Historically high second quarter Adjusted EBITDA ($7.5 million) and net earnings ($0.2 million).
Sherwood Park, Alberta, August 10, 2021 (TSXV:VTX) – Vertex Resource Group Ltd. (“Vertex” or the “Company”) reports its financial and operational results for the three and six months ending June 30, 2021. The following should be read in conjunction with the Management Discussion and Analysis (“MD&A”) and the condensed consolidated interim financials statements of Vertex for three and six months ended June 30, 2021, which are available on SEDAR at www.sedar.com.
Key financial results for the three and six months ended June 30, 2021 are as follows:
|Three months ended June 30,||Six months ended June 30,|
|(in thousands of Canadian Dollars)|
|2021||2020||% Change||2021||2020||% Change|
|Adjusted EBITDA (1)||7,539||6,702||12%||12,194||12,025||1%|
|Free cash flow (1)||6,519||7,058||-8%||10,483||11,815||-11%|
|Adjusted EBITDA per share, basic and diluted||0.08||0.07||12%||0.13||0.13||1%|
(1) See "Non-IFRS Financial Measures"
HIGHLIGHTS FOR THE THREE MONTHS ENDING JUNE 30, 2021
Historically high second quarter adjusted EBITDA of $7.5 million compared to $6.7 million in Q2 2020.
Historically high net income of $0.2 million in Q2 2021 compared to a net loss of $0.7 million in the same period of 2020.
The Company generated $38.1 million in revenues compared to $28.3 million in Q2 2020.
The Company extended the maturity date of its secured credit facilities by one year to May 31, 2023.
Free cash flow amounted to $6.5 million compared to $7.1 million in Q2 2020 (See Non-IFRS Financial Measures – Section 7.0).
HIGHLIGHTS FOR THE SIX MONTHS ENDING JUNE 30, 2021
Revenue increased to $71.1 million from $66.7 million for the same period in 2020.
Adjusted EBITDA amounted to $12.2 million for the six months of 2021 compared to $12.0 million in 2020.
Net loss for the six months ended June 30, 2021 was $0.4 million compared to $6.3 million the prior year.
Free cash flow amounted to $10.5 million compared to $11.8 million in H1 2020.
During the second quarter of 2021, we achieved the highest adjusted EBITDA and net earnings in our history for a Q2. The second quarter is typically the slowest of the year in Canada due to the spring break up period, however our operations showed a significant improvement over the 2020-quarter and exceeded our expectations for 2021. Vertex’s growing reputation, strong presence in various geographic areas, relationships with clients, and diversified complement of services have allowed it to withstand the economic pressures better than other service providers offering a single service or those that have operations in only one geographic region. Strong client relationships, effective safety programs, strong quality control, a reputation for meeting commitments, and various government support and stimulus programs mitigated the potential for material reductions in gross margins. Vertex continues to demonstrate the strength and resiliency of our business model and are in an enviable position to facilitate further growth as the economy continues to recover.
The remainder of 2021 is expected to see continued positive momentum for Vertex’s services, above the levels experienced in 2020 due to various government programs for reclamation and abandonment of environmental liabilities, improved capital spending across multiple industries, unfettered access to work sites, recovery of energy production, increased natural gas developments and commodity prices, reinstatement of major customer maintenance programs, and continued diversification. As our activity levels increase, we remain focused on managing our growth to protect our balance sheet. Our cost management strategies resulted in positive earnings once again this quarter and we continue to focus on generating strong levels of free cashflow.
Federal, provincial, and state governments across North America have identified investment in infrastructure as a key component of their economic recovery plans which will include the maintenance, upgrade and expansion of critical infrastructure. The new administration in the United States has pledged to enhance environmental and air quality regulations which should create further opportunities for our services. Additionally, new opportunities in the telecommunications, utilities and renewable energy sectors are expected to grow based on increased capital investment plans by several of our key customers.
Conservative private capital deployment and continued focus on debt reductions will likely delay the return to Pre-COVID activity until 2022 but activity in 2021 is expected to rebound from 2020. Consolidation of customers in the oil and gas sector is expected to continue and when combined with anticipated business failures, will provide further opportunities for Vertex to grow our market share.
Vertex’s vision of being a world-leading environmental services company has not changed. As an Environmental Service business, we believe we are uniquely positioned for ESG performance. We understand that we have a responsibility to maximize our Internal ESG performance and have made a corporate commitment to do so. More substantially, we understand that our Supply Chain opportunity to support the ESG initiatives of our customers has a significantly broader global impact. As such our ESG system design includes both an internal and supply chain focus. As our ESG journey evolves so too will our measurement and reporting, holding ourselves accountable to internal and supply chain metrics. Ultimately, our intent is to create business resiliency by becoming a primary source of executable ESG supply chain solutions for our customers.
Since 1962, Vertex has been a leading North American provider of environmental services. Headquartered in Sherwood Park, Alberta, Vertex employs a staff of approximately 750 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
NON-IFRS FINANCIAL MEASURES
This news 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.
“Adjusted EBITDA” is a non-financial measure which is calculated by adjusting net (loss) income 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 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.
“Free cash flow” is a non-financial measure which is calculated by reducing adjusted EBITDA by maintenance capital expenditures net of disposal proceeds.
Reconciliations of Adjusted EBITDA and free cash flow are provided in the MD&A under the heading “7.0 Non-IFRS Financial Measures”.
Any “financial outlook” or “future oriented financial information” in this press release, as defined by applicable securities laws, has been approved by management of Vertex. Such financial outlook or future oriented financial information is provided for the purpose of providing information about management’s current expectations and plans relating to the future. Readers are cautioned that reliance on such information may not be appropriate for other circumstances.
Certain statements contained in this news release constitute “forward-looking information”. When used in this document or by any of the Company’s management, the words “may”, “would”, “will”, “intend”, “plan”, “propose”, “anticipate” and “believe” are intended to identify forward-looking information. In particular, but without limiting the foregoing, this document contains forward-looking information and statements pertaining to the following: the Company’s key strategies, objectives and competitive strengths; anticipated expenses; growth opportunities in the Company’s reportable and operating segments in 2020; supply and demand for the Company’s services; activity levels in the energy industry and other industries in which the Company operates; future development activities; and the Company’s ability to retain existing clients and attract new business, particularly business outside of the energy industry. Such statements reflect the Company’s forecasts, estimates and expectations, as they relate to the Company’s current views based on its experience and expertise with respect to future events, and are subject to certain risks, uncertainties, and assumptions.
The forward-looking information and statements contained in this document reflect several material factors and expectations and assumptions of the Company, including, without limitation: that the Company will continue to conduct its operations in a manner consistent with past operations; positive future trends in revenue, gross profit margin, Adjusted EBITDA, Bank EBITDA and net income; the general continuance of current or, where applicable, assumed industry conditions; the mix of revenue from non-energy customers in 2021; pricing of the Company’s services; the Company’s ability to market successfully to current and new clients; the Company’s ability to obtain qualified personnel and equipment in a timely and cost-effective manner; the Company’s future debt levels; the impact of competition on the Company; the Company’s ability to obtain financing on acceptable terms; the general continuance of current or, where applicable, assumed industry conditions; the continuance of existing tax, royalty and regulatory regimes; the impact of seasonal weather conditions; client activity levels; anticipated market recovery; the Company’s anticipated business strategies and expected success; the Company’s ability to utilize its equipment; levels of deployable equipment; and future sources of funding for the Company’s capital program.
Factors that could cause the forward-looking information in this news release to change or to be inaccurate include, but are not limited to: volatility of the energy industry and other industries; dependence on customer contracts and market acceptance; the Company’s growth strategy may not achieve anticipated results; potential litigation claims; difficulty in attracting and retaining skilled personnel; adverse litigation judgments, settlements and exposure to liability resulting from legal proceedings could reduce profits or limit Vertex’s ability to operate; the market for Vertex’s products and services is subject to extensive government and regulatory approvals; health, safety and environment laws and regulations may require the Company to make substantial expenditures or cause it to incur substantial liabilities; the Company may fail to realize anticipated benefits of future acquisitions; Vertex’s indebtedness may adversely affects its financial flexibility and competitive position; competition in the industries in which Vertex operates; downturns in general economic and market conditions; operational hazards and unforeseen interruptions for which Vertex may not be adequately insured; positive covenants in Vertex’s material contracts could limit its ability to operate; third party credit risk; conservation measures and technological advances may reduce demand for hydrocarbons; loss of the Company’s information and computer systems or cyber-attacks; director and officer conflicts of interest; a reassessment by tax authorities of Vertex’s income calculations; volatility in the price of the Company’s common shares; and the risk factors set forth under the heading “Risk Factors” in the Company’s Annual Information Form filed under the Company’s SEDAR profile at www.sedar.com. The Company undertakes no obligation to update these forward-looking statements, other than as required by applicable law.
Neither the 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 press release.