Mosaic Capital Corporation Reports Q2 2018 Financial Results

CALGARY, Aug. 13, 2018 /CNW/ - Mosaic Capital Corporation ("Mosaic" or the "Company") (TSX–V Symbols: M and M.DB) has released its unaudited condensed interim consolidated financial results for the three and six months ended June 30, 2018. The Company's financial statements and management's discussion and analysis ("MD&A") can be accessed under Mosaic's profile on SEDAR at www.sedar.com and on the Company's website at www.mosaiccapitalcorp.com.

Selected Financial Highlights
		Three months ended June 30,					Six months ended June 30,
(in $000s, except as noted)			2018		2017	% Change		2018		2017	% Change
Revenue		$	91,089	$	69,726	31%	$	159,089	$	127,835	24%
Adjusted EBITDA ^(1)		$	6,141	$	5,350	15%	$	7,924	$	10,612	-25%
	per share	$	0.58	$	0.51	14%	$	0.75	$	1.07	-30%
	as a % of revenue		6.74%		7.67%	-12%		4.98%		8.30%	-40%
Net (loss) income		$	(529)		7,603	-107%	$	5,362	$	8,613	-38%
Net (loss) income attributable to equity holders		$	(3,015)	$	5,019	-160%	$	3,697	$	2,594	43%
	per share	$	(0.28)	$	0.48	-160%	$	0.35	$	0.26	33%
Free Cash Flow ^(1)		$	796	$	1,559	-49%	$	(95)	$	3,866	-102%
	per share	$	0.08	$	0.15	-49%	$	(0.01)	$	0.39	-102%
Preferred securities distributions declared		$	1,496	$	1,496	-	$	2,975	$	3,981	-25%
Common share dividends declared		$	1,115	$	1,111	-	$	2,228	$	2,204	1%
	per share	$	0.11	$	0.11		$	0.21	$	0.21	-
TTM Preferred Distribution Payout Ratio ^(1)								84%		115%	-26%
TTM Combined Payout Ratio ^(1)								147%		158%	-7%
Weighted avg. common shares outstanding			10,606,183		10,536,860	1%		10,590,015		9,874,813	7%

Note:
(1)	Adjusted EBITDA, Free Cash Flow, Trailing twelve-month ("TTM") Preferred Distribution Payout Ratio and TTM Combined Payout Ratio are not a recognized measure under IFRS. Refer to "Non-GAAP Measures".

For the three-month period ended and as at June 30, 2018, Mosaic:

• increased revenue by 31% over the same period in 2017, largely driven by the acquisition of Circle 5 and Cedar as well as improved operating conditions and market share gains for our portfolio companies in the Infrastructure segment;
  
  
• generated Adjusted EBITDA of $6.1 million, an increase of 15% over the prior year period, which was supported by the operating leverage in certain of our portfolio companies and a reduction in corporate overhead expenses;
  
  
• provided dividends of $1.1 million to our shareholders; 
  
  
• delivered a trailing twelve-month Combined Payout Ratio of 147%, which was an improvement from the trailing twelve-month ratio of 158% in Q2 2017; and
  
  
• maintained a healthy balance sheet with $14.9 million in cash, $67.0 million in working capital and Total Debt to EBITDA leverage of 1.82.

Segmented Financial Performance
		Three months ended June 30,					Six months ended June 30,
(in $000s, except as noted)			2018		2017	% Change		2018		2017	% Change
Revenue:
	Infrastructure	$	62,388	$	43,058	45%	$	105,095	$	83,005	27%
	Diversified		26,488		23,867	11%		49,057		39,353	25%
	Energy		2,112		2,676	-21%		4,767		5,186	-8%
	Real Estate		101		125	-19%		170		291	-41%
	Corporate		-		-			-		-
Total revenue			91,089		69,726	31%		159,089		127,835	24%
Adjusted EBITDA ^(1)
	Infrastructure		4,865		2,135	128%		5,579		5,641	-1%
	Diversified		3,098		5,041	-39%		5,878		8,199	-28%
	Energy		(334)		265	-226%		(323)		834	-139%
	Real Estate		22		(168)	113%		(91)		(206)	56%
	Corporate		(1,510)		(1,923)	21%		(3,119)		(3,856)	19%
Total adjusted EBITDA		$	6,141	$	5,350	15%	$	7,924	$	10,612	-25%
	as a % of revenue		6.7%		7.6%			5.0%		8.3%

Note:
(1)	Adjusted EBITDA is not a recognized measure under IFRS. Refer to "Non-GAAP Measures".

Outlook

Mosaic's second quarter 2018 results illustrate a sequential improvement over the first quarter of 2018 and a 15% year-over-year gain in Adjusted EBITDA.  Notwithstanding these improvements, Mosaic's second quarter results remain below management's estimation of the Company's full capability.  While most portfolio companies in the Infrastructure segment delivered strong gains, the seasonal uptick for certain others did not occur as quickly as anticipated.  Compounding this, we faced temporary, yet unfavourable product mix for certain companies in our Diversified segment and the Energy segment continued to experience challenges related to wide commodity price differentials in Canada and intense competition levels in the U.S. market.  

As we progress further into 2018, we see continued seasonal ramping of activity levels with corresponding improvements in our monthly results.  This trend should support sequential and year-over-year EBITDA growth in the second half of 2018 as our portfolio companies work through a large backlog of projects in the queue.

Mark Gardhouse, CEO commented "While Mosaic's second quarter results mark a meaningful improvement over prior periods, we believe there is much work ahead for our team to optimize the profitability of our underlying portfolio.  The entire team at Mosaic has re-invigorated its approach to identify and solve near term operational challenges while building out the appropriate strategies to secure longer-term growth opportunities.  We look forward to the successful deployment of these initiatives and to demonstrate the more comprehensive cash flow capability of our portfolio as we progress further into the year.  In the interim, we remain committed to the current dividend policy which we feel is well supported by the positive outlook we have for our profitability levels and free cash flow generation."

Mosaic's growth strategy is centered on the acquisition of controlling equity interests in new portfolio companies with a specific focus on growing Free Cash Flow per share while maintaining a strong balance sheet.  Supplementing this, Mosaic's management team adds value with operational and strategic focus by actively engaging with its portfolio companies to build long-term value.

Mosaic's pipeline of high quality acquisition opportunities remains robust and the Company will continue to pursue its strategy to grow through acquisitions with a focus on building an increasingly diversified portfolio of private, mid-market companies that offer strong Free Cash Flow while maintaining a healthy balance sheet.

Conference Call

Management will hold a conference call to discuss Q2 2018 results on Tuesday, August 14th, 2018 at 10:00 AM ET. All interested parties are invited to join the conference call by dialing 1-855-353-9183 from within Canada or the U.S. or 403-532-5601 from Calgary or internationally, then entering the participant Code 63121#. A recording of the conference call will be made available on Mosaic's website at www.mosaiccapitalcorp.com.

ABOUT MOSAIC CAPITAL CORPORATION

Mosaic is a Canadian investment company that owns a portfolio of established businesses which span a diverse range of industries and geographies. Mosaic's strategy is to create long-term value for its shareholders through accretive acquisitions, long-term portfolio ownership, sustained cash flows and organic portfolio growth.  Mosaic achieves its objectives by maintaining financial discipline, acquiring businesses at attractive valuations, performing extensive acquisition due diligence, utilizing optimal transaction structuring and working closely with subsidiary businesses after acquisition.

Reader Advisory

Non-GAAP Measures

Selected financial information for the three and six-month periods ended June 30, 2018 are set out above and includes the following measures that are not recognized under International Financial Reporting Standards ("IFRS") and are non-generally accepted accounting principles ("Non-GAAP") measures: Adjusted EBITDA, Free Cash Flow, Preferred Distribution Payout Ratio and Combined Payout Ratio. This information should be read in conjunction with the unaudited condensed interim consolidated financial statements for the three and six months ended June 30, 2018 and 2017 and Mosaic's MD&A for the period ended June 30, 2018 available under Mosaic's profile on SEDAR at www.sedar.com. Further information regarding these Non-GAAP measures is contained in Mosaic's MD&A. 

Forward-Looking Statements

This news release contains forward-looking information and statements within the meaning of applicable Canadian securities laws (herein referred to as "forward-looking statements") that involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. All information and statements in this press release which are not statements of historical fact may be forward-looking statements. The words "believe", "expect", "intend", "estimate", "anticipate", "project", "scheduled", and similar expressions, as well as future or conditional verbs such as "will", "should", "would", and "could" often identify forward-looking statements. Forward-looking statements included in this news release include, but are not limited to:

• the overall business strategy and objectives of Mosaic;
• the Company's expectation to grow and diversify cash flow;
• the Company's expectation to improve profitability, cash flow and secure long-term growth opportunities; and
• the Company's expectation to maintain its current dividend policy.

Such statements or information, if any, are only predictions and reflect the current beliefs of management with respect to future events and are based on information currently available to management. Actual results and events may differ materially from those contemplated by these forward-looking statements due to these statements being subject to a number of risks and uncertainties. Undue reliance should not be placed on these forward-looking statements as there can be no assurance that the plans, intentions or expectations upon which they are based will occur.

By their nature forward-looking statements involve assumptions and known and unknown risks and uncertainties, both general and specific, that contribute to the possibility that the predictions, forecasts, projections and other things contemplated by the forward-looking statements will not occur. A number of factors could cause actual results to differ materially from the results stated in the forward-looking statements, including, but not limited to, risks related to: general economic and business conditions; the failure to realize the anticipated benefits of Mosaic's recent and future acquisitions; adverse fluctuations in commodity prices; competition for, among other things, capital, equipment and skilled personnel; the inability to generate sufficient cash flow from operations to meet current and future obligations; the inability to obtain required debt and/or equity capital on suitable terms; competition for acquisition targets; adverse weather conditions; seasonality and fluctuations in results; and limited diversification of Mosaic's subsidiaries. Should any of the risks or uncertainties facing Mosaic and its subsidiaries materialize, or should assumptions underlying the forward-looking statements prove incorrect, actual results, performance, activities or achievements could vary materially from those expressed or implied by any forward-looking statements contained in this news release.

Although Mosaic believes that the expectations represented by any forward-looking-statements contained herein are reasonable based on the information available to them on the date of this news release, management cannot assure investors that actual results, performance or achievements will be consistent with these forward-looking statements. Any forward-looking statements herein contained are made as of the date of this press release and Mosaic does not assume any obligation to update or revise them to reflect new information, events or circumstances, except as required by law.

Neither the 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.

SOURCE Mosaic Capital Corporation

Cam Deller, Vice President, Corporate Development, Mosaic Capital Corporation, 400, 2424 - 4th Street SW, Calgary, AB, T2S 2T4, T: [phone], E: [email protected]