VTX Vertex Resource Group Ltd

Achieved record results for nine months as net revenue and adjusted EBITDA were $185.9 million and $30.2 million respectively.

SHERWOOD PARK, AB, Nov. 13, 2023  /CNW/ - (TSXV:VTX) - Vertex Resource Group Ltd. ("Vertex" or the "Company") reports its financial and operational results for the third quarter ended September 30, 2023.  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 September 30, 2023, which are available on SEDAR+ at www.sedarplus.ca.

The third quarter continued to deliver strong results in multiple categories in both the three and nine month periods.  Initiatives around competitive pricing, debt reduction, acquisition growth and exploring opportunities in new markets that have been a focus since 2022 gained further traction in 2023.

Key financial results for the three and nine months ended September 30, 2023, and 2022 are as follows: 

• Highest gross and net revenue in company history for any quarter at $68.3 million and $66.8 million respectively.
• Environmental Services achieved $49.3 million of gross and net revenue, the highest in company history.
• Cash used in financing activities was $7.3 million in the quarter compared to cash provided by financing activities of $5.3 million in Q3 2022.

• Gross revenue increased to $190.1 million from $185.5 million for the same period in 2022; which is the highest in any previous nine month period.
• Net revenue of $185.9 million, the highest in company history for a nine month period, compared to $158.5 million for the same period of 2022.
• Record adjusted EBITDA⁽¹⁾ amounted to $30.2 million for the nine months of 2023 compared to $24.6 million in 2022.
• Profit margin as a % of net revenue increased to 26.5% from 25.0% for the nine months.
• Cash used in financing activities was $32.7 million in the nine month period to date compared to cash provided by financing activities of $1.7 million in the same period of 2022.
• Free cash flow⁽¹⁾ amounted to $13.5 million compared to $11.9 million for the nine months.

Vertex's outlook remains confident as asset utilization and demand for services remains steady through to the end of 2023 and into 2024. Several drilling programs and maintenance projects that were planned for the third quarter were postponed into the fourth quarter or pushed fully into 2024.  This resulted in intervals of downtime that were unable to be filled due to the delayed timing of these decisions.

The Alberta government placed a six-month moratorium on new renewable energy projects early in the third quarter which had an immediate impact on our Environmental Consulting segment.  Most of our services for renewables are provided for the planning, viability and development stage and this moratorium has postponed this work until new regulations are brought forth for 2024.  This was very unexpected within the industry and it was challenging to replace this work for the remainder of 2023. 

Vertex has been expanding our Environmental Services in the United States by opening three locations in Montana, North Dakota and Colorado during late Q2.  This expansion will allow Vertex to service more of our existing customers in these markets, while developing new clientele. We anticipate these growth initiatives will contribute positively to our 2024 operations. 

As we approach the fourth quarter and plan for 2024, Vertex remains focused on executing our strategic business model and delivering value to our shareholders by enabling growth through the cross-selling of our services throughout the lifecycle of our clients' projects in various industries.  Additionally, Vertex is committed to further enhancing shareholder value by reducing our debt levels and through our planned share repurchases. 

During the finalization of the 2022 audited consolidated financial statements, management identified that revenue from certain contracts with customers was recorded net of the costs incurred to reflect an agency relationship and to match the economic nature of the cash flows of the contracts.  Under the terms of the contracts the Company was the principal in the arrangement. As a result, revenue and direct costs had been previously understated.  In the Interim Financial Statements, the comparative period, being the three and nine months ended September 30, 2022 has been restated to correct the error.  There is no impact to the Company's statement of financial position as at September 30 2022, no impact on profit margin, net income, basic or diluted earnings per share, and no impact on operating, investing, or financing cash flows for the periods ended September 30, 2022.

Since 1962, Vertex has been a leading North American provider of environmental services. Headquartered in Sherwood Park, Alberta, Vertex employs a staff of approximately 1,100 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.

This news 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-financial measure which is calculated by adjusting net (loss) income 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, and share-based compensation.  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, 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 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-financial measure which is calculated by reducing adjusted EBITDA by maintenance capital expenditures, cash interest and taxes, depreciation of right of use assets – real property; net of disposal proceeds.

C) "Adjusted Working Capital" is a non-financial measure which is calculated by reducing current liabilities by the current portion loans and borrowings, lease liabilities and other liabilities.

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

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.

Any "financial outlook" or "future oriented financial information" in this MD&A, as defined by applicable securities laws, has been approved by management of Vertex. Such financial outlook or future oriented financial information is provided for the purpose of providing information about management's current expectations and plans relating to the future. Readers are cautioned that reliance on such information may not be appropriate for other circumstances.

Certain statements contained in this document constitute "forward-looking information". When used in this document or by any of the Company's management, the words "may", "would", "will", "intend", "plan", "propose", "anticipate" and "believe" are intended to identify forward-looking information. In particular, but without limiting the foregoing, this document contains forward-looking information and statements pertaining to the following: the Company's key strategies, objectives and competitive strengths; anticipated expenses; the Company's ability to integrate and capitalize on underutilized equipment through cross-selling opportunities across service lines and reducing redundant costs in 2023; growth opportunities in 2023; supply and demand for the Company's services; anticipated savings in 2023; activity levels in the oil and gas industry and other industries in which the Company operates; annual gross maintenance capital expenditures for 2023; future development activities; and the Company's ability to retain existing clients and attract new business, particularly business outside of the oil and gas industry. Such statements reflect the Company's forecasts, estimates and expectations, as they relate to the Company's current views based on its experience and expertise with respect to future events, and are subject to certain risks, uncertainties, and assumptions.

The forward-looking information and statements contained in this document reflect several material factors and expectations and assumptions of the Company, including, without limitation: that the Company will continue to conduct its operations in a manner consistent with past operations; positive future trends in revenue, gross profit margin, Adjusted EBITDA, Bank EBITDA and net income; the general continuance of current or, where applicable, assumed industry conditions; the mix of revenue from non-oil and gas customers in 2023; pricing of the Company's services; the Company's ability to market successfully to current and new clients; the Company's ability to obtain qualified personnel and equipment in a timely and cost-effective manner; the Company's future debt levels; the impact of competition on the Company; the Company's ability to obtain financing on acceptable terms; the general continuance of current or, where applicable, assumed industry conditions; the continuance of existing tax, royalty and regulatory regimes; the impact of seasonal weather conditions; client activity levels; anticipated market recovery; the Company's anticipated business strategies and expected success; the Company's ability to utilize its equipment; levels of deployable equipment; and future sources of funding for the Company's capital program.

The forward-looking information and statements included in this document are not guarantees of future performance and should not be unduly relied upon. Such information and statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking information or statements, including, without limitation: volatility of the oil and natural gas industry; dependence on customer contracts and market acceptance; the Company's growth strategy may not achieve anticipated results; potential litigation claims; difficulty in attracting and retaining skilled personnel; adverse litigation judgments, settlements and exposure to liability resulting from legal proceedings could reduce profits of limit Vertex's ability to operate; the market for Vertex's products and services is subject to extensive government and regulatory approvals; health, safety and environment laws and regulations may require the Company to make substantial expenditures or cause it to incur substantial liabilities; the Company may fail to realize anticipated benefits of future acquisitions; Vertex's indebtedness may adversely affect its financial flexibility and competitive position; competition in the industries in which Vertex operates; downturns in general economic and market conditions; operational hazards and unforeseen interruptions for which Vertex may not be adequately insured; positive covenants in Vertex's material contracts could limit its ability to operate; third part credit risk; conservation measures and technological advances may reduce demand for hydrocarbons; loss of the Company's information and computer systems or cyber-attacks; director and officer conflicts of interest; a reassessment by tax authorities of Vertex's income calculations; volatility in the price of the Common Shares; and the risk factors set forth under the heading "Risk Factors" in the AIF.

Vertex's business is subject to a number of risks and uncertainties. Readers are encouraged to review and carefully consider the risk factors described in the AIF, which risk factors are specifically incorporated by reference herein.

The forward-looking statements contained in this MD&A are expressly qualified in their entirety by this cautionary statement. The forward-looking statements included in this MD&A are made as of the date of this MD&A. The Company does not intend and does not assume any obligation to update any such factors or to publicly announce the result of any revisions to any of the forward-looking statements contained herein to reflect future results, events or developments, unless required by law.

SOURCE Vertex Resource Group Ltd.