Macro Enterprises : Announces 2020 Third Quarter Results

Fort St. John, B.C, - November 27, 2020

FOR IMMEDIATE RELEASE

MACRO ENTERPRISES INC. ANNOUNCES 2020 THIRD QUARTER RESULTS

Summary of financial results

(thousands of dollars except per share amounts)

	Three months ended	Nine months ended
	September 30	September 30
	2020	2019	2020	2019
		(unaudited)
Revenue	$93,619	$114,499	183,739	$332,907
EBITDA1	16,836	17,225	26,617	50,072
Net earnings	7,484	8,116	7,261	22,809
Net earnings per share	$0.24	$0.27	$0.24	$0.75
Weighted average common shares
outstanding (thousands)			31,119	30,409

Note 1: Readers are advised to note that references to EBITDA in the table above are to net income from continuing operations before interest, taxes, amortization and impairment charges. EBITDA is not an earnings measure recognized by International Financial Reporting Standards ("IFRS") and does not have a standardized meaning prescribed by IFRS. Management believes that EBITDA is an appropriate measure in evaluating the Company's performance. Readers are cautioned that EBITDA should not be construed as an alternative to net income (as determined under IFRS) as an indicator of financial performance, or to cash flow from operating activities (as determined under IFRS) as a measure of liquidity and cash flow. The Company's method of calculating EBITDA may differ from the methods used by other issuers and, accordingly, the Company's EBITDA may not be comparable to similar measures used by other issuers.

All dollar amounts in this news release are expressed in Canadian dollars.

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HIGHLIGHTS

• The Company recorded $7.5 million in net earnings or $0.24 per common share and EBITDA of $16.8 million.
• Total working capital as at September 30, 2020 was $60.9 million after considering $15.4 million in current portions of long-term debt and right of use lease obligations.
• The Company is reporting shareholders' equity of $123.3 million or $3.96 per share based on weighted average common shares outstanding as at September 30, 2020.
• Subsequent to September 30, 2020, the Company announced the signing of a non-binding MOU detailing the re-organization of its current Joint Venture interests with Spiecapag Canada. Macro will be assuming 100% control and the economic interests of the Trans Mountain Expansion Project in exchange for its 40% interest in the Coastal GasLink Pipeline Project.
• The Company expects revenue to exceed $250.0 million in fiscal 2020. The guidance considers the Company's current core business underway and a pro-rata portion of its Joint Venture interests until the closing of the MOU announced subsequent to quarter end.

THIRD QUARTER RESULTS

Macro Enterprises Inc. posted consolidated revenue of $93.6 million compared to $114.5 million reported third quarter last year. Approximately 90% or $70.0 million of the revenue earned related to pipeline and facilities construction with the balance or $13.6 million relating to maintenance and integrity services being performed under existing master service agreements. Revenue recognized for the quarter ended September 30, 2020 included revenue from its joint operations on the Coastal GasLink Pipeline project and to a limited extent the Trans Mountain Expansion project. Prior year revenue relating to pipeline and facilities construction was approximately 98% or $112.6 million while the balance related to maintenance and integrity.

Operating expenses were $74.8 million or 80% of revenue compared to $93.8 million or 82% of revenue in the third quarter last year. As discussed in previous quarters, the Company continued to incur additional costs and overheads while maintaining its current scale of operations which has impacts on margins. With the ongoing global Covid-19 health pandemic and market uncertainty, margins are expected to fluctuate while the Company stabilizes its operations to meet the changing needs of its clients. During the quarter the Company applied for the Canadian Emergency Wage Subsidy ('CEWS') and was able to claim $2.0 million in government assistance which was applied as a reduction in salaries and wage expenses recorded in its operating expenses. Going forward, the Company believes it should qualify for the wage subsidies if the program continues as presently structured. All aspects of operations will be actively monitored and streamlined to ensure savings are realized while maintaining the highest degree of health, safety and environmental standards possible.

General and administrative expenses were $2.4 million, up $0.4 million from the $2.0 million recorded prior year. Included in the Company's general and administrative expenditures are professional fees, corporate wages, burdens and other overheads, including rents, insurance, travel and administrative supplies that are not charged directly to projects. During the quarter, the Company was able to claim

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$0.3 million in wage subsidies under the CEWS program and applied the subsidies as a reduction to the salary and wage expenses reported in its general and administrative expenses.

Depreciation of property, plant and equipment was $5.1 million compared to $4.8 million reported in the previous year. The increase in depreciation directly correlated to the added property, plant and equipment acquired in prior years along with the recognition of right to use assets under lease during the period. Depreciation is calculated at various declining balance methods across the Company's multiple categories of property, plant and equipment and is used in guiding the annual capital expenditure estimates. Residual values, methods of amortization and useful lives of the assets are reviewed annually and adjusted if appropriate. Based on the substantial value associated with its Right to Use Assets the Company anticipates higher depreciation costs going forward.

During the third quarter the Company recognized a non-cash gain of $528,000 on the mark-to-market remeasurement of its preferred shares at period end. The gain adjustment is indicative of a 12.5% decrease to the Company's share value over the prior reported period.

During the third quarter the Company recognized non-cashstock-based compensation charges of $143,000.

Finance costs of $1.0 million were lower than prior year due to the adjustments the Company recognized under IFRS 16 right of use asset lease obligations and the associated implicit interest charges, the amortization of deferred finance costs recorded on its credit facilities and the issuance of its letters of credit relating to contract financial assurances. In addition to the non-cash deferred transaction costs, interest charges, standby and admin fees associated with the Company's credit facility, other finance costs included $41,000 of effective interest rate payments made on its preferred shares. Prior year the finance costs included substantial charges for the right of use obligations which at the time exceeded $33 million and along with $76 million of outstanding letters of credit being carried.

Income tax expense in the quarter of $3.3 million was at an effective rate of 30.6% which approaches the enacted tax rates of 27% after reversing non-cash charges and timing differences, namely the collections of prior year holdbacks and mark-to-market adjustments.

Net income was $7.5 million ($0.24 per share) compared to a net income of $8.1 million ($0.27 per share) recognized during the three months ended September 30, 2019. EBITDA was $16.8 million compared to $17.2 million recognized during the three months ended September 30, 2019. As a result of increased activity and improved margins, the CEWS program, minimal non-cash adjustments including mark-to-market gains and stock-based compensation, the Company's net income and EBITDA were positively impacted quarter over quarter and compared positively to prior years.

OUTLOOK

Presently, the Company's ability to provide reliable outlook guidance for the 2020 fiscal year and beyond is materially impaired due to the prevailing uncertainty about the short and long term economic and geo-political effects of the current COVID-19. Despite the pandemic, the Company has continued to work when it can and ensure it will take all necessary steps to maintain and preserve its balance sheet during this potentially prolonged period of uncertainty however as COVID cases increase, the ability to work may be affected.

When the pandemic is brought under control to the extent that the businesses on which the Company's operations are dependent are relieved of the current pandemic emergency measures such that they are able to resume customary operations, and if the projects under contract continue as anticipated, then,

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based on its current committed back log of business today which includes pipeline maintenance and integrity work underway, ongoing facilities construction and its proportionate share of the joint venture operations, the Company would expect revenues to exceed $250 million in fiscal 2020.

Joint Venture Update:

As announced subsequent to period end, the Company entered a non-binding memorandum of understanding with Spiecapag Canada Corp. with respect to their ongoing negotiations of the terms of a possible reorganization whereby the Company would exchange its indirect 40% interest in the Coastal GasLink Pipeline Project for Speicapag's 50 % interest in the Trans Mountain Expansion Pipeline Project (the "TMEP Project"). The TMEP Project includes the contract for the construction of approximately 85 kilometers of 36 inch pipeline along the Coquihalla-Hope Corridor in British Columbia referred to as pipeline "Spread 5B. The Company continues working with Trans Mountain to satisfy permitting and scheduling requirements and is expecting to receive its formal notice to proceed in the near term. The preliminary work, which is well underway, includes line sweeps, hydro-vac services, clearing, access pioneering and blasting, and is expected to conclude by the end of March 2021 at which point under the contract it will enter the second phase for the completion of the project which is forecast to complete December of 2022. As a condition of the phased and reimbursable type construction contract, the Company has placed a $35.0 million letter of credit supported by Export Development Canada for preliminary construction work that is currently underway.

Company Activities:

• The Company is finishing two secured new facility construction projects with an aggregate value in excess of $50 million for work. The work is on schedule for completion by the end of the current year.
• The Company remains actively bidding and estimating costs on projects for its larger clients and anticipates both construction and core maintenance work continuing in the near to mid-term.

The continuation of these activities is subject to successfully resolving any near term and long term economic or market effects of the global pandemic outbreak of COVID-19 and the significant geopolitical events impacting current commodity prices.

SUBSEQUENT EVENTS

Subsequent to period end, the Company entered into a non-binding memorandum of understanding with Spiecapag Canada Corp. ("Spiecapag") with respect to their ongoing negotiations of the terms of a possible reorganization whereby the Company would exchange its indirect 40% interest in the Coastal GasLink Pipeline Project (the "CGL Project") for Spiecapag's 50% interest in the TransMountain Expansion Pipeline Project (the "TMEP Project").

Subject to the preparation of definitive agreements and the satisfaction of closing conditions, the reorganization would result in Spiecapag fully owning and controlling the Macro Spiecapag Coastal GasLink Joint Venture (the "CGL JV") and the Company fully owning and controlling the Macro Spiecapag Trans Mountain Joint Venture ("TMEP JV"). The closing will occur shortly after the closing conditions, including project customer consent, have been obtained.

To effect the reorganization with respect to the CGL Project, Macro would give up all or substantially all of its indirect interest in the CGL JV by either transferring to Spiecapag all of the issued and outstanding shares in the capital of Macro Pipeline Construction Inc., the Macro joint venture entity of the CGL JV,

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