Location Operating Income less net Recycling is the corporate location operating income excluding the impact of corporate location recycling sales, net of paper baling costs.

• Margin is the percentage of revenue that has turned into EBITDA or Operating Income. Margin is defined as EBITDA or operating income divided by revenue.

• Constant currency is a measure of growth before foreign currency translation impacts. It is defined as the current period results in CAD currency using the foreign exchange rate in the equivalent prior year period. This allows for period over period comparisons of business performance excluding the impact of currency fluctuations.

Reconciliation of EBITDA and Operating Income to Net Income

		For the three months ended September 30,												For the nine months ended September 30,
		2022				2021				% Change				2022				2021				% Change
		$				$								$				$
EBITDA			3,641				2,857				27	%			12,247				7,533				63	%
Less: depreciation - tangible assets			(1,627	)			(1,148	)			42	%			(4,351	)			(3,259	)			34	%
Operating income			2,014				1,709				18	%			7,896				4,274				85	%
Less: interest expense			(407	)			(289	)			41	%			(1,193	)			(773	)			54	%
Add: interest income			11				3				267	%			11				11				-	%
Operating income less net interest expense			1,618				1,423				14	%			6,714				3,512				91	%
Less: amortization - intangible assets			(837	)			(679	)			23	%			(2,414	)			(1,944	)			24	%
Add: gain on disposition of tangible assets			31				-				100	%			51				-				100	%
Add/(deduct): remeasurement of contingent consideration			154				(253	)			161	%			117				(253	)			146	%
Add: government assistance			-				23				(100)	%			-				1,341				(100)	%
Income before foreign exchange and income tax			966				514				88	%			4,468				2,656				68	%
Add/(deduct): foreign exchange gain (loss)			3,263				1,025				218	%			4,046				(114	)			3,649	%
Deduct: Income tax expense			(342	)			58				(690)	%			(1,541	)			(399	)			286	%
Net income			3,887				1,597				143	%			6,973				2,143				225	%

Financial Statements

Redishred's September 30, 2022 Financial Statements and Management's Discussion and Analysis will be available on www.sedar.com and www.redishred.com.

About Redishred Capital Corp.

Redishred Capital Corp. ("Redishred") is the owner of the PROSHRED^®, PROSCAN and secure e-Cycle brands, trademarks and intellectual property in the United States. Redishred digitizes, secures, shreds and recycles confidential documents and proprietary materials for thousands of customers in the United States in all industry sectors. Redishred is a pioneer in the mobile document destruction and recycling industry and has the ISO 9001:2015 certification. It is Redishred's vision to be the ‘system of choice' in providing digital retention, secure shredding and recycling services on a global basis. Redishred Capital Corp. grants PROSHRED^` and PROSCAN franchise businesses in the United States and by way of a license arrangement in the Middle East. Redishred Capital Corp. also operates fifteen corporate businesses directly. The Company's plan is to grow its business by way of both franchising and the acquisition and operation of information security businesses that generate stable and recurring cash flow through a scheduled client base, continuous paper recycling and concurrent unscheduled shredding service.

FOR FURTHER INFORMATION PLEASE CONTACT:

Redishred Capital Corp. (TSX.V - KUT)
Jeffrey Hasham, MBA, CPA, CA
Chief Executive Officer
Jeffrey.hasham@redishred.com
www.redishred.com
Phone: (416) 849-3469 Fax: (905) 812-9448

or,

Redishred Capital Corp. (TSX.V - KUT)
Harjit Brar, CPA, CA
Senior Vice President and Chief Financial Officer
harjit.brar@redishred.com
www.redishred.com
Phone: (437) 328-6639 Fax: (905) 812-9448

Note: Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

This news release contains forward looking statements that reflect the current expectations of management of Redishred and Redishred's future results, performance, achievements, prospects and opportunities. Wherever possible, words such as "may", "will", "estimate", "believe", "expect", "intend" and similar expressions have been used to identify these forward looking statements. These statements reflect current beliefs and are based on information currently available to management of Redishred. Forward looking statements necessarily involve known and unknown risks, uncertainties and other factors including risks and uncertainties relating to the COVID-19 pandemic. A number of factors, including those discussed in Redishred's 2021 Management Discussion and Analysis under "Risk Factors", could cause actual results, performance, achievements, prospects or opportunities to differ materially from the results discussed or implied in the forward looking statements. These factors should be considered carefully and a reader should not place undue reliance on the forward looking statements. There can be no assurance that the expectations of management of Redishred will prove to be correct. Readers are cautioned that such forward looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from these statements. Redishred can give no assurance that actual results will be consistent with these forward-looking statements.

SOURCE: Redishred Capital Corp.

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