Dexterra Announces Results for Q2 2023 and Declares Dividend

Toronto, Ontario--(Newsfile Corp. - August 8, 2023) - Dexterra Group Inc. (TSX: DXT)

Highlights

• The Corporation generated strong results in Q2 2023 including consolidated revenue of $267.8 million which was an increase of 15% compared to Q2 2022. Q2 revenue increases are primarily related to IFM growth and continued strong performance in WAFES, including significant wildfire support and robust natural resources market activity;

• The Corporation's Adjusted EBITDA for Q2 2023 was $27.2 million, a significant improvement over Q2 2022 and a 29% increase compared to Q1 2023, reflecting better performance in all business units;

• The Corporation reported consolidated net earnings of $8.5 million for Q2 2023 compared to $0.4 million in Q2 2022 and $4.7 million in Q1 2023;

• The Corporation renegotiated its long term debt agreement which was approved by the Board of Directors and is expected to close in August 2023 with a maturity date of September 7, 2026. It includes an expanded available credit limit of $260 million plus an uncommitted accordion of $150 million;

• In connection to the previously announced Normal Course Issuer Bid ("NCIB"), Dexterra repurchased in Q2 2023 189,100 common shares at a weighted average price per share of $5.60 for a total of $1.1 million; and

• Dexterra declared a dividend for Q3 2023 of $0.0875 per share for shareholders of record at September 29, 2023, to be paid October 13, 2023.

This news release contains certain measures and ratios, such as Adjusted EBITDA, Adjusted EBITDA as a percentage of revenue, Adjusted Free Cash Flow and backlog, that do not have any standardized meaning as prescribed by GAAP and, therefore, are considered non-GAAP measures. The method of calculating these measures may differ from other entities and accordingly, may not be comparable to measures used by other entities. See "Non-GAAP measures" and "Reconciliation of Non-GAAP measures" of the Corporation's MD&A for the three months and six months ended June 30, 2023 and 2022 for details which is incorporated by reference herein.

Second Quarter Financial Summary

		Three months ended June 30,						Six months ended June 30,
(000's except per share amounts)		2023			2022			2023			2022
Total Revenue	$	267,830		$	233,896		$	535,917		$	457,856
Adjusted EBITDA(1)	$	27,216		$	13,642		$	48,354		$	30,658
Adjusted EBITDA as a percentage of revenue(1)		10%			6%			9 %			7%
Net earnings(2)	$	8,494		$	350		$	13,177		$	1,410
Earnings per share
Basic and Diluted	$	0.13		$	0.00		$	0.20		$	0.02
Total assets	$	626,863		$	622,029		$	626,863		$	622,029
Total loans and borrowings	$	126,524		$	128,732		$	126,524		$	128,732
Adjusted Free Cash Flow(1)	$	4,011		$	5,240		$	6,569		$	(6,551	)

 

(1) Please refer to the "Non-GAAP measures" section for the definition of Adjusted EBITDA, Adjusted EBITDA as a percentage of revenue and Adjusted Free Cash Flow and to the "Reconciliation of non-GAAP measures" section for the related calculations.
(2) Non-recurring charges included in pre-tax earnings are described in the reconciliation of Non-GAAP measures and include $0.7 million and $2.5 million in the three and six months ended June 30, 2023 (three and six months ended June 30, 2022 - $1.4 million and $4.3 million).

Second Quarter Operational Analysis

		Three months ended June 30,						Six months ended June 30,
(000's)		2023			2022			2023			2022
Revenue:
IFM	$	76,538		$	65,168		$	162,945		$	129,393
WAFES		137,671			119,104			267,293			234,199
Modular Solutions		53,121			49,627			105,179			92,904
Corporate and Inter-segment eliminations		500			(3	)		500			1,360
Total Revenue	$	267,830		$	233,896		$	535,917		$	457,856
Adjusted EBITDA:
IFM	$	4,539		$	3,997		$	9,772		$	7,959
WAFES		25,034			16,275			43,489			32,260
Modular Solutions		1,977			(3,020	)		3,351			(2,580	)
Corporate costs and Inter-segment eliminations		(4,334	)		(3,610	)		(8,258	)		(6,981	)
Total Adjusted EBITDA	$	27,216		$	13,642		$	48,354		$	30,658

 

Integrated Facilities Management ("IFM")

For Q2 2023, IFM revenues were $76.5 million, an increase of 17% from Q2 2022 related to continued strong organic growth, and 11% lower than Q1 2023, due primarily to the seasonality of the education and leisure sectors where Q2 and Q3 are slower periods.

IFM Adjusted EBITDA for the quarter was $4.5 million compared to $4.0 million for Q2 2022 and $5.2 million for Q1 2023 due to the lower revenue and seasonality factors discussed above. Adjusted EBITDA as a percentage of revenue, excluding certain loss contracts with revenues of $3.8 million, continued to improve in Q2 2023 compared to prior periods and is tracking towards our near-term target of 7%. Contract price management and optimization of the IFM portfolio remains a focus to continue to improve margins.

For the six months ended June 30, 2023, IFM revenues were $162.9 million, an increase of 26% and Adjusted EBITDA was 23% higher compared to the same period in the prior year.

Workforce Accommodations, Forestry and Energy Services ("WAFES")

Revenue from the WAFES business unit for Q2 2023 was $137.7 million, an increase of 16% compared to Q2 2022 and a 6% increase compared to Q1 2023. Adjusted EBITDA for Q2 2023 was $25.0 million compared to $16.3 million in Q2 2022 and $18.5 million in Q1 2023. Adjusted EBITDA as a percentage of revenue was 18% in Q2 2023, which is higher than the 14% in both Q2 2022 and Q1 2023. The overall positive Q2 results in WAFES are the result of abnormally high service activity in support of unprecedented wildfires and robust market activity in workforce accommodations and energy services. This includes high camp occupancy and rental equipment activity levels, as well as a contract change order related to the recovery of inflationary costs on a major project. The non-recurring items increased Adjusted EBITDA by approximately $5 million in Q2 2023.

For the six months ended June 30, 2023 compared to the same period in 2022, revenue was $267.3 million, an increase of 14%, and Adjusted EBITDA was 35% higher compared to the same period in the prior year. Adjusted EBITDA as percentage of revenue was 16%, compared to 14% in 2022 due to the factors noted above.

Modular Solutions

Modular Solutions revenues for Q2 2023 were $53.1 million an increase of 7% compared to Q2 2022 and a 2% increase compared to Q1 2023. Adjusted EBITDA for Q2 2023 was $2.0 million, which is an increase of $5.0 million when compared to a loss of $3.0 million in Q2 2022 and a $0.6 million increase compared to Q1 2023. The improvement in profitability is the result of the continued execution of the four-point business turnaround plan.

Revenue for the six months ended June 30, 2023 was $105.2 million, an increase of 13% compared to the same period in 2022. Adjusted EBITDA for the six months ended June 30, 2023 was $3.4 million, an increase of $5.9 million compared to the same period in the prior year.

Liquidity and Capital Resources

Debt was $126.5 million at June 30, 2023 compared to $110.6 million at Q1 2023. The increase from Q1 2023 is primarily due to special access matting capital investments of $4.6 million as well as $8.3 million related to implementing revised payment practice for trade payables and for growth working capital.

The conversion of Adjusted EBITDA to Adjusted Free Cash Flow for 2023 is expected to be between 40% to 50%.

Additional Information

A copy of Dexterra's Condensed Consolidated Interim Financial Statements ("Financial Statements") for the three and six months ended June 30, 2023 and 2022 and related Management's Discussion and Analysis ("MD&A") have been filed with the Canadian securities regulatory authorities and are available on SEDAR at sedarplus.ca and Dexterra's website at dexterra.com. The Financial Statements have been prepared in accordance with International Financial Reporting Standards and the reporting currency is in Canadian dollars.

Conference Call

Dexterra will host a conference call and webcast to begin promptly at 8:30 Eastern time on August 9, 2023 to discuss the second quarter results.

To access the conference call by telephone the conference call dial in number is 1-800-319-4610.

A live webcast of the conference call will be accessible on Dexterra Group's website at dexterra.com/investor-presentations-events/ by selecting the webcast link. An archived recording of the conference call will be available approximately one hour after the completion of the call until September 9, 2023 by dialing 1-855-669-9658, passcode 0120.

About Dexterra

Dexterra employs more than 8,500 people, delivering a range of support services for the creation, management, and operation of infrastructure across Canada.

Powered by people, Dexterra brings best-in-class regional expertise to every challenge and delivers innovative solutions, giving clients confidence in their day-to-day operations. Activities include a comprehensive range of integrated facilities management services, industry leading workforce accommodation solutions, innovative modular building capabilities, and other support services for diverse clients in the public and private sectors.

For further information contact:

Drew Knight, CFO
Head office: Airway Centre, 5915 Airport Rd., 4th Floor Mississauga, Ontario L4V 1T1
Telephone: (416) 767-1148

You can also visit our website at dexterra.com.

Reconciliation of non-GAAP measures

The following provides a reconciliation of non-GAAP measures to the nearest measure under GAAP for items presented throughout the News Release.

Adjusted EBITDA

(000's)		Three months ended June 30,						Six months ended June 30,
		2023			2022			2023			2022
Net earnings	$	8,494		$	350		$	13,177		$	1,410
Add:
Share based compensation (recovery)		730			(105	)		1,365			432
Depreciation & amortization		9,929			9,885			19,204			20,230
Equity investment depreciation		435			299			737			585
Finance costs		3,505			1,960			6,929			3,404
Loss (gain) on disposal of property, plant and equipment		42			(234	)		60			(237	)
Income tax expense		3,338			124			4,386			512
Non-recurring:
Contract loss provisions(1)		-			-			255			2,167
Restructuring and other costs(2)		743			1,363			2,241			2,155
Adjusted EBITDA	$	27,216		$	13,642		$	48,354		$	30,658

 

(1) Contract loss provisions for the three and six months ended June 30, 2023 were $nil and $0.3 million (2022 - $nil and $2.2 million). These costs relate to a contractual dispute and remediation work on pre-acquisition contracts from the Acquisition of Horizon North Logistics Inc. in May 2020.
(2) Restructuring and other costs for the six months ended June 30, 2023 of $2.2 million includes CEO transition costs of $1.4 million (Q2 - $nil) and contract demobilization and restructuring costs of $0.8 million (Q2 2023 - $0.7 million). Restructuring and other costs for six months ended June 30, 2022 of $2.2 million included costs related to 2022 IFM Acquisitions, CEWS clawback and severance costs (Q2 2022 - $1.4 million).

Adjusted Free Cash Flow

(000's)		Three months ended June 30,						Six months ended June 30,
		2023			2022			2023			2022
Net cash flows from operating activities	$	2,798			11,142		$	6,522		$	3,394
Sustaining capital expenditures, net of proceeds, including
intangibles		(1,261	)		(783	)		(1,426	)		(1,784	)
Finance costs paid		(3,232	)		(1,946	)		(6,318	)		(3,191	)
Lease payments		(2,635	)		(3,173	)		(5,207	)		(4,970	)
Non-recurring:
Revised trade payable payment practice for growth working
capital(1)		8,341			-			12,998			-
Adjusted Free Cash Flow	$	4,011		$	5,240		$	6,569		$	(6,551	)

 

(1) Adjusted Free Cash Flow is not adjusted for growth working capital in the 2022 comparative periods.

Forward-Looking Information

Certain statements contained in this MD&A may constitute forward-looking information under applicable securities law. Forward-looking information may relate to Dexterra Group's future outlook and anticipated events, business, operations, financial performance, financial condition or results and, in some cases, can be identified by terminology such as "continue"; "forecast"; "may"; "will"; "project"; "could"; "should"; "expect"; "plan"; "anticipate"; "believe"; "outlook"; "target"; "intend"; "estimate"; "predict"; "might"; "potential"; "continue"; "foresee"; "ensure" or other similar expressions concerning matters that are not historical facts. In particular, statements regarding Dexterra Group's future operating results and economic performance; management expectations of market sector recoveries, its leverage, Adjusted Free Cash Flow, NRB Modular Solutions backlog and revenue, extension/expansion of its credit facility and its objectives and strategies are forward-looking statements. These statements are based on certain factors and assumptions, including expected growth, market recovery, results of operations, performance and business prospects and opportunities regarding Dexterra Group, which Dexterra Group believes are reasonable as of the current date. While management considers these assumptions to be reasonable based on information currently available to Dexterra Group, they may prove to be incorrect. Forward-looking information is also subject to certain known and unknown risks, uncertainties and other factors that could cause Dexterra Group's actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward- looking information, including, but not limited to: the ability to retain clients, renew existing contracts and obtain new business; an outbreak of contagious disease that could disrupt its business; the highly competitive nature of the industries in which Dexterra Group operates; reliance on suppliers and subcontractors; cost inflation; volatility of industry conditions could impact demand for its services; a reduction in the availability of credit could reduce demand for Dexterra Group's products and services; Dexterra Group's significant shareholder may substantially influence its direction and operations and its interests may not align with other shareholders; its significant shareholder's 49% ownership interest may impact the liquidity of the common shares; cash flow may not be sufficient to fund its ongoing activities at all times; loss of key personnel; the failure to receive or renew permits or security clearances; significant legal proceedings or regulatory proceedings/changes; environmental damage and liability is an operating risk in the industries in which Dexterra Group operates; climate changes could increase Dexterra Group's operating costs and reduce demand for its services; liabilities for failure to comply with public procurement laws and regulations; any deterioration in safety performance could result in a decline in the demand for its products and services; failure to realize anticipated benefits of acquisitions and dispositions; inability to develop and maintain relationships with Indigenous communities; the seasonality of Dexterra Group's business; inability to restore or replace critical capacity in a timely manner; reputational, competitive and financial risk related to cyber-attacks and breaches; failure to effectively identify and manage disruptive technology; economic downturns can reduce demand for Dexterra Group's services; its insurance program may not fully cover losses. Additional risks and uncertainties are described in Note 22 of the Corporation's Consolidated Financial Statements for the year ended December 31, 2022 and 2021 contained in its most recent Annual Report filed with securities regulatory authorities in Canada and available on SEDAR at sedarplus.ca. The reader should not place undue importance on forward-looking information and should not rely upon this information as of any other date. Dexterra Group is under no obligation and does not undertake to update or alter this information at any time, except as may be required by applicable securities law.

To view the source version of this press release, please visit https://www.newsfilecorp.com/release/176539