DE Decisive Dividend Corporation

KELOWNA, BC, May 8, 2024 /CNW/ - Decisive Dividend Corporation (TSXV: DE) (the "Company" or "Decisive") today reported its financial results for the three months ended March 31, 2024.

Highlights of the Company's financial performance in Q1 2024 include the following:

• Quarterly consolidated sales in Q1 2024, decreased 5% to $29.4 million, compared to $30.9 million in Q1 2023.
• Generated $4.0 million, or $0.21 per share, in Adjusted EBITDA* in Q1 2024, a decrease of 19% relative to $4.9 million, or $0.33 per share, in Q1 2023.
• Consolidated net profit in the quarter was $0.2 million, or $0.01 per share, compared to $2.0 million, or $0.13 per share, in Q1 2023.
• Lower sales in the quarter, particularly with respect to hearth products where backlogs to start the year were significantly lower than the start of 2023, and the increase in the scale of the organization and the associated operating expenses relative to Q1 2023, were the main drivers of the decrease in Adjusted EBITDA* and net profit relative to Q1 2023.
• Balance sheet strength and flexibility. Conservative leverage ratio of 2.1 times debt to Adjusted EBITDA* as of the date of this press release, after debt funding two acquisitions in 2024. Ample liquidity as of the date of this press release with $4.1 million of cash, $43.2 million available on the committed portion of the Company's syndicated credit facility, plus $75.0 million of availability on the accordion facility.
• In March 2024, the Company increased its per share monthly dividend to $0.045 from $0.040 previously.

Selected Financial Highlights:

The following are selected financial highlights of Decisive for the three months ended March 31, 2024. 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+ at www.sedarplus.ca and on Decisive's website (www.decisivedividend.com).

Q1 2024 Highlights:

• Consolidated sales decreased 5% to $29.4 million compared to $30.9 million in Q1 2023. The decrease was driven primarily by decreases in hearth product sales where backlogs to start the year were significantly lower than the start of 2023.
• Consolidated gross profit increased 1% to $11.2 million from $11.1 million in Q1 2023, despite the decrease in sales.
• Consolidated gross profit percentages increased to 38% from 36% in Q1 2023. Both segments contributed to the margin increase that were a result of product mix changes, pricing increases and other margin enhancing activities, as well as the contribution from the four high margin businesses acquired in 2023.
• Consolidated Adjusted EBITDA* decreased to $4.0 million, down 19% relative to Q1 2023. 
• Consolidated net profit in the quarter was $0.2 million, or $0.01 per share, compared to $2.0 million, or $0.13 per share, in Q1 2023.
• Consolidated free cash flow* decreased 36% to $1.9 million, or $0.10 per share, relative to Q1 2023
• Lower sales in the quarter, particularly with respect to hearth products where backlogs to start the year were significantly lower than the start of 2023, and the increase in the scale of the organization and the associated operating expenses relative to Q1 2023, were the main drivers of the decrease in Adjusted EBITDA*, net profit, and free cash flow* relative to Q1 2023.

Jeff Schellenberg, Chief Executive Officer of Decisive, noted:

"2024 has started off as a tale of two contrasts, as we have seen continued on-strategy acquisition activity while a challenging macroeconomic environment and the work being done by our subsidiary leadership on their teams, strategies and processes to support longer term growth objectives impacted quarterly operating results. 

Even as demand has been challenged our gross profit percentages have remained strong as a result of the margin enhancing activities the subsidiaries have undertaken, along with the quality of the margins of the acquisitions we have completed. The new company we acquired in April 2024, Techbelt, has a similar high margin profile and, as a result, we expect them to further support margin levels. While our subsidiaries are currently seeing softer demand for their products and we are expecting a more historically typical quiet Q2 due to the seasonality of some of our businesses (including our hearth and machined products businesses), they are actively pursuing opportunities to bolster demand, enhance market share and position the business to respond to demand generated as economic conditions improve or the businesses enter stronger seasonal periods. 

From an M&A perspective, we are extremely pleased with the acquisition of Techbelt as it adds another reoccurring revenue, high margin, low capital intensity wear-parts business to our portfolio.  We were also pleased with the opportunity to complete our first tuck-in acquisition into an existing subsidiary in March 2024. Further, the number of acquisition opportunities we are seeing that fit within the profile of our current portfolio of businesses continue to be robust and we remain well positioned with respect to available capacity under our credit facility to fund acquisitions. 

Finally, while we have seen our payout ratio increase to 66% on a trailing twelve-month basis in Q1 2024, up from 54% at year-end 2023, this shift illustrates the importance of the deliberate approach we have taken with respect to decisions to change dividend levels. While we have substantially increased the dividend over the last 5 quarters, each of the shifts was from a position of strength with the payout ratio being well within target levels. This measured approach positions us to maintain a growing and sustainable dividend, a key characteristic of a dividend aristocrat, being one of which is a key objective of the organization."

Outlook:

Decisive remains focused on continuing to drive performance in line with its overall strategic objectives including:

• Executing on the growth strategy, demonstrated by the completion of 8 acquisitions in a 24-month span, to the date of the completion of the acquisition of Techbelt.
• Building a strong and growing acquisition prospect pipeline.
• Assembling a diversified portfolio of high quality, high gross margin product manufacturing businesses focused on achieving long-term organic growth to support long-term strength in per share financial metrics.
• Solidifying subsidiary leadership and developing an eco-system of support for its subsidiaries at head office.
• Taking steps to work through current operational headwinds and to position each of the businesses to deliver long term organic growth including through developing new markets, securing new customers, product development, university backed research studies, customer product trials, facility expansions, organizational right-sizing, and/or organizational structure realignment for growth.
• Increasing production capacity and improving operational efficiency, including through automation initiatives, with an aggregate $3.8 million of growth capital expenditures* on manufacturing equipment made over the last 24 months and utilization of third-party manufacturing partners.
• Providing sustainable and growing dividends to shareholders, with 12.5% increase in the annualized dividend from $0.48 per share to $0.54 per share. Dividend payout ratio 66% for the trailing twelve-month period ended March 31, 2024.
• Maintaining balance sheet flexibility with conservative leverage ratios and ample availability on the Company's new syndicated credit facility.
• 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.

Conference Call

Decisive will host a conference call for interested parties on Thursday, May 9, 2024, at 8:00am Pacific Time (11:00am Eastern Time) to discuss the Company's Q1 2024 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 9, 2024, at 8:00am Pacific Time / 11:00am Eastern Time
(please call 10 minutes ahead of time)

Participant Information:
To join the conference call without operator assistance, you may register and enter your phone number at https://emportal.ink/4b8tvYi to receive an instant automated call back.

You can also dial direct to be entered into the call by an operator:
Dial in number – North America (toll free): 1-800-836-8184
Dial in number – United Kingdom (toll free): 08006522435
Dial in number – International: +1-289-819-1350

Replay Information (replay available until May 16, 2024):
Replay number – North America (toll free): 1-888-660-6345
Replay number – International: +1-289-819-1450
Replay access code 58265#

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 Accounting Standards, 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 Accounting Standards, 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 Accounting Standards 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 Accounting Standards 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 Accounting Standards;
• 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 Accounting Standards measures.

Adjusted EBITDA

Free Cash Flow

Free Cash Flow Less Maintenance Capital and Dividend Payout Ratio

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, 2024 demand levels, demand from customers, potential future acquisitions, and initiatives being explored to enhance margins and increase market share. 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