Redishred Capital Corp.

Thank you for standing by. This is the conference operator. Welcome to the ReadyShred Capital Corp. 3rd Quarter 2022 Financial Results and Business Update Conference Call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there'll be an opportunity to ask questions. To join the question queue, you may press star, then 1 on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and zero. I would now like to turn the conference over to Jeffrey Hashim, Chief Executive Officer. Please go ahead.

Great. Thank you very much, Arielle. Good morning, everyone. Jeff Hashim here. Welcome to our third quarter of 2022 investor call. I wanted to thank everyone again for joining here. I know for many of you on the West Coast, it's very early, so appreciate you making that out for us. I'm also joined here by Harjeet Bharat, who's our CFO, and together we'll be reviewing our results and providing an update on ReadyShred Capital Corp. And of course, we will allow for a Q&A session once we've made our remarks. What I would like to also make sure everyone does know is that We have our Q3 financial statements, MD&A, and press release. Those were all filed last night, just after the markets closed. So obviously, I know a number of you have been digging through the numbers. And if you have not had a chance to take a look at those, please do so. So for us, Q3 2022, we continue to grow our sales and our EBITDA. Sales was another record for us. EBITDA was not another record. However, we continue to grow our EBITDA dollars year over year, double digits, and we'll go through the numerics shortly. This is driven by organic and acquisition growth. So both our organic service, recycling, Shredding all contributed to the growth as well as, of course, the acquisitions that we conducted late in 2021 and throughout 2022. We focused in on same corporate locations. EBITDA grew, sorry, revenue grew by 25% and EBITDA grew by 13%. Also, if we look at total corporate locations, including acquisitions, our total revenue grew 52% and EBITDA 33%. So the good news is we had good growth in our business. I think the key here for us is that our shredding business and our organic shredding service revenue continue to grow. If we look at just the shredding revenue, excluding the recycling business, it grew 15%. And then if we look at our e-waste business and our ProScan business, they continue to contribute positively to both the top line and the bottom line. Of course, we know paper prices continue to go up, and they were at record highs once again. We'll talk a little bit about paper a little later. Paper prices do right now continue to be strong. They've plateaued, but they do continue to be strong and they've continued to contribute to these results as well. So those are the strong highlights and we're pleased that the revenue grew. We'll talk a little bit about the EBITDA because there were some challenges that we had to overcome and really there's three areas that were impacting our results in the third quarter. First was the labor market. Second was the supply chain, and particularly for truck parts and truck supplies. And thirdly, the high fuel costs. And all of that, a lot of that is in the context of high inflation. Uh, and, um, and so, uh, these did impact our margins. Uh, we were, we were hoping to have stronger margins and we'll talk, we'll talk a little bit about the details here, uh, right now. So number one, um, We were just, I was just looking at a BMO economic report as well as the Anderson economic report and in the United States. And we're feeling this for sure. The labor market continues to be very tight. It was tight through the summer and into the fall. and that resulted in us making sure that we're marked to market on particularly driver wages. Those costs continue to go up. We are seeing some leveling. We're seeing some flattening. We're seeing a little bit even in some markets of softening, which is good for us because we want to hire great people. Again, we are mark-to-market in terms of hiring our very important customer service professionals, which are our drivers. So that softening is going to help us, I do believe, in 2023. However, that softening is really plateauing at a fairly high level. So we'll see, hopefully, where this goes. Again, in some markets, we're seeing a little bit of softening, which is good. We did push through price increases in the latter part of Q3, and we'll see the benefit of that in Q4 and, of course, into early 2023. Probably the largest – I mean, fuel, I think, goes without saying. Fuel is extremely high today. so far this year uh in the third quarter when uh some gas prices were coming down diesel prices didn't come down as much diesel prices actually have popped back up in some markets as well so diesel prices um were quite high and continue to be high uh and we are hoping to see some reductions in fuel prices going forward. Similar to the labor market, we do expect some softening there, and that should help us into 2023. Our business, our planning, right now we're planning to see fuel closer to the highs than the lows in 2023. So if they do drop, we're in a good position. Probably the biggest impact for us was related to truck parts in our truck fleet. So number one, when trucks go down, and they do invariably go down, and we need parts, a number of things are going against us. And we're not alone in this. Many people in logistics or truck-related businesses are feeling this. We feel it a little bit more potentially because of our application where, you know, you've got both the shredder box, the shredder and the truck, and they're all interconnected. So if a chassis goes downward, out. The shredder goes down, we're down. And so when the trucks were in for repair, they were in for longer. The repairs were more expensive as we waited for truck parts. And downtime is the killer in our business. And so when I look at the results and I look at the fact that we were able to continue to have extremely strong revenue growth organically, we did that. We serviced our customers organically. The customer acquisition is critical because we get an opportunity to service those customers in the future. So we did not want to miss customers. And so we took the opportunity to make sure we did anything and everything to fulfill our customer requirements, both on the recurring basis, schedule basis, and on a purge basis. So with those trucks being down, we had to secure rental trucks. We had to double team our trucks to make sure the clients were serviced in some cases. All of those things came to bear, which increased our costs during the quarter. I'll talk a little bit about what we're experiencing now beyond the quarter. So from a good news perspective, the supply chain bottlenecks are easing. The other thing that we had the challenge with in Q2 and Q3 was new trucks. We were anticipating several new trucks in Q2 and Q3 And, of course, those older trucks then would, a number of them would be traded in or be moved to backup truck status. And what, of course, happened there is we needed to use those trucks that neither needed to go in for trade-in or needed to be moved to backup status. And, of course, we're trading them in for a reason. We want new trucks with full capacity, and we didn't have that through a lot of Q2 and Q3. So, again... That increased our costs to repair trucks that were supposed to go back in and to, in some cases, have more labor on the truck. So it drove up those two costs. I will say this, our strategy, and we've talked about this a number of times, our strategy to maintain a very modern truck fleet, a standard modern truck fleet, this could have been worse. We actually, in a couple of cases, helped some of our competitors when their trucks went down and there were one or two truck shop and they go down and they needed help. We were there to help them because we were able to sort of sneak in a couple of stops for them, if you will, on a route. Our modern fleet strategy is, really saved us this quarter, and I'm very thankful for that. The other thing that saved us is because of our density, particularly in the northeast, is the ability to share trucks amongst locations. So we had that ability as well. Again, they're typically backup trucks, so they're not quite as efficient. However, all of those things really prevented a very adverse outcome. And so our strategy going forward, will continue to be to keep a modern fleet, to continue to grab new trucks. As noted, we are now, here we are in the fourth quarter, in the latter part of the fourth quarter, we've had a strong supply of new trucks come in, finally. And we will be able to start off the first quarter of the new year strong because we're going to have the capacity. We've also, of course, are working on our buying for the new year for new trucks. So from a truck supply perspective, things are easing up for us. And we're able to put new trucks on the road. In most cases, in most locations, we're seeing an easing up, which means rental costs are coming down. Our labor costs on routes are coming down. Our repair costs are going to come down. All those things are going to start to ease as we, you know, this latter part of Q4 and into 2023. So we're very pleased now. uh, about that. So, uh, I wanted to give everyone that color because, uh, that, uh, um, you know, that, that hurt us, um, in Q3, uh, quite a bit. And, uh, uh, so as much as fuel went up and labor went up and those hurt the, the, for us, truck capacity is critical. Uh, and, um, um, again, we were fortunate to secure the revenue we did and we're pleased about that. Uh, turning, switching gears, then I'll kind of pass it to Harjeet. Um, just on, uh, the acquisition front is, as many of you know, we acquired pro ship Philadelphia franchise. That was, uh, on November 1st, um, the cash consideration was 7 million, just over 7 million us. There are earnouts tied to revenue, uh, both service revenue and paper revenue. Uh, and really this completes our New York, New Jersey, Pennsylvania corridor for us. Um, We have a very strong presence in New York, New Jersey. In fact, we have a nice bailing facility in New Jersey now in the center of New Jersey. We have a bailing facility now in Pennsylvania. We're going to be able to reshuffle some routes. We're going to be able to get some further economies by having that. The Philadelphia location has a predominantly new truck fleet, newer truck fleet, which is good. Good people, good management. I think we're going to see, due to the geographic proximity to our other markets, we're going to see some opportunity to improve our routing, our margins, our back office costs, all those types of things. So we're very pleased about that. And of course, having another bailing facility. more premium on the paper for the company. And so that's going to help as well, creates more stability in that revenue stream. So with all of that said, I think I've done enough talking and I think I'd like to pass this over to Harjeet who will go into a little bit more detail on the numerics.

Thank you, Jeff. Good morning, everyone. And thanks again for joining us on this call this morning. So, you know, as Jeff noted, we are pleased with our growth trajectory in Q3. And of course, we're very excited about the approach at Philly acquisition and the opportunities this acquisition will provide us. So in terms of financial results from a top line perspective, consolidated revenue for Q3 was 14.7 million. That compared to 9.8 million in Q3 2021. So roughly about a 50% increase. From a bottom line perspective, EBITDA for Q3 was 3.6 million compared to 2.9 million in Q3 2021. So those are the Q3 results from a top and bottom line perspective. If we look at it from a year-to-date perspective, we're ahead as well. So revenue in EBITDA for Q3 2022 year-to-date were 41.8 and 12.12 million respectively. If you look at it compared to year-to-date 2021, Revenue and EBITDA were $25.8 million and $7.5 million respectively. And if we look at what's driving that growth, it's both strong same corporate location performance and the results of the acquisitions that we have completed in the past 12 months, including, of course, American shredding and safeguard document destruction, which is an acquisition that we did over the summer. On a per share basis, fully diluted net income per share more than doubled at 21 cents per share for Q3 2022 compared to 10 cents in Q3 2021. And on a year-to-date basis, fully diluted net income was almost three times as high at 38 cents per share compared to 13 cents per share for Q3 2021 year-to-date. And just a reminder again, all these calculations that I am sharing with you they do reflect the one for five common share consolidation that we completed back in August. So those are the sort of the income results. If you look at the cash flow, cash provided by operations was 3.3 million for Q3 2022 and on a year to date basis, 8.7 million. And again, the main driver of that is our strong EBITDA results. If we look at the balance sheet, you know, we have solid liquidity, networking capital of 5.6 million, and we have 11 million in cash. So all in all, we're pleased with the results for Q3 2022 and are looking forward to executing our plan for Q3 and finishing the year off strong. So on that note, I will turn it over to Jeff for some final comments before we open up for questions.