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Redishred Capital Corp. (Redishred) Announces Q2-2018 Results

FSCWIRE

Redishred Capital Corp. (“Redishred”) Announces Q2-2018 Results

Mississauga, Ontario (FSCwire)

Quarterly Earnings Call:

4:30pm EST, August 22, 2018, Participant call in number is 1-800-319-4610

Second Quarter Highlights:

Consolidated Highlights:

  • Total system sales (the revenues produced by all franchise, license and corporate locations) were $10.2 million USD, increasing 16% in Q2 of 2018, compared to Q2 of 2017. (Of the $10.2 million USD, $4.55 million USD or 45% was recurring revenue).
  • The Company generated revenue of $3.5 million CDN during Q2 of 2018, growing 12% over Q2 of 2017.
  • Consolidated EBITDA for Q2-2018 was $926,000 CDN, growing 33% over Q2-2017.

Corporate Locations Highlights:

  • Revenues from corporate locations in Q2 of 2018 were $2.9 million CDN, growing 13% over Q2 of 2017. (Revenues from corporate locations denominated in USD grew 17% year over year).
  • Corporate locations EBITDA in Q2-2018 reached a record high of just over $1.2 million CDN, growing 16% over Q2-2017. (EBITDA denominated in USD grew 20% year over year).
  • On April 2, 2018, the Company acquired the assets of the Shred Con business in upstate New York.
  • On June 8, 2018, the Company acquired the assets of the On Guard Shredding business in New York City.

Capital Management:

  • The Company used $1.2 million CDN of its cash reserves for the two acquisitions conducted during the 2nd quarter. As a result, at June 30, 2018, the Company’s working capital declined by $338,000 CDN over December 31, 2017 to $1.1 million CDN.
  • The Company has continued to improve its debt ratios into Q2 of 2018 and has the resources required to conduct accretive acquisitions.
  • Subsequent to the 2nd quarter, on July 26, 2018, the Company completed a private placement of common shares for gross proceeds of $11 million CDN. The net proceeds of the private placement will be used to fund future acquisitions, organic growth and for general corporate purposes.

Management’s Comments on the 2nd Quarter of 2018

“The second quarter of 2018 was a strong quarter for Redishred,” noted Jeffrey Hasham, CEO. “We made positive progress on our strategic priorities. Same location System Sales grew 16% in Q2-2018 when compared to Q2-2017, with 12% growth in the all-important scheduled, recurring category. We conducted over $1.4M in acquisitions in existing markets in New York State that should drive stronger route density and operating income in the state. Existing Corporate locations contributed almost $1.1 million in EBITDA, and existing Franchised locations drove $560,000 in royalties and fee revenue during the quarter. In addition, on July 26th, Redishred enhanced its financial capability by issuing $11 million of equity to fund continued growth.”

Financial Highlights:

For the three months ended June 30

For the six months ended June 30

(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

29

29

0%

29

29

0%

System sales

$10,192

$8,773

16%

$19,198

$17,193

12%

Percentage scheduled

45%

46%

(1)%

47%

46%

1%

Consolidated Operating Performance – in CDN

Revenue

$3,486

$3,102

12%

$6,502

$5,736

13%

EBITDA(1)

$926

$699

33%

$1,706

$1,506

13%

Operating Income(2)

$654

$434

51%

$1,186

$1,054

12%

As a percentage of revenue

19%

14%

5%

18%

23%

(5)%

Operating Income per share fully diluted

$0.013

$0.010

30%

$0.024

$0.023

4%

Corporate Locations Performance – in CDN

Revenue

$2,924

$2,579

13%

$5,431

$4,685

16%

EBITDA(1)

$1,179

$1,019

16%

$2,202

$1,873

18%

Operating income(2)

$912

$757

21%

$1,694

$1,426

19%

As a percentage of revenue

31%

29%

2%

31%

30%

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 reclassified to conform to the current period’s presentation.

Capital Management – in CDN

As at June 30 and December 31,

2018

2017

% change

Working capital

$1,073

$1,411

(24)%

Debt to total assets ratio

0.37

0.42

12%

Fixed Charge Coverage ratio – rolling 12 months

2.16

2.30

6%

Total Funded Debt to EBITDA ratio – rolling 12 months

1.14

1.28

11%

Stronger System Sales driving 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 sales and marketing initiatives designed to capture scheduled revenue as well as one-time unscheduled revenue.

During the first half of 2018 Redishred’s system sales growth over the first half of 2017 was as follows:

Total System Sales increased by 12%

By Service Type:

By Location Type:

Scheduled (recurring) increased by 12%

Franchise location system sales increased by 11%

Unscheduled increased by 14%

Royalty revenue increased by 2%

Recycling increased by 7%

Corporate location system sales increased by 16% (Same Store 6%)

Franchise Operations

The Company’s roots are founded in franchising and at June 30, 2018, the Company supported 22 franchisees across the United States. The franchise system continued to perform well in Q2-2018 with the following high level sales results (Note: same location system sales represent 100% of total system sales):

For the 3 months ended June 30

For the 6 months ended June 30

In $000’s, in USD

2018

2017

% Change

2018

2017

% Change

Total locations

22

22

0%

22

22

0%

Total system sales

$7,938,288

$6,850,909

16%

$14,912,437

$13,477,309

11%

Total scheduled service sales

$3,551,756

$3,112,442

14%

$7,009,333

$6,153,179

14%

Total unscheduled service sales

$2,611,283

$2,296,298

14%

$4,883,769

$4,510,402

8%

Total recycling sales

$1,714,624

$1,442,169

19%

$2,958,709

$2,813,728

5%

Corporate Operations

The Company operates seven shredding locations in Syracuse, Albany, Milwaukee, New York City, Charlotte, Miami and Northern Virginia. These locations represent the Company’s corporately owned locations. The Company acquired the Shred Con business on April 2, 2018, which is operated out of the Syracuse office. The Company also acquired the On Guard Shredding business on June 8, 2018, which is operated out of the New York City office. The results of the acquisitions are included under non-same corporate locations.

During the three months ended June 30, 2018, the corporate location revenues grew by 13% and EBITDA grew by 16% over the three months ended June 30, 2017. Same store corporate locations grew sales by 8% and EBITDA grew by 8% over Q2-2017. Non-same corporate locations include the 3 month results of Shred Con and 3 week results of On Guard Shredding.

Q2 Corporate Operations Results

(In CDN, In 000’s)

Total Corporate Locations

Same Corporate Locations

Non-same Corporate Locations

For the 3 months ended June 30,

2018

2017

% Change

2018

2017

% Change

2018

2017

Revenue:

$

$

$

$

$

$

Shredding service

2,353

2,147

10%

2,255

2,147

5%

98

Recycling

571

432

32%

531

432

23%

40

Total revenue

2,924

2,579

13%

2,786

2,579

8%

138

Operating costs

1,745

1,561

12%

1,692

1,561

8%

53

EBITDA

1,179

1,019

16%

1,094

1,019

8%

85

% of revenue

40%

39%

1%

39%

39%

0%

61%

Depreciation – tangible assets

267

262

2%

253

262

%

14

Corporate operating income

912

757

21%

841

757

11%

71

% of revenue

31%

29%

2%

30%

29%

1%

51%

Corporate Locations Trend:

2018

2017

2016

Q2

Q1

Q4

Q3

Q2

Q1

Q4

Q3

Corporate location revenue ($)

2,923,705

2,506,453

2,280,150

2,349,342

2,579,361

2,106,123

1,876,057

1,870,736

Quarter over quarter % change

16%

10%

(3)%

(9)%

22%

12%

0%

2%

Corporate location EBITDA ($)

1,178,439

1,022,647

768,539

952,118

967,171

905,789

514,917

707,997

Quarter over quarter % change

15%

33%

(19)%

(2)%

7%

76%

(27)%

3%

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 2, 2018, PROSHRED® held its’ 5th 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 conduct research to prevent 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 June 30, 2018 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 seven 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 2017 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.

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