Decisive Dividend Corporation Reports Financial Results for the Three and Six Months Ended June 30, 2023

KELOWNA, BC, Aug. 10, 2023 /CNW/ - Decisive Dividend Corporation (TSXV: DE) (the "Company" or "Decisive") today reported its financial results for the three and six months ended June 30, 2023.

Highlights of the Company's financial performance in Q2 2023 include the following:

• Consolidated sales increased 32% to $30.7 million in Q2 2023 compared to $23.2 million in Q2 2022.
• The quarterly sales increase brings consolidated sales for the first half of 2023 to $61.6 million, an increase of $19.7 million, or 47%, relative to the first half of 2022.
• Generated a record $5.3 million in Adjusted EBITDA* in Q2 2023, an increase of 57% relative to Q2 2022.
• Adjusted EBITDA* in the first half of 2023 of $10.2 million represents a 80% increase compared to the first half of 2022.
• Generated net profit of $1.2 million, or $0.07 per share, in Q2 2023, an increase of $0.3 million, consistent on a per share basis compared to Q2 2022.
• In the first half of 2023, generated net profit of $3.2 million, or $0.20 per share, an increase of $1.8 million, or $0.09 per share compared to the first half of 2022.
• Per share monthly dividend increased twice in 2023. First in March to $0.035 from $0.030 previously, and again to $0.040 effective for the August dividend payment. Represents an aggregate increase of 33% in the annualized dividend.
• Balance sheet strength and flexibility. Conservative leverage ratio of 1.5 times debt to Adjusted EBITDA ratio as of June 30, 2023, with $14.0 million available on the revolving term acquisition facility and $7.3 million available on the revolving term operating facility.

Selected Financial Highlights:

The following are selected financial highlights of Decisive for the three and six months ended June 30, 2023. All amounts are expressed in Canadian dollars. The Company's Unaudited - interim condensed consolidated financial statements as well as its management's discussion and analysis ("MD&A") are posted on SEDAR and on Decisive's website (www.decisivedividend.com).

(Stated in thousands of dollars, except per share amounts)
	For the three months ended								For the six months ended
June 30,		2023			2022		Change			2023			2022		Change
Sales	$	30,706		$	23,189		32 %		$	61,559		$	41,878		47 %
Gross profit		11,499			7,756		48 %			22,620			13,954		62 %
Gross profit %		37 %			33 %					37 %			33 %
Adjusted EBITDA*		5,266			3,344		57 %			10,159			5,650		80 %
Per share basic		0.31			0.27		15 %			0.63			0.46		38 %
Profit before tax		1,911			1,245		53 %			4,595			2,060		123 %
Profit		1,201			884		36 %			3,167			1,396		127 %
Per share basic		0.07			0.07		0 %			0.20			0.11		82 %
Per share diluted		0.06			0.07		-14 %			0.18			0.11		64 %
Free cash flow*		3,080			1,990		55 %			6,058			3,275		85 %
Per share basic		0.18			0.16		13 %			0.38			0.27		42 %
Free cash flow less maintenance capital*		2,729			1,698		61 %			5,218			2,756		89 %
Per share basic		0.16			0.14		18 %			0.33			0.22		45 %
Dividends declared		1,829			1,132		62 %			3,255			2,044		59 %
Per share basic		0.11			0.09		18 %			0.20			0.17		22 %
For the trailing twelve month period ended June 30,										2023			2022
Dividend payout ratio*										59 %			86 %

* Adjusted EBITDA, Free Cash Flow, Free Cash Flow Less Maintenance Capital, and Dividend Payout Ratio are not recognized financial measures under International Financial Reporting Standards (IFRS) and therefore may not be comparable to similar measures presented by other issuers, but are used by management to assess the performance of the Company and its segments. A reader should not place undue reliance on any Non-IFRS financial measures. See "Non-IFRS Financial Measures" later in this press release for detailed descriptions of these measures and reconciliations of applicable IFRS measures to non-IFRS measures.

Q2 2023 Highlights:

• Consolidated sales increased 32% to $30.7 million compared to $23.2 million in Q2 2022.
• Consolidated gross profit increased 48% to $11.5 million from $7.8 million in Q2 2022.
• Consolidated gross profit percentages increased to 37% from 33% in Q2 2022.
• Consolidated Adjusted EBITDA* increased to $5.3 million, up 57% relative to Q2 2022. 
• In the finished product segment, the two businesses acquired since Q2 2022, ACR and Capital I, each contributed meaningfully to the overall 37% increase in segment sales in the quarter. Traditional seasonality more than offset pricing increases for Blaze King and overall sales decreased 5% relative to Q2 2022. Slimline sales decreased 25% compared to Q2 2022, and Marketing Impact sales were consistent with Q2 2022.
• In the component manufacturing segment, newly acquired businesses Micon and Procore contributed to the overall 26% increase in segment sales in the quarter. Additionally, Unicast sales increased 9%, Hawk sales were consistent with lower seasonal volumes, and Northside sales increased 31% compared to Q2 2022. Margin enhancing activities led to increased gross profit percentages in the quarter for the segment, driving the above noted consolidated gross profit percentage increase as well.
• Consolidated net profit in the quarter was $1.2 million, or $0.07 per share, compared to $0.9 million, or $0.07 per share, in Q2 2022.
• Consolidated free cash flow* increased to $3.1 million, up 55% relative to Q2 2022.

2023 Year-to-Date Highlights:

• Consolidated sales increased 47% to $61.6 million, compared to $41.9 million in the first half of 2022.
• Consolidated gross profit increased 62% to $22.6 million from $14.0 million in the first half of 2022.
• Consolidated gross profit percentages increased to 37% from 33% in the first half of 2022, which was driven primarily by margin enhancing activities in the component manufacturing segment.
• Consolidated Adjusted EBITDA* increased to $10.2 million, up 80% relative to the first half of 2022, driven by the above noted increases in sales and gross profit. 
• The five businesses acquired from the beginning of 2022 to the end of June 2023, contributed meaningfully to the increased first half consolidated sales.
• Despite seasonality negatively impacting sales for Blaze King and Hawk during Q2 2023 and lower year-over-year Slimline sales, on an aggregate basis, the five businesses owned prior to 2022 experienced organic revenue growth of 13% in the first half of 2023, which highlights the benefit of diversification in the portfolio.
• Sales in the finished product segment increased by $13.0 million, or 58%, relative to the first half of 2022.
• Sales for the component manufacturing segment increased by $6.7 million, or 34%, relative to the first half of 2022.
• Consolidated net profit was $3.2 million, or $0.20 per share, an increase of $1.8 million, or $0.09 per share compared to the first half of 2022.
• Consolidated free cash flow* increased to $6.1 million, up 84% relative to the first half of 2022.

Jeff Schellenberg, Chief Executive Officer of Decisive, noted:

"Q2 marks the eighth straight quarter where Decisive has had record-setting Adjusted EBITDA.  From a value creation perspective, our per share Adjusted EBITDA and Free Cash Flow were very strong, growing by 15% and 19% on a year-over-year basis even while we saw the return of higher degrees of seasonality in the business and some productivity and demand challenges in our business.  The diversified nature of the portfolio of businesses where demand and operational efficiency improvements in different businesses support the overall enhanced performance of the business, even in the face of some challenges, is very encouraging to see.  The gross margin expansion from 33% in Q2 2022 to 37% in Q2 2023, is further evidence of the steps made to drive profitability in our subsidiaries, which we continue to view as a key driver of our future growth with a focus on continuing to invest in our portfolio businesses to support increase profitability growth while acquiring new portfolio businesses that positively contribute to overall profitability as well. 

The performance we saw from the three new businesses we added in April 2023 (Micon Industries, Procore International Radiators and Capital I) is extremely positive, as is the step we have taken to hire Brian McDonald as the General Manager of Micon Industries and Procore International Radiators, which addresses the leadership transition steps that needed to be taken in those businesses. Further, we are thrilled with the deal we were able to complete early in Q3 2023, with the acquisition of Innovative Heating Technologies. This transaction significantly enhances our cash flow generating capability, profitability and diversification while opening the door to several potential synergies with existing businesses. We expect that this transaction will each be immediately accretive to our shareholders. In completing this acquisition,  our pro forma Adjusted EBITDA for the trailing twelve months ended June 30, 2023 is over $30 million (See "Information Relating to Acquisitions" later in this press release), which is 66% higher than our reported Adjusted EBITDA and 35% higher than our reported Adjusted EBITDA per share.

With the completion of this acquisition, we have completed six acquisitions in fifteen months, more than doubling the number of businesses in our portfolio in that span. The most recent transaction was funded through our upsized acquisition facility and the proceeds of the warrant exercise by Waratah Capital Advisors, keeping us in-line with our 50/50 debt and equity acquisition funding target. Further, our pipeline of acquisition opportunities remains strong, even after completing these six transactions and we are committed to continue pursuing opportunities to support the many legacy-minded exiting business owners who lack a succession plan and are looking for new owner for their business that will preserve and build on the legacy they have created.

Finally, we were very pleased to have announced an increase in the dividend at the end of Q2, on the back of our ongoing operating results and demand outlook for our subsidiaries. The monthly dividend was increased to $0.04 per common share effective August 2023, up from the $0.035 per share per month which was set in April 2023, supported by the strong free cash flow per share generated by our subsidiaries."

Outlook:

Decisive remains focused on continuing to drive performance in line with its overall strategic objectives including:

• Executing on the growth strategy with the acquisition of six businesses in a 15-month span.
• Building a strong and growing acquisition prospect pipeline.
• Assembling a diversified portfolio of high quality, high gross margin product manufacturing businesses to support profitability growth even through periods of seasonality or lower demand in any individual business.
• Optimizing operations, with an emphasis on enhancing margins.
• Increasing production capacity and improving operational efficiency, with an aggregate $1.8 million of growth capital expenditures* on manufacturing equipment made over the last 24 months and utilization of third-party manufacturing partners.
• Providing sustainable and growing dividends to shareholders, with two increases of the monthly dividend in 2023, representing an aggregate increase of 33% in the annualized dividend from $0.36 per share to $0.48 per share.
• Maintaining balance sheet flexibility with conservative leverage ratios and ample availability on the Company's revolving term operating and acquisition facilities.
• Bolstering Decisive's resilience through a variety of economic conditions by aligning the business with supportive shareholders and lenders, and further diversifying the portfolio via acquisition and organic growth.

Conference Call

Decisive will host a conference call for interested parties on Friday, August 11, 2023, at 8:00am Pacific Time (11:00am Eastern Time) to discuss the Company's Q2 2023 results. The call will be hosted by Jeff Schellenberg, Decisive's Chief Executive Officer and Rick Torriero, Chief Financial Officer.

Details for those who wish to participate in this conference call are as follows:

Conference Call Details:
on Friday, August 11, 2023, at 8:00am Pacific Time / 11:00am Eastern Time
(please call 10 minutes ahead of time)

Participant Information:
Dial in number – Canada / United States (toll free): 1-800-319-4610
Dial in number – International: [phone]

Replay Information (replay available until September 8, 2023):
Replay number – Canada / United States (toll free): 1-800-319-6413
Replay number – International: [phone]
Replay access code 0307

About Decisive Dividend Corporation

Decisive Dividend Corporation is an acquisition-oriented company, focused on opportunities in manufacturing. The Company's purpose is to be the sought-out choice for exiting legacy-minded business owners, while supporting the long-term success of the businesses acquired, and through that, creating sustainable and growing shareholder returns. The Company uses a disciplined acquisition strategy to identify already profitable, well-established, high quality manufacturing companies that have a sustainable competitive advantage, a focus on non-discretionary products, steady cash flows, growth potential and established, strong leadership.

For more information on Decisive, or to sign up for email notifications of Company press releases, please visit www.decisivedividend.com.

Cautionary Statements

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.

Information Relating to Acquisitions

This press release contains certain information (including historical financial information) relating to acquisitions completed by Decisive in the last twelve months as well as pre-acquisition historical financial information relating to the acquired businesses. The pre-acquisition historical financial information relating to the acquired businesses has not been audited and is based upon information provided to Decisive by the acquired businesses, and their respective management and previous shareholders.

The table below sets forth the pro forma combined financial information of Decisive and the applicable pre-acquisition periods for the acquisitions completed in the last twelve months:

(Stated in thousands of dollars, except per share amounts)								Add
						pre-acquisition
								periods for
								acquired
					Decisive(1)	businesses(2)					Pro forma
For the trailing twelve month period ended June 30, 2023					(unaudited)			(unaudited)			(unaudited)
Sales				$	118,270		$	37,839		$	156,109
Gross profit					41,521			18,006			59,527
Gross profit %					35 %			48 %			38 %
Profit					5,855			9,074			14,929
Per share basic					0.39						0.82
Adjusted EBITDA*					18,177			12,018			30,195
Per share basic					1.22						1.65

(1)

Based on Decisive's unaudited financial information reported for the twelve-months ended June 30, 2023.

(2)

Based on ACR Heat Products Limited's unaudited financial information for the pre-acquisition period from July 1, 2022 to October 2, 2022, combined with the unaudited financial information for the pre-acquisition period from July 1, 2022 to April 4, 2023 for each of Capital I Industries Inc., Micon Industries Ltd., and Procore International Radiators Ltd., and the unaudited financial information of Innovative Heating Technologies Inc. for the period from July 1, 2022 to June 30, 2023.

Non-IFRS Financial Measures

In this press release, reference is made to "Adjusted EBITDA", "Free Cash Flow", "Growth Capital Expenditures", "Maintenance Capital Expenditures" and "Dividend Payout Ratio", which are not recognized financial measures under IFRS, but are believed to be meaningful in the assessment of the Company's performance as defined below.

"Adjusted EBITDA" is defined as earnings before finance costs, income taxes, depreciation, amortization, foreign exchange gains or losses, other non-cash items such as gains or losses recognized on the fair value of contingent consideration items, asset impairment, share-based compensation, and restructuring costs, and other non-operating items such as acquisition costs.

Adjusted EBITDA is a financial performance measure that management believes is useful for investors to analyze the results of the Company's operating activities prior to consideration of how those activities are financed and the impact of non-operating charges related to planned or completed acquisitions, foreign exchange, taxation, depreciation, amortization, and impairment charges.

The most directly comparable financial measure is profit or loss. Adjusted EBITDA per share is also presented, which is calculated by dividing Adjusted EBITDA, as defined above, by the weighted average number of shares outstanding during the period.

"Free Cash Flow" is defined as cash provided by operating activities, as defined by IFRS, adjusted for changes in non-cash working capital, timing considerations between current income tax expense and income taxes paid, interest payments, required principal payments on long-term debt and right of use lease liabilities, and any unusual non-operating one-time items such as acquisition and restructuring costs (as described above).

Free Cash Flow is a financial performance measure used by management to analyze the cash generated from operations before the impact of changes in working capital items or other unusual items and after giving effect to expected income taxes thereon, as well as required interest and principal payments on long-term debt and right of use lease liabilities.

The most directly comparable financial measure is cash provided by operating activities. Adjustments made to cash provided by operating activities in the calculation of Free Cash Flow include other IFRS measures, including changes in non-cash working capital, current income tax expense, income taxes paid, interest paid, and principal payments on long-term debt and right of use lease liabilities.

Free Cash Flow per share is also presented, which is calculated by dividing Free Cash Flow, as defined above, by the weighted average number of shares outstanding during the period.

"Free Cash Flow Less Maintenance Capital" is defined as Free Cash Flow, as defined above, less Maintenance Capital Expenditures, as defined below. Free Cash Flow Less Maintenance Capital is a financial performance measure used by management to analyze the cash generated from operations before the impact of changes in working capital items or other unusual items and after giving effect to expected income taxes thereon, as well as required interest and principal payments on long-term debt and right of use lease liabilities, and capital expenditures required to sustain the current operations of the Company.

The Company presents Free Cash Flow Less Maintenance Capital Expenditures per share, which is calculated by dividing Free Cash Flow Less Maintenance Capital, as defined above, by the weighted average number of shares outstanding during the period.

"Growth and Maintenance Capital Expenditures" maintenance capital expenditures are defined as capital expenditures required to maintain the operations of the Group at the current level and are net of proceeds from the sale of property and equipment. Growth capital expenditures are defined as capital expenditures that are expected to generate incremental cash inflows and are not considered by management in determining the cash flows required to sustain the current operations of the Company. While there are no comparable IFRS measures for Maintenance Capital Expenditures or Growth Capital Expenditures, the total of Maintenance Capital Expenditures and Growth Capital Expenditures is equivalent to the total purchases of property and equipment, net of proceeds from the sale of property and equipment, on the Company's statement of cash flows.

"Dividend Payout Ratio" the Company presents a dividend payout ratio, which is calculated by dividing dividends declared by the Company by Free Cash Flow Less Maintenance Capital, as defined above. The Dividend Payout Ratio is a financial ratio used by management to analyze the percentage of cash generated from operations, before the impact of changes in working capital items or other unusual items and after giving effect to expected income taxes thereon, as well as required interest and principal payments on long-term debt and right of use lease liabilities, and capital expenditures required to sustain the current operations of the Company, returned to shareholders as dividends. Dividend Payout Ratio is analyzed on a trailing twelve-month basis in order to reduce the impact of seasonality on the analysis. 

While the above Non-IFRS financial measures are used by management to assess the historical financial performance of the Company, readers are cautioned that:

• Non-IFRS financial measures, such as Adjusted EBITDA, Free Cash Flow, Growth Capital Expenditures, Maintenance Capital Expenditures and Dividend Payout Ratio, are not recognized financial measures under IFRS;
• The Company's method of calculating Non-IFRS financial measures may differ from that of other corporations or entities and therefore may not be directly comparable to measures utilized by other corporations or entities;
• Non-IFRS financial measures should not be viewed as an alternative to measures that are recognized under IFRS such as profit or loss or cash provided by operating activities; and
• A reader should not place undue reliance on any Non-IFRS financial measures.

Set forth below are reconciliations of Non-IFRS financial measures to their most relevant IFRS measures.

Adjusted EBITDA

(Stated in thousands of dollars)
	For the three months ended						For the six months ended
June 30,		2023			2022			2023			2022
Profit for the period	$	1,201		$	884		$	3,167		$	1,396
Add (deduct):
Financing costs		881			657			1,636			1,112
Income tax expense		710			361			1,428			664
Amortization and depreciation		1,771			1,140			3,091			2,016
Acquisition and restructuring costs		578			578			602			578
Share-based compensation expense		115			28			354			98
Foreign exchange losses (gains)		18			(291)			(24)			(197)
Interest and other income		(8)			(4)			(26)			(8)
Gain on sale of equipment		-			(9)			(69)			(9)
Adjusted EBITDA		5,266			3,344			10,159			5,650

 

(Stated in thousands of dollars, except per share amounts)								Add
						pre-acquisition
								periods for
								acquired
					Decisive(1)	businesses(2)					Pro forma
For the trailing twelve month period ended June 30, 2023					(unaudited)			(unaudited)			(unaudited)
Profit				$	5,855		$	9,074		$	14,929
Add (deduct):
Financing costs					3,048			89			3,137
Income tax expense					2,367			2,993			5,360
Amortization and depreciation					5,958			344			6,302
Acquisition and restructuring costs					1,104			-			1,104
Inventory fair value adjustments and write downs					22			-			22
Share-based compensation expense					399			-			399
Foreign exchange losses (gains)					(446)			(438)			(884)
Interest and other income					(38)			(44)			(82)
Gain on sale of equipment					(92)			-			(92)
Adjusted EBITDA					18,177			12,018			30,195

Free Cash Flow and Free Cash Flow Less Maintenance Capital

(Stated in thousands of dollars)
	For the three months ended						For the six months ended
June 30,		2023			2022			2023			2022
Cash provided by operating activities	$	6,995		$	1,494		$	6,964		$	1,290
Add (deduct):
Changes in non-cash working capital		(2,311)			1,327			1,286			2,799
Income taxes paid		11			(51)			1,333			991
Current income tax expense		(929)			(439)			(1,836)			(763)
Acquisition and restructuring costs		578			578			602			578
Interest paid		(836)			(614)			(1,547)			(1,028)
Lease payments		(373)			(305)			(689)			(592)
Required principal repayments on debt		(55)			-			(55)			-
Free cash flow	$	3,080		$	1,990			6,058			3,275
Maintenance capital expenditures		(351)			(292)			(840)			(519)
Free cash flow less maintenance capital		2,729			1,698			5,218			2,756

Dividend Payout Ratio

(Stated in thousands of dollars)
For the trailing twelve month period ended June 30,								2023			2022
Cash provided by operating activities							$	14,097		$	2,165
Add (deduct):
Changes in non-cash working capital								1,679			5,871
Income taxes paid								1,333			862
Current income tax expense								(2,816)			(1,145)
Acquisition and restructuring costs								1,103			693
Interest paid								(2,873)			(1,997)
Lease payments								(1,323)			(1,119)
Required principal repayments on debt								(55)			(8)
Free cash flow								11,145			5,322
Maintenance capital expenditures								(1,275)			(934)
Free cash flow less maintenance capital								9,870			4,388
Dividends declared								5,780			3,791
Dividend payout ratio								59 %			86 %

Forward-Looking Statements

Certain statements contained in this press release constitute forward-looking information. These statements relate to future events or future performance. The use of any of the words "could", "intend", "expect", "believe", "will", "projected", "estimated" and similar expressions and statements relating to matters that are not historical facts are intended to identify forward-looking information and are based on management's current beliefs, assumptions and expectations as to the outcome and timing of such future events.  Actual future results may differ materially. In particular, this press release contains forward-looking information relating to the future prospects of the Company and its operating subsidiaries, 2023 demand levels, demand from customers, potential future acquisitions, and productivity and efficiency initiatives being explored to enhance margins. Risk factors that could cause actual results or outcomes to differ materially from the results expressed or implied by forward-looking information include, among other things: general economic conditions; pandemics; competition; government regulation; environmental regulation; access to capital; market trends and innovation; climate risk; general uninsured losses; risk related to acquisitions; dependence on customers, distributors and strategic relationships; supply and cost of raw materials and purchased parts; operational performance and growth; implementation of the growth strategy; product liability and warranty claims; litigation; reliance on technology, intellectual property, and information systems; availability of future financing; interest rates and debt financing; income tax matters; foreign exchange; dividends; trading volatility of common shares; dilution risk; reliance on management and key personnel; employee and labour relations; and conflicts of interest, all as more particularly described in the most recent annual MD&A of the Company available on the Company's profile at www.sedar.com. There can be no assurance as to the future financial performance of the Company or that the board of directors of the Company will declare or pay any dividends in the future or, if dividends are declared and paid, there can be no assurance as to the frequency or amount of such dividends. The Company cautions the reader that the risk factors referenced above are not exhaustive. The forward-looking information contained in this release is made as of the date hereof and the Company is not obligated to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required by applicable securities laws. Because of the risks, uncertainties and assumptions contained herein, investors should not place undue reliance on forward-looking information. The foregoing statements expressly qualify any forward-looking information contained herein.

SOURCE Decisive Dividend Corporation

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