Mr. Steve King reports

ALARIS EQUITY PARTNERS ANNOUNCES AN INVESTMENT OF US$59.5 MILLION INTO A NEW PARTNER

Alaris Equity Partners Income Trust's subsidiary, Alaris Equity Partners USA Inc., has made an investment of $59.5-million (U.S.) into The Shipyard LLC (TSY), with a commitment to finance an additional $5.5-million (U.S.) (tranche 2) if TSY achieves certain financial hurdles.

"We're very excited to be partnering with the founders and management of The Shipyard. The Shipyard team has built a wonderful company that has exhibited the ability to generate steady free cash flow and high growth without any material debt or capital expenditure requirements. The most important part of our investment, though, is the people. From top to bottom, founder and CEO [chief executive officer] Rick Milenthal has built a culture of trust and integrity that we feel will result in a tremendous long-term partnership for Alaris," said Steve King, president and chief executive officer of Alaris.

"The Alaris model of investment is perfect for a growing successful company like The Shipyard. They back our team and fuel our growth, fully empowering our management team to do what is best for our people and our clients," said Rick Milenthal, chief executive officer of The Shipyard.

TSY investment

The TSY investment consists of: (i) $42.5-million (U.S.) of preferred equity, entitling Alaris to an initial annualized distribution of $5.95-million (U.S.); and (ii) $17-million (U.S.) for a minority common equity ownership in The Shipyard. The TSY distribution is equivalent to a pretax yield of 14 per cent in the first full year after the TSY contribution. The Shipyard can elect to defer a portion of the TSY distribution for up to 3 per cent ($1.28-million (U.S.) in the first full year) of the TSY preferred contribution with any such deferred distributions compounding at the current yield of the TSY distribution. If The Shipyard achieves the financial hurdles, tranche 2 will consist entirely of additional $5.5-million (U.S.) of preferred equity and will have the same initial yield and rights as the initial TSY investment.

Commencing on Jan. 1, 2025, the TSY distribution will be adjusted annually based on the percentage change in net revenue over the most recently completed 12-month period versus the prior 12-month period, subject to a collar of 7 per cent.

Alaris's management believes that The Shipyard will have an earnings coverage ratio between 1.2 times and 1.5 times, based on: (i) Alaris's review of TSY's internal pro forma financial results for the most recent trailing 12-month period in 2023; (ii) certain other changes to TSY's capital structure; and (iii) the TSY distribution payable to Alaris. Proceeds of the TSY investment were used to provide a partial liquidity event to equityholders.

About The Shipyard LLC

Founded in 2013 and headquartered in Columbus, Ohio, The Shipyard is an integrated marketing agency renowned for engineering brand love by uniquely combining data science with integrated media, creative and analytical processes. The goal of its skilled employee base of over 160 marketing professionals is to discover and engage all relevant audience segments through omnichannel marketing campaigns, driving marketing outcomes and accelerating brand growth. The company's audience discovery approach, no customer left behind, is supported by a proprietary data intelligence engine, The Helm, combined with a full-suite of end-to-end, agency-of-record marketing solutions to drive measurable and sustainable results for brands. The Shipyard has developed vertical expertise across highly attractive verticals, including travel and tourism, financial and professional services, energy and sustainability, and consumer packaged goods/retail, with significant runway and continuing initiatives to further penetrate each.

About Alaris Equity Partners Income Trust

The trust, through its subsidiaries, indirectly provides alternative financing to private companies (partners) in exchange for distributions with the principal objective of generating stable and predictable cash flows for payment of distributions to unitholders of the trust. Distributions from the partners are adjusted each year based on the percentage change of a top-line financial performance measure such as gross margin and same-store sales and rank in priority to the owners' common equity position.

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