Mr. Michael Andlauer reports

ANDLAUER HEALTHCARE GROUP REPORTS 2023 FOURTH QUARTER AND FULL YEAR RESULTS

Andlauer Healthcare Group Inc. has released its financial results for the three-month period (Q4 2023) and year ended Dec. 31, 2023 (fiscal 2023).

Q4 2023 Summary

• Revenue totaled $169.1 million, an increase of 2.0% from $165.8 million for the three-month period ended December 31, 2022 ("Q4 2022");
• Operating income was $28.0 million, compared to $28.2 million in Q4 2022;
• Net income totaled $18.6 million, or $0.44 per share (diluted), compared to $19.8 million, or $0.46 per share (diluted), in Q4 2022;
• Total comprehensive income was $13.5 million, compared to $17.1 million in Q4 2022;
• EBITDA totaled $44.8 million, compared to $44.7 million in Q4 2022; and
• EBITDA Margin was 26.5%, compared to 27.0% in Q4 2022.
• Fiscal 2023 Summary
• Revenue totaled $648.0 million, compared to $648.4 million in the year ended December 31, 2022 ("Fiscal 2022");
• Operating income was $96.1 million, compared to $110.3 million in Fiscal 2022;
• Net income was $66.1 million, or $1.55 per share (diluted), compared to $76.3 million, or $1.79 per share in Fiscal 2022;
• Total comprehensive income was $60.7 million, compared to $91.0 million in Fiscal 2022;
• EBITDA totaled $163.8 million, compared to $174.5 million in Fiscal 2022;
• EBITDA Margin was 25.3%, compared to 26.9% in Fiscal 2022; and
• During Fiscal 2023, less than 1.0% of total revenue was derived from AHG clients that are involved in the Canadian supply of COVID-19 vaccines, compared with approximately 3.0% in Fiscal 2022 and approximately 4.0% in Fiscal 2021.

"As expected, our results for the fourth quarter reflect a return to positive revenue growth in each of our product lines, except for our packaging solutions, and a strong EBITDA margin of 26.5%. While we experienced a year-over-year decline in our U.S. truckload businesses, we believe the market has now stabilized, and we continue to generate solid organic growth in our Canadian transportation network," said Michael Andlauer, Chief Executive Officer of AHG. "Our strong leadership position in Canada's healthcare transportation and logistics market and established presence in the U.S., are supported by our long-standing relationships with major industry customers. We remain focused on opportunities to strategically extend our platform and further enhance our value proposition for customers."

Q4 2023 Financial Results

Consolidated revenue for Q4 2023 increased by 2.0% to $169.1 million, compared with $165.8 million in Q4 2022. The increase is primarily attributable to organic growth in the Company's Canadian specialized transportation product lines, partially offset by lower fuel surcharge revenue, a decline in US-based truckload rates and reduced revenue related to COVID-19 vaccines and ancillary products. The Company's COVID-19 related revenue declined to approximately 1.0% of consolidated revenue in Q4 2023, compared to approximately 2.3% of revenue in Q4 2022. The increase in revenue was also impacted by the Q4 2022 reclassification of pass-through expenses in the Company's logistics and distribution product line as discussed below.

Revenue for the healthcare logistics segment totaled $44.1 million, an increase of 5.5%, or approximately $2.3 million, compared with Q4 2022. The increase was attributable to 7.8% year-over-year growth in the Company's logistics and distribution product line revenue, partially offset by a 16.7% decline in packaging revenue.

The increase in logistics and distribution revenue was primarily attributable to a reclassification of approximately $5.1 million of certain pass-through expenses to logistics and distribution revenue for Logistics Support Unit (LSU) Inc. ("LSU") (acquired by AHG on March 1, 2022) in accordance with IFRS 15 during Q4 2022. This net revenue treatment has been consistently applied during Fiscal 2023. The increase was partially offset by lower outbound order handling and transportation activities for Accuristix and a decline in revenue related to COVID-19 vaccines and ancillary products. The year-over-year decline in packaging revenue primarily reflects the loss of one of the Company's packaging customers in Q1 2023 and lower volume from AHG's remaining base of packaging customers compared to Q4 2022.

Revenue in the specialized transportation segment totaled $124.9 million, an increase of 0.8%, or approximately $1.0 million, compared with Q4 2022. The increase reflects organic growth in each of the Company's Canadian specialized transportation product lines, partially offset by lower fuel surcharge revenue, a decline in US-based truckload rates and reduced revenue related to COVID-19 vaccines and ancillary products.

Ground transportation revenue for Q4 2023 was $113.6 million, an increase of 0.5%, or approximately $0.6 million, compared with Q4 2022. The increase is primarily attributable to organic growth in the Company's Canadian ground transportation network, partially offset by a decline in its US-based truckload rates, reduced revenue related to COVID-19 vaccines and ancillary products, and lower fuel costs passed through to customers as a component of pricing compared to Q4 2022. Ground transportation revenue, excluding fuel, in the Company's Canadian network increased by approximately 6.3%. AHG continued to experience a year-over-year decline in its US-based truckload rates as opportunities to obtain rate premiums in Fiscal 2022 due to pandemic-related equipment and driver shortages have diminished.

The $0.5 million increase in air freight forwarding revenue in Q4 2023 compared to Q4 2022 reflects a 1.3% year-over-year increase in weight shipped, partially offset by a lower volume of shipments. The $1.0 million increase in dedicated and last mile delivery revenue in Q4 2023 compared to Q4 2022 reflects continued organic growth, partially offset by a reduction in fuel surcharge revenue.

Cost of transportation and services was $85.8 million, or 50.7% of revenue, compared with $86.3 million, or 52.1% of revenue, for Q4 2022. Lower fuel costs in line with decreases in revenue related to fuel prices were largely offset by increased costs of transportation and services attributable to organic growth in the Company's Canadian ground transportation network.

Direct operating expenses were $25.1 million, or 14.8% of revenue, compared with $21.0 million, or 12.7% of revenue, for Q4 2022. The increase was primarily attributable to the reclassification of certain pass-through expenses in Q4 2022 to logistics and distribution revenue for LSU in accordance with IFRS 15, as discussed above. The increase in direct operating expenses in Q4 2023 was partially offset by a reduction in outbound order handling activities for Accuristix in line with lower revenue.

Selling, general and administrative ("SG&A") expenses were $12.8 million, or 7.6% of revenue, compared with $13.8 million, or 8.3% of revenue, for Q4 2022. SG&A expenses for Q4 2023 were in line with the Company's expectations on a percentage of revenue basis.

Operating income totaled $28.0 million, a decrease of $0.2 million compared to Q4 2022. The decrease was primarily attributable to reduced contributions from Boyle Transportation and Skelton USA, and the decline in revenue related to COVID-19 vaccines and ancillary products.

Net income was $18.6 million, or $0.44 per share (diluted), compared with $19.8 million, or $0.46 per share (diluted), in Q4 2022. Lower segment net income before eliminations for AHG's specialized transportation segment was primarily attributable to reduced contributions from Boyle Transportation and Skelton USA, and lower segment net income from the Company's healthcare logistics segment reflects reduced order handling activity.

Total comprehensive income was $13.5 million compared to $17.1 million for Q4 2022. Total comprehensive income differs from net income due to the acquisition of foreign operations (Boyle Transportation and Skelton USA), which resulted in a negative foreign currency translation adjustment of $5.0 million in Q4 2023 compared to a negative foreign currency translation adjustment of $2.8 million in Q4 2022.

Earnings before interest, taxes, depreciation and amortization ("EBITDA") Superscript 1 totaled $44.8 million compared with $44.7 million for Q4 2022. The slight increase is due to the factors discussed above and primarily reflects organic growth in the Company's Canadian specialized transportation network, partially offset by lower contributions from the Company's US-based truckload operations, reduced outbound order handling activities for Accuristix and lower revenue related to COVID-19 vaccines and ancillary products. EBITDA Margin Superscript 1 was 26.5% in Q4 2023, compared to 27.0% in Q4 2022.

Fiscal 2023 Financial Results

Consolidated revenue for Fiscal 2023 totaled $648.0 million, compared with $648.4 million in Fiscal 2022. Revenue attributable to organic growth in the Company's Canadian specialized transportation network accounted for an increase of approximately $14.0 million from Fiscal 2022 to Fiscal 2023, which was partially offset by lower fuel surcharge revenue, downward pressure on US-based truckload rates, a decline in packaging revenue and reduced revenue related to COVID-19 vaccines and ancillary products. During Fiscal 2023, less than 1.0% of total revenue was derived from the Company's clients that are involved in the Canadian supply of COVID-19 vaccines, compared with approximately 3.0% in Fiscal 2022.

Operating income for Fiscal 2023 was $96.1 million, a decrease of $14.3 million, or 13.0%, compared with $110.3 million for Fiscal 2022. Approximately $10.9 million of the decrease was attributable to lower margins in the Company's US-based truckload businesses. The remaining decrease was attributable to lower revenue generated from COVID-19 related business, lower outbound volume in Accuristix in Q3 2023 and Q4 2023, and lower air freight forwarding revenue in Q2 2023 compared to Q2 2022, partially offset by organic growth in the Company's Canadian ground transportation network.

Net income for Fiscal 2023 totaled $66.1 million, or $1.55 per share (diluted), compared to $76.3 million, or $1.79 per share (diluted), for Fiscal 2022. Lower segment net income before eliminations for AHG's specialized transportation segment, primarily attributable to reduced US-based truckload rates and related margins, and lower air freight forwarding revenue in Q2 2023, contributed to the Company's decreased profitability on a consolidated basis.

EBITDA for Fiscal 2023 decreased by 6.1% to $163.8 million, from $174.5 million for Fiscal 2022. The decrease in EBITDA was due to the factors discussed above. EBITDA Margin for Fiscal 2023 was 25.3%, which is in line with the Company's pre-pandemic historical range of EBITDA Margins. EBITDA Margin in Fiscal 2022 was 26.9%.

Dividend

The Company paid a dividend (encompassing the period from October 1, 2023 to December 31, 2023) in the amount of $0.09 per subordinate voting share and multiple voting share on January 15, 2024.

Subject to financial results, capital requirements, available cash flow, corporate law requirements and any other factors that AHG's Board of Directors may consider relevant, it is the Company's intention to declare a quarterly dividend of $0.10 per subordinate voting share and multiple voting share on an ongoing basis.

Shares Outstanding

On March 24, 2023, the Company announced that the Toronto Stock Exchange had approved its notice of intention to make a normal course issuer bid ("NCIB") for up to a maximum of 1,856,857 of its subordinate voting shares, or approximately 10% of its public float as of March 23, 2023, over the 12-month period commencing on March 29, 2023. As at December 31, 2023, 474,740 Subordinated Voting Shares had been purchased and cancelled pursuant to the NCIB.

As at December 31, 2023, there were 19,627,038 subordinate voting shares and 21,840,000 multiple voting shares issued and outstanding.

Financial Statements

AHG's audited consolidated financial statements and related Management's Discussion & Analysis ("MD&A") for Fiscal 2023 are available on the Company's website and under AHG's profile on SEDAR+.

Conference call and webcast

Michael Andlauer, Chief Executive Officer, and Peter Bromley, Chief Financial Officer, will host a conference call for analysts and investors on Wednesday, March 6, 2024 at 8:30 a.m. (ET).

To join the conference call without operator assistance, you may register and enter your phone number at: https://emportal.ink/48NThAu to receive an instant automated call back. Alternatively, you can dial (416) 764-8650 or (888) 664-6383 to reach a live operator that will join you into the call.

You can access a live webcast of the call under the Presentations & Events section of AHG's investor website.

To access a replay of the conference call, dial 416-764-8677 or (888) 390-0541, passcode: 648001 #. The replay will be available until March 13, 2024. The webcast will be archived on the Company's website following the conclusion of the call.

About AHG

AHG is a leading and growing supply chain management company offering a robust platform of customized third-party logistics ("3PL") and specialized transportation solutions for the healthcare sector. The Company's 3PL services include customized logistics, distribution and packaging solutions for healthcare manufacturers across Canada. AHG's specialized transportation services in Canada, including air freight forwarding, ground transportation, dedicated delivery and last mile services, provide a one-stop shop for clients' healthcare transportation needs. Through its complementary service offerings, available across a coast-to-coast distribution network, AHG strives to accommodate the full range of its clients' specialized supply chain needs on an integrated and efficient basis. The Company also provides specialized ground transportation services, primarily to the healthcare sector, across the 48 contiguous U.S. states.

We seek Safe Harbor.