08:08:31 EDT Fri 29 Mar 2024
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or Name
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CA



Redishred Capital Corp
Symbol KUT
Shares Issued 78,843,438
Close 2021-04-15 C$ 0.67
Market Cap C$ 52,825,103
Recent Sedar Documents

Redishred has operating income of $2.23-million in 2020

2021-04-15 19:11 ET - News Release

Mr. Jeffrey Hasham reports

REDISHRED CAPITAL CORP. ("REDISHRED") ANNOUNCES Q4 AND FISCAL 2020 RESULTS HIGHLIGHTING: 90% AND 18% GROWTH IN CONSOLIDATED EBITDA IN Q4 AND FISCAL 2020, RESPECTIVELY

Redishred Capital Corp. has released its fourth quarter and 2020 results.

Quarterly earnings call:

8:30 a.m. ET, April 16, 2021, participant call-in number is 1-800-319-4610

Annual highlights

Consolidated highlights:

  • The company generated revenue of $25.4-million during 2020, growing 14 per cent versus 2019.
  • Consolidated EBITDA (earnings before interest, taxes, depreciation and amortization) for 2020 was $5.9-million, growing 18 per cent versus 2019.
  • Consolidated EBITDA margin (excluding government assistance) for 2020 was 23 per cent, consistent with 2019.
  • The company qualified for $1.9-million in government assistance during 2020.
  • Consolidated EBITDA including government assistance was $7.8-million, growing 56 per cent versus 2019.
  • The growth in consolidated EBITDA was driven by the acquisitions in Connecticut and Chicago over the last 18 months and from both routing efficiencies found and cost reductions taken to mitigate the negative impacts of COVID-19.

Corporate locations highlights:

  • Corporate location revenue in 2020 grew 18 per cent versus 2019 to $23.2-million.
  • Corporate location EBITDA (excluding government assistance) in 2020 grew 15 per cent versus 2019 to $7.1-million.
  • Same corporate location EBITDA in 2020 was $5.0-million, this was a decline of 20 per cent when compared with 2019 driven by the negative impacts of COVID-19.
  • The company mitigated the revenue decline by reducing costs which led to an EBITDA margin for same corporate locations of 29 per cent in 2020 versus 32 per cent in 2019 prior to the inclusion of government assistance.
  • Corporate location EBITDA including government assistance in 2020 was $8.7-million, growing 40 per cent versus 2019.

Acquisitions:

  • The company completed $16-million in acquisitions with the purchase of the Proshred Connecticut business on March 1, 2020, and the Proshred and Proscan Massachusetts businesses on Dec. 31, 2020.

Capital management:

  • During the year, the company repaid $1-million on one of its term loans, retiring the company's most costly term loan instrument before its due date.
  • The company used cash reserves of $12-million to finance acquisitions during the year.
  • The company's lender advanced $5-million on its senior credit facility for the acquisitions during the year.
  • As of Dec. 31, 2020, the company has $1-million available on its operating line of credit.

Fourth quarter highlights

Consolidated highlights:

  • The company generated revenue of $6.1-million during Q4 2020, declining by 2 per cent versus Q4 2019.
  • Consolidated EBITDA for Q4 2020 grew 90 per cent versus Q4 2019 to $1.1-million.
  • Consolidated EBITDA margin for Q4 2020 grew 900 basis points versus Q4 2019 to 19 per cent.
  • Consolidated operating income for Q4 2020 was $212,000 during Q4 2020 growing 289 per cent versus Q4 2019.

Management's comments on fiscal 2020

Jeffrey Hasham, the company's chief executive officer, noted: "The fourth quarter is traditionally our slowest quarter in the fiscal year, and with the impact of COVID-19 continuing in many markets, this caused a decline in our system sales of 4 per cent versus Q4 2019. Same location shredding revenue from the corporate locations fell 11 per cent during Q4 2020 versus Q4 2019 as increased restrictions remained in place in the Northeast United States to combat the COVID-19 pandemic. Despite these reductions in service opportunities the company continued to acquire new clients both business and residential and in December of 2020 the decline in same location shredding revenue from corporate-owned locations was only 3 per cent.

"During the last half of 2020, the company was prepared to seize opportunities in the marketplace and increased marketing leading to improved unscheduled shredding revenue, including increased penetration in the residential market. Additionally, the company brought back furloughed sales employees to source new clients and to assist our clients that continue to work remotely. Simultaneously, our operations team continued to be very nimble dealing with increased client service requests, and their efforts allowed for stronger route density and better route economics. This is evidenced by the fact that our EBITDA margins in the fourth quarter on a same location basis were 25 per cent, improving one basis point from the prior year and on a total location basis was 27 per cent, up 300 basis points over the prior comparative period. For the year, despite same location revenues being down 25 per cent in Q2, 10 per cent in Q3 and 11 per cent in Q4, EBITDA margins for the year were 31 per cent before wage subsidies. Our acquired locations also saw similar reductions to revenues and they achieved 36-per-cent EBITDA margins before wage subsidies. These are impressive results given the operating restrictions related to COVID-19."

Mr. Hasham further noted that: "The great work and results delivered by the team enabled Redishred to complete a significant acquisition on the last day of the year; the purchase of the Proshred and Proscan Massachusetts business. This is a business that is well established and well operated and we are thrilled to have the opportunity to keep growing the two businesses and to bring Proscan to other markets. Lastly, and most crucially, I am humbled by the dedication the entire team exhibited during the last nine months of the pandemic. The entire Redishred team has performed above and beyond all expectations -- they deferred wages, and throughout, have provided safe service to our valued customers. I would like to take this moment to thank all our employees, franchisees, management and board members for their unwavering support and contributions during these unprecedented times. Two thousand twenty-one will be a great year and we will remain focused on doing the right thing every day to drive a better tomorrow for Redishred."

Revenue growth in 2020 from acquisitions despite challenges with COVID-19

The company achieved 14-per-cent total revenue growth during the year due primarily to the acquisitions conducted during the last 18 months including Chicago and Connecticut.

Q4 2020 system sales impacted by seasonality

Shredding system sales declined by 4 per cent in Q4 2020 versus Q3 2020 as the fourth quarter has fewer business days than other quarters due to United States holidays. When compared with Q4 2019, shredding system sales declined by 5 per cent due to the impacts of the COVID-19 pandemic.

Scheduled system sales declined by 9 per cent in Q4 2020 versus Q4 2019 as the COVID-19 pandemic compelled many larger non-essential clients to provide work from home options to their employees, resulting in reduced service frequencies or a suspension of services.

Unscheduled system sales grew by 0.5 per cent in Q4 2020 over Q4 2019 despite the continued negative impacts of the pandemic. The company increased both sales and marketing spend in the fourth quarter of 2020 with a view to driving increased unscheduled sales given available capacity.

Recycling system sales grew by 1 per cent in Q4 2020 versus Q4 2019 as the average paper price in the Proshred system for Q4 2020 was on par with the price obtained in Q4 2019. As businesses continued to reopen during Q4 2020, the company saw an increase in total tonnage processed of 3 per cent in Q4 2020 versus Q3 2020. When compared with Q4 2019, the company saw a 7-per-cent decline.

Corporate footprint growth from acquisitions

The company completed the acquisition of the Proshred and Proscan Massachusetts business from its franchisee on Dec. 31, 2020. With the acquisition of the Proshred Connecticut business on March 1, 2020, the company completed a total of $16-million in acquisitions in 2020. The acquired locations earned a total of $5.4-million (U.S.) in revenue for the year 2019 and currently operate 16 trucks in total. The acquisitions have completed the northeast's corporate footprint allowing for fleet and management synergies with adjacent corporate locations.

Same corporate location EBITDA

Same corporate location EBITDA for 2020 was negatively impacted by the "shelter at home" orders issued in Q2 2020 which prevented the company from providing services to its non-essential clients. This also led to a decline in tonnage because of the decline in shredding revenue which was coupled with a decline in paper prices. The company mitigated against the revenue decline by reducing costs which led to an EBITDA margin of 31 per cent in 2020 versus 32 per cent in 2019.

Same corporate location EBITDA continued to be impacted by COVID-19 in Q4 2020 as larger non-essential clients continued to provide work from home options to their employees. Despite this, same corporate location EBITDA margin improved by 100 basis points to 25 per cent. The company managed its routes and related sales, marketing, and support costs, which led to reduced operating costs to mitigate against the reduced sales.

Growth in consolidated EBITDA despite challenges with COVID-19

The company achieved growth in consolidated EBITDA in Q4 2020 and fiscal year 2020 as compared with the prior comparative periods due to:

  • The acquisitions conducted in the last 18 months;
  • The cost reduction initiatives taken and the routing enhancements made to mitigate against the negative impacts of COVID-19 on sales.

In addition to the growth in consolidated EBITDA, the company qualified for and received $1.9-million from the government assistance programs in Canada and the U.S. during 2020 which has been recorded in other income.

Franchise operations

During 2020, the company supported 19 franchisees across the United States. The franchise system's high-level sales results are as shown in the attached table.

Corporate locations

As of Dec. 31, 2020, the company operated 11 locations in Syracuse, Albany, Milwaukee, New York, Charlotte, Miami, Northern Virginia, North New Jersey, Kansas, Chicago and Connecticut. On Dec. 31, 2020, the company acquired the Proshred and Proscan Massachusetts franchise which will be included in the corporate location results beginning Jan. 1, 2021. Same corporate location results include all locations apart from the Connecticut location which was acquired on March 1, 2021.

Total corporate location revenues declined by 3 per cent in Q4 2020 versus Q4 2019 because of the negative impacts related to the COVID-19 pandemic. The company mitigated against the decline in revenues by reducing its total costs resulting in EBITDA growth of 11 per cent in Q4 2020 versus Q4 2019. EBITDA margin improved by 300 basis points over this period, resulting in an EBITDA margin of 27 per cent. The corporate locations continued to optimize routes using new routing software implemented in late 2019 coupled with continued execution of cost mitigation programs.

Several corporate locations in the northeast region have seen stricter economic restrictions as a result of the pandemic as compared with other regions in the U.S. The majority of franchisees are in regions where the economic restrictions have been milder than those in the northeast.

In Q4 2020 versus Q4 2019, same corporate location shredding revenue was negatively impacted by COVID-19 resulting in an 11-per-cent decline. In response to the decline in revenue, the company reduced same location costs by 14 per cent in Q4 2020 versus Q4 2019. EBITDA margin from same corporate locations in Q4 2020 was 25 per cent, improving 100 basis points over the same comparative period.

Community and social commitment

The company's locations under the Proshred banner conduct many community shredding events. These events provide an opportunity for the company's 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 per cent of the shredded material is recycled, as the company's 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 the company's website. The company's annual national Shred Cancer event was held in the fall of 2020. These events are held to raise research funds for the American Institute for Cancer Research (AICR). It is the company's goal as a company and franchise system to support AICR in its endeavour to prevent cancer and possibly cure this disease. So far, Proshred has raised almost $200,000 (U.S.) for this cause.

Financial statements

Redishred's Dec. 31, 2020, financial statements, notes, and management's discussion and analysis will be available on SEDAR and on the company website.

About Redishred Capital Corp.

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 grants Proshred franchise businesses in the United States and by way of licence arrangement in the Middle East. Redishred Capital also operates 11 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.

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