Andlauer Healthcare Group Reports 2020 First Quarter Financial Results

TORONTO, May 11, 2020 /CNW/ - Andlauer Healthcare Group Inc. (TSX: AND) ("AHG" or the "Company") today reported its financial results for the three-month period ended March 31, 2020 ("Q1 2020").

Q1 2020 Highlights

• Revenue increased 14.4% to $81.7 million, compared to $71.4 million in the three months ended March 31, 2019 ("Q1 2019");
• Operating income increased 13.6% to $12.4 million, compared to $10.9 million in Q1 2019;
• Net income and comprehensive income increased 8.5% to $8.2 million, compared to $7.5 million in Q1 2019;
• EBITDA⁽¹⁾ increased 9.2% to $18.8 million, compared to $17.2 million in Q1 2019, despite the absorption of approximately $1.5 million of incremental costs related to share-based compensation arrangements and the transition to a public company;
• EBITDA Margin⁽¹⁾ was 23.0%, compared to 24.1% in Q1 2019;
• AHG declared its first dividend as a public company on March 12, 2020. The dividend of $0.06087 per subordinate voting share and multiple voting share was paid on April 15, 2020 to shareholders of record as at March 31, 2020; and
• The Company activated its business continuity plans in response to the coronavirus disease ("COVID-19") pandemic and successfully maintained service levels while proactively implementing measures across its operations to prioritize the health and safety of its personnel, clients, and suppliers.

"We generated revenue growth across all five of our product lines in the quarter and maintained strong EBITDA margins," said Michael Andlauer, Chief Executive Officer of AHG. "To date, our operations have run without service disruption during the COVID-19 pandemic, as we contribute to supporting reliable supply chains for the Canadian healthcare industry. While the global economic outlook has deteriorated in 2020 due to COVID-19, we expect our business to remain resilient due to our exclusive focus on the healthcare sector and our ability to manage our network and personnel costs variably with volume."  

Selected Consolidated Financial Summary

	Three Months Ended
($CAD 000s)	March 31,
	2020	2019	Variance
Revenue
Logistics & Distribution	23,567	21,547	9.4%
Packaging	7,344	6,415	14.5%
Healthcare Logistics Segment	30,911	27,962	10.5%
Ground Transportation	46,329	40,814	13.5%
Air Freight Forwarding	5,265	5,013	5.0%
Dedicated and Last Mile Delivery	6,267	3,682	70.2%
Intersegment Eliminations	(7,122)	(6,075)	17.2%
Specialized Transportation Segment	50,739	43,434	16.8%
Total revenue	81,650	71,396	14.4%
Operating expenses	69,246	60,474	14.5%
Operating income	12,404	10,922	13.6%
Net income and comprehensive income	8,182	7,539	8.5%
Select financial metrics
EBITDA^(1)	18,799	17,208	9.2%
EBITDA Margin^(1)	23.0%	24.1%	(110 bps)

Q1 2020 Financial Results

Revenue for Q1 2020 totaled $81.7 million, an increase of 14.4% compared with Q1 2019. Revenue growth was led by continued volume growth in AHG's ground transportation and logistics and distribution products, and by new contracts in its dedicated and last mile delivery product, resulting in approximately $10.3 million of incremental revenue. The Company believes that Q1 2020 revenue was also positively impacted due to accelerated buying activity by its clients' customers in connection with the COVID-19 pandemic. Accordingly, revenue in the second quarter of 2020 may be negatively impacted as customer inventories are drawn down to more normal levels.

Cost of Transportation and Services for Q1 2020 was $33.5 million, or 41.1% of revenue, compared with $29.7 million, or 41.6% of revenue, for Q1 2019. The cost of transportation and services operating ratios for both periods are in line with prior years with no major fluctuations in costs versus revenue.

Direct Operating Expenses for Q1 2020 were $21.6 million, or 26.5% of revenue, compared with $19.3 million, or 27.0% of revenue, for Q1 2019. The year-over-year operating ratios for direct operating expenses in relation to revenue are consistent with prior years, with no major factors influencing variances. The Company incurred certain incremental costs in connection with its COVID-19 response measures, including additional cleaning activities, expenses for personal protective equipment for its associates, and other measures impacting productivity; however, these incremental costs were mitigated through operating leverage arising from incremental volume and other cost controls.

Selling, General and Administrative ("SG&A") expenses for Q1 2020 were $7.7 million, or 9.5% of revenue, compared with $5.2 million, or 7.3% of revenue, for Q1 2019. SG&A expenses for Q1 2020 include share-based compensation arrangements of approximately $0.8 million, or 1.0% of revenue, which are incremental to the historical SG&A expenses reflected in operating income. The share-based compensation arrangements relate to the initial option grants to AHG's senior management team and deferred share unit grants made to the Board of Directors to provide further alignment with shareholders. A further $0.7 million of incremental costs associated with being a public company, or 0.8% of revenue, are also included in SG&A expenses for Q1 2020. Approximately $0.2 million of the public company SG&A expenses reflected in Q1 2020 were one-time in nature.

Operating Income for Q1 2020 increased by 13.6% to $12.4 million, compared with $10.9 million for Q1 2019. The increase was primarily attributable to growth in revenue and improved operating efficiencies. Net Income and comprehensive income for Q1 2020 increased by 8.5% to $8.2 million, from $7.5 million in Q1 2019.

Earnings before interest, taxes, depreciation and amortization ("EBITDA")⁽¹⁾ for Q1 2020 increased by 9.2% to $18.8 million, from $17.2 million for Q1 2019 and reflects the absorption of approximately $1.5 million of incremental costs related to share-based compensation arrangements and other public company costs not incurred in Q1 2019. EBITDA Margin⁽¹⁾ for Q1 2020 was 23.0%, compared to 24.1% for Q1 2019. While EBITDA Margin⁽¹⁾ for Q1 2020 declined compared to Q1 2019, it was broadly in line with EBITDA Margin⁽¹⁾ of 23.1% for Q4 2019. Operating leverage was created for Q1 2020 versus the prior year as increases in the Company's two most significant operating costs (cost of transportation and services, and direct operating expenses) were lower than the increases in revenue growth. However, these improvements were offset by increases in SG&A costs associated with being a public company.

Dividend

The Company paid its first dividend (encompassing the period from December 11, 2019, the closing date of the Company's initial public offering, to March 31, 2020) of $0.06087 per subordinate voting share and multiple voting share on April 15, 2020 to shareholders of record as at March 31, 2020.

Subject to financial results, capital requirements, available cash flow, corporate law requirements and any other factors that the Company's Board of Directors may consider relevant, it is the Company's intention to declare a quarterly dividend of $0.05 per subordinate voting share and multiple voting share on an ongoing basis.

Shares Outstanding

As at March 31, 2020, there were 12,500,000 subordinate voting shares and 25,100,000 multiple voting shares outstanding. 

Financial Statements

AHG's unaudited interim condensed consolidated financial statements and related Management's Discussion & Analysis ("MD&A") for Q1 2020 are available on the Company's website at www.andlauerhealthcare.com and on the Company's profile on SEDAR at www.sedar.com.

Conference call

Michael Andlauer, Chief Executive Officer, and Peter Bromley, Chief Financial Officer, will host a conference call for analysts and investors on Tuesday, May 12, 2020 at 8:30 a.m. (ET). The dial-in numbers for the conference call are [phone] or [phone]. A live webcast of the call is available at: www.andlauerhealthcare.com/presentations-events.  

To listen to a replay of the conference call, dial [phone] or [phone], passcode: 662982 #. The replay will be available until May 19, 2020. The webcast will be archived on the Company's website following conclusion of the call.

About AHG

AHG is a leading and growing supply chain management company offering a robust platform of customized third-party logistics ("3PL") and specialized transportation solutions for the healthcare sector. The Company's 3PL services include customized logistics, distribution and packaging solutions for healthcare manufacturers across Canada. AHG's specialized transportation services, including air freight forwarding, ground transportation, dedicated delivery and last mile services, provide a one-stop shop for clients' healthcare transportation needs. Through its complementary service offerings, available across a coast-to-coast distribution network, the Company strives to accommodate the full range of its clients' specialized supply chain needs on an integrated and efficient basis. For more information on AHG, please visit: www.andlauerhealthcare.com  

Forward-looking Information

This news release contains forward-looking information and forward-looking statements (collectively, "forward-looking information") within the meaning of applicable securities laws. Forward-looking information may relate to the Company's future financial outlook and anticipated events or results and may include information regarding the Company's financial position, business strategy, growth strategies, addressable markets, budgets, operations, financial results, taxes, dividend policy, plans, objectives and responses to the outbreak of COVID-19. Particularly, information regarding the Company's expectations of future results, performance, achievements, facility expansions, leases, platform expansions, acquisitions, public company costs, payment of dividends, prospects, financial targets or outlook, intentions, opportunities or the potential impact of, and response measures to be taken with respect to, COVID-19 is forward-looking information. In some cases, forward-looking information can be identified by the use of forward-looking terminology such as "plans", "targets", "expects", "budget", "scheduled", "estimates", "outlook", "forecasts", "projection", "prospects", "strategy", "intends", "anticipates", "believes", "commencing" or variations of such words and phrases or statements that certain actions, events or results "may", "could", "would", "might", "will", "will be taken", "occur" or "be achieved". In addition, any statements that refer to expectations, intentions, projections or other characterizations of future events or circumstances contain forward-looking information. Statements containing forward-looking information are not historical facts but instead represent management's expectations, estimates and projections regarding future events or circumstances. Such forward-looking statements are qualified in their entirety by the inherent risks, uncertainties and changes in circumstances surrounding future expectations which are difficult to predict and many of which are beyond the control of the Company.

Forward-looking information is necessarily based on a number of opinions, estimates and assumptions, including but not limited to those assumptions described under the heading "Cautionary Note Regarding Forward-Looking Information" in the MD&A for Q1 2020. Forward-looking information is subject to known and unknown risks, uncertainties, assumptions and other factors that may cause the actual results, level of activity, performance or achievements to be materially different from those expressed or implied by such forward-looking information, including but not limited to factors discussed under the heading "Risk Factors" in the Company's annual information form dated March 12, 2020, which is available, together with the Q1 2020 MD&A, on the Company's profile on SEDAR at www.sedar.com. If any of these risks or uncertainties materialize, or if the opinions, estimates or assumptions underlying the forward-looking information prove incorrect, actual results or future events might vary materially from those anticipated in the forward-looking information. Accordingly, investors should not place undue reliance on forward-looking information, which speaks only as of the date made. The forward-looking information contained in this news release represents the Company's expectations as of the date of this news release, and are subject to change after such date and the Company disclaims any intention or obligation or undertaking to update or revise any forward-looking information whether as a result of new information, future events or otherwise, except as required under applicable securities laws.

(1) Non-IFRS Financial Measures

This news release contains certain non-IFRS measures. These measures are not recognized measures under IFRS, do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing further understanding of the Company's results of operations from management's perspective. Accordingly, these measures should not be considered in isolation nor as a substitute for analysis of the Company's financial information reported under IFRS. AHG uses non-IFRS measures including "EBITDA", and "EBITDA Margin". These non-IFRS measures are used to provide investors with supplemental measures of the Company's operating performance and thus highlight trends in its core business that may not otherwise be apparent when relying solely on IFRS financial measures. AHG also believes that securities analysts, investors and other interested parties frequently use non-IFRS measures in the evaluation of issuers. AHG management also uses non-IFRS measures in order to facilitate operating performance comparisons from period to period, to prepare annual operating budgets and to determine components of management compensation.

EBITDA

AHG defines EBITDA as net income (loss) and comprehensive income (loss) for the period before: (i) income tax (recovery) expense; (ii) interest income; (iii) interest expense; and (iv) depreciation and amortization.

AHG believes EBITDA is a useful measure to assess the Company's financial performance because it provides a more relevant picture of operating results by excluding the effects of expenses that are not reflective of the Company's underlying business performance.

EBITDA Margin

AHG defines EBITDA Margin as EBITDA divided by revenue. EBITDA Margin represents a measure of the Company's profitability expressed as a percentage of revenue.

AHG believes EBITDA Margin is a useful measure to assess the Company's financial performance because it helps quantify the Company's ability to convert revenues generated from clients into EBITDA.

For quantitative reconciliations of net income and comprehensive income to EBITDA for Q1 2020 and Q1 2019, please see "Reconciliation of Non-IFRS Measures" in the Company's MD&A for Q1 2020, available on the Company's profile on SEDAR (www.sedar.com), or the Company's website (www.andlauerhealthcare.com).  

SOURCE Andlauer Healthcare Group Inc.

Peter Bromley, Chief Financial Officer, Tel: [phone]; Bruce Wigle, Investor Relations, Tel: [phone]