Redishred Capital Corp.

Thank you for standing by. This is the conference operator. Welcome to the Ready Shred Capital Corp fourth 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 one 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 call over to Jeffrey Hashim, Chief Executive Officer. Please go ahead.

Thank you very much. Good morning, everyone. Welcome to Ready Shreds Q4 and year-end 2022 conference call. I want to thank everyone for attending on this Monday morning. Today I'm joined by Harjit Bharar, our Chief Financial Officer, and together we'll be reviewing the the fourth quarter and year-end 2022 results and provide some color on those and a company update. And of course, we'll finish the session off with some Q&A. Did want to let everyone know that the year-end audit financial statements, including Q4 and 2022 MD&A press release were disseminated on Friday. and obviously on CDAR. And of course, please, at your convenience, take a look and read through them. So for the Q4 2022 and full year 2022, this is a good growth year for us. Sales were strong. EBITDA grew by double digits. In fact, Harjeet will go through the exact numbers But it was our strongest year-over-year dollar growth that we've seen in the history of ReadyShred on an EBITDA basis. So if we look at the fourth quarter, both revenue and EBITDA were significantly up. Revenue was up 48%, and EBITDA was up 85%, respectively, when you compare that to the fourth quarter of 2021. For the year ended 2022, so this fiscal year 22 versus 21, revenue was up 58%, EBITDA up 67%. So how did this growth continue for us? And many of you know us very well. We're following our game plan. Number one, organic growth, what we own, we build, and we're driving strong growth. same location, service, revenue growth, shredding, scanning, and e-waste. So you take that into the mix. Of course, we had strong paper revenues that came from there. And then, of course, we had a good year for acquisitions. And towards the tail end of 2022, November 1st to be exact, we purchased the ProShred Philadelphia franchise. That completed really the northeast end for us in terms of acquisitions and a very good acquisition for us. So as much as we've been acquiring and we've been acquiring, we've been acquiring it smart. We've been pragmatic about the deals we do. And I think this is paying off for us in terms of translation to the results that you've seen. So noted that Zillia franchise is a good one for us. for many reasons, well-operated in the Northeast. We look at our organic results and core shredding business, and if you look at our same corporate location revenue, Shredding revenue, again, that grew by 21%. So when you strip out the paper, the service revenue growth was 21%. And our secure recycling business, secure recycle and ProScan, both for the year, were up. And we're very pleased about that. And, of course, I already mentioned recycling being up. Combination of really three things. Number one, strong paper prices. Number two, increased tonnage. Number three, We're now bailing in five locations. ProScan business, I do want to note that in the fourth quarter it was softer than I think any of us might have anticipated. The ProScan business is more what I would call chunky, to use not such a nice word, but I don't know any other way to say it. We have a lot of larger clients and government clients, so you wind up playing with when the government releases their budget money. There's a lot of repeat clients that are large and their timing can be off sometimes three, four, five months. If you can get these peaks and then get these valleys in that business, very different than the shredding business. We have a lot of small recurring clients. 2023, our usual stable of clients are there and the business is performing so far so good in 2023. So Q4 is a little bit of a timing challenge more than anything. When we look back at 22, It was a tough year in terms of a number of factors. It was a tight labor market, and that triggered not only was there inflation, macroeconomic inflation, but that driver labor market was quite profound. Many of you know about the supply chain issues that impacted new truck supply, as well as parts for older trucks. So that caused inflation. increased downtime or reduced uptime, but increased downtime for four-hour trucks. And the good news is we're able to sort of use our backup trucks and our spare trucks. But again, those required higher repair maintenance fees, which Archie will talk about. Higher fuel prices were certainly well known, and that drove the cost. So this whole inflationary environment certainly did us no favors on the cost side and they did impact our margins more than we would have liked. Given all of that, we finished 2022 quite well and we're really well positioned. When Harjeet reviews the balance sheet, you'll see why we're very well positioned because we can continue to do deals and as these macroeconomic factors wear down the independents, I think that will give us opportunities to buy independents. Our pipeline is quite good. We've got a number of folks in the pipeline. Independents, of course, are always in the pipeline. Acquisitions, Philadelphia is mentioned. That was a $7 million deal up front, plus earnouts. The earnouts are tied to service revenue and to paper price. So we've got downside protection on both, which is good. And since we bought it, it's performing to plan, so we're pleased about that. So when we sort of look at all of this, I also want to make note, and I mentioned this earlier, we're bailing paper now in five of our corporate locations. So we have 15 as of today. We have five that are bailing. These are our five largest locations. So when we look at December, when we started November 30th of 2021, we had two locations, Chicago and Kansas bailing. And now with the acquisitions that we've done, we've got five and a lot of our volume is going through there. So probably about 50% of our tonnage corporately is being bailed at a higher price. And those of course have a higher cost because the bailing has a cost. Those costs include rent for the warehouse, labor, utilities, and those types of things. Just to give everyone some color on that, the paper revenue for us, we're doing work and processing it to make sure that we're getting as high a dollar as we can for that paper. As noted, Philly brought the bailing facilities up to five. With that, Harjeet, I want to turn that over to you and you can get into a little bit more of the details there.

Sure. Thank you, Jeff. And thank you again, everyone, for joining on this call today. So in terms of financial results, our consolidated revenue for Q4 2022 was $15.4 million. We compare that to $10.4 million in the fourth quarter of 2021. So that's, again, a 48% increase. From a bottom line perspective, EBITDA in Q4 was $3.1 million. compared to 1.7 million in Q4 2021. And even with the growth here, the margins were stronger than the comparative period in Q4 2021. So we were 400 basis points higher. If we look at the full year results, again, strong growth, as Jeff alluded to, revenue was 57 million. EBITDA was 15.3 million for the year. And if you compare that to 2021, we had revenue of 36 million. and EBIT of 9.2 million. And then if you look at the margins, you know, we definitely had our cost challenges, but saying that, you know, even comparing it to 2021, you know, we were ahead 200 basis points. You know, obviously that's partially driven by sort of strong recycling prices, which helped. But again, it was the cost, which I'll sort of maybe dive into a little bit more deeper shortly that, you know, have had some impact on the margins. And, you know, if you look at our growth overall, like, you know, Jeff again mentioned it as well, but, you know, we've had strong organic growth and we've been very pragmatic from an acquisition front and that's translated to the bottom line. So in terms of the cost that we spoke about, you know, we've had to incur incremental costs. For example, like we've had to rent trucks, you know, due to some of the parts supply issues. And, you know, that, you know, that's, you know, driven up in part costs, you know, we've had wage inflation for our drivers, um, you know, higher fuel prices. And if you sort of aggregate them all together, you're looking at about a 1.3 million negative impact, uh, for the 2020 year on our corporate location operating costs and hence our bottom line. Um, so definitely some headwinds from a, from a cost perspective. Um, so in terms of the, the truck supplies, um, You know, truck supply has improved, you know, as have parts supplies for older trucks. You know, but there are still some remaining challenges, you know, as we start in 2023, but definitely a bit more positive than what it was in 2022. The, you know, I'm talking about the results, but even if you translate them down on a per share basis, so EBITDA was 17 cents in Q4 2022. That compares to 10 cents in Q4 2021. And then for a full year, EBITDA was 84 cents per share in 2022 compared to 58 cents per share in 2021. From a net income perspective, full year 2022 net income per share was 84 cents compared to 58 cents in 2021. And, you know, we've talked about sort of the income side, but, you know, from a cash flow perspective, you know, we did have, you know, strong cash provided by operating companies. activities you know 2.9 million in q4 2022 and 11.6 million if you look at 2022 as a whole you know so cash flows have been strong we still have a good liquidity on our balance sheet um you know we're sitting on cash to seven million dollars and we also have uh capacity under existing banking uh facilities to help facilitate uh growth you know as we sort of look into 2023 And all in all, again, we're pleased with the results for 2022, and we look forward to executing our plan in 2023. And so on that note, I will turn it over to Jeff for some closing comments.