TORONTO, Nov. 10, 2020 /CNW/ - Andlauer Healthcare Group
Inc. (TSX: AND) ("AHG" or the "Company") today reported its
financial results for the three and nine-month periods ended
September 30, 2020 ("Q3 2020" and
"YTD 2020", respectively).
Q3 2020 Summary
- Revenue was $75.8 million in Q3
2020, an increase of 7.0% compared to $70.8
million for the three months ended September 30, 2020 ("Q3 2019");
- Operating income was $13.2
million, an increase of 16.3% compared to $11.3 million in Q3 2019;
- Net income and comprehensive income was $8.6 million, an increase of 10.7% from
$7.8 million in Q3 2019;
- EBITDA(1) increased 13.0% to $20.2 million, compared to $17.9 million in Q3 2019, despite the absorption
of approximately $1.2 million of
incremental costs related to share-based compensation arrangements
and the transition to a public company;
- EBITDA Margin(1) was 26.6% in Q3 2020, compared to
25.2% in Q3 2019;
- AHG successfully implemented its new 220,000 square-foot
state-of-the-art logistics and distribution facility in
Brampton, Ontario, commencing
operations at the new facility in July
2020;
- AHG continued to maintain service levels across it operations,
while monitoring the safety measures implemented in response to
COVID-19 to prioritize the health and safety of its personnel,
clients, and suppliers; and,
- Subsequent to Q3 2020, on October 5,
2020, AHG announced the completion of two tuck-in
acquisitions (TDS Logistics Ltd. and McAllister Courier Inc.) for a
combined purchase price of $15.9
million.
"We returned to a more normalized operating environment in the
quarter as government restrictions related to the COVID-19 pandemic
were lifted or eased starting last quarter. We generated revenue
growth in four of our five product lines primarily due to increased
volumes. Our operating capacity in our packaging division continues
to be temporarily constrained by the COVID-19 related safety
measures we put in place to protect our personnel, clients and
suppliers. Growth in our EBITDA, EBITDA margins and operating
income for the quarter reflects our increased overall revenue
combined with effective productivity and cost management," said
Michael Andlauer, Chief Executive
Officer of AHG. "Looking ahead, we expect to generate continued
growth supported by steady and growing client volumes, the opening
of our new facility in Brampton,
Ontario this past quarter and our recent acquisitions of
McAllister Courier and TDS
Logistics, which will increase the reach of our services and
further expand our market presence in Ontario. We continue to evaluate other
complementary acquisition opportunities."
Selected Consolidated Financial Summary
($CAD
000s)
|
Three months
ended
September 30,
|
Nine months
ended
September 30,
|
2020
|
|
2019
|
|
Variance
|
|
2020
|
|
2019
|
|
Variance
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
Logistics &
Distribution
|
25,682
|
|
21,707
|
|
18.3
|
%
|
|
70,909
|
|
65,647
|
|
8.0
|
%
|
Packaging
|
4,261
|
|
4,701
|
|
(9.4)
|
%
|
|
15,456
|
|
16,415
|
|
(5.3)
|
%
|
Healthcare Logistics
Segment
|
29,943
|
|
26,408
|
|
13.4
|
%
|
|
86,365
|
|
82,062
|
|
5.2
|
%
|
Ground
Transportation
|
42,946
|
|
41,609
|
|
3.2
|
%
|
|
128,779
|
|
123,355
|
|
4.4
|
%
|
Air Freight
Forwarding
|
5,736
|
|
4,848
|
|
18.3
|
%
|
|
16,391
|
|
14,420
|
|
13.7
|
%
|
Dedicated and Last Mile
Delivery
|
6,357
|
|
4,015
|
|
58.3
|
%
|
|
18,816
|
|
11,861
|
|
58.6
|
%
|
Intersegment
Eliminations
|
(9,177)
|
|
(6,036)
|
|
52.0
|
%
|
|
(22,643)
|
|
(18,311)
|
|
23.7
|
%
|
Specialized
Transportation Segment
|
45,862
|
|
44,436
|
|
3.2
|
%
|
|
141,343
|
|
131,325
|
|
7.6
|
%
|
Total
Revenue
|
75,805
|
|
70,844
|
|
7.0
|
%
|
|
227,708
|
|
213,387
|
|
6.7
|
%
|
Operating
expenses
|
62,240
|
|
59,525
|
|
4.6
|
%
|
|
191,050
|
|
179,742
|
|
6.3
|
%
|
Operating
income
|
13,165
|
|
11,319
|
|
16.3
|
%
|
|
36,658
|
|
33,645
|
|
9.0
|
%
|
Net income and
comprehensive income
|
8,596
|
|
7,763
|
|
10.7
|
%
|
|
23,845
|
|
23,270
|
|
2.5
|
%
|
Select financial
metrics
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA
(1)
|
20,190
|
|
17,872
|
|
13.0
|
%
|
|
56,948
|
|
52,825
|
|
7.8
|
%
|
EBITDA Margin
(1)
|
26.6%
|
|
25.2%
|
|
140
bps
|
|
25.0%
|
|
24.8%
|
|
20 bps
|
Q3 2020 Financial Results
Revenue for Q3 2020 totaled $75.8
million, an increase of 7.0% compared with Q3 2019. Revenue
in Q3 2020 reflects the return of certain healthcare activities
such as elective surgical procedures and the re-opening of clinics
which use certain products of AHG's clients, including dental
clinics, optometric clinics, animal health clinics and veterinary
hospitals, as restrictions placed on such activities during the
second quarter of 2020 in response to the COVID-19 pandemic were
lifted by provincial public health authorities. This resulted in
strong volumes in Q3 2020 for the Company's logistics and
distribution, and ground transportation product lines. Growth in
logistics and distribution revenue in Q3 2020 also reflects the
implementation of a significant new client contract and the opening
of AHG's new 220,000 square-foot facility in Brampton, Ontario in July 2020. AHG's air freight forwarding and
dedicated and last mile delivery product lines generated
year-over-year growth of 18.3% and 58.3%, respectively. Growth in
air freight forwarding revenue was partially attributable to
contractual price increases, with the remaining increase reflecting
year-over-year volume growth of approximately 15% as customers
expedited shipments in order to adjust to more normal levels of
national demand as provincial governments eased COVID-19 related
restrictions. Revenue growth in dedicated and last mile delivery
reflects expanded client routes which commenced in the second half
of 2019. The 9.4% decline in packaging revenue for Q3 2020 was
primarily attributable to measures that AHG implemented in
March 2020 to provide for the safety
of its employees in connection with the COVID-19 pandemic,
including limiting the number of associates in its operations to
allow for physical distancing in accordance with public health
guidelines, which has temporarily reduced operating capacity.
Cost of transportation and services for Q3 2020 was $30.8 million, or 40.6% of revenue, compared with
$29.6 million, or 41.7% of revenue,
for Q3 2019. The lower cost of transportation and services
operating ratios for Q3 2020 reflect lower fuel costs in line with
the decrease in revenue related to fuel, and savings achieved by
the Company's effective management of its variable costs as volume
increased in the quarter.
Direct operating expenses for Q3 2020 were $18.0 million, or 23.7% of revenue, compared with
$18.3 million, or 25.8% of revenue,
for Q3 2019. AHG incurred certain incremental costs in connection
with its COVID-19 response measures, including additional cleaning
activities for its facilities and equipment, expenses for personal
protective equipment, and other measures impacting productivity;
however, these incremental costs were mitigated through effective
productivity management and other cost controls. During Q3 2020,
AHG continued to qualify for the Canada Emergency Wage Subsidy ("CEWS") program
in connection with its packaging operations. A total of
$0.9 million was recognized as a
reduction of direct operating expense for Q3 2020 as a result of
support received from the CEWS program.
Selling, General and Administrative ("SG&A") expenses for Q3
2020 were $6.8 million, or 9.0% of
revenue, compared with $5.1 million,
or 7.2% of revenue, for Q3 2019. SG&A expenses for Q3 2020
include share-based compensation arrangements of approximately
$0.7 million, which are incremental
to the historical SG&A expenses reflected in the Company's
operating income. These share-based compensation arrangements
relate to the initial stock option grants to AHG's senior
management team and deferred share unit grants made to its board of
directors, which are intended to provide further alignment with
shareholders. A further $0.5 million
of cost is included in Q3 2020 SG&A expenses for incremental
costs associated with being a public company.
Operating income for Q3 2020 was $13.2
million, an increase of 16.3% compared with $11.3 million for Q3 2019. Net income and
comprehensive income for Q3 2020 increased by 10.7% to $8.6 million, from $7.8
million for Q3 2019. Higher segment net income before
eliminations for both our healthcare logistics operating segment
and our specialized transportation operating segment contributed to
the increased profitability on a consolidated basis.
Earnings before interest, taxes, depreciation and amortization
("EBITDA")(1) for Q3 2020 increased by 13.0%, to
$20.2 million, from $17.9 million for Q3 2019. The increase in
EBITDA(1) was due to the factors discussed above
and include approximately $1.2
million of incremental costs related to share-based
compensation arrangements and other public company costs not
incurred in Q3 2019. EBITDA Margin(1) for Q3 2020
was 26.6% compared with 25.2% for Q3 2019, as operating ratios for
the Company's two most significant operating costs (cost of
transportation and services and direct operating expenses) were
lower in Q3 2020 compared to Q3 2019.
Q3 2020 Dividend
The Company paid a dividend (encompassing the period from
July 1, 2020 to September 30, 2020) in the amount of $0.05 per subordinate voting share and multiple
voting share on September 11, 2020 to
shareholders of record as at September 30,
2020
Subject to financial results, capital requirements, available
cash flow, corporate law requirements and any other factors that
AHG's Board of Directors may consider relevant, it is the Company's
intention to declare a quarterly dividend of $0.05 per subordinate voting share and multiple
voting share on an ongoing basis.
Shares Outstanding
As at September 30, 2020, there
were 12,500,000 subordinate voting shares and 25,100,000 multiple
voting shares outstanding.
Financial Statements
AHG's unaudited interim condensed consolidated financial
statements and related Management's Discussion & Analysis
("MD&A") for Q3 2020 are available on the Company's website at
www.andlauerhealthcare.com and on the Company's profile on SEDAR at
www.sedar.com.
Conference call
Michael Andlauer, Chief Executive
Officer, and Peter Bromley, Chief
Financial Officer, will host a conference call for analysts and
investors on Wednesday, November 11,
2020 at 8:30 a.m. (ET). The
dial-in numbers for participants are (416) 764-8650 or (888)
664-6383. The call will be webcast live at:
www.andlauerhealthcare.com/presentations-events.
To access a replay of the conference call, dial (416) 764-8677
or (888) 390-0541, passcode: 713280 #. The replay will be available
until November 18, 2020. The webcast
will be archived on the Company's website following conclusion of
the call.
About AHG
AHG is a leading and growing supply chain management company
offering a robust platform of customized third-party logistics
("3PL") and specialized transportation solutions for the healthcare
sector. The Company's 3PL services include customized logistics,
distribution and packaging solutions for healthcare manufacturers
across Canada. AHG's specialized
transportation services, including air freight forwarding, ground
transportation, dedicated delivery and last mile services, provide
a one-stop shop for clients' healthcare transportation needs.
Through its complementary service offerings, available across a
coast-to-coast distribution network, the Company strives to
accommodate the full range of its clients' specialized supply chain
needs on an integrated and efficient basis. For more information on
AHG, please visit: www.andlauerhealthcare.com.
Forward-looking Information
This news release contains forward-looking information and
forward-looking statements (collectively, "forward-looking
information") within the meaning of applicable securities laws.
Forward-looking information may relate to the Company's future
financial outlook and anticipated events or results and may include
information regarding the Company's financial position, business
strategy, growth strategies, addressable markets, budgets,
operations, financial results, taxes, dividend policy, plans,
objectives and responses to the outbreak of COVID-19. Particularly,
information regarding the Company's expectations of future results,
performance, achievements, facility expansions, leases, platform
expansions, acquisitions, public company costs, payment of
dividends, prospects, financial targets or outlook, intentions,
opportunities or the potential impact of, and response measures to
be taken with respect to, COVID-19 is forward-looking information.
In some cases, forward-looking information can be identified by the
use of forward-looking terminology such as "plans", "targets",
"expects", "budget", "scheduled", "estimates", "outlook",
"forecasts", "projection", "prospects", "strategy", "intends",
"anticipates", "believes", "commencing" or variations of such words
and phrases or statements that certain actions, events or results
"may", "could", "would", "might", "will", "will be taken", "occur"
or "be achieved". In addition, any statements that refer to
expectations, intentions, projections or other characterizations of
future events or circumstances contain forward-looking information.
Statements containing forward-looking information are not
historical facts but instead represent management's expectations,
estimates and projections regarding future events or circumstances.
Such forward-looking statements are qualified in their entirety by
the inherent risks, uncertainties and changes in circumstances
surrounding future expectations which are difficult to predict and
many of which are beyond the control of the Company.
Forward-looking information is necessarily based on a number
of opinions, estimates and assumptions, including but not limited
to those assumptions described under the heading "Cautionary Note
Regarding Forward-Looking Information" in the MD&A for Q3 2020.
Forward-looking information is subject to known and unknown risks,
uncertainties, assumptions and other factors that may cause the
actual results, level of activity, performance or achievements to
be materially different from those expressed or implied by such
forward-looking information, including but not limited to factors
discussed under the heading "Risk Factors" in the Company's annual
information form dated March 12,
2020, which is available, together with the Q3 2020
MD&A, on the Company's profile on SEDAR at www.sedar.com. If
any of these risks or uncertainties materialize, or if the
opinions, estimates or assumptions underlying the forward-looking
information prove incorrect, actual results or future events might
vary materially from those anticipated in the forward-looking
information. Accordingly, investors should not place undue reliance
on forward-looking information, which speaks only as of the date
made. The forward-looking information contained in this news
release represents the Company's expectations as of the date of
this news release, and are subject to change after such date and
the Company disclaims any intention or obligation or undertaking to
update or revise any forward-looking information whether as a
result of new information, future events or otherwise, except as
required under applicable securities laws.
(1) Non-IFRS Financial Measures
This news release contains certain non-IFRS measures. These
measures are not recognized measures under IFRS, do not have a
standardized meaning prescribed by IFRS and are therefore unlikely
to be comparable to similar measures presented by other companies.
Rather, these measures are provided as additional information to
complement those IFRS measures by providing further understanding
of the Company's results of operations from management's
perspective. Accordingly, these measures should not be considered
in isolation nor as a substitute for analysis of the Company's
financial information reported under IFRS. AHG uses non-IFRS
measures including "EBITDA", and "EBITDA Margin". These non-IFRS
measures are used to provide investors with supplemental measures
of the Company's operating performance and thus highlight trends in
its core business that may not otherwise be apparent when relying
solely on IFRS financial measures. AHG also believes that
securities analysts, investors and other interested parties
frequently use non-IFRS measures in the evaluation of issuers. AHG
management also uses non-IFRS measures in order to facilitate
operating performance comparisons from period to period, to prepare
annual operating budgets and to determine components of management
compensation.
EBITDA
AHG defines EBITDA as net income (loss) and comprehensive
income (loss) for the period before: (i) income tax (recovery)
expense; (ii) interest income; (iii) interest expense; and (iv)
depreciation and amortization.
AHG believes EBITDA is a useful measure to assess the
Company's financial performance because it provides a more relevant
picture of operating results by excluding the effects of expenses
that are not reflective of the Company's underlying business
performance.
EBITDA Margin
AHG defines EBITDA Margin as EBITDA divided by revenue.
EBITDA Margin represents a measure of the Company's profitability
expressed as a percentage of revenue.
AHG believes EBITDA Margin is a useful measure to assess the
Company's financial performance because it helps quantify the
Company's ability to convert revenues generated from clients into
EBITDA.
For quantitative reconciliations of net income and
comprehensive income to EBITDA for Q3 2020 and Q3 2019, please see
"Reconciliation of Non-IFRS Measures" in the Company's MD&A for
Q3 2020, available on the Company's profile on SEDAR
(www.sedar.com), or the Company's website
(www.andlauerhealthcare.com).
SOURCE Andlauer Healthcare Group Inc.