Redishred Capital Corp. (“Redishred”) Announces Q4 and Fiscal 2019 Results: Highlighting 43% Annual Growth in Consolidated EBITDA

MISSISSAUGA, ON / ACCESSWIRE / April 17, 2020 / Redishred Capital Corp. (TSXV:KUT)

Quarterly Earnings Call:

8:45am EST, April 20, 2020, Participant call in number is 1-800-319-4610

Annual Highlights:

Consolidated Highlights:

  • Consolidated EBITDA for 2019 was $5 million CAD, growing 43% over 2018, despite a $1.06 million CAD decline in revenue due to commodity paper prices.
  • The Company generated revenue of $22 million CAD during 2019, growing 53% over 2018.
  • The decline in commodity paper prices of 32% year over year resulted in the decline in same location recycling revenue, EBITDA and consolidated operating income in 2019.
  • Consolidated operating income for 2019 was $2.4 million CAD, growing 3% over 2018.

Corporate Locations Highlights:

  • Corporate location revenue in 2019 grew 64% over 2018 to $19.7 million CAD.
  • Corporate location EBITDA in 2019 grew 41% over 2018 to $6.2 million CAD.
  • Same corporate location EBITDA in 2019 declined by 16% or $698,000 CAD over 2018 to $3.7 million CAD. The impact from paper prices was a $872,000 CAD reduction in same location recycling revenue.
  • Same corporate location operating income in 2019 declined by 32% over 2018, driven primarily by the reduction in paper prices. Subsequent to year-end, commodity paper prices have recovered by up to $70 per ton from January to April, 2020.

Acquisitions

  • The Company completed $26 million CAD in acquisitions with the purchase of the Proshred Kansas City and Secure E-Cycle businesses on January 31, 2019 and the Proshred Chicago business on October 1, 2019.

Capital Management:

  • On July 4, 2019, the Company completed a private placement of 11.8 million common shares at a price of $0.95 per common share for total gross proceeds of $11.25 million CAD. The net proceeds of the private placement will be used to fund future growth initiatives including both acquisitions and organic growth, and for general corporate purposes

Fourth Quarter Highlights:

Consolidated Highlights:

  • Consolidated EBITDA for Q4-2019 was $605,000 CAD, declining 27% or $220,000 CAD over Q4-2018. The impact from paper prices was a $499,000 CAD reduction in same location recycling revenue and $299,000 CAD reduction in acquired recycling revenue.
  • The Company generated revenue of $6.3 million CAD during Q4-2019, growing 35% over Q4-2018.
  • Consolidated operating income for Q4-2019 was $(112,000) CAD during Q4-2019 declining 124% over Q4-2018.

Management’s Comments on the FY 2019 and Q1 2020 due to COVID19

Jeffrey Hasham, the Company’s Chief Executive Officer, noted “The Company’s fourth quarter featured (1) continued growth in scheduled recurring revenue, (2) our largest acquisition to date by way of the purchase of Proshred Chicago, and (3) continued significant declines in the recycling revenue due to the decline in paper prices worldwide. Over the last 18 months, the Company has acquired over $25 million dollars in acquisitions, and this has necessitated the need to enhance our back-end technology, processes and further invest in sales resources. These investments should have positive benefits to growing organic scheduled revenue, routing efficiency and supporting future acquisitions moving into 2020 and 2021.”

Mr. Hasham further noted that “The first quarter of 2020 started off positively, with the right sales infrastructure driving service sales growth along with the acquisition of Proshred Connecticut on March 1, 2020. Unfortunately, the COVID19 Pandemic has caused a significant reduction to our corporate revenues and system sales commencing March 16, 2020, which will impact the Company’s first quarter results. The impact to the 2nd quarter of 2020 is unknown at this time, with the month of April 2020 being down between 40% and 50% of the 2020 sales plan. Redishred has been assessed as an essential service in all of its operating locations, and management has and will continue to monitor trends daily in all markets. I would like to thank our front-line Customer Service Professionals for their dedication to client service, as they have been safe, secure and strong during this difficult time.”

Financial Highlights:

         
 

Three months ended
December 31,

Twelve months ended
December 31,

 

2019

2018

% change

2019

2018

% change

             

System Sales Performance – in USD

         
             

Total locations in the United States

30

30

0%

30

30

0%

             

Total system sales

$10,477

$10,576

(1)%

$44,321

$39,841

11%

Percentage scheduled sales

56%

48%

 

50%

47%

 

Total system sales – same location

$10,206

$10,576

(4)%

$41,886

$39,841

5%

Percentage scheduled sales

57%

48%

 

51%

47%

 
             
 

Three months ended
December 31,

Twelve months ended
December 31,

 

2019

2018
(restated)

% change

2019

2018

% change

Consolidated Operating Performance – in CAD

         
             

Revenue

$6,281

$4,470

41%

$22,407

$14,660

53%

EBITDA

$605

$825

(27)%

$5,045

$3,516

43%

EBITDA margin

10%

18%

(8)%

23%

24%

(1)%

Operating income

$(112)

$466

(124)%

$2,410

$2,340

3%

Operating income margin

(2)%

10%

(12)%

11%

16%

(5)%

Operating income per weighted average share fully diluted

$(0.002)

$0.008

(125)%

$0.032

$0.041

(21)%

             
 

Three months ended
December 31,

Twelve months ended
December 31,

 

2019

2018

% change

2019

2018

% change

             

Corporate Location Performance – in CAD

         
             

Revenue

$5,734

$3,608

59%

$19,737

$12,015

64%

EBITDA

$1,376

$1,170

18%

$6,235

$4,409

41%

EBITDA margin

24%

32%

(8)%

32%

37%

(5)%

Operating income

$620

$821

(24)%

$3,687

$3,267

13%

Operating income margin

11%

23%

(12)%

19%

27%

(9)%

Capital Management – in CAD

As at December 31,

     

2019

2018

% change

             

Working capital

     

$4,432

$7,288

(39)%

Debt to total assets ratio

     

0.44

0.29

(55)%

Normalized Fixed Charge Coverage ratio – rolling 12 months

 

2.39

1.94

(23)%

Normalized Total Funded Debt to EBITDA ratio – rolling 12 months

2.94

1.69

(74)%

Shredding System Sales Growth despite declining Paper Prices

Shredding system sales grew by 17% during Q4-2019 over Q4-2018 with scheduled sales growth of 16% during the same period. The Company continued to focus on providing recurring scheduled service to small and medium sized enterprise clients and continued to invest in marketing initiatives designed to capture one-time unscheduled sales. However, the decline in commodity paper prices resulted in a decline in total system sales of 1% in Q4-2019 as compared to Q4-2018. The average paper price in the Proshred system declined by 64% in Q4-2019 over Q4-2018 as the price dropped from $185 per ton to $67 per ton. Despite the continued decline in paper prices during 2019, total system sales grew by double digits at 11% over 2018 with shredding system sales growth of 17% year over year.

During 2019 Redishred’s system sales growth over 2018 was as follows:

Total System Sales increased by 11% (Same Location increased by 6%)

   

By Service Type:

By Location Type:

Scheduled sales increased by 20%
(Same Location increased by 16%)

Franchise location total system sales increased by 10%
(Same Location increased by 5%)

Unscheduled sales increased by 22%
(Same Location increased by 11%)

Corporate location sales increased by 64%
(Same Location declined by 1%)

Recycling sales decreased by 24%
(Same Location declined by 28%)

 

Franchise Operations

The Company’s roots are founded in franchising and at December 31, 2019, the Company supported 20 franchisees across the United States. The franchise system continued to perform well with the following high-level sales results:

 

For the 12 months ended December 31

In USD, In $000’s

2019

2018

% Change

       

Total same locations

20

20

0%

       

Total same location system sales

$28,605

$26,108

10%

       

Total same location scheduled service sales

$14,834

$12,296

21%

       

Total same location unscheduled service sales

$9,537

$8,436

13%

       

Total same location recycling sales

$4,233

$5,377

(21)%

Corporate Operations

As of December 31, 2019, the Company operates ten locations in Syracuse, Albany, Milwaukee, New York City, Charlotte, Miami, Northern Virginia, North New Jersey, Kansas and Chicago.

Same location EBITDA in USD declined by 44% or $396,000 during the fourth quarter of 2019 over the prior comparative period. The decline was driven by the fall in commodity paper prices which led to a $381,000 decline in recycling sales which accounted for 96% of the decline.

In CAD, In $000’s

Total Corporate Locations

Same Corporate Locations

Non-same Corporate Locations

For the 3 months ended December 31,

2019

2018

% Change

2019

2018

% Change

2019

2018

 

$

$

 

$

$

 

$

$

Revenue:

               

Shredding sales

5,198

2,859

82%

2,956

2,859

3%

2,242

Recycling sales

536

749

(28)%

250

749

(67)%

286

Total sales

5,734

3,608

59%

3,206

3,608

(11)%

2,528

                 

Operating costs

4,358

2,438

79%

2,556

2,438

5%

1,802

EBITDA

1,376

1,170

18%

650

1,170

(44)%

726

% of revenue

24%

32%

(8)%

20%

32%

(12)%

29%

                 

Depreciation – tangible assets

756

349

(117)%

430

349

(23)%

326

                 

Operating income

620

821

(24)%

220

821

(73)%

400

% of revenue

11%

23%

(12)%

7%

23%

(16)%

16%

                 

Operating income less recycling

84

72

16%

(30)

72

(142)%

114

% of revenue

2%

3%

(1)%

(1)%

3%

(4)%

5%

 

Corporate Locations Trend:

 

2019

2018

In $000’s

Q4

Q3

Q2

Q1

Q4

Q3

Q2

Q1

Revenue ($)

5,734

4,662

4,833

4,507

3,608

2,977

2,924

2,506

Quarter over quarter % change

23%

(4)%

8%

25%

21%

2%

17%

10%

EBITDA ($)

1,376

1,432

1,704

1,723

1,170

1,038

1,179

1,023

Quarter over quarter % change

(4)%

(9)%

(1)%

47%

12%

(12)%

15%

33%

Community and Social Commitment

Our locations under the PROSHRED® banner conduct many 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. On June 1, 2019, PROSHRED® held its 6th annual Shred Cancer event at most of its locations, raising money for the American Institute for Cancer Research (“AICR”). It is our goal as a Company and Franchise System to support the AICR in their endeavor to prevent cancer and possibly cure this disease. So far, PROSHRED® has raised in excess of $150,000 for this cause. Please visit www.proshred.com/aicr for more information on this effort.

Financial Statements

Redishred’s December 31, 2019 Financial Statements, Notes and Management’s Discussion and Analysis will be available at www.sedar.com and www.redishred.com.

About Redishred

Redishred Capital Corp. is the owner of the PROSHRED® trademarks and intellectual property in the United States. PROSHRED® shreds and recycles confidential documents and proprietary materials for thousands of customers in the United States in all industry sectors. PROSHRED® is a pioneer in the mobile document destruction and recycling industry and has the ISO 9001:2015 certification. It is PROSHRED®’s vision to be the ‘system of choice’ and provide shredding and recycling services on a global basis. Redishred Capital Corp. grants PROSHRED® franchise businesses in the United States and by way of license arrangement in the Middle East. Redishred Capital Corp. also operates eleven corporate shredding businesses directly. The Company’s plan is to grow its business by way of both franchising and the acquisition and operation of document destruction 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)
Kasia Pawluk, CPA, CA
Chief Financial Officer
kasia.pawluk@redishred.com
www.redishred.com
Phone: (416) 204-0076 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 and uncertainties. A number of factors, including those discussed in the 2019 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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