Dexterra Announces Results for Q3 2022 and Declares Dividend

Highlights

• Revenue of $259.8 million for Q3 2022 which increased $57.0 million, or 28%, compared with Q3 2021 and $25.9 million or 11% compared to Q2 2022. The increase of revenue in Q3 2022 is primarily attributed to the continued growth in IFM and WAFES. This includes additional revenue of $25.2 million generated through the acquisitions of Dana Hospitality and the assets of Tricom Group (collectively the "Q1 IFM Acquisitions") compared to Q3 2021 as well as an increase in WAFES revenue due to increased activity levels and successful rebids on contracts;
  
  
• Dexterra Group Inc.'s ("Dexterra" or the "Corporation") Adjusted EBITDA for Q3 2022 was $20.1 million compared to $13.6 million in Q2 2022 and $22.4 million in Q3 2021. The Q3 2022 results primarily reflect the $3.9 million improvement in Modular results compared to Q2 2022 and increased WAFES activity levels. The EBITDA decrease in Q3 2022 compared to Q3 2021 is primarily related to lower Modular results of $1.9 million. The results also reflect the impact of inflation on all business units which is being actively managed;
  
  
• Consolidated net earnings of $5.2 million for Q3 2022 compared to consolidated net earnings of $7.8 million in Q3 2021. The consolidated net earnings for the nine months ended September 30, 2022 were $6.6 million compared to consolidated net earnings of $20.5 million in 2021. The decrease is mainly attributable to the lower Modular results and the inclusion of $9.1 million in Canada Emergency Wage Subsidy ("CEWS") for the nine-month period ended September 30, 2021;
  
  
• Net debt decreased to $111.6 million at Q3 2022 compared to $128.7 million at Q2 2022. For the three months ended September 30, 2022, Free Cash Flow was $23.6 million. The Corporation expects its Free Cash Flow conversion to EBITDA to exceed 50% for fiscal 2022; and
  
  
• Dexterra declared a dividend for Q4 2022 of $0.0875 per share for shareholders of record at December 31, 2022, to be paid January 16, 2023.

This news release contains certain measures and ratios, such as Adjusted EBITDA, Adjusted EBITDA as a % of revenue, Adjusted EBITDA excluding CEWS as a % of revenue, Free Cash Flow and Backlog, that do not have any standardized meaning as prescribed by GAAP and, therefore, are considered non-GAAP measures that do not have a prescribed meaning under IFRS. The method of calculating these measures may differ from other entities and accordingly, may not be comparable to measures used by other entities. See "Non-GAAP measures" and "Reconciliation of Non-GAAP measures" of the Corporation's MD&A for the three and nine months ended September 30, 2022 and 2021 for details which is incorporated by reference herein.

Toronto, Ontario--(Newsfile Corp. - November 8, 2022) - Dexterra Group Inc. (TSX: DXT)

Third Quarter Financial Summary

(1) Please refer to the "Non-GAAP measures" section for the definition of Adjusted EBITDA, Adjusted EBITDA as a % of revenue and Free Cash Flow and to the "Reconciliation of non-GAAP measures" section for the related calculations. Adjusted EBITDA as a % of revenue for the nine months ended September 30, 2021 excludes CEWS of $9.1 million.
(2) Adjusted EBITDA, Net earnings and Free Cash Flow includes CEWS of $9.1 million for the nine months ended September 30, 2021.

Third Quarter Operations Analysis

(1) Includes CEWS of $9.1 million for the nine months ended September 30, 2021.
(2) YTD 2021 excludes CEWS of $9.1 million.

Integrated Facilities Management ("IFM")

For Q3 2022, IFM revenues were $71.4 million and increased by $32.3 million, or 83%, from the $39.1 million in Q3 2021. The increase primarily reflects the Q1 IFM Acquisitions, which contributed $25.2 million in revenue in Q3 2022. Excluding the acquisitions, revenue increased by $7.2 million or 18% compared to Q3 2021 due to new business wins and increased service activities at airports. The business unit was also successful in rebids of significant contracts. In addition, business is expected to increase in Q4 2022 due to the resurgence in the education sector to post pandemic levels which started in September 2022. Adjusted EBITDA, as a percentage of revenue, was 4.0% for Q3 2022, which is lower than the 8.0% recorded in Q3 2021 and 6.1% in Q2 2022. The decrease in margin is primarily a result of continued inflationary pressures for which there is a lag in passing on costs to the customer, the seasonality of the education sector business and integration and cost review of the Q1 IFM Acquisitions which resulted in lower profitability by approximately $1.5 million in Q3. For the nine months ended September 30, 2022, IFM revenues were $200.8 million and increased primarily due to the Q1 IFM Acquisitions which contributed $75.3 million year to date in revenue. Adjusted EBITDA as a percentage of revenue for this business unit was 5.4% on a year-to-date basis which is lower than 7.8% in the same period in 2021 for the same reasons outlined above. The lower margins in Q3 2022 are expected to be temporary in nature.

Workforce Accommodations, Forestry and Energy Services ("WAFES")

Revenue from the WAFES business unit for Q3 2022 was $132.6 million, an increase of $13.9 million compared to Q3 2021 and a $13.5 million increase compared to Q2 2022. WAFES revenue performance was strong in Q3 2022 compared to Q3 2021 due to the $6.9 million increase in catering, infrastructure install, and rental activities in Western Canada which resulted in increased occupancy and utilization across all services and a $7.0 million increase in revenue in Energy Services from higher mat sales and increased trucking and install work. Increases were partially offset by the $4 million reduction in fire support activity in 2022 due to lower activity. Revenue from the WAFES business unit for the nine months ended September 30, 2022 was $366.8 million with the increase attributable to growth in catering, infrastructure and install activities. Revenues from Energy Services were $19.6 million and $44.4 million for the three and nine months ended September 30, 2022. The stronger Q3 year-to-date 2022 results reflect overall strong activity in the natural resources sector and new client wins. Adjusted EBITDA as a percentage of revenue is 15.7%, compared to 17.6% in Q3 2021 and 14.5% on a year-to-date basis. The lower margin as compared to Q3 2021 is primarily due to the reduction in fire support activity, revenue mix and inflationary impacts resulting from increased cost of food, fuel, and utilities which are passed onto customers over time. For the quarter ended September 30, 2022, support services constituted 47% of the total revenue mix which was consistent with Q2 2022.

Modular Solutions

Modular Solutions business unit revenues for Q3 2022 were $54.5 million compared to $45.1 million in Q3 2021 and $49.6 million in Q2 2022.

Adjusted EBITDA for Q3 2022 was $0.9 million, compared to $2.8 million in Q3 2021 and a loss of $3.0 million in Q2 2022 that was primarily related to material and subcontractor cost increases on fixed priced contracts and $1.8 million of start-up costs for new products. Modular generated 2% EBITDA margin in Q3 2022. Margins are expected to continue to improve in Q4 2022 and return to normal levels by mid-2023 through business turnaround initiatives and as the impact of inflationary pressures experienced throughout 2022 is expected to dissipate as contracts in the backlog are completed in the remainder of 2022 and new contracts reflect current market prices. Revenue for the nine months ended September 30, 2022 was $147.4 million, an increase of $12.2 million over the prior year period. YTD EBITDA for 2022 was impacted by the same items as noted above.

Liquidity and Capital Resources

For the three and nine months ended September 30, 2022, cash generated by operating activities was $29.8 million and $33.2 million, respectively, compared to cash generated of $1.8 million and $39.9 million in the same periods of 2021 (nine months ended September 30, 2021 included CEWS of $9.1 million). The results for the quarter represent improved cash collections and release of significant customer holdbacks. Debt will be reduced with Free Cash Flow generated by operations in Q4 2022. The conversion of EBITDA to Free Cash Flow for 2022 is expected to exceed 50%.

Debt was $111.6 million at September 30, 2022 and decreased when compared to $128.7 million at Q2 2022. Debt increased in 2022 by approximately $50 million for the Q1 IFM Acquisitions. The Corporation's financial position and liquidity remain strong with $77.0 million unused capacity on its credit lines at September 30, 2022.

Additional Information

A copy of Dexterra's Condensed Consolidated Interim Financial Statements ("Financial Statements") for the three and nine months ended September 30, 2022 and 2021 and related Management's Discussion and Analysis ("MD&A") have been filed with the Canadian securities regulatory authorities and are available on SEDAR at sedar.com and Dexterra's website at dexterra.com. The Financial Statements have been prepared in accordance with International Financial Reporting Standards and the reporting currency is in Canadian dollars.

Conference Call

Dexterra will host a conference call and webcast to begin promptly at 8:30 Eastern time on November 9, 2022 to discuss the third quarter results.

To access the conference call by telephone the conference call dial in number is 1-800-319-4610.

A live webcast of the conference call will be accessible on Dexterra Group's website at dexterra.com/investor-presentations-events/ by selecting the webcast link. An archived recording of the conference call will be available approximately one hour after the completion of the call until December 9, 2022 by dialing 1-855-669-9658, passcode 9403.

About Dexterra

Dexterra employs more than 8,500 people, delivering a range of support services for the creation, management, and operation of infrastructure across Canada.

Powered by people, Dexterra brings best-in-class regional expertise to every challenge and delivers innovative solutions, giving clients confidence in their day-to-day operations. Activities include a comprehensive range of integrated facilities management services, industry leading workforce accommodation solutions, innovative modular building capabilities, and other support services for diverse clients in the public and private sectors.

For further information contact:

Drew Knight, CFO
Head office: Airway Centre, 5915 Airport Rd., 4th Floor Mississauga, Ontario L4V 1T1
Telephone: (416) 767-1148

You can also visit our website at dexterra.com

Reconciliation of non-GAAP measures

The following provides a reconciliation of non-GAAP measures to the nearest measure under GAAP for items presented throughout the News Release.

(1) Includes CEWS of $9.1 million for the nine months ended September 30, 2021.
(2) Includes settlement of a CEWS claim, severance costs and the earn-out relating to the Tricom Group acquisition.
(3) Contract loss provisions are related to contractual dispute and remediation work on pre-acquisition contracts and claims from the Acquisition of Horizon North Logistics Inc. in May 2020 and are recorded on a net basis. The work on these contracts is substantially complete with final payments to be negotiated. There were no corresponding amounts in prior periods ended September 30, 2021.

^{No CEWS was recorded in Q3 2021 or in 2022 so the Adjusted EBITDA and Adjusted EBITDA excluding CEWS numbers are the same.}

Forward-Looking Information

Certain statements contained in this news release may constitute forward-looking information under applicable securities law. Forward-looking information may relate to Dexterra's future outlook and anticipated events, business, operations, financial performance, financial condition or results and, in some cases, can be identified by terminology such as "continue"; "forecast"; "may"; "will"; "project"; "could"; "should"; "expect"; "plan"; "anticipate"; "believe"; "outlook"; "target"; "intend"; "estimate"; "predict"; "might"; "potential"; "continue"; "foresee"; "ensure" or other similar expressions concerning matters that are not historical facts. In particular, statements regarding Dexterra's future operating results and economic performance, including COVID-19 related impacts and the impacts of the Q1 IFM Acquisitions; management expectations of market sector recoveries, its leverage, Free Cash Flow, NRB Modular Solutions backlog and revenue, and its objectives and strategies are forward-looking statements. These statements are based on certain factors and assumptions, including expected growth, market recovery, results of operations, performance and business prospects and opportunities regarding Dexterra, which Dexterra believes are reasonable as of the current date. While management considers these assumptions to be reasonable based on information currently available to Dexterra, they may prove to be incorrect. Forward-looking information is also subject to certain known and unknown risks, uncertainties and other factors that could cause Dexterra's actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking information, including, but not limited to: the ability to retain clients, renew existing contracts and obtain new business; an outbreak of contagious disease that could disrupt its business; the highly competitive nature of the industries in which Dexterra operates; reliance on suppliers and subcontractors; cost inflation; volatility of industry conditions could impact demand for its services; a reduction in the availability of credit could reduce demand for Dexterra's products and services; Dexterra's significant shareholder may substantially influence its direction and operations and its interests may not align with other shareholders; its significant shareholder's 49% ownership interest may impact the liquidity of the common shares; cash flow may not be sufficient to fund its ongoing activities at all times; loss of key personnel; the failure to receive or renew permits or security clearances; significant legal proceedings or regulatory proceedings/changes; environmental damage and liability is an operating risk in the industries in which Dexterra operates; climate changes could increase Dexterra's operating costs and reduce demand for its services; liabilities for failure to comply with public procurement laws and regulations; any deterioration in safety performance could result in a decline in the demand for its products and services; failure to realize anticipated benefits of acquisitions and dispositions; inability to develop and maintain relationships with Indigenous communities; the seasonality of Dexterra's business; inability to restore or replace critical capacity in a timely manner; reputational, competitive and financial risk related to cyber-attacks and breaches; failure to effectively identify and manage disruptive technology; economic downturns can reduce demand for Dexterra's services; its insurance program may not fully cover losses. Additional risks and uncertainties are described in Note 21 of the Corporation's Consolidated Financial Statements for the years ended December 31, 2021 and 2020 contained in its most recent Annual Report filed with securities regulatory authorities in Canada and available on SEDAR at sedar.com. The reader should not place undue importance on forward-looking information and should not rely upon this information as of any other date. Dexterra is under no obligation and does not undertake to update or alter this information at any time, except as may be required by applicable securities law.

To view the source version of this press release, please visit https://www.newsfilecorp.com/release/143552