Vertex Resource Group Ltd. Reports Fourth Quarter and Year End 2023 Results

Posted On March 28, 2024

Achieved record annual results as net revenue and adjusted EBITDA were $247.3 million and $37.9 million respectively.

Sherwood Park, Alberta, March 27, 2024 (TSXV:VTX) – Vertex Resource Group Ltd. (“Vertex” or the “Company”) reports its financial and operational results for the fourth quarter and year ended December 31, 2023.  The following should be read in conjunction with the Management Discussion and Analysis (“MD&A”) and the audited consolidated financial statements of Vertex for the year ended December 31, 2023, which are available on SEDAR+ at www.sedarplus.ca.

The fourth quarter continued to deliver steady results in multiple categories in both the three and twelve month periods.  Initiatives around competitive pricing, debt reduction, geographic and sector diversification that have been a focus since 2022 gained further traction in 2023.

Key financial results for the three months and years ended December 31, 2023, and 2022 are as follows:

HIGHLIGHTS
Three Months ended December 31, Three Months ended December 31,
(in thousands of Canadian Dollars)2023202220232022
RestatedRestated
Gross revenue65,11071,666255,237257,161
Less flow through subcontractor costs3,76711,8257,97838,783
Net revenue61,34359,841247,259218,378
Profit Margin12,35612,63761,68452,251
Profit Margin %20%21%25%24%
Adjusted EBITDA7,7727,55637,93232,185
Adjusted EBITDA %13%13%15%15%
Free cash flow (2)4,0421,15917,81012,558
Adjusted EBITDA per share, basic
and diluted
0.070.070.330.30
(1) See “Non-IFRS Financial Measures”

HIGHLIGHTS FOR THE THREE MONTHS ENDED DECEMBER 31, 2023

  • Vertex achieved the highest net revenue for any fourth quarter in the company’s history at $61.3 million.
  • Record fourth quarter adjusted EBITDA1 of $7.8 million compared to $7.6 million in Q4 2022.
  • Free cash flow1 generated was $4.0 million compared to $1.2 million in Q4 2022.
  • Repurchased common shares throughout the fourth quarter at a weighted average of $0.40, for total consideration of $453. The total amount of common shares repurchased and cancelled during the fourth quarter of 2023 represents 1.0% of the total issued and outstanding common shares of the Company.

HIGHLIGHTS FOR THE YEAR ENDED DECEMBER 31, 2023

  • Net revenue of $247.3 million, an increase of 13% from $218.4 million in 2022, is the highest net revenue achieved in the Company’s operating history.
  • Adjusted EBITDA of $37.9 million compared to $32.2 million in 2022, also the highest in the Company’s history.
  • Net revenue growth of 26% in Environmental Services which more than offset a 7% reduction in Environmental Consulting.
  • Reported net income of $2.5 million in 2023 compared to $2.0 million in the prior year.
  • Reduced loans and borrowings during the year by $13.3 million.
  • Free cash flow generated was $17.8 million compared to $12.6 million in 2022.

 

OUTLOOK

2023 was a solid year for Vertex with the results being driven by operational efficiencies, organic growth, and realized synergies from previous acquisitions. Our outlook for 2024 is that activity levels will remain steady for both of our operating segments across North America. In addition to our new United States locations providing more opportunities, there are multiple major capital projects in industries such as midstream, utilities/telecommunications, and municipal infrastructure planned for 2024 and 2025.

Throughout 2024 Vertex will remain focused on increasing shareholder value, by continuing to drive operational efficiencies, repay debt and enhance our suite of services to meet customer demands with a disciplined approach.  On August 25, 2023, Vertex received approval from the TSX Venture Exchange (“TSXV”) to commence a NCIB to repurchase up to 5% of the issued and outstanding Common Shares as of August 18, 2023. As of the date of this MD&A, Vertex has repurchased and cancelled 2,934,800 common shares under its NCIB at an average share price of $0.40. The Board of Directors and management believe there is a substantive disparity between Vertex’s share price and the fundamental value of the business.  Therefore, Vertex will continue to assess capital allocations on it’s NCIB against other capital expenditures to enhance customer desirability of our services.

Vertex’s outlook is positive with customer demand supporting maintenance and development activity as well as the continued strengthening of environmental legislation in both Canada and the United States resulting in increased asset retirement liabilities being addressed.  Further government and industry initiatives around energy transition and lowering carbon intensity are providing Vertex with numerous opportunities for our solutions and services.  Vertex continues to demonstrate the strength and resiliency of our business model and is in an enviable position to facilitate further growth through cross-selling of our services throughout the life-cycle of our client’s projects in a variety of industries.

 

ABOUT VERTEX

Since 1962, Vertex has been a leading North American provider of environmental services. Headquartered in Sherwood Park, Alberta, Vertex employs a staff of approximately 1,000 employees and lease operators that provide services to help clients achieve their developmental and operational goals. From initial site selection, consultation and regulatory approval, through construction, operation and maintenance, to conclusion and environmental cleanup, Vertex provides a wide array of services to customers operating in industries such as energy, mining, utilities, private development, public infrastructure, construction, telecommunications, forestry, agriculture and government.

Vertex principally operates in Canada with select locations in the United States.

 

For further information please contact:

Terry Stephenson, CEO, or Sherry Bielopotocky, CFO at 780-464-3295

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

 

NON-IFRS FINANCIAL MEASURES

This release includes certain terms or performance measures that are not defined under International Financial Reporting Standards (“IFRS”), including “Adjusted EBITDA”. The data presented is intended to provide additional information that should not be considered in isolation or as a substitute measure of performance prepared in accordance with IFRS. The non-IFRS measures should be read in conjunction with the Company’s financial statements and accompanying notes.

  1. “Adjusted EBITDA” is a non-IFRS financial measure which is calculated by adjusting net income (loss) for the sum of income taxes, finance costs including interest accretion on lease liabilities, depreciation of property and equipment and right of use assets, amortization of intangible assets, share-based compensation, restructuring costs and impairment. The Company uses Adjusted EBITDA as an indicator of its principal business activities operational performance prior to consideration of how its activities are financed and the impact of taxation, non-cash depreciation and amortization, restructuring costs and other non-cash expenses such as impairments required under IFRS. Adjusted EBITDA does not have a standardized meaning prescribed by IFRS and is not necessarily comparable to similar measures provided by other companies. Adjusted EBITDA is used by many analysts as an important analytical tool and the management of Vertex believes it is useful for providing readers with additional clarity on Vertex’s operational performance. This measure is also considered important by the Company’s lenders in determining compliance by the Company with the financial covenants under its lending arrangements.
  2. “Free cash flow” is a non-IFRS financial measure. The most directly comparable GAAP measure for free cash flow is cash flow from operating activities.  A summary of the reconciliation of cash flow from operating activities to free cash flow is set forth in the table below.  Management uses the term “free cash flow” for its own performance measure and to provide shareholders and potential investors with a measurement of the Company’s efficiency and its ability to generate the cash necessary to fund its future growth expenditures, to repay debt and provide shareholder returns.
  3. Adjusted Working Capitalis a non-IFRS financial measure which is calculated by reducing current liabilities by the current portion of loans and borrowings, lease liabilities and other liabilities. Adjusted working capital is used by Vertex to monitor its capital structure, liquidity, and it’s ability to fund current operations.
  4. Adjusted EBITDA per share, basic and diluted” is a non-financial measure which is calculated by dividing adjusted EBITDA by the weighted average shares outstanding – basic and diluted.

Reconciliations of adjusted EBITDA, free cash flow and adjusted working capital are provided in the following tables.

ADJUSTED EBITDA
Three Months ended
December 31,
Three Months ended
December 31,
2023202220232022
Net income (loss) for the period(1,295)(1,295)2,4582,042
Add:
Depreciation and amortization6,4616,16623,61920,376
Finance costs2,7282,97011,4868,875
Share-based compensation1450164200
Income tax expense (recovery)(107)(335)205692
ADJUSTED EBITDA7,7727,55637,93232,185
FREE CASH FLOW
Cash flows from operating activities6,17811,61344,95021,441
Changes in non-cash operating working capital items2,409(4,111)(6,874)9,848
Maintenance capex(3,436)(3,868)(15,168)(12,282)
Cash interest(1,733)(2,119)(8,003)(6,561)
Depreciation of right of use assets - real property(1,332)(1,113)(4,860)(3,549)
Cash taxes(69)-2628
Proceeds from disposal of property and equipment2,0257577,7393,633
Free cash flow4,0421,15917,81012,558
ADJUSTED WORKING CAPITAL
December 31,
20232022
Current assets70,40882,073
Current liabilities, less69,17074,176
Current portion of loans and borrowings(14,701)(18,508)
Current portion of lease liabilities(10,722)(9,711)
Current portion of other liabilities(1,532)(2,636)
Current liabilities (excluding current portion of loans and borrowings, lease liabilities, and other liabilities)42,215(2,636)
Adjusted working capital28,193(38,752)

 

Forward-Looking Information

This Press Release contains forward-looking statements and information (“forward-looking statements”) within the meaning of applicable Canadian securities laws. The forward-looking statements contained in this Press Release are based on the expectations, estimates and projections of management of Vertex as of the date of this Press Release unless otherwise stated. The use of any of the words “believe”, “expect”, “anticipate”, “contemplate”, “target”, “plan”, “outlook”, “potential”, “estimated”, “intends”, “continue”, “may”, “will”, “should” and similar expressions are intended to identify forward-looking statements. More particularly and without limitation, this Press Release contains forward-looking statements concerning anticipated financial performance; the outlook for 2024; the Company’s ability to grow profitably; sufficiency of working capital; and with respect to Vertex’s ability to meet evolving customer demands.

Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. Investors are cautioned that forward-looking statements are based on the opinions, assumptions and estimates of management considered reasonable at the date the statements are made, and actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to the risks associated with the industries in which Vertex operates in general, such as:

  • Ability to access sufficient capital from internal and external sources
  • Ability to market to new customers
  • Ability to obtain equipment in a timely and cost-efficient manner
  • Ability to secure work
  • Adjustments and cancellations of backlog
  • Changes in legislation, including but not limited to tax laws and environmental regulations
  • Collection of recognized revenue
  • Commodity price, interest rate and exchange rate fluctuations
  • Competition, ethics, and reputational risks
  • Compliance with environmental laws risks
  • Cyber-security risks
  • Economy and cyclicality
  • Global pandemics
  • Health, safety and environmental risks
  • Industry and inherent project delivery risks
  • Insurance risk
  • Joint venture risk
  • Labour matters
  • Litigation risk
  • Loss of key management; ability to hire and retain qualified and capable personnel
  • Maintaining safe worksites
  • Operational risks
  • Potential for non-payment and credit risk and ongoing financing availability
  • Third party credit risk
  • Unforeseen weather conditions
  • Unanticipated shutdowns, work stoppages, and lockouts
  • Volatility of market trading

Readers are cautioned that the foregoing list of factors is not exhaustive. Additional information on other factors that could affect the operations or financial results of the parties, and the combined company are included in reports on file with applicable securities regulatory authorities, including but not limited to: Annual Information Form for the year ended December 31, 2023, which may be accessed on Vertex’s SEDAR+ profile at www.sedarplus.ca.

The forward-looking statements contained in this Press Release are made as of the date hereof and the Company undertakes no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as, and to the extent required by applicable securities laws.

 

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