Decisive Dividend Corporation Reports Record Financial Results for the Three Months Ended March 31, 2023

KELOWNA, BC, May 10, 2023 /CNW/ - Decisive Dividend Corporation (TSXV: DE) (the "Company" or "Decisive") today reported its financial results for the three months ended March 31, 2023.

Highlights of the Company's financial performance in Q1 2023 include the following:

• Record quarterly consolidated sales in Q1 2023, which increased 65% to $30.9 million, compared to $18.7 million in Q1 2022.
• Generated a record $4.9 million, or $0.33 per share, in Adjusted EBITDA* in Q1 2023, an increase of 112% relative to $2.3 million, or $0.19 per share, in Q1 2022.
• Generated net profit of $2.0 million, or $0.13 per share, in Q1 2023, an increase of 284%, or $0.09 per share compared to Q1 2022.
• In March 2023, the Company increased its per share monthly dividend to $0.035 from $0.030 previously, effective for the April 2023 dividend payment, which represented a 17% increase in the annualized dividend.

Selected Financial Highlights:

The following are selected financial highlights of Decisive for the three months ended March 31, 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 March 31,										2023			2022		Change
Sales									$	30,854		$	18,689		65 %
Gross profit										11,122			6,198		79 %
Gross profit %										36 %			33 %
Adjusted EBITDA*										4,894			2,305		112 %
Per share basic										0.33			0.19		72 %
Profit before tax										2,684			814		230 %
Profit										1,966			512		284 %
Per share basic										0.13			0.04		225 %
Per share diluted										0.12			0.04		200 %
Free cash flow*										2,979			1,285		132 %
Per share basic										0.20			0.11		88 %
Free cash flow less maintenance capital*										2,490			1,057		136 %
Per share basic										0.17			0.09		91 %
Dividends declared										1,426			912		56 %
Per share basic										0.10			0.08		27 %
For the trailing twelve month period ended March 31,										2023			2022
Dividend payout ratio*										58 %			83 %

* 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.

Q1 2023 Highlights:

• Consolidated sales increased 65% to $30.9 million compared to $18.7 million in Q1 2022.
• Consolidated gross profit increased 79% to $11.1 million from $6.2 million in Q1 2022.
• Consolidated gross profit percentages increased to 36% from 33% in Q1 2022.
• Consolidated Adjusted EBITDA* increased to $4.9 million, up 112% relative to Q1 2022. 
• Strong performance across the portfolio of businesses, with the two businesses acquired post Q1 in 2022 contributing meaningfully to the increased quarterly sales in addition to the 22% aggregate organic revenue growth experienced by the five businesses owned prior to 2022.
• In the finished product segment, the two businesses acquired in 2022, Marketing Impact and ACR, each contributed meaningfully to the overall 88% increase in segment sales in the quarter. In addition, Blaze King sales increased 12% while Slimline sales decreased 25% compared to Q1 2022.
• In the component manufacturing segment, Unicast sales increased 91%, Hawk sales increased 42%, and Northside sales increased 18% compared to Q1 2022.
• Consolidated net profit in the quarter was $2.0 million, or $0.13 per share, compared to $0.5 million, or $0.04 per share, in Q1 2022.
• Consolidated free cash flow* increased to $3.0 million, up 132% relative to Q1 2022.

Jeff Schellenberg, Chief Executive Officer of Decisive, noted:

"Recent positive momentum continued for Decisive in Q1, with record-setting quarterly results for the third straight quarter. From a value creation perspective, our per share Adjusted EBITDA and Free Cash Flow were very strong, growing significantly on a year-over-year basis and outpacing our very strong revenue growth, providing evidence of the steps being taken to drive profitability and cash flow in our operating subsidiaries as they continue to experience strong demand. The 3% growth in gross margin experienced in Q1 2023 compared to Q1 2022 is further evidence of the steps made to drive profitability in our subsidiaries. We view the enhanced performance of our portfolio of businesses as a key driver of our future growth and continue to invest in these businesses to support that growth and increase profitability. 

We also made material progress on our other strategic objectives. First, after the end of the quarter, we completed the acquisition of three businesses that further diversify the overall product offering but also create several potential synergies with existing businesses. We expect that these businesses will each be immediately accretive to our shareholders and are very excited to see these three new businesses contribute to our overall results next quarter. In completing these acquisitions, we acquired approximately $4.8 million in Adjusted EBITDA, which in addition to our reported trailing twelve-month Adjusted EBITDA of $16.3 million and an additional $1.3 million of Adjusted EBITDA for the six pre-acquisition months for ACR, results in $22.4 million of pro forma Adjusted EBITDA over the last reported periods.

With the completion of these three acquisitions, we have completed five acquisitions in twelve months, doubling the number of businesses in our portfolio in that span. These transactions were funded through our acquisition facility and two successful equity raises, including a bought deal financing completed in April 2023, keeping us in-line with our 50/50 debt and equity acquisition funding target. Further, while our focus has been on completing these recently announced deals, we continue to have an active and growing pipeline of acquisition opportunities and 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.

Second, we were also very pleased to have announced an increase in the dividend in the quarter, on the back of our 2022 and Q1 2023 operating results and demand outlook for our subsidiaries. The monthly dividend was increased to $0.035 per common share effective April 2023, up from the $0.03 per share per month which was set in April 2022, supported by the strong free cash flow per share generated by our subsidiaries.

The start of 2023 has been eventful, and we look forward to providing further updates to our shareholders as we progress through the remainder of the year."

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 five businesses in a twelve-month span.
• Building a strong and growing acquisition prospect pipeline.
• Continuing to build upon the strong demand across the portfolio of businesses expected through 2023.
• Optimizing operations, with an emphasis on enhancing margins in the face of broad and steady customer demand trends.
• Increasing production capacity and improving operational efficiency, with an aggregate $2.2 million of growth capital expenditures* on manufacturing equipment made over the last 24 months.
• Providing sustainable and growing dividends to shareholders, with the increase of the monthly dividend in May 2022 to $0.03 per share and again in April 2023 to $0.035 per share.
• Maintaining balance sheet flexibility with $3.6 million of cash on hand plus $16.6 million of 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 Thursday, May 11, 2023, at 7:30am Pacific Time (10:30am Eastern Time) to discuss the Company's Q1 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:
Thursday, May 11, 2023, at 7:30am Pacific Time / 10:30am 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 June 9, 2023):
Replay number – Canada / United States (toll free): 1-800-319-6413
Replay number – International: [phone]
Replay access code 0160

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.

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 March 31,								2023			2022
Profit for the period							$	1,966		$	512
Add (deduct):
Financing costs								755			455
Income tax expense								718			302
Amortization and depreciation								1,320			876
Acquisition and restructuring costs								25			-
Share-based compensation expense								239			70
Foreign exchange losses (gains)								(42)			94
Interest and other income								(18)			(4)
Gain on sale of equipment								(69)			-
Adjusted EBITDA								4,894			2,305

 

Free Cash Flow and Free Cash Flow Less Maintenance Capital

(Stated in thousands of dollars)
For the three months ended March 31,								2023			2022
Cash provided by operating activities							$	(33)		$	(205)
Add (deduct):
Changes in non-cash working capital								3,598			1,472
Income taxes paid								1,322			1,042
Current income tax expense								(906)			(323)
Acquisition and restructuring costs								25			-
Interest paid								(711)			(414)
Lease payments								(316)			(287)
Required principal repayments on debt								-			-
Free cash flow								2,979			1,285
Maintenance capital expenditures								(489)			(228)
Free cash flow less maintenance capital								2,490			1,057

 

Dividend Payout Ratio

(Stated in thousands of dollars)
For the trailing twelve month period ended March 31,								2023			2022
Cash provided by operating activities							$	8,595		$	861
Add (deduct):
Changes in non-cash working capital								5,318			6,823
Income taxes paid								1,271			1,012
Current income tax expense								(2,326)			(1,084)
Acquisition and restructuring costs								1,103			115
Interest paid								(2,651)			(1,888)
Lease payments								(1,255)			(1,063)
Required principal repayments on debt								-			(30)
Free cash flow								10,055			4,746
Maintenance capital expenditures								(1,215)			(698)
Free cash flow less maintenance capital								8,840			4,048
Dividends declared								5,083			3,373
Dividend payout ratio								58 %			83 %

 

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, increasing 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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