Second quarter 2023 sales of
Cash flow from operations of
Declares dividend of
Financial Highlights for Q2 2023
- Generated sales of
$585.9 million (C$786.8 million ) - Achieved gross profit of
$119.4 million , representing a gross margin percentage of 20.4% - Operating expenses as a percentage of sales were 16.1%, and grew by just
$1.5 million , or 1.7%, organically despite higher inflationary conditions prevalent in the economy - Generated net income of
$9.4 million and Adjusted EBITDA of$46.2 million (C$62.0 million ) - Achieved basic earnings per share of
$0.42 and Adjusted basic earnings per share of$0.56 (C$0.75 ) - Cash flow from operating activities was
$52.8 million (C$70.8 million ). Net bank debt decreased by$51.7 million - Ended the quarter with a strong balance sheet and a Leverage Ratio of 3.0 times
- Declared a dividend of
C$0.13 per share, payable onOctober 27, 2023 to shareholders of record as ofOctober 16, 2023
"ADENTRA performed well in the second quarter as we leveraged our strategies and proven business model to achieve positive financial results, increase operating cash flow, and pay down debt even in a challenging macroeconomic environment," said
"While our Q2 results did not keep pace with the record results generated during the exceptional conditions of fiscal 2022, we achieved sequential quarterly improvement in sales volumes, gross margin and EBITDA margin percentage as compared to Q1 2023. Our performance in a period of reduced demand and product price deflation underscores the success of our strategies to grow and broaden our end-market participation, expand our channels to market, diversify and strengthen our product mix, and deepen our geographic coverage."
"We also continued to demonstrate our business's ability to convert a high percentage of adjusted EBITDA into operating cash flow before changes in working capital, and to release working capital and generate additional cash flow in periods of reduced economic activity. Second quarter operating cash flow grew to
"Our strong cash flow generation enabled us to further reduce our net bank debt by
"Looking forward, market headwinds are expected to persist in the near term but our business model and strategies are designed for success. We are confident in our ability to continue generating steady performance and strong operating cash flow through the balance of 2023," said
Outlook
The combined impact of recent inflation and interest rate hikes is expected to have a continued near-term negative effect on economic activity. This, in turn, is resulting in a moderation of demand for our products as compared to 2022, and could lead to a continuation of the softer product pricing and volumes that we have experienced thus far in 2023. While we expect third quarter 2023 adjusted results will be similar to what we achieved in Q2 2023, we do not expect our overall 2023 financial performance to match the record-setting levels achieved in 2022.
As we have demonstrated in previous business cycles and most recently through the first half of 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 will continue to convert a high proportion of 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 cash.
Over the longer term we anticipate a return to robust demand levels, 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. We continue to see a multi-year runway for growth in the repair and remodel, residential, and commercial markets we participate in.
From a trade perspective, the
Q2 2023 Investor Call
ADENTRA will hold an investor call on
Summary of Results
Three months | Three months | Six months | Six months | ||||||
ended | ended | ended | ended | ||||||
2023 | 2022 | 2023 | 2022 | ||||||
Total sales | $ | 585,935 | $ | 700,263 | $ | 1,165,792 | $ | 1,345,149 | |
Sales in the US | 540,988 | 645,899 | 1,077,172 | 1,237,121 | |||||
Sales in | 60,365 | 69,412 | 119,433 | 137,357 | |||||
Gross profit | 119,449 | 153,829 | 236,442 | 301,611 | |||||
Gross profit % | 20.4 % | 22.0 % | 20.3 % | 22.4 % | |||||
Operating expenses | (94,419) | (92,875) | (186,847) | (177,647) | |||||
Income from operations | $ | 25,030 | $ | 60,954 | $ | 49,595 | $ | 123,964 | |
Add: Depreciation and amortization | 17,713 | 16,487 | 34,731 | 31,693 | |||||
Earnings before interest, taxes, depreciation and | |||||||||
amortization ("EBITDA") | $ | 42,743 | $ | 77,441 | $ | 84,326 | $ | 155,657 | |
EBITDA as a % of revenue | 7.3 % | 11.1 % | 7.2 % | 11.6 % | |||||
Add (deduct): | |||||||||
Depreciation and amortization | (17,713) | (16,487) | (34,731) | (31,693) | |||||
Net finance expense | (12,105) | (5,789) | (24,324) | (11,171) | |||||
Income tax expense | (3,557) | (13,250) | (6,306) | (27,390) | |||||
Net income for the period | $ | 9,368 | $ | 41,915 | $ | 18,965 | $ | 85,403 | |
Basic earnings per share | $ | 0.42 | $ | 1.77 | $ | 0.85 | $ | 3.60 | |
Diluted earnings per share | $ | 0.42 | $ | 1.76 | $ | 0.84 | $ | 3.58 | |
Average US dollar exchange rate for | $ | 0.745 | $ | 0.783 | $ | 0.742 | $ | 0.786 |
Analysis of Specific Items Affecting Comparability (in thousands of Canadian dollars)
| |||||||||
Three months | Three months | Six months | Six months | ||||||
ended | ended | ended | ended | ||||||
2023 | 2022 | 2023 | 2022 | ||||||
Earnings before interest, taxes, depreciation and | |||||||||
amortization ("EBITDA"), per table above | $ | 42,743 | $ | 77,441 | $ | 84,326 | $ | 155,657 | |
LTIP expense | 3,407 | 1,152 | 4,693 | 1,850 | |||||
Transaction expense | — | — | — | 892 | |||||
Adjusted EBITDA | $ | 46,150 | $ | 78,593 | $ | 89,019 | $ | 158,399 | |
Adjusted EBITDA as a % of revenue | 7.9 % | 11.2 % | 7.6 % | 11.8 % | |||||
Net income for the period, as reported | $ | 9,368 | $ | 41,915 | $ | 18,965 | $ | 85,403 | |
Adjustments, net of tax | 3,142 | 1,049 | 4,313 | 2,299 | |||||
Adjusted net income for the period | $ | 12,510 | $ | 42,964 | $ | 23,278 | $ | 87,702 | |
Basic earnings per share, as reported | $ | 0.42 | $ | 1.77 | $ | 0.85 | $ | 3.60 | |
Net impact of above items per share | 0.14 | 0.04 | 0.19 | 0.10 | |||||
Adjusted basic earnings per share | $ | 0.56 | $ | 1.81 | $ | 1.04 | $ | 3.70 | |
Diluted earnings per share, as reported | $ | 0.42 | $ | 1.76 | $ | 0.84 | $ | 3.58 | |
Net impact of above items per share | 0.14 | 0.04 | 0.19 | 0.10 | |||||
Adjusted diluted earnings per share | $ | 0.56 | $ | 1.80 | $ | 1.03 | $ | 3.68 | |
Results from Operations - Three Months Ended
For the three months ended
Our
In
We generated second quarter gross profit of
For the three months ended
For the three months ended
For the three months ended
For the three months ended
We generated second quarter Adjusted EBITDA of
Net income for the second quarter of 2023 was
For the three months ended
Results from Operations - Six Months Ended
For the six months ended
First half sales from our
In
We generated gross profit of
For the six months ended
The
For the six months ended
For the six months ended
For the six months ended
We generated Adjusted EBITDA of
Net income for the first half of 2023 was
For the six months ended
About ADENTRA
ADENTRA is one of
Non-GAAP and other Financial Measures
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, professional fees and transaction expenses. 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, professional fees and transaction expenses. We believe adjusted profit is a useful supplemental measure for investors, and is used by management, for 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.
- "Organic growth" and "acquisition-based growth" consists of quantifying the change in total sales as either related to organic growth or acquisition-based growth, or the impact of foreign exchange related to the translation of Canadian sales to
U.S. dollars. Total sales earned by acquired companies in the first 12 months following an acquisition is reported as acquisition-based growth and thereafter as organic growth. Organic growth excludes the impact of acquisitions and foreign exchange impact related to the translation of Canadian sales toU.S. dollars. From time to time, we also quantify the impacts of certain unusual events to organic growth to provide useful information to investors to help better understand our financial results.
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 year ended
Such non-GAAP financial measures and non-GAAP ratios are not standardized financial measures under International Financial Reporting Standards ("IFRS") and might not be comparable to similar financial measures disclosed by other issuers. For reconciliation between non-GAAP measures 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 includes, but is not limited to: Looking forward, market headwinds are expected to persist in the near term but our business model and strategies are designed for success; we are confident in our ability to continue generating steady performance and strong operating cash flow through the balance of 2023; the combined impact of recent inflation and interest rate hikes is expected to have a continued near-term negative effect on economic activity; this could lead to a continuation of the softer product pricing and volumes that we have experienced thus far in 2023; we expect third quarter 2023 adjusted results will be similar to what we achieved in Q2 2023; we do not expect our overall 2023 financial performance to match the record-setting levels achieved in 2022; 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 will continue to convert a high proportion of EBITDA to operating cash flows before changes in working capital; our investment in working capital typically decreases during periods of reduced activity, resulting in an additional source of cash; over the longer term we anticipate a return to robust demand levels, 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; we continue to see a multi-year runway for growth in the repair and remodel, residential, and commercial markets we participate in.
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
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
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 management as of the date of this news release. The financial outlook is provided for the purpose of providing readers with an understanding of the Company's 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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