/NOT FOR DISTRIBUTION IN THE UNITED STATES. FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF
TSX-AD.UN
Q3 2020 Highlights:
- Generated revenue of
$23.4 million in the quarter and$77.6 million for the nine months endedSeptember 30, 2020 , along with Normalized EBITDA of$20.1 million and$58.7 million in each period, respectively. Compared to Q2 2020, revenue increased 16% on a per unit basis and Normalized EBITDA increased 19% per unit, as a result of: - Body Contour Centers ("BCC") restarting distributions after deferring during Q2 2020 while all their clinics were temporarily closed due to COVID-19. They have continued to see positive results from all key performance indicators and in addition to restarting distributions they intend to repay the
US$1.7 million of deferred distributions from Q2 within the next six months. Kimco Holdings, LLC ("Kimco") restarting distributions during Q3 2020 due to their notable financial results and positive outlook. Kimco's ability to execute on new COVID-19 specific cleaning solutions to meet increased demand in addition to winning a number of new clients, has resulted in Alaris receivingUS$0.9 million of distributions in Q3 2020 and expected distributions ofUS$1.1 million in the fourth quarter.- Full quarter of distributions from the Trust's initial investment into
Carey Electric Contracting, LLC ("Carey Electric "), which was completed inJune 2020 ; - Increases to the fair value of Alaris' investments totalled
$11.9 million for the quarter, which includes:$9.8 million for Kimco as a result of their improved results and an increase in expectations for future distributions from Alaris' previous quarterly results,$1.2 million forFleet Advantage, LLC ("Fleet") and$0.9 million forUnify Consulting, LLC ("Unify"), as both companies have shown positive results year-to-date and are now projected for maximum positive resets inJanuary 2021 ; - The underlying financial performance of our portfolio continues to be resilient with nine Partners realizing increasing profitability year to date, one flat and seven declining. This demonstrates the required nature of services which our Partners provide. The weighted average combined Earnings Coverage Ratio ("ECR") has increased to 1.7x, compared to 1.5x before the impacts of COVID-19. The ECR points to the cash flow cushion that Alaris has in receiving all of the Run Rate Revenue. Of note, roughly 18 months ago Alaris had 6 of 16 Partners with an ECR greater than 1.5x, 12 months ago there were 7 of 15 with an ECR of greater than 1.5x and today 12 of 17 Partners have an ECR greater than 1.5x;
- On
September 1, 2020 , Alaris announced that it had completed the previously announced plan of arrangement ("the Arrangement") pursuant to which the Trust indirectly acquired all of the issued and outstanding common shares ofAlaris Royalty Corp. (the "Corporation") in exchange for trust units. Following the Arrangement, the Trust is a materially simplified cross-border investment structure involving fewer foreign jurisdictions. The conversion should reduce compliance and other administrative costs and Alaris' exposure to changes in foreign laws, while it also increases the amount of cash available for distribution to unitholders. As part of the conversion to a trust, the Alaris' symbol on the TSX changed to "AD.UN" (previously was "AD"); - Subsequent to
September 30, 2020 , Alaris contributed an additionalUS$55.0 million (the "GWM Contribution") toGWM Holdings Inc. and a subsidiary thereof (collectively "GWM") in exchange for initial annualized distributions ofUS$6.6 million . The investment consists ofUS$44.0 million of subordinated debt andUS$11.0 million of preferred equity. Due to the structure used for this GWM follow-on contribution, the after-tax yield is expected to be equivalent to that of a deal done at an initial pre-tax yield of approximately 13%; - Following the GWM Contribution and the restart of distributions from BCC and Kimco, the Trust's
Run Rate Payout Ratio is approximately 74% when including distributions, overhead expenses and current distributions to unitholders expected for the next twelve months. As calculated, the Run Rate Payout Ratio is expected to generate approximately$15.9 million in excess cash flow or$0.45 per unit; - The Trust's subsidiary,
Alaris Equity Partners Inc. ("AEP") finalized a two-year extension to its credit facility with its syndicate of senior lenders, with the maturity date now being inNovember 2023 . All key terms and pricing remained consistent with the previous facility; and - Up to the date of this release the Trust has repurchased for cancellation 1,156,541 of its trust units (or shares of AEP prior to the Arrangement) at an average price of
$8.69 per unit through its Normal Course Issuer Bid ("NCIB"). The repurchases have resulted in a total annualized pre-tax savings of approximately$1.39 million or$0.04 per unit.
"Our second full quarter of operating during the COVID-19 pandemic has seen the operations and financial performance of most of our Partners adapting successfully to this unique environment" said
Per Unit Results | Three months ended | Nine months ended | ||||
Period ending | 2020 | 2019 | % Change | 2020 | 2019 | % Change |
Revenue | -19.5% | -7.3% | ||||
Earnings | +40.4% | -96.6% | ||||
Normalized EBITDA | -19.7% | -20.1% | ||||
Net cash from operating activities | -49.1% | -10.9% | ||||
Distributions declared | -24.8% | -18.2% | ||||
Basic earnings / (loss) | +40.4% | -119.6% | ||||
Fully diluted earnings / (loss) | +38.6% | -119.7% | ||||
Weighted average basic units (000's) | 35,584 | 36,647 | 36,003 | 36,567 |
Revenue per unit decreased 19.5% during the three months ended
For the three months ended
Net cash from operating activities for the three months ended
Reconciliation of Net Income to Normalized EBITDA | Three months ended | Nine months ended | ||
$ thousands | 2020 | 2019 | 2020 | 2019 |
Earnings | ||||
Normalizing Adjustment | ||||
Non-recurring tax expenses related to US Tax Regulations | - | - | 12,448 | - |
Normalized Earnings | ||||
Adjustments to Net Income: | ||||
Amortization and depreciation | 50 | 165 | 169 | 495 |
Finance costs | 4,269 | 5,813 | 13,331 | 13,880 |
Income tax expense | 6,775 | (261) | (2,872) | 4,845 |
EBITDA | ||||
Normalizing Adjustments | ||||
Realized gain on investment | - | (9,317) | (11,603) | (9,317) |
Unrealized (gain) / loss on investments at fair value | (11,885) | 9,357 | 76,257 | 5,162 |
Transaction diligence costs | 1,076 | 1,122 | 4,011 | 2,129 |
Bad debt expense / (recovery) | - | - | - | (2,018) |
Distributions received on redemption (SBI) | - | - | (9,176) | - |
Unrealized (gain) / loss on foreign exchange | 1,542 | (1,965) | (4,721) | 4,351 |
Realized loss on foreign exchange | 14 | 90 | 200 | 1,138 |
Non-cash impact of trust conversion | (10,647) | - | (10,647) | - |
Unit-based compensation re-valuation | (550) | - | (550) | - |
Legal and accounting fees for trust conversion | 903 | - | 2,436 | - |
Normalized EBITDA |
Outlook
With improved visibility on our Run Rate Revenue from our Partners, Alaris is re-initiating guidance. Based on current distribution expectations from each Partner, total revenue is expected to be approximately
Annual general and administrative expenses are currently estimated at
Amount ($) | $ / Unit | Payout | |||
Revenue | |||||
General & Admin. | (12,500) | (0.35) | |||
Interest & Taxes | (31,400) | (0.88) | |||
Free cash flow | |||||
Annual Distribution | 44,100 | 1.24 | |||
Excess Cash Flow | 74% | ||||
Other Considerations (after taxes and interest): | |||||
PFGP | Full distributions of | +9,849 | +0.28 | 63% | |
New Investments | Every | +3,145 | +0.09 | 60% |
The senior debt facility was drawn to
The Consolidated Statement of Financial Position, Statement of Comprehensive Income, and Statement of Cash Flows are attached to this news release. Alaris' financial statements and MD&A are available on SEDAR at www.sedar.com and on our website at www.alarisequitypartners.com.
Earnings Release Date and Conference Call Details
Alaris management will host a conference call at
Participants can access the conference call by dialing toll free 1-888-390-0546. Alternatively, to listen to this event online, please click the webcast link and follow the prompts given: Q3 Webcast. Please connect to the call or log into the webcast at least 10 minutes prior to the beginning of the event.
For those unable to participate in the conference call at the scheduled time, it will be archived for instant replay for a week. You can access the replay by dialing toll free 1-888-390-0541 and entering the passcode 390365#. The webcast will be archived and is available for replay by using the same link as above or by finding the link we'll have stored under the "Investor" section – "Presentation and Events", on our website at www.alarisequitypartners.com.
An updated corporate presentation will be posted to the Trust's website within 24 hours at www.alarisequitypartners.com.
About the Trust:
Alaris, through its subsidiaries, provides alternative financing to private companies ("Partners") in exchange for distributions, dividends or interest (collectively, "Distributions") with the principal objective of generating stable and predictable cash flows for distribution payments to its unitholders. Distributions from the Partners are adjusted annually based on the percentage change of a "top-line" financial performance measure such as gross margin or same store sales and rank in priority to the owner's common equity position.
Non-IFRS Measures
The terms EBITDA, Normalized EBITDA,
Actual Payout Ratio refers to Alaris' total cash distributions paid during the period (annually or quarterly) divided by the actual net cash from operating activities Alaris generated for the period.
Run Rate Revenue refers to Alaris' total revenue expected to be generated over the next twelve months.
EBITDA refers to earnings determined in accordance with IFRS, before depreciation and amortization, net of gain or loss on disposal of capital assets, interest expense and income tax expense. EBITDA is used by management and many investors to determine the ability of an issuer to generate cash from operations. Management believes EBITDA is a useful supplemental measure from which to determine the Trust's ability to generate cash available for debt service, working capital, capital expenditures, income taxes and distributions.
Normalized EBITDA refers to EBITDA excluding items that are non-recurring in nature and is calculated by adjusting for non-recurring expenses and gains to EBITDA. Management deems non-recurring items to be unusual and/or infrequent items that the Alaris incurs outside of its common day-to-day operations. For the nine months ended
Earnings Coverage Ratio refers to the Normalized EBITDA of a Partner divided by such Partner's sum of debt servicing (interest and principal), unfunded capital expenditures and distributions to Alaris. Management believes the earnings coverage ratio is a useful metric in assessing our partners continued ability to make their contracted distributions.
Per Unit values, other than earnings per unit, refer to the related financial statement caption as defined under IFRS or related term as defined herein, divided by the weighted average basic units outstanding for the period.
IRR refers to internal rate of return, which is a metric used to determine the discount rate that derives a net present value of cash flows to zero. Management uses IRR to analyze partner returns.
Normalized Earnings refers to Earnings excluding non-recurring tax expenses related to newly enacted US Tax regulations that were applied retrospectively to
The terms EBITDA, Normalized EBITDA,
Forward-Looking Statements
This news release contains forward-looking information and forward-looking statements (collectively, "forward-looking statements") under applicable securities laws, including any applicable "safe harbor" provisions. Statements other than statements of historical fact contained in this news release are forward–looking statements, including, without limitation, management's expectations, intentions and beliefs concerning the growth, results of operations, performance of the Trust and the
By their nature, forward-looking statements require Alaris to make assumptions and are subject to inherent risks and uncertainties. Assumptions about the performance of the Canadian and
There can be no assurance that the assumptions, plans, intentions or expectations upon which these forward–looking statements are based will occur. Forward–looking statements are subject to risks, uncertainties and assumptions and should not be read as guarantees or assurances of future performance. The actual results of the Trust and the Partners could materially differ from those anticipated in the forward–looking statements contained herein as a result of certain risk factors, including, but not limited to, the following: the ongoing impact of the COVID-19 pandemic on the Trust and the Partners (including how many Partners will experience a slowdown or closure of their business and the length of time of such slowdown or closure); management's ability to assess and mitigate the impacts of COVID-19; the dependence of Alaris on the Partners; leverage and restrictive covenants under credit facilities; reliance on key personnel; general economic conditions, including the ongoing impact of COVID-19 on the Canadian,
Condensed consolidated statements of financial position (unaudited)
30-Sep | 31-Dec | |
$ thousands | 2020 | 2019 |
Assets | ||
Cash and cash equivalents | ||
Prepayments | 1,065 | 1,509 |
Derivative contracts | - | 555 |
Trade and other receivables | 9,713 | 1,226 |
Income taxes receivable | 8,560 | 4,205 |
Investment tax credit receivable | - | 1,032 |
Assets acquired held for sale | - | 97,173 |
Promissory notes receivable | 5,796 | 6,580 |
Current Assets | ||
Promissory notes and other receivables | 20,135 | 19,663 |
Deposits | 20,206 | 20,206 |
Property and equipment | 891 | 1,053 |
Investments | 751,593 | 881,037 |
Investment tax credit receivable | - | 2,243 |
Deferred income taxes | - | 986 |
Non-current assets | ||
Total Assets | ||
Liabilities | ||
Accounts payable and accrued liabilities | ||
Distributions payable | 11,031 | 5,047 |
Derivative contracts | 950 | - |
Liabilities acquired held for sale | - | 60,297 |
Office Lease | 701 | 837 |
Income tax payable | 495 | 384 |
Current Liabilities | ||
Deferred income taxes | 6,203 | 4,715 |
Loans and borrowings | 168,863 | 285,193 |
Convertible debenture | 81,783 | 90,939 |
Other long-term liabilities | 2,796 | - |
Non-current liabilities | ||
Total Liabilities | ||
Equity | ||
Unitholders' capital | ||
Equity component of convertible debenture | - | 4,059 |
Equity reserve | 15,715 | 14,763 |
Translation reserve | 28,284 | 17,076 |
Retained earnings / (deficit) | (103,784) | (56,764) |
Total Equity | ||
Total Liabilities and Equity |
Condensed consolidated statements of comprehensive income / (loss) (unaudited)
Three months ended | Nine months ended | ||||
$ thousands except per unit amounts | 2020 | 2019 | 2020 | 2019 | |
Revenues, net of realized foreign exchange gain or loss | |||||
Net realized gain from investments | - | 9,317 | 11,603 | 9,317 | |
Net unrealized gain / (loss) of investments at fair value | 11,885 | (9,357) | (76,257) | (5,162) | |
Total revenue and other operating income | |||||
General and administrative | 3,604 | 2,164 | 10,089 | 7,080 | |
Transaction diligence costs | 1,076 | 1,122 | 4,011 | 2,129 | |
Unit-based compensation | 66 | 1,974 | 1,689 | 3,227 | |
Bad debt expense / (recovery) | - | - | - | (2,018) | |
Depreciation and amortization | 50 | 165 | 169 | 495 | |
Total operating expenses | 4,796 | 5,425 | 15,958 | 10,913 | |
Earnings / (loss) from operations | |||||
Finance costs | 4,269 | 5,813 | 13,331 | 13,880 | |
Unrealized (gain) / loss on foreign exchange | 1,542 | (1,966) | (4,721) | 4,351 | |
Non-cash impact of trust conversion | (10,647) | - | (10,647) | - | |
Earnings / (loss) before taxes | |||||
Current income tax expense | 1,619 | 1,016 | 3,890 | 6,333 | |
Deferred income tax expense / (recovery) | 5,156 | (1,277) | 5,686 | (1,488) | |
Total income tax expense / (recovery) | 6,775 | (261) | 9,576 | 4,845 | |
Earnings / (loss) | |||||
Other comprehensive income | |||||
Foreign currency translation differences | (6,600) | 4,297 | 11,208 | (10,545) | |
Total comprehensive income | |||||
Earnings / (loss) per unit | |||||
Basic | |||||
Fully diluted | |||||
Weighted average units outstanding | |||||
Basic | 35,584 | 36,647 | 36,003 | 36,567 | |
Fully Diluted | 35,976 | 36,938 | 36,395 | 36,858 |
Condensed consolidated statements of cash flows (unaudited)
Nine months ended | ||
$ thousands | 2020 | 2019 |
Cash flows from operating activities | ||
Earnings / (loss) for the period | ||
Adjustments for: | ||
Finance costs | 13,331 | 13,880 |
Deferred income tax expense / (recovery) | 5,686 | (1,488) |
Depreciation and amortization | 169 | 495 |
Net realized gain from investments | (11,603) | (9,317) |
Net unrealized (gain) / loss of investments at fair value | 76,257 | 5,162 |
Unrealized (gain) / loss on foreign exchange | (4,721) | 4,351 |
Non-cash impact of trust conversion | (10,647) | - |
Transaction diligence costs | 4,011 | 2,129 |
Unit-based compensation | 1,689 | 3,227 |
Changes in working capital (operating): | ||
- trade and other receivables | 236 | (2,145) |
- income tax receivable / payable | (4,244) | (1,937) |
- prepayments | 444 | 868 |
- accounts payable, accrued liabilities | (5) | (1,096) |
Cash generated from operating activities | 60,047 | 68,241 |
Cash interest paid | (9,835) | (11,151) |
Net cash from operating activities | ||
Cash flows from investing activities | ||
Acquisition of investments | ||
Transaction diligence costs | (4,011) | (2,129) |
Proceeds from partner redemptions | 111,306 | 20,089 |
Proceeds on disposal of assets and liabilities held for sale | 39,196 | - |
Promissory notes issued | - | (8,877) |
Promissory notes repaid | 784 | 3,465 |
Changes in working capital - investing | (8,723) | - |
Net cash from / (used in) investing activities | ||
Cash flows from financing activities | ||
Repayment of loans and borrowings | ||
Proceeds from loans and borrowings | 64,225 | 111,882 |
Proceeds from convertible debenture, net of fees | - | 95,527 |
Distributions paid | (30,480) | (45,236) |
Trust unit repurchases | (10,051) | - |
Office lease payments | (136) | (418) |
Net cash from / (used in) financing activities | ||
Net increase / (decrease) in cash and cash equivalents | ||
Impact of foreign exchange on cash balances | (3,440) | (973) |
Cash and cash equivalents, Beginning of period | 17,104 | 22,774 |
Cash and cash equivalents, End of period | ||
Cash taxes paid |
SOURCE
© Canada Newswire, source