First quarter 2024 sales of
Earnings per share increase to
Financial Highlights for Q1 2024 (as compared to Q1 2023, unless otherwise stated)
- Generated sales of
$535.1 million (C$721.7 million ), as compared to$579.9 million (C$784.3 million ) - Gross margin grew to
$118.2 million , from$117.0 million - Gross margin percentage increased to 22.1%, a 190 basis points improvement
- Operating expenses increased by
$1.4 million , or 1.5% - Net income increased by 11.2% to
$10.7 million ; Basic earnings per share grew 11.6% to$0.48 (C$0.65 ) - Adjusted net income increased by 16.8% to
$17.3 million ; Adjusted basic earnings per share increased 18.2% to$0.78 (C$1.05 ) - Adjusted EBITDA grew 6.3% to
$45.6 million (C$61.4 million ) - Operating cash flow before changes in working capital increased
$6.9 million to$36.9 million , from$30.0 million - Declared a dividend of
C$0.14 per share, payable onJuly 26, 2024 to shareholders of record as ofJuly 15, 2024
"We delivered robust gross margin performance again in the first quarter, helping to drive improved bottom-line results, including 18.2% year-over-year growth in Adjusted basic earnings per share and 6.3% growth in Adjusted EBITDA" said
"Our first quarter sales volumes also continued to stabilize, increasing by approximately 1% year-over-year. As expected, however, product price deflation continued to impact our top line results, resulting in a 7.7% decrease in total sales compared to the same period last year."
"Overall, our results continue to demonstrate ADENTRA's ability to perform well in all business cycles. Our 22.1% gross margin performance in a deflationary product price environment was particularly meaningful, and underscores the success of our strategic initiatives, including the expansion and diversification of our product mix with higher-margin and value-added offerings, the success of our global sourcing program, and our disciplined operational performance. Operating expenses remained well controlled across our business, and were just 1.5% higher year-over-year, despite continued inflationary pressures in the economy."
"As we move forward, we are sharply focused on our Destination 2028 goal of achieving
"While investing in future growth, we also remain committed to providing near-term value for investors. During the first quarter we returned
Outlook
Forecasters are anticipating a stable environment for residential construction in 2024 and a stable-to-lower year of demand for the repair and remodel market. Each of these markets represents approximately 40% of our business, respectively.
Overall, the inflation and interest rate hikes of recent years are expected to continue to moderately impact economic activity. While our sales volumes have improved in recent quarters, we continue to experience softness in product pricing. Sales comparisons to 2023 are expected to improve in the latter half of the year. In this environment, we anticipate modest growth in full-year Adjusted EBITDA, driven by continued gross margin strength and disciplined management of operating expenses.
As we have demonstrated in previous business cycles and most recently in 2023, we are adept at managing our business and cash flows effectively in challenging market conditions. Our size and scale, together with the diversity in our product categories, customer channels and end-markets, provide important stability while reducing our exposure to any one geography or segment of the industry. Our strong balance sheet provides financial stability as we move through periods of changing market conditions, and our business model is expected to continue converting a high proportion of Adjusted EBITDA to operating cash flows before changes in working capital. In addition, our investment in working capital typically decreases during periods of reduced activity, resulting in an additional source of liquidity.
Our balance sheet and liquidity support the continued execution of our Destination 2028 plan, which includes acquiring
Over the longer term our business is supported by strong fundamentals in our end markets which include historic under-building of homes, positive demographic factors, strong home equity, and an aging housing stock. Decreases in interest rates could further support end-market demand for our products. We continue to see a multi-year runway for growth in our core repair and remodel, residential, and commercial markets.
Q1 2024 Investor Call
ADENTRA will hold an investor call on
Summary of Results
Three months | Three months | |||
ended | ended | |||
2024 | 2023 | |||
Total sales | $ 535,138 | $ 579,857 | ||
Sales in the US | 492,470 | 536,184 | ||
Sales in | 57,542 | 59,068 | ||
Gross margin | 118,234 | 116,993 | ||
Gross margin % | 22.1 % | 20.2 % | ||
Operating expenses | (93,835) | (92,428) | ||
Income from operations | $ 24,399 | $ 24,565 | ||
Add: Depreciation and amortization | 18,329 | 17,018 | ||
Earnings before interest, taxes, depreciation and | ||||
amortization ("EBITDA") | $ 42,728 | $ 41,583 | ||
EBITDA as a % of revenue | 8.0 % | 7.2 % | ||
Add (deduct): | ||||
Depreciation and amortization | (18,329) | (17,018) | ||
Net finance expense | (11,078) | (12,219) | ||
Income tax expense | (2,650) | (2,749) | ||
Net income for the period | $ 10,671 | $ 9,597 | ||
Basic earnings per share | $ 0.48 | $ 0.43 | ||
Diluted earnings per share | $ 0.47 | $ 0.42 | ||
Average US dollar exchange rate for | $ 0.742 | $ 0.739 |
Analysis of Specific Items Affecting Comparability (in thousands of Canadian dollars)
| ||||
Three months | Three months | |||
ended | ended | |||
2024 | 2023 | |||
Earnings before interest, taxes, depreciation and | ||||
amortization ("EBITDA"), per table above | $ 42,728 | $ 41,583 | ||
LTIP expense | 2,824 | 1,286 | ||
Adjusted EBITDA | $ 45,552 | $ 42,869 | ||
Adjusted EBITDA as a % of revenue | 8.5 % | 7.4 % | ||
Net income for the period, as reported | $ 10,671 | $ 9,597 | ||
LTIP expense, net of tax | 2,586 | 1,172 | ||
Amortization of acquired intangible assets, net of tax | 4,062 | 4,062 | ||
Adjusted net income for the period | $ 17,319 | $ 14,831 | ||
Basic earnings per share, as reported | $ 0.48 | $ 0.43 | ||
Net impact of above items per share | 0.30 | 0.23 | ||
Adjusted basic earnings per share | $ 0.78 | $ 0.66 | ||
Diluted earnings per share, as reported | $ 0.47 | $ 0.42 | ||
Net impact of above items per share | 0.29 | 0.23 | ||
Adjusted diluted earnings per share | $ 0.76 | $ 0.65 |
Results from Operations - Three Months Ended
For the three months ended
Our US operations generated first quarter sales of
In
First quarter gross margin increased to
For the three months ended
For the three months ended
For the three months ended
For the three months ended
First quarter Adjusted EBITDA grew 6.3% to
Net income for the first quarter of 2024 increased to
First quarter adjusted net income grew 16.8% to
About ADENTRA
ADENTRA is one of
Non-GAAP and other Financial Measures
In 2024, we revised our calculations of Adjusted net income, Adjusted basic earnings per share, and Adjusted diluted earnings per share to exclude the amortization of acquired intangible assets. The historical presentation of these measures within this MD&A has also been updated to reflect the revised calculations. We believe that excluding the amortization of acquired intangible assets from these non-GAAP financial measures helps management and investors in understanding our underlying operating performance.
In this news release, reference is made to the following non-GAAP financial measures:
- "Adjusted EBITDA" is EBITDA before long term incentive plan ("LTIP") expense, accrued trade duties, professional fees, and transaction costs. We believe Adjusted EBITDA is a useful supplemental measure for investors, and is used by management, for evaluating our ability to meet debt service requirements and fund organic and inorganic growth, and as an indicator of relative operating performance.
- "Adjusted net income" is net income before LTIP expense, accrued trade duties, professional fees, transaction costs, and amortization of intangible assets acquired in connection with an acquisition. We believe adjusted net income is a useful supplemental measure for investors, and is used by management to assist in evaluating our profitability, our ability to meet debt service and capital expenditure requirements, our ability to generate cash flow from operations, and as an indicator of relative operating performance.
- "EBITDA" is earnings before interest, income taxes, depreciation and amortization, where interest is defined as net finance income (expense) as per the consolidated statement of comprehensive income. We believe EBITDA is a useful supplemental measure for investors, and is used by management, for evaluating our ability to meet debt service requirements and fund organic and inorganic growth, and as an indicator of relative operating performance.
- "Working capital" is accounts receivable, inventory, and prepaid expenses, partially offset by short-term credit provided by suppliers in the form of accounts payable and accrued liabilities. We believe working capital is a useful indicator for investors, and is used by management, for evaluating the operating liquidity available to us.
In this news release, reference is also made to the following non-GAAP ratios: "adjusted basic earnings per share", "adjusted diluted earnings per share", "Adjusted EBITDA margin" and "Leverage Ratio". For a description of the composition of each non-GAAP ratio and how each non-GAAP ratio provides useful information to investors and is used by management, see "Non-GAAP and Other Financial Measures" in the Company's management's discussion and analysis for the quarter ended
Such non-GAAP financial measures and non-GAAP ratios are not standardized financial measures under IFRS and might not be comparable to similar financial measures disclosed by other issuers. For a reconciliation between non-GAAP measures and non-GAAP ratios and the most directly comparable financial measure in our financial statements, please refer to the "Summary of Results".
Forward-Looking Statements
Certain statements in this press release contain forward-looking information within the meaning of applicable securities laws in
The forward-looking information in this press release is included, but not limited to: We also continue to maintain significant unused borrowing capacity of over
The forecasts and projections that make up the forward-looking information are based on assumptions which include, but are not limited to: there are no material exchange rate fluctuations between the Canadian and US dollar that affect our performance; the general state of the economy does not worsen; we do not lose any key personnel; there is no labor shortage across multiple geographic locations; there are no circumstances, of which we are aware that could lead to the Company incurring costs for environmental remediation; there are no decreases in the supply of, demand for, or market values of our products that harm our business; we do not incur material losses related to credit provided to our customers; our products are not subjected to negative trade outcomes; we are able to sustain our level of sales and earnings margins; we are able to grow our business long term and to manage our growth; we are able to integrate acquired businesses; there is no new competition in our markets that leads to reduced revenues and profitability; we can comply with existing regulations and will not become subject to more stringent regulations; no material product liability claims; importation of components or other innovative products does not increase and replace products manufactured in
The forward-looking information is subject to risks, uncertainties and other factors that could cause actual results to differ materially from historical results or results anticipated by the forward-looking information. The factors which could cause results to differ from current expectations include, but are not limited to: exchange rate fluctuations between the Canadian and US dollar could affect our performance; our results are dependent upon the general state of the economy; the impacts of COVID-19, further mutations thereof or other outbreaks of disease, could have significant impacts on our business; we depend on key personnel, the loss of which could harm our business; a labour shortage across multiple geographic locations could harm our business; decreases in the supply of, demand for, or market values of hardwood lumber or sheet goods could harm our business; we may incur losses related to credit provided to our customers; our products may be subject to negative trade outcomes; we may not be able to sustain our level of sales or earnings margins; we may be unable to grow our business long term or to manage any growth; we are unable to integrate acquired businesses; competition in our markets may lead to reduced revenues and profitability; we may fail to comply with existing regulations or become subject to more stringent regulations; product liability claims could affect our revenues, profitability and reputation; importation of components or other innovative products may increase, and replace products manufactured in
This news release contains information that may constitute a "financial outlook" within the meaning of applicable securities laws. The financial outlook has been approved by our management as of the date of this news release. The financial outlook is provided for the purpose of providing readers with an understanding of our anticipated financial performance. Readers are cautioned that the information contained in the financial outlook may not be appropriate for other purposes.
All forward-looking information in this news release is qualified in its entirety by this cautionary statement and, except as may be required by law, we undertake no obligation to revise or update any forward-looking information as a result of new information, future events or otherwise after the date hereof.
Third-Party Information
Certain information contained in this news release includes market and industry data that has been obtained from or is based upon estimates derived from third-party sources, including industry publications, reports and websites. Although the data is believed to be reliable, we have not independently verified the accuracy, currency or completeness of any of the information from third-party sources referred to in this news release or ascertained from the underlying economic assumptions relied upon by such sources. We hereby disclaim any responsibility or liability whatsoever in respect of any third-party sources of market and industry data or information.
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