[ACCESSWIRE]
MISSISSAGUA, ON / ACCESSWIRE / November 30, 2016 / Redishred Capital Corp. (OTC PINK: RDCPF) (TSXV: KUT)
Third Quarter Highlights:
Management's Comments on the Third Quarter of 2016
Jeffrey Hasham, the Company's CEO, had the following comments, "PROSHRED® continued to achieve record system sales results in the third quarter of 2016. This was driven by strong increases in our recurring scheduled service, which is the category that creates stable and predictable cash flows for our franchisees and corporate locations. We have continued to focus our sales and marketing energy on providing on-site destruction services to small and medium sized enterprises. Our clients have real risks related to information breach and compliance with an ever increasing number of laws related to information security and destruction. Our on-site service provides them with the peace of mind that they have taken reasonable measures in this area." Mr. Hasham further noted that, "It is exciting to see our foot print move to over 30 metropolitan markets serviced as both St. Louis and Orlando commenced operations in the third quarter. In both new markets we have deployed dual purpose shredding equipment capable of shredding paper and hard drives. The Company's plan is to continue to invest in new trucks and human resources to further drive results into 2017 and beyond."
(1) System sales are revenues generated from franchisees, licensees and corporate owned locations. Redishred Capital Corp. derives its royalty and service fee revenues based on a percentage of system sales from franchisees and licensees. Redishred Capital Corp. derives revenues from corporate location system sales.
Financial Highlights:
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3 months ended September 30 | 9 months ended September 30 | ||||
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2016 | 2015 | % change | 2016 | 2015 | % change |
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System sales (USD) | 7,511,789 | 6,497,246 | 16% | 21,957,104 | 18,637,513 | 18% |
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Total Revenue | 2,418,386 | 1,974,509 | 22% | 7,242,056 | 5,572,043 | 30% |
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Corporate location data: | |
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Corporate location revenue | 1,870,736 | 1,554,557 | 20% | 5,605,453 | 4,372,002 | 28% |
Corporate location operating costs | (1,162,739) | (908,449) | (28)% | (3,512,800) | (2,471,505) | (42)% |
Corporate location EBITDA | 707,997 | 646,108 | 10% | 2,092,653 | 1,900,497 | 10% |
Depreciation - equipment | (160,070) | (120,789) | (33)% | (443,110) | (360,985) | (23)% |
Operating income from corporate locations | 547,927 | 525,319 | 4% | 1,649,543 | 1,539,512 | 7% |
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Franchise and license data: | |
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Franchise and license fees | 67,611 | 4,120 | 1541% | 245,253 | 33,229 | 638% |
Royalties and service fees | 480,039 | 415,832 | 15% | 1,391,350 | 1,166,812 | 19% |
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Franchise and license revenue | 547,650 | 419,952 | 30% | 1,636,603 | 1,200,041 | 36% |
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Total operating costs | (514,899) | (417,321) | (23)% | (1,618,548) | (1,276,347) | (27)% |
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Operating income (1) | 580,678 | 527,950 | 10% | 1,667,598 | 1,463,206 | 14% |
Total Company EBITDA (2) | 740,748 | 648,739 | 14% | 2,110,708 | 1,821,190 | 16% |
Net income | 75,589 | 363,260 | (79)% | 191,274 | 1,004,810 | (81)% |
Income per share | 0.003 | 0.013 | (77)% | 0.004 | 0.035 | (89)% |
(1) Operating income is determined as operating income from corporate locations plus franchise and license revenue less total operating costs.
(2) Total company EBITDA is determined as corporate location EBITDA plus franchise and license revenue less total operating costs.
Stronger System Sales Driving Both Royalty and Corporate Location Revenue
Redishred achieved 16% growth in total system sales, and 15% on a same location basis during the third quarter of 2016 versus the same quarter in 2015. This drove royalty revenues up by 15% for the same comparative periods (calculated in USD). System sales were driven upwards due to the Company's continued focus on providing recurring scheduled service to small and medium sized enterprise clients.
Our corporate store location revenues grew by 20% during the third quarter of 2016 versus the same quarter in 2015 (calculated in USD). The growth included $163,220 in acquired revenue, which when adjusted for yielded a growth rate of 10%.
Franchise Activity Contributes to Short Term and Long Term Franchise Revenue Growth
In 2016, new franchise awards have significantly increased over both 2015 and 2014. New franchise fees to date in 2016 have equated to just under $237,000 versus $25,000 in 2015. The new locations have contributed to short term revenue growth by way of new franchise fees and will lead to future growth in royalty revenue and also enhance the Company's footprint in the United States. New franchisees have been attracted to the Company's improved financial position both at a franchisor level and at the unit franchisee level.
Corporate Location Operating Income Growth Continues to Build
Corporate location revenue has grown 28% on a year to date basis versus the same period in 2015, while Corporate location operating income on a year to date basis has grown 7% over the same period in 2015. The slower growth in operating income has been impacted by one time transition costs related to the Record Shred acquisition; increased costs related to truck repairs and refurbishment; and increased costs related to management of the corporate locations. Senior management believes that the investment in human resources, trucks and acquisitions will have positive impacts to both top line and bottom line growth for the remainder of 2016 and into 2017.
Debt Reduction and Improving Balance Sheet
Over the last twenty-four months, the Company has used a significant portion of its excess cash flow to reduce the amount owing on its line of credit. During the nine months ended September 30, 2016 the Company has paid down its line of credit by $500,000 (nine-months ended September 30, 2015 - $245,000) and over the last twenty-four months by almost one million dollars. With improving Operating Income, the Company's rolling twelve-month debt service coverage has improved by 27% since December 31, 2015 and working capital has improved to over $450,000 in September 2016. Management will continue to balance investment in human resources, trucks and technology with continued reduction to its debt balances.
Investing Now for Long-Term Sustainability
To date in 2016, the Company's senior management has:
The investments have been funded primarily though current operating cash flows while simultaneously reducing the Company's most expensive debt class. The Company's senior management believes all these activities and investments will yield stronger cash generation in 2017 and beyond.
Corporate Operations
During the nine months ended September 30, 2016, Redishred directly operated six shredding locations in Syracuse, NY, Albany, NY, Milwaukee, WI, New York City, NY, Charlotte, NC, and Miami, FL.
During the three months ended September 30, 2016, the corporate location revenue grew by 20% over the same comparative prior year period. The Company also increased EBITDA by 10% and operating income by 4% over the three months ended September 30, 2015. During the nine months ended September 30, 2016, the corporate location revenues grew by 28% over the same comparative prior year period. The Company also increased EBITDA by 10% and operating income by 7% over the nine months ended September 30, 2015.
All Corporate Locations Results:
3 months ended September 30 | 9 months ended September 30 | |||||||||||||||||||||||
2016 |
revenue % of | 2015 |
% of revenue |
2016 |
% of revenue |
2015 |
% of revenue |
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$ | $ | $ | $ | |||||||||||||||||||||
Revenue: | ||||||||||||||||||||||||
Shredding service | 1,586,024 | 85% | 1,309,120 | 84% | 4,816,664 | 86% | 3,644,651 | 83% | ||||||||||||||||
Recycling | 284,712 | 15% | 245,437 | 16% | 788,789 | 14% | 727,351 | 17% | ||||||||||||||||
Total revenue | 1,870,736 | 100% | 1,554,557 | 100% | 5,605,453 | 100% | 4,372,002 | 100% | ||||||||||||||||
Operating costs | 1,162,739 | 62% | 908,449 | 58% | 3,512,800 | 63% | 2,471,505 | 57% | ||||||||||||||||
EBITDA | 707,997 | 38% | 646,108 | 42% | 2,092,653 | 37% | 1,900,497 | 44% | ||||||||||||||||
Depreciation - equipment | 160,070 | 9% | 120,789 | 8% | 443,110 | 8% | 360,985 | 8% | ||||||||||||||||
Corporate operating income | 547,927 | 29% | 525,319 | 34% | 1,649,543 | 29% | 1,539,512 | 35% |
Corporate Locations Trend:
2016 | 2015 | 2014 | ||||||
Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | Q4 | |
Corporate location revenue ($) | 1,870,736 | 1,842,693 | 1,892,024 | 1,549,379 | 1,554,557 | 1,443,384 | 1,374,062 | 1,257,312 |
Quarter over quarter % change | 1% | (3)% | 22% | (1)% | 7% | 5% | 9% | |
Corporate location EBITDA ($) | 707,997 | 688,142 | 696,514 | 626,711 | 646,108 | 678,855 | 575,535 | 533,728 |
Quarter over quarter % change | 3% | (1)% | 11% | (3)% | (5)% | 18% | 8% |
Community and Social Commitment
Our locations under the PROSHRED® banner conducted numerous community shredding events during the nine months ending September 30, 2016. These events provide an opportunity for our 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% of the shredded material is recycled, as our 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 our website, www.proshred.com.
On June 4, 2016, PROSHRED® held its' 3rd annual Shred Cancer event at most of its locations, raising money for the American Institute for Cancer Research ("AICR"). It is our goal as a Company to support the AICR in their endeavor to conduct research to prevent and possibly cure this disease. Mr. Hasham commented that, "All of us at PROSHRED® are committed to working with AICR on their goal to reduce the instances of cancer by preventing it. The research they do is crucial in the battle against this disease. I want to thank every PROSHRED® owner and all our collective employees for the time and effort put forth to these events." Please visit www.proshred.com/aicr for more information on this effort.
Recycling system sales increased by 19% during the three months ended September 30, 2016 in comparison to the same period in 2015. During the three months ended September 30, 2016, the PROSHRED® system shred and recycled 9,900 tons of paper, which equates to approximately 149,000 trees saved.
Financial Statements
Redishred's September 30, 2016 Financial Statements, Notes and Management's Discussion and Analysis will be available at www.sedar.com and www.redishred.com.
Services
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 9001:2008 certification. It is PROSHRED®'s vision to be the 'system of choice' and provide shredding and recycling services on a global basis. Redishred Capital Corp. grants PROSHRED® franchise businesses in the United States and by way of license arrangement in the Middle East. Redishred Capital Corp. also operates six 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.
FOR FURTHER INFORMATION PLEASE CONTACT:
Redishred Capital Corp. (TSXV: KUT)
Jeffrey Hasham, MBA, CPA, CA
Chief Executive Officer
Jeffrey.hasham@redishred.com
www.redishred.com
Phone: (416) 849-3469 Fax: (905) 812-9448
or
Redishred Capital Corp. (TSXV: KUT)
Kasia Pawluk, CPA, CA
Chief Financial Officer
Kasia.pawluk@redishred.com
www.redishred.com
Phone: (416) 204-0076 Fax: (905) 812-9448
Note: Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
This news release contains forward looking statements that reflect the current expectations of management of Redishred and Redishred's future results, performance, achievements, prospects and opportunities. Wherever possible, words such as "may," "will," "estimate," "believe," "expect," "intend," and similar expressions have been used to identify these forward looking statements. These statements reflect current beliefs and are based on information currently available to management of Redishred. Forward looking statements necessarily involve known and unknown risks and uncertainties. A number of factors, including those discussed in the 2015 management discussion and analysis under "Risk Factors", could cause actual results, performance, achievements, prospects or opportunities to differ materially from the results discussed or implied in the forward looking statements. These factors should be considered carefully and a reader should not place undue reliance on the forward looking statements. There can be no assurance that the expectations of management of Redishred will prove to be correct. Readers are cautioned that such forward looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from these statements. Redishred can give no assurance that actual results will be consistent with these forward-looking statements.
SOURCE: Redishred Capital Corp.