Vertex Resource Group Ltd. Reports First Quarter 2024 Results

Achieved record first quarter net revenue of $59 million.

SHERWOOD PARK, AB, May 15, 2024 /CNW/ - (TSXV: VTX) - Vertex Resource Group Ltd. ("Vertex" or the "Company") reports its financial and operational results for the first quarter ended March 31, 2024.  The following should be read in conjunction with the Management Discussion and Analysis ("MD&A") and the unaudited condensed consolidated interim financial statements of Vertex for the period ended March 31, 2024, which are available on SEDAR+ at www.sedarplus.ca.

The first quarter continued to deliver steady revenue, which was muted by additional direct costs and high interest rates.  Initiatives around competitive pricing, debt reduction, geographic and sector diversification will continue to be a focus for 2024.

Key financial results for the three months March 31, 2024, and 2023 are as follows: 

HIGHLIGHTS
	Three months ended
	March 31,
(in thousands of Canadian Dollars)	2024	2023
Gross revenue	59,831	58,657
Less flow through subcontractor costs	1,322	1,849
Net revenue	58,509	56,808
Profit margin	13,346	14,606
Profit margin %	23 %	26 %
Adjusted EBITDA (1)	6,900	8,615
Adjusted EBITDA %	12 %	15 %
Free cash flow (1)	2,937	4,547
Adjusted EBITDA per share, basic and diluted (1)	0.06	0.07
Earnings (loss) per share, basic and diluted	(0.01)	0.01
(1) See "Non-IFRS Financial Measures"

HIGHLIGHTS FOR THE THREE MONTHS ENDED MARCH 31, 2024

• Vertex achieved the highest net revenue for any first quarter in the company's history at $58.5 million.
• Environmental consulting net revenue increased by 19% compared to Q1 2023.
• Free cash flow¹ generated was $2.9 million compared to $4.5 million in Q1 2023.
• Repurchased common shares throughout the first quarter at a weighted average of $0.40, for total consideration of $0.7 million. The total amount of common shares repurchased and cancelled during the first quarter of 2024 and fourth quarter of 2023 represents 2.5% of the total issued and outstanding common shares of the Company.

OUTLOOK

Vertex's performance in the first quarter of 2024 has been noteworthy, with a reported net revenue increase of 3% compared to the first quarter of 2023. This growth is attributed to the strong demand for our Environmental Consulting services, despite facing headwinds from delayed projects and unpredictable weather that impacted costs in the quarter for the Environmental Services segment.  The company's strategic emphasis on operational efficiency and disciplined market engagement has been pivotal in navigating these challenges.  There are several major capital projects planned for 2024 to 2026 in markets we serve, that will support sustained and expanded activity levels for our services.  While wildfires have not affected Vertex to the same degree as last year, we are mindful of the potential impacts they may have to site access and business interruptions.

Furthermore, Vertex's dedication to environmental services and ESG reporting resonates with the broader movement towards sustainable energy and carbon intensity reduction, which is a priority for both government and industry sectors. This alignment not only enhances Vertex's corporate responsibility profile but also strategically positions the company to leverage emerging opportunities in this space. The proactive cross-selling of services across diverse industries and project phases underscores Vertex's adaptability and commitment to growth. These factors, combined with the financial results and strategic initiatives undertaken, lay a solid foundation for Vertex's potential for sustained growth and value generation for its shareholders.

ABOUT VERTEX

Since 1962, Vertex has been a leading North American provider of environmental services. Headquartered in Sherwood Park, Alberta, Vertex employs a staff of approximately 1,000 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.

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

This 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.

A)	"Adjusted EBITDA" is a non-IFRS financial measure which is calculated by adjusting net income (loss) 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 the 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.
B)	"Free cash flow" is a non-IFRS financial measure.  The most directly comparable GAAP measure for free cash flow is cash flow from operating activities.  A summary of the reconciliation of cash flow from operating activities to free cash flow is set forth in the table below.  Management uses the term "free cash flow" for its own performance measure and to provide shareholders and potential investors with a measurement of the Company's efficiency and its ability to generate the cash necessary to fund its future growth expenditures, to repay debt and provide shareholder returns.
C)	"Adjusted Working Capital" is a non-IFRS financial measure which is calculated by reducing current liablities by the current portion of loans and borrowings, lease liablities and other liabilities.  Adjusted working capital is used by Vertex to monitor its capital structure, liquidity, and it's ability to fund current operations.
D)	"Adjusted EBITDA per share, basic and diluted" is a non-financial measure which is calculated by dividing adjusted EBITDA by the weighted average shares outstanding – basic and diluted.

Reconciliations of adjusted EBITDA, free cash flow and adjusted working capital are provided in the following tables.

ADJUSTED EBITDA	Three months ended
	March 31,
	2024	2023
Net (loss) income for the period	(1,371)	1,011
Add:
Depreciation and amortization	5,898	5,580
Finance costs	2,735	2,497
Share-based compensation	59	-
Income tax recovery	(421)	(473)
Adjusted EBITDA	6,900	8,615

 

FREE CASH FLOW	Three months ended
	March 31,
	2024	2023
Cash provided by operating activities	9,276	15,385
Changes in non-cash operating working capital items	(2,356)	(6,875)
Maintenance capex	(1,501)	(2,214)
Cash interest	(2,008)	(1,848)
Depreciation of right of use assets - real property	(902)	(1,037)
Proceeds from disposal of property and equipment	428	1,136
Free cash flow	2,937	4,547

 

ADJUSTED WORKING CAPITAL	March 31,	December 31,
	2024	2023
Current assets	66,709	70,408
Current liabilities, less	62,589	69,170
Current portion of loans and borrowings	(14,561)	(14,701)
Current portion of lease liabilities	(11,072)	(10,722)
Current portion of other liabilities	(1,333)	(1,532)
Current liabilities (excluding current portion of loans and borrowings, lease liabilities, and other liabilities)	35,623	42,215
Adjusted working capital	31,086	28,193

Forward-Looking Information

This Press Release contains forward-looking statements and information ("forward-looking statements") within the meaning of applicable Canadian securities laws. The forward-looking statements contained in this Press Release are based on the expectations, estimates and projections of management of Vertex as of the date of this Press Release unless otherwise stated. The use of any of the words "believe", "expect", "anticipate", "contemplate", "target", "plan", "outlook", "potential", "estimated", "intends", "continue", "may", "will", "should" and similar expressions are intended to identify forward-looking statements. More particularly and without limitation, this Press Release contains forward-looking statements concerning anticipated financial performance; the outlook for 2024; the Company's ability to grow profitably; sufficiency of working capital; and with respect to Vertex's ability to meet evolving customer demands.

Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. Investors are cautioned that forward-looking statements are based on the opinions, assumptions and estimates of management considered reasonable at the date the statements are made, and actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to the risks associated with the industries in which Vertex operates in general, such as:

• Ability to access sufficient capital from internal and external sources
• Ability to market to new customers
• Ability to obtain equipment in a timely and cost-efficient manner
• Ability to secure work
• Adjustments and cancellations of backlog
• Changes in legislation, including but not limited to tax laws and environmental regulations
• Collection of recognized revenue
• Commodity price, interest rate and exchange rate fluctuations
• Competition, ethics, and reputational risks
• Compliance with environmental laws risks
• Cyber-security risks
• Economy and cyclicality
• Global pandemics
• Health, safety and environmental risks
• Industry and inherent project delivery risks
• Insurance risk
• Joint venture risk
• Labour matters
• Litigation risk
• Loss of key management; ability to hire and retain qualified and capable personnel
• Maintaining safe worksites
• Operational risks
• Potential for non-payment and credit risk and ongoing financing availability
• Third party credit risk
• Unforeseen weather conditions
• Unanticipated shutdowns, work stoppages, and lockouts
• Volatility of market trading

Readers are cautioned that the foregoing list of factors is not exhaustive. Additional information on other factors that could affect the operations or financial results of the parties, and the combined company are included in reports on file with applicable securities regulatory authorities, including but not limited to: Annual Information Form for the year ended December 31, 2023, which may be accessed on Vertex's SEDAR+ profile at www.sedarplus.ca.

The forward-looking statements contained in this Press Release are made as of the date hereof and the Company undertakes no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as, and to the extent required by applicable securities laws.

SOURCE Vertex Resource Group Ltd.

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