XX Avante Corp

Avante Logixx Inc. (TSX.V: XX) (OTC: ALXXF) (“Avante” or the “Company”) is pleased to announce its financial results for the fiscal year ended March 31, 2022 (all amounts in Canadian dollars thousands, unless otherwise indicated).

SUMMARY FINANCIAL RESULTS FOR THE YEAR ENDED MARCH 31, 2022:

$ thousands unless otherwise noted		March 31, 2022	March 31, 2021
Revenues, continuing operations(1)		$18,156	$17,134
Gross profit, continuing operations(1) (3)		$7,848	$7,320
Gross profit margin, continuing operations(1) (3)		43.2%	42.7%
RMR in the period, continuing operations(1) (3)		$9,648	$8,543
EBITDA(2) (3)		$187	$3,793
Adjusted EBITDA(3)		$4,200	$6,666
Adjusted EBITDA, Avante Security Segment(1) (3)		$1,402	$1,750
Net Income (loss), continuing operations(1) (2)		$(5,937)	$(3,990)
Net Income (loss)(2)		$(4,392)	$(2,803)
Total Funded Debt as reported per IFRS(4)		$8,865	$15,548
Total Funded Debt & Lease Obligations per IFRS(1) (4)		$9,706	$17,729
Total Common Shares outstanding at period end		26,489,438	21,192,004
Average Common Shares outstanding during the period		21,830,599	21,192,004

(1)	The Company sold Logixx Security Inc. (“Logixx Security”) on June 1, 2022.  Its financial results are treated as discontinued operations for this reporting period.
(2)	Net income (loss) and EBITDA in each period also reflect significant gain or loss amounts attributable to the derivative component of convertible debentures that were converted into common shares on February 16, 2022.  The net loss during fiscal 2022 also reflects significant costs related to the Board’s strategic review.
(3)	EBITDA, Adjusted EBITDA and Recurring Monthly Revenue (“RMR”) are non-IFRS financial measures that have no standard meaning under IFRS and as a result may not be comparable to the calculation of similar measures by other companies.  See Description of Non-IFRS Financial Measures.  Reconciliations of EBITDA, Adjusted EBITDA and RMR to Net Income or Revenues, as applicable, are provided in the Company’s Management Discussion & Analysis (“MD&A”).
(4)	Funded Debt was fully repaid on June 1, 2022, upon receipt of proceeds from the sale of Logixx Security.

Under IFRS reporting standards, the Company is required to remove the financial results of Logixx Security Inc. (“Logixx Security”), that was sold on June 1, 2022, in respect of the reporting periods ended March 31, 2022 and March 31, 2021.  However, the expenses of the corporate head office, that supported a larger enterprise prior to the sale of Logixx Security, remain within the reported financial results for such periods.  Significant cost reduction measures were implemented by the Company after March 31, 2022, and funded debt was fully repaid on June 1, 2022.  In addition, reported net income (loss) during each fiscal period reflected significant gains or losses attributable to the derivative component of the convertible debentures that were converted into common shares on February 16, 2022.  Significant costs related to the former Board’s strategic review initiated in August 2021, as well as acquisition costs, are also reflected within the IFRS net loss during fiscal 2022.  Therefore, readers are cautioned that IFRS reported consolidated financial results and balance sheet amounts in respect of the fiscal years ending March 31, 2022 and 2021 may not be reliable predictors of financial results or balances for the Company during subsequent fiscal periods.

“The business has been significantly transformed since the Board and management changes implemented by the Company on March 30, 2022.” said Manny Mounouchos, Founder, CEO & Board Chair of Avante. “During March to June 2022, we closed the corporate office, eliminated redundant vehicle leases, removed several senior level positions and completed the sale Logixx Security.  Management is now focused on a new strategy to leverage the Company’s valuable residential security business within Avante Security currently serving the Toronto and Muskoka regions of Ontario.”

Added Stephen Rotz, Chief Financial Officer of the Company, “We anticipate releasing our financial results in respect of the first fiscal quarter ended June 30, 2022 during late August 2022 and expect to report June 30th cash balances of approximately $11.9 million. Settlement of working capital with the purchasers of Logixx Security is expected to yield an additional $1 million during September.  While some integration costs remain to be paid from the Company’s cash balance, the Company is well positioned to capitalize on opportunities going forward given its significant cash balances, its debt free balance sheet along with access to an unused $2 million, senior secured revolving credit facility with its bank and a $10 million unsecured, non-revolving term loan facility provided by the Company’s largest shareholder.”

FINANCIAL HIGHLIGHTS FOR THE FISCAL YEAR AND QUARTER ENDED MARCH 31, 2022:

Within continuing operations, the Company reported year-over-year revenue growth of 6.0% (or $1.0 million) during fiscal 2022 increasing to $18.2 million from $17.1 million.  Gross profit margins within continuing operations improved to 43.2% of revenue, versus 42.7% during the prior year, with total gross profit increasing by $0.5 million.

The Avante Security segment delivered growing recurring monthly revenues (“RMR”) within the Company’s continuing operations, totaling $2,488 of revenue during the fourth quarter of fiscal 2022, from $2,314 during the prior year’s fourth quarter, representing growth of 7.5%.  During the full year of fiscal 2022, RMR was $9,648 versus $8,543 during fiscal 2021, representing an increase of 12.9%.

As summarized in the table below, the Company’s RMR (from continuing operations) has been growing throughout the last eight quarters, and total revenues grew sequentially over each of the last three fiscal quarters.  In addition, gross profit margins over the last eight quarters have ranged between 40.1% and 46.7% with a tighter range during fiscal 2022:

Avante Security		Fiscal 2021(1)				Fiscal 2022(1)
$ thousands		Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4
RMR in the period		$2,033	$2,070	$2,126	$2,314	$2,372	$2,372	$2,416	$2,488
Other revenue		1,674	2,376	2,202	2,339	1,657	2,066	2,335	2,450
Total revenue		$3,707	$4,446	$4,328	$4,653	$4,029	$4,438	$4,751	$4,938
Total Gross Profit		$1,733	$1,874	$1,848	$1,865	$1,776	$1,842	$2,143	$2,087
Gross Profit %		46.7%	42.2%	42.7%	40.1%	44.1%	41.5%	45.1%	42.3%

    

(1)	The Company’s fiscal year end is on March 31 of each year.

During the fourth quarter of Fiscal 2022, the Company experienced strong sequential and year-over-year growth in both Protective Service revenues and Monitoring & Managed service revenues.  However, this growth was partially offset by sequential declines in Electronic Services implementation revenues.  Similar trends occurred on a year-over-year basis in respect of the entire fiscal year ended March 31, 2022.

SEGMENT RESULTS:

The Company’s total Adjusted EBITDA, including discontinued operations, decreased $2.5 million from $6.7 million during fiscal 2021 to $4.5 million during fiscal 2022.  As summarized in the tables at the end of this news release under “Reconciliation of EBITDA and Adjusted EBITDA by Segment”, the year-over-year decline in Adjusted EBITDA during fiscal 2022 was due to reduced earnings within both the Avante Security and Discontinued Operations segments, offset by a lower loss within corporate costs of continuing operations.

The Avante Security segment reported reduced Adjusted EBITDA of $1.4 million during fiscal 2022, versus $1.8 million during fiscal 2021.  This decrease of $0.4 million was largely due to higher operating expenses, as the prior year benefited from temporary COVID-19 salary cuts and fiscal 2022 absorbed higher costs for salary increases, insurance premiums and allocated overhead expenses for audit and incremental IT security costs.  The Company’s new management team, as of March 30, 2022, has addressed these cost pressures within Avante Security by reducing headcount and overhead costs and by implementing pricing and fuel levy charges to customers as of June 2022.

During fiscal 2022, Discontinued Operations reflected the Logixx Security Segment for twelve months, while during fiscal 2021, Discontinued Operations included the Logixx Security Segment for twelve months as well as the City Wide Segment for six months ending September 30, 2020.  During Fiscal 2022, Adjusted EBITDA of Discontinued Operations was $4.2 million, compared to $7.4 million during fiscal 2021, a decrease of $3.1 million.  Logixx Security’s prior year benefited more significantly from strong margins on COVID-19 related service revenues, while the current year’s gross profit was impacted negatively by higher unbillable overtime costs due to labour shortages from August 2021 to the end of fiscal 2022.  In addition, Discontinued Operations during the prior year benefited from positive earnings of approximately $0.6 million generated from the City Wide Segment.

The loss from central corporate costs, net of eliminations, within continuing operations showed a positive improvement of $1.0 million during fiscal 2022, as the prior year reflected management bonuses that were not repeated in respect of fiscal 2022.

OTHER HIGHLIGHTS:

Effective February 16, 2022, the holders of the Company’s convertible debentures elected to convert all outstanding debentures into common shares.  This eliminated reported debt in respect of these debentures under IFRS standards as of the third quarter ended December 31, 2022 of $8.6 million (face value $8.3 million) and increased outstanding Common Shares by 5,297,434.  On June 1, 2022, all remaining funded debt of the Company was repaid from proceeds of the sale of Logixx Security and the Company was in a significant cash position as of that date.

Manny Mounouchos concluded by saying that “over the coming months, we will articulate additional plans for growing the business.  However, our shareholders should not forget that we are building upon strong recurring revenues, insignificant customer attrition, low customer net acquisition costs and a highly regarded portfolio of customers.  I fully expect future financial reporting to better reflect recent transformation activities, to create a more balanced cost structure, and benefits from additional plans for this great business.”

Readers should refer to the Company’s financial statements and MD&A in respect of the fiscal years ended March 31, 2022 and 2021 for additional risk factors, accounting policies, detailed financial disclosures, reconciliation of non-IFRS financial measures to the most directly comparable IFRS financial measures, related party transactions, contingencies and reporting of subsequent events since the fiscal year ended March 31, 2022.  Such financial statements and MD&A are incorporated by reference into this news release and are filed electronically through the System for Electronic Document Analysis and Retrieval (“SEDAR”), which can be accessed at www.sedar.com.

This news release shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the securities described herein in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.  This news release does not constitute an offer of securities for sale in the United States.  The securities described herein have not been, nor will they be, registered under the United States Securities Act of 1933, as amended, and such securities may not be offered or sold within the United States absent registration under U.S. federal and state securities laws or an applicable exemption from such U.S. registration requirements.

Neither 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 release.

ABOUT AVANTE LOGIXX INC.:

Avante Logixx Inc. (TSXV: XX), provides high-end security services through its wholly owned subsidiary, Avante Security Inc., serving residential customers located in Toronto and Muskoka regions of Ontario, Canada.  With an experienced team, a focus on customer service excellence and development of innovative solutions, we remain committed to providing our shareholders with exceptional returns.  Please visit our website at www.avantelogixx.com.

Emmanuel Mounouchos Founder, CEO & Board Chair, Avante Logixx Inc.416-923-6984manny@avantesecurity.com

Forward-Looking Information

This news release may contain forward-looking statements (within the meaning of applicable securities laws) relating to the business of the Company and the environment in which it operates.  Forward-looking statements are identified by words such as “believe”, “anticipate”, “project”, “expect”, “intend”, “plan”, “will”, “may” “estimate”, “pro-forma” and other similar expressions.  These statements are based on the Company’s expectations, estimates, forecasts and projections.  The forward-looking statements in this news release are based on certain assumptions.  They are not guarantees of future performance and involve risks and uncertainties that are difficult to control or predict.  A number of factors could cause actual results to differ materially from the results discussed in the forward-looking statements, including, but not limited to, the Company’s ability to achieve the benefits expected as a result of the sale of Logixx Security Inc., anticipated growth from acquisitions, new service offerings and from development and deployment of new technologies and the list of risk factors identified in the Company’s Management Discussion & Analysis (MD&A), Annual Information Form (AIF) and other continuous disclosure documents available at www.sedar.com.  There can be no assurance that forward-looking statements will prove to be accurate as actual outcomes and results may differ materially from those expressed in these forward-looking statements.  Readers, therefore, should not place undue reliance on any such forward-looking statements.  Further, these forward-looking statements are made as of the date of this news release and, except as expressly required by applicable law, the Company assumes no obligation to publicly update any such statement, whether as a result of new information, future events or otherwise.

Non-IFRS Financial Measures

This press release includes certain measures which have not been prepared in accordance with International Financial Reporting Standards (“IFRS”) such as EBITDA, Adjusted EBITDA and Recurring Monthly Revenue (“RMR”).  These non-IFRS measures are not recognized under IFRS and and do not have a standardized meaning prescribed by IFRS.  Accordingly, users are cautioned that these measures should not be construed as alternatives to net income determined in accordance with IFRS.  The non-IFRS measures presented are unlikely to be comparable to similar measures presented by other issuers.

References to EBITDA are to net income before interest, taxes, depreciation and amortization.  References to Adjusted EBITDA are to net income before interest, taxes, depreciation, amortization of intangibles & capitalized commissions, share-based payments, acquisition, integration and / or reorganization costs, deferred financing costs, loss (gain) in fair value of derivative liability and expensing of fair value adjustments per IFRS.  Recurring Monthly Revenues, or RMR, represent revenue during the fiscal period that benefited from contractual periodic billing to customers, typically monthly, quarterly or annually.

Management believes that Adjusted EBITDA and Recurring Monthly Revenues are appropriate additional measures for evaluating Avante’s performance.  Readers are cautioned that neither EBITDA, Adjusted EBITDA nor Recurring Monthly Revenues should be construed as an alternative to net income or revenues (as such financial measures are determined under IFRS), as an indicator of financial performance or to cash flow from operating activities (as determined under IFRS) or as a measure of liquidity and cash flow.  Avante’s method of calculating EBITDA, Adjusted EBITDA and Recurring Monthly Revenues may differ from methods used by other issuers and, accordingly, Avante’s reported Non-IFRS measures may not be comparable to similar measures used by other issuers.

RECONCILIATION OF EBITDA & ADJUSTED EBITDA BY SEGMENT:

Continuing Operations:

	Fiscal Year Ended March 31, 2022				Fiscal Year Ended March 31, 2021
	Avante Security	Corporate & Eliminations	Total		Avante Security	Corporate & Eliminations	Total
Revenue	18,161	(5)	18,156		17,142	(8)	17,134
Cost of sales	(10,844)	536	(10,308)		(10,070)	256	(9,814)
Gross profit	7,317	531	7,848		7,072	248	7,320
Direct operating expenses	5,931	2,241	8,172		5,326	2,844	8,170
Other operating expenses	709	639	1,348		717	547	1,264
Total operating expenses	6,640	2,880	9,520		6,043	3,391	9,434
Other (income) expenses	79	(282)	(203)		104	2,235	2,339
Reorganization & acquisition costs	26	4,381	4,407		-	196	196
Provision for income taxes	144	(83)	61		277	(937)	(660)
Net Income (loss), continuing	428	(6,365)	(5,937)		648	(4,637)	(3,989)
Current income tax expense (recovery)	-	-	-		-	-	-
Deferred income tax expense (recovery)	144	(83)	61		277	(937)	(660)
Interest expense	95	364	459		109	276	385
Depreciation and amortization	709	532	1,241		717	474	1,191
EBITDA, continuing	1,376	(5,552)	(4,176)		1,751	(4,824)	(3,073)
Share based compensation	-	108	108		-	73	73
Reorganization and acquisition costs	27	4,380	4,407		-	196	196
Loss (gain), fair value of derivative liability	-	(471)	(471)		-	2,070	2,070
Deferred financing fees	-	125	125		-	49	49
Adjusted EBITDA, Continuing	1,403	(1,410)	(7)		1,751	(2,436)	(685)

Discontinued Operations:

	Fiscal Year Ended March 31, 2022				Fiscal Year Ended March 31, 2021
	Logixx Security	Corporate & Eliminations	Total		Discontinued Operations	Corporate & Eliminations	Total
Revenue	76,446	(536)	75,910		74,952	(371)	74,581
Cost of sales	(64,277)	2	(64,275)		(61,187)	120	(61,067)
Gross profit	12,169	(534)	11,635		13,765	(251)	13,514
Direct operating expenses	9,278	(2,150)	7,128		9,810	(3,153)	6,657
Other operating expenses	1,504	-	1,504		3,707	-	3,707
Total operating expenses	10,782	(2,150)	8,632		13,517	(3,153)	10,364
Other (income) expenses	1,338	-	1,338		820	-	820
Reorganization & acquisition costs	217	-	217		484	-	484
Provision for income taxes	(97)	-	(97)		566	-	566
Net Income (loss), discontinued	(71)	1,616	1,545		(1,622)	2,902	1,280
Current income tax expense (recovery)	22	-	22		52	-	52
Deferred income tax expense (recovery)	(119)	-	(119)		514	-	514
Interest expense	1,039	-	1,039		1,155	-	1,155
Depreciation and amortization	1,504	-	1,504		3,868	-	3,868
EBITDA, discontinued	2,376	1,616	3,991		3,967	2,902	6,869
Share based compensation	-	-	-		-	-	-
Reorganization and acquisition costs	217	-	217		484	-	484
Loss (gain), fair value of derivative liability	-	-	-		-	-	-
Deferred financing fees	-	-	-		-	-	-
Adjusted EBITDA, Discontinued	2,593	1,616	4,209		4,451	2,902	7,353

Note:  During fiscal 2021, Discontinued Operations included the financial results of the City Wide Segment for six months ending September 30, 2020 as well as the financial results in respect of the Logixx Security Segment for twelve months ending March 31, 2021.