Mr. Amin Ladha reports

ZEDCOR INC. ANNOUNCES FOURTH QUARTER RESULTS FOR 2024, DIVERSIFICATION OF REVENUE AND CONTINUED USA EXPANSION

Zedcor Inc. has released its financial and operating results for the three months and 12 months ended Dec. 31, 2023.

Q4 2023 revenues were $5.8-million and the company generated adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $1.4-million. The company's two large pipeline security projects concluded in the fourth quarter of 2023 and the company was able to diversify its customer base as a result by adding over 190 customers. Furthermore, the company's revenue base is now largely diversified across customers and geographies. Subsequent to the end of the year, utilization rates have reached 90 per cent and daily revenues are at comparable levels to when the two pipelines projects were active. March, 2024, was one of Zedcor's most active months ever and the company expects to achieve record monthly revenue from its MobileyeZ security tower fleet.

During the quarter, the company had approximately 40 per cent of its MobileyeZ security tower fleet in Ontario. In addition, the company exited 2023 with 50 towers at its Houston equipment and service centre, which has subsequently increased to 72. These security towers have reached 100-per-cent utilization and the company is starting to build a backlog of demand at its Houston service centre. The fleet is fully deployed across a number of different customers, including the largest home builder in the United States, general contractors in Texas and two Canadian customers that have U.S.-based operations.

U.S. operations and manufacturing update

Zedcor's MobileyeZ manufacturing operations are starting to ramp up. The company is on track to complete 20 Solar Electric MobileyeZ security towers in April and intends to streamline its manufacturing in order to build 50 or more security towers a month starting in Q3 2024. The company anticipates bringing the total U.S. fleet to 400 or more security towers by the end of 2024.

Zedcor's Solar Electric MobileyeZ will be a fully stand-alone security tower with battery backup. It can also be plugged in to power in winter months if there is not enough sunlight. This is an innovative security tower and first of its kind in the North American market with dual-power capabilities, allowing it to function in any environment across the U.S. and Canada. It is also zero emissions, helping customers reduce their carbon footprint and meet environmental targets.

Todd Ziniuk said: "As the number of deployments of our MobileyeZ continue to increase in the U.S., our team continually demonstrates our innovativeness. We have upgraded all of our cameras across the fleet to have AI at the edge. We have also started offering MobileyeZ with radar units. This improves our service levels and increases our already industry leading theft diversion. The disruptive nature of our security towers, combined with 24/seven live, verified monitoring, is having an impact on the traditional security industry as evidenced by the demand we are seeing and the backlog that we are starting to build in the U.S. The company is excited about its prospects in the U.S. market and has seen unprecedented demand for its MobileyeZ security towers. With its manufacturing operations ramping up, the company has control to meet the demands of the U.S. market. We are also extremely pleased to increase our presence in retail security. This is an industry where traditional security measures are either ineffective or prohibitively expensive and the sector is ripe for disruption. We are excited to work with top names in the retail sector and we look forward to demonstrating our service first approach in order to grow the relationship."

Zedcor recorded $5,799 and $24,889 of revenue for the three and 12 months ended Dec. 31, 2023. This compares with $6,415 and $22,099 of revenue from for the three and 12 months ended Dec. 31, 2022. The revenue growth of 13 per cent for the year is the result of a larger fleet of security towers located throughout the company's six service centres in Canada. Revenue for the year grew despite pipeline construction projects for the company's two largest customers winding down throughout 2023. A number of the security towers that were returned had been continually providing reliable security services to two different customers since 2017 without being returned to the company for service. Once returned, Zedcor was able to repair and upgrade the returned towers, which drove costs higher in the second half of the year, while also diversifying and growing its customer base both geographically and across different industries.

Adjusted EBITDA was to $1,401 and $7,645 for the three and 12 months ended Dec. 31, 2023, compared with $2,380 and $7,569 for the three and 12 months ended Dec. 31, 2022. This represented a growth of 1 per cent for the 12 months ended Dec. 31, 2023.

The company's security and surveillance services saw increased revenues and EBITDA for the 12 months ended Dec. 31, 2023, compared with 2022, due largely to increased customer demand of its larger fleet of MobileyeZ security towers. The increased revenue was offset by: (1) reduced security guard revenue; and (2) reduced revenue from a two large pipeline construction projects that were completed in the second half of 2023. In addition, in Q4 2023, the company's revenue at its two Alberta, Canada, equipment centres saw reduced revenues due to inclement weather, which delayed the start of construction projects for some of the company's customers. A majority of the security towers returned from the pipeline construction project have been rented to new or existing customers across Canada and, therefore, reduced the company's customer and industry concentration risks. Utilization for the company's fleet of security towers averaged 82 per cent in Q4 2023, which is a low point for the company. Subsequent to the end of the year, utilization rebounded and was over 90 per cent for the company's fleet of Electric MobileyeZ. The company's U.S.-based operations also ramped up subsequent to the end of the year, which reduced the negative impact on adjusted EBITDA.

Zedcor exited the period with 825 MobileyeZ security towers, which was an increase of 319 when compared with Dec. 31, 2022. Of the 825 units, 50 are located in Zedcor's Houston, Tex., service centre.

Financial and operational highlights for the three and 12 months ended Dec. 31, 2023, include:

• For the 12 months ended Dec. 31, 2023, net income before tax was $2,652, compared with a net income before tax of $3,993 for the 12 months ended Dec. 31, 2022. The decrease in net income year over year is directly attributable to: (1) two of the company's largest customers wrapping up pipeline construction projects during the second half of the year; and (2) U.S. expansion costs, which totalled $721, negatively impacted net income before tax. Of the $721 in U.S. expansion costs, approximately 70 per cent are one-time costs related to expansion, set-up of manufacturing operations and legal fees. Zedcor still remained profitable during 2023 due to: (1) a larger fleet of towers and strong customer demand which drove utilization and, in turn, revenues; and (2) $2,159 in other income. As part of the sale of the company's rental segment assets in 2021, the company is to receive a 35-per-cent bonus for every dollar of EBITDA over certain thresholds. As a result of this agreement, the company received $2,159 for the second anniversary payment.
• Continued traction across Ontario: The company expanded to Ottawa in Q2 2022 and Toronto in Q3 2022. As at Dec. 31, 2023, approximately 40 per cent of the company's MobileyeZ security tower fleet is located in Ontario. This represents a growth of 28 per cent from the start of the year. The company's intentions to diversify its geographical footprint and grow its customer base is yielding results. The company is continuing to see strong demand for its services in Eastern Canada and additional security towers will continue to be delivered to Ontario and Manitoba in 2024.
• Diversification away from the company's core pipeline construction customers: As the company increases its fleet of MobileyeZ and expands geographically, its risk related to customer concentration has decreased. For the three-month period ended Dec. 31, 2023, 12 per cent of the company's revenues were generated from its top three customers, down from 69 per cent over the three-month period ended Dec. 31, 2022. While the revenue from the top three customers decreased by 57 per cent, security tower revenue decreased by only 3 per cent for Q4 2023 compared with Q4 2022. Zedcor's services are customer and industry agonistic and the company continued to see that in 2023 as it was able to diversify its customers across the construction industry and into retail security.
• Expansion into retail security with a leading North American home improvement retailer: After a three-month pilot program that began in June, 2023, with locations tested in British Colombia, Southern Alberta and Southern Ontario, Zedcor entered into a master rental services agreement with to provide MobileyeZ security towers with 24-hour-a-day-seven-day-a-week live, verified video monitoring at numerous locations across Canada until September, 2026. The number of locations that the company is servicing has expanded subsequent to Dec. 31, 2023.
• Award of Ontario O-Train construction mobile security project: Sites being secured include equipment storage yards, light maintenance and storage facilities and five LRT stations under construction on the O-Train west extension. As at Dec. 31, 2023, the company has 24 MobileyeZ security towers deployed with anticipated peak demand for this project, which is expected to be completed in late 2026.
• The company continued to attract new customers across Canada. For the three months ended Dec. 31, 2023, the company provided services to more than 50 new customers. For the 12 months ended Dec. 31, 2023, the company has added over 190 new customers.
• On track U.S. expansion: In Q3 2023, the company leased a facility and hired its first employee in the U.S. In addition, the company has shipped a small number of security towers for research and development purposes to help ensure supply targets are met for its 2024 expansion program. Zedcor exited the year with 50 MobileyeZ, obtained its Texas security licence, continued positive business development with both existing Canadian customers with operations in the U.S. and potential U.S.-based customers, hired sales people for the Houston market, and generated its first U.S. revenue in Q4 2023.
• The company continued to manage its supply chain and logistics. Orders were pro-actively placed for light tower materials, cameras and communication equipment for the company's 2024 capital program. Zedcor also started manufacturing operations out of its Houston facility in order to resolve bottle necks related to light tower assembly. By addressing this bottleneck, the company can ramp up production to meet anticipated customer demand for the expansive U.S. market. This will also allow the company to control its capital costs, while designing innovative solutions in order to pro-actively meet customer needs. Additional security products will be constructed based on customer demand, expansion plans into other strategic markets in Canada and the U.S., and availability of capital.

Liquidity and capital resources

An attached table shows a summary of the company's cash flows by source or (use) for the 12 months ended Dec. 31, 2023, and Dec. 31, 2022.

An attached table presents a summary of working capital information.

The primary uses of funds are operating expenses, maintenance and growth capital spending, and interest and principal payments on debt facilities. The company has a variety of sources available to meet these liquidity needs, including cash generated from operations. In general, the company funds its operations with cash flow generated from operations, while growth capital and acquisitions are typically financed by issuing new equity or debt.

On June 6, 2023, the company entered into a second amending agreement, which increased the company's equipment financing from $6.0-million to $15.0-million. As at Dec. 31, 2023, the second amended financing agreement provides the company with the following:

1. A $6.1-million term loan that is fully committed for five years: The term loan bears interest at 5.15 per cent and will have monthly blended principal and interest payments of $116.
2. A $15.0-million revolving equipment financing facility: The company is able to draw on this facility at any time for up to 100 per cent of new equipment purchases. The draws bear interest at prime plus 2.0 per cent and each draw will be amortized over five years with blended principal and interest payments. As at Dec. 31, 2023, the prime interest rate was 7.20 per cent and the interest rate on the revolving equipment financing was 9.20 per cent. As the company pays down the revolving equipment financing, it can borrow back up to the facility maximum of $15.0-million.
3. An authorized overdraft facility up to $3.0-million, secured by the company's accounts receivable, up to 75 per cent, less priority payables which are GST payable, income taxes payable, employee remittances payable and WCB (Workers Compensation Board) payables. The authorized overdraft is due on demand and any outstanding overdraft bears interest at prime plus 1.5 per cent. As at Dec. 31, 2023, the prime interest rate was 7.20 per cent and the interest rate on the revolving equipment financing was 8.70 per cent.

The second amended financing agreement is secured with a first charge over the company's current and after acquired equipment, a general security agreement, a subordination and postponement agreement with a director of the company with respect to a note payable, and other standard non-financial security.

The agreement has the following quarterly financial covenant requirements, calculated on a trailing-12-month basis:

• A debt servicing covenant of no less than 1.25 to 1.00;
• A financed debt to EBITDA covenant of no more than 3.00 to 1.00.

As at Dec. 31, 2023, the company is in compliance with its financial covenant requirements. The debt servicing ratio as calculated based on the second amended financing agreement was 2.15 to 1.00 and the financed debt to EBITDA was 1.91 to 1.00.

Credit risk

The company extends credit to customers, primarily comprising pipeline construction companies and construction companies, in the normal course of its operations. Historically, bad debt expenses have been limited to specific customer circumstances. However, the volatility in economic activity may result in higher collection risk on trade receivables. The company has reviewed its outstanding accounts receivable as at Dec. 31, 2023, and believes the expected loss provision is sufficient.

Outlook

Zedcor continues to execute its long-term strategy of growing its technology enabled security services across North America. Zedcor continues to effectively use a mix of cash flow and debt to build additional MobileyeZ security towers to provide surveillance services to its expanding customer base. While there was a decrease in utilization in Q4 2023, this was temporary and revenue and utilization levels have increased in Q1 2024. As the Trans Mountain expansion pipeline project came to an end in Q4 2023, the company was able to effectively redeploy equipment to other customers throughout the company's operating regions. The company has grown its sales force across Canada in order to obtain contracts for its MobileyeZ and continue to expand its service offering to different industries. The company also expanded its service offering to Houston, Tex., in Q4 2023 and is excited about the early results it is seeing for expansion in Texas and other regions in the U.S. The U.S. fleet of security towers is fully utilized and the company is starting to build a backlog of demand.

Priorities that the company intends to focus on for the remainder for 2024 include:

1. Expanding operations in the United States and continuing to grow revenues in Canada: Due to significant spending on infrastructure in North America, along with increased theft and vandalism, the company is seeing strong demand for its products in both countries. Zedcor's innovative products, coupled with the company's commitment to customer service, are perfectly situated to disrupt the traditional security market.
2. With the strong demand that Zedcor is seeing for its security towers, the company intends to further take control of its supply chain and remove bottlenecks for its security towers by manufacturing and assembling more of the components of its towers in house. This will allow the company to actively manage demand and, over time, reduce its capital costs.
3. Building new, innovative products based on customer demand: As the company has obtained customers in different industry verticals, it has seen an increasing number of use cases for its security solutions coupled with Zedcor's 24-hour-a-day-seven-day-a-week live, verified video monitoring. This includes a need for additional AI-based (artificial intelligence) technology that is actively monitored, as well as a mobile security product with a smaller footprint.
4. The company intends to generate customer and shareholder value and positive earnings per share. By effectively managing its growth, executing on the above noted strategies and increasing its capital markets presence, Zedcor will be able to continue to generate positive earnings per share, grow its shareholder base and increase share price.

No conference call

No conference call will be held in conjunction with this news release. Full details of the company's financial results, in the form of the condensed consolidated interim financial statements and notes for the three months ended Dec. 31, 2023, and Dec. 31, 2022, and the management's discussion and analysis of the results are available on SEDAR+ and on the company's website.

About Zedcor Inc.

Zedcor is a Canadian public corporation and is the parent company to Zedcor Security Solutions Corp. Zedcor is a technology enabled company that is changing how physical security services are provided to businesses. Zedcor operates throughout Canada and Texas with equipment and service centres in British Columbia, Alberta, Manitoba, Ontario and Houston, Tex. The company has three main service offerings to customers across all market segments: (1) surveillance and live monitoring through its proprietary MobileyeZ security towers; (2) surveillance and live monitoring of fixed site locations; and (3) security personnel.

The company operates a fleet of over 850 proprietary MobileyeZ security towers, equipped with high-resolution, technology-based cameras, and monitors numerous fixed site locations for customers across various industries. Video from security towers and fixed site locations is streamed to the company's central monitoring station where video alarms are live verified and responded to based on customer requirements. Zedcor also offers high level security guard services to enterprise-level customers that are looking to supplement video-based security for valuable, high-risk or mission-critical operational assets.

We seek Safe Harbor.