Revenue of $34.7 million and EBITDA of $4.3 million first quarter 2018.
Sherwood Park, Alberta, May 15th, 2018 (TSX.V:VTX) – Vertex Resource Group Ltd. (“Vertex” or the “Company”) is pleased to report its financial and operational results for the first quarter of 2018. The following should be read in conjunction with the Management Discussion and Analysis (“MD&A”) and the consolidated financials and notes of Vertex for the quarter ended March 31, 2018, which are available on SEDAR at www.sedar.com
FINANCIAL AND OPERATIONAL HIGHLIGHTS
Key financial and operational highlights for the quarters ending March 31, 2018 and 2017 are as follows:
IMPROVED RESULTS FOR THE FIRST QUARTER OF 2018
The results for the first quarter of 2018 were an improvement over the first quarter of 2017 with revenue, gross profit, EBITDA and net loss all improving. Vertex’s efforts have yielded positive results in the quarter and are trending towards record revenues in the coming quarters of 2018 as Vertex strives to boost activity levels and utilization through integrating 2017 acquisitions, understanding its customers’ environmental liabilities and cross selling between business segments to promote organic growth. Vertex continues to actively seek accretive acquisitions to add to its service lines, geographical footprint and customer diversification trends.
Main highlights for the first quarter of 2018 compared to the first quarter of 2017 were:
- Revenue increased to $34.7 million or by 60.3% in the first quarter 2018 from $21.7 million for the same quarter of 2017. Growth in revenue is attributable to rebounds in customer spending in certain segments, acquisition impacts, cross-selling strategies between segments and industry diversification.
- Gross profit for the first quarter of 2018 was $8.8 million, up 21.1% from $7.3 million in the same quarter of 2017. Gross profit as a percentage of revenue (“gross profit margin”) decreased to 25.4% in the first quarter of 2018 from 33.6% in the same quarter of 2017, due to revenue increases from lower margin service lines.
- General and administrative costs (“G&A”) as a percentage of revenue, was down to 12.9% in the first quarter of 2018 compared to 17.9% in the first quarter of 2017.
- EBITDA for the first quarter of 2018 was $4.3 million, an increase of 26.1% compared to the first quarter of 2017. This increase was driven by improved revenue and activity levels as compared to the first quarter of 2017.
- Net loss for the first quarter of 2018 improved by 31.3% or $0.2 million, to a loss of $0.5 million, from a loss of $0.7 million in the first quarter of 2017.
- Cash generated from operating activities increased by $6.4 million to $7.8 million for the first quarter of 2018, from $1.3 million in the first quarter of 2017.
- $5.1 million was paid down on total loans and borrowings, less cash, in the first quarter of 2018 reducing to $56.8 million as of March 31, 2018 compared to $61.9 million as of December 31, 2017.
- Announced $70 million in secured credit facilities on a three-year term with a $20 million accordion facility available to support future growth initiatives of the Company. It is anticipated, starting in 2019, that the refinancing will reduce the Company’s overall interest rate and expense, resulting in annual cost savings of approximately $2 million.
OUTLOOK
Vertex anticipates further improvements in utilization and profitability in certain operating segments. The Company expects it will comfortably surpass results from 2017. Vertex further expects continued progression in increasing Vertex’s overall utilization as a result of new work heading into the rest of the fiscal year. With the current cost structure and controls in place, increases in revenue are expected to have positive impacts on gross margins, EBITDA and net income as the Company focuses on profitability.
Vertex continues to be encouraged by growth opportunities in its Environmental Services segment through abandonments, water solutions and environmental liability management for its customers both in western Canada and the United States heading into the next nine months of 2018. Vertex continues to focus on diversifying its customer base and increasing its exposure directly to operating and maintenance budgets of its customers. The Company also continues to cultivate and pursue opportunities to diversify its customer base by providing its services to customers outside of the oil and gas industry. Vertex anticipates the pricing and margin of its services to improve slightly in 2018 as demand for its services is expected to increase. Vertex will continue to focus on achieving efficiencies and cost reductions throughout its operations, including a continued focus on the integration of recent acquisitions, cross-selling complementary services between segments in order to lower customers’ costs and providing integrated solutions for the environmental liabilities of its customers.
Vertex continues to focus on reducing debt and interest costs, managing working capital and adhering to prudent capital expenditure plans. Accretive, complementary acquisitions remain an essential component of Vertex’s long-term growth plans and it continues to evaluate opportunities as they arise. Vertex is committed to further improving its operational and financial performance while ensuring that it is creating shareholder value for the longer term.
ABOUT VERTEX
Established in 1976, Vertex has grown to become a leading provider of environmental and environmentally focused industrial services. Headquartered in Sherwood Park, Alberta, Vertex employs a staff of approximately 750 employees that service a wide array of customers in industries such as oil and gas, utilities, telecommunication, forestry, agriculture and government. Vertex’s management team is comprised of industry veterans with a successful track record for industry consolidation and opportunistic acquisitions. Vertex principally operates in western Canada and maintains a presence in select locations in the United States.
[expand title=”Advisories & Contact”]For further information please contact:
Terry Stephenson, CEO, or Michael Zvonkovic, CFO at Phone: 780-464-3295
NON-IFRS FINANCIAL MEASURES
This news release includes certain terms or performance measures that are not defined under International Financial Reporting Standards (“IFRS”), including “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.
(“EBITDA”) is defined as net loss before interest, income taxes, depreciation and amortization. EBITDA is a non-IFRS measure, calculated by adding back to net income (loss) the sum of income taxes, finance costs, amortization of property and equipment and intangible assets. The Company uses EBITDA as an indicator of its principal business activities prior to consideration of how its activities are financed and the impact of taxation and non-cash depreciation and amortization. EBITDA does not have a standardized meaning prescribed by IFRS and is not necessarily comparable to similar measures provided by other companies. EBITDA is used by many analysts as one of several important analytical tools and management of Vertex believes it is useful for providing readers with additional clarity on Vertex’s operational performance prior to consideration of how its activities are financed, taxed, amortized or depreciated. This measure is also considered important by the Company’s lenders and is adjusted in determining compliance by the Company with the financial covenants under its lending arrangements. Please refer to the MD&A under the heading “Financial Highlights – EBITDA” for a reconciliation of EBITDA to net income for the three-month periods ended March 31, 2018 and 2017.
FORWARD-LOOKING INFORMATION
Certain statements contained in this news release, such as the Company’s expectations regarding its results and the impact of its cost controls, and diversification efforts for the remainder of the year, constitute “forward-looking information” as such term is used in applicable Canadian securities laws. Forward-looking information is based on plans, expectations and estimates of management at the date the information is provided and is subject to certain factors and assumptions, including, that the Company’s financial condition and development plans do not change as a result of unforeseen events, that the Company’s expectation regarding the impact of its cost controls and diversification efforts are accurate and assumptions regarding future commodity prices, exchange rates and demand for the Company’s services. Forward-looking information is subject to a variety of risks and uncertainties and other factors that could cause plans, estimates and actual results to vary materially from those projected in such forward-looking information. Factors that could cause the forward-looking information in this news release to change or to be inaccurate include, but are not limited to, the risk that any of the assumptions referred to prove not to be valid or reliable, that occurrences such as those referred to above are realized and result in delays, or cessation in planned work, that the Company’s financial condition and development plans change, as well as the other risks and uncertainties applicable to the provision of environmental and industrial services and to the Company as set forth in the Company’s Annual Information Form filed under the Company’s SEDAR profile at www.sedar.com. The Company undertakes no obligation to update these forward-looking statements, other than as required by applicable law.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this press release.[/expand]