Andlauer Healthcare Group Reports 2020 Fourth Quarter and Full Year Results

TORONTO, Feb. 24, 2021 /CNW/ - Andlauer Healthcare Group Inc. (TSX: AND) ("AHG" or the "Company") today reported its financial results for the three-month period ("Q4 2020") and year ended December 31, 2020 ("Fiscal 2020").

Q4 2020 Summary

• Revenue increased 13.1% to $86.6 million, compared to $76.6 million for the three months ended December 31, 2019 ("Q4 2019");
• Operating income increased 25.8% to $14.3 million, compared to $11.3 million in Q4 2019;
• Net income and comprehensive income increased 96.0% to $13.9 million, compared to $7.1 million in Q4 2019;
• EBITDA⁽¹⁾ increased 23.9% to $22.0 million, compared to $17.7 million in Q4 2019;
• EBITDA Margin⁽¹⁾ was 25.4%, compared to 23.1% in Q4 2019;
• AHG continued to maintain service levels across its operations, while monitoring the safety measures implemented in response to COVID-19 to prioritize the health and safety of its personnel, clients, and suppliers;
• AHG completed two tuck-in acquisitions (TDS Logistics Ltd. ("TDS") and McAllister Courier Inc. ("MCI")) for a combined purchase price of $15.9 million; and
• Subsequent to Q4 2020, on February 23, 2021, AHG entered into definitive agreements to acquire 100% of Skelton Canada Inc. and 49% of Skelton USA Inc. for total aggregate consideration of approximately $114.7 million, subject to customary working capital adjustments. The acquisitions are expected to close on or about March 1, 2021.

Fiscal 2020 Highlights

• Revenue increased 8.4% to $314.3 million, compared to $290.0 million in the year ended December 31, 2019 ("Fiscal 2019");
• Operating income increased 13.2% to $50.9 million, compared to $45.0 million in Fiscal 2019;
• Net income and comprehensive income increased 24.3% to $37.7 million, compared to $30.3 million in Fiscal 2019;
• EBITDA⁽¹⁾ increased 11.8% to $78.9 million, compared to $70.6 million in Fiscal 2019, despite the absorption of approximately $2.8 million of incremental costs related to share-based compensation arrangements and a full year of public company costs; and
• EBITDA Margin⁽¹⁾ was 25.1%, compared to 24.3% in Fiscal 2019.

"We are extremely pleased with our performance in 2020, our first full year as a public company. We continue to demonstrate strong organic growth from our core businesses with attractive EBITDA margins, and we further enhanced our platform with significant facility and route expansions, and the completion of complementary tuck-in acquisitions. I'm proud of the success our team has achieved while dealing with a challenging operating environment due to the pandemic," said Michael Andlauer, Chief Executive Officer of AHG. "We are off to a strong start in fiscal 2021 with the announcement of the Skelton acquisitions, which will greatly enhance our platform in Canada and will provide us with a strategic entry into the U.S. market."    

Selected Consolidated Financial Summary

($CAD 000s)	Three months ended December 31,				Year ended December 31,
	2020	2019	Variance		2020	2019	Variance
Revenue
Logistics & Distribution	26,067	22,664	15.0	%	96,976	88,311	9.8	%
Packaging	3,924	4,892	(19.8)	%	19,380	21,307	(9.0)	%
Healthcare Logistics Segment	29,991	27,556	8.8	%	116,356	109,618	6.1	%
Ground Transportation	48,391	45,685	5.9	%	177,170	169,040	4.8	%
Air Freight Forwarding	6,091	5,236	16.3	%	22,482	19,656	14.4	%
Dedicated and Last Mile Delivery	10,979	4,828	127.4	%	29,795	16,689	78.5	%
Intersegment Eliminations	(8,820)	(6,704)	31.6	%	(31,463)	(25,015)	25.8	%
Specialized Transportation Segment	56,641	49,045	15.5	%	197,984	180,370	9.8	%
Total Revenue	86,632	76,601	13.1	%	314,340	289,988	8.4	%
Operating expenses	72,351	65,253	10.9	%	263,401	244,995	7.5	%
Operating income	14,281	11,348	25.8	%	50,939	44,993	13.2	%
Net income and comprehensive income	13,869	7,075	96.0	%	37,714	30,345	24.3	%
Select financial metrics
EBITDA^(1)	21,964	17,729	23.9	%	78,912	70,554	11.8	%
EBITDA Margin^(1)	25.4%	23.1%	130 bps		25.1%	24.3%	80 bps

Q4 2020 Financial Results

Revenue for Q4 2020 increased by 13.1% to $86.6 million, compared with $76.6 million in Q4 2019. AHG's acquisitions of TDS and MCI accounted for approximately $5.5 million of the $10.0 million increase, with the remaining growth attributable to the factors described below.

Revenue for the healthcare logistics segment totaled $30.0 million in Q4 2020, an increase of 8.8% compared with Q4 2019. The increase was attributable to greater inbound product volume, storage and handling activities in the Company's logistics and distribution product line related to its existing client contracts and the July 2020 implementation of a significant new client contract at its new 220,000 square-foot facility in Brampton, Ontario. The increase was partially offset by a 19.8% revenue decline in the Company's packaging product line, the result of a temporary reduction in operating capacity that was necessitated by safety measures implemented in March 2020 in connection with the COVID-19 pandemic, including limiting the number of associates in the Company's operations to allow for physical distancing in accordance with public health guidelines. 

Revenue in the specialized transportation segment totaled $56.6 million in Q4 2020, an increase of 15.5% compared with Q4 2019. The increase was attributable to: 5.9% growth in the Company's ground transportation product line driven by higher client volumes and $1.0 million in incremental revenue from the Company's acquisition of MCI; and year-over-year growth in AHG's air freight forwarding and dedicated and last mile delivery product lines of 16.3% and 127.4%, respectively. Growth in air freight forwarding was attributable to contractual price increases (adjustments made to accessorial charges and rate agreements), including new surcharges implemented by the Company's air carriers in connection with revised Transport Canada hours-of-service based pilot safety rules, and a 15% increase in volumes, as customers continued to adjust to varying levels of national demand as provincial governments attempted to manage the COVID-19 pandemic. Growth in dedicated and last mile delivery reflects approximately $4.5 million in incremental revenue from the Company's acquisition of TDS, with the remainder attributed to expanded client routes.   

Cost of transportation and services for Q4 2020 was $38.5 million, or 44.5% of revenue, compared with $32.6 million, or 42.6% of revenue, for Q4 2019. The higher cost of transportation and services and operating ratio for Q4 2020 reflects the addition of the TDS and MCI cost profiles, partially offset by lower fuel costs in line with the decrease in revenue related to fuel, and savings achieved by the Company's effective management of its variable costs as volume increased by 3.5% compared to Q4 2019.

Direct operating expenses for Q4 2020 were $18.8 million, or 21.7% of revenue, compared with $18.6 million, or 24.3% of revenue, for Q4 2019. AHG incurred certain incremental costs in connection with its COVID-19 response measures, including additional cleaning activities for its facilities and equipment, expenses for personal protective equipment, and other measures impacting productivity; however, these incremental costs were mitigated through effective productivity management and other cost controls. During Q4 2020, AHG continued to qualify for the Canada Emergency Wage Subsidy ("CEWS") program in connection with its packaging operations. A total of $0.6 million was recognized as a reduction of direct operating expenses for Q4 2020 as a result of support received from the CEWS program.

Selling, General and Administrative ("SG&A") expenses for Q4 2020 were $7.3 million, or 8.4% of revenue, compared with $7.5 million, or 9.8% of revenue, for Q4 2019. SG&A expenses for Q4 2020 include share-based compensation arrangements of approximately $0.8 million, compared to $1.4 million in Q4 2019. These share-based compensation arrangements relate to the initial stock option grants to AHG's directors and senior management team and deferred share unit grants made to its board of directors, which are intended to provide further alignment with shareholders. A further $0.3 million is included in Q4 2020 SG&A expenses for incremental costs associated with being a public company, compared to $0.9 million in Q4 2019.

Operating income for Q4 2020 was $14.3 million, an increase of 25.8% compared to Q4 2019, primarily reflecting the strong growth in total revenue, which exceeded the 10.9% increase in total operating expenses.

Net income and comprehensive income for Q4 2020 increased by 96.0% to $13.9 million, from $7.1 million for Q4 2019. The increase reflects a deferred income tax recovery of $4.3 million in Q4 2020 and higher segment net income before eliminations from both the Company's healthcare logistics and specialized transportation operating segments.

Earnings before interest, taxes, depreciation and amortization ("EBITDA")⁽¹⁾ for Q4 2020 increased by 23.9% to $22.0 million, from $17.7 million for Q4 2019. EBITDA margin⁽¹⁾ for Q4 2020 improved to 25.4% from 23.1% for Q4 2019. Certain SG&A expenses and other costs related to the Company's initial public offering contributed to lower EBITDA margins in Q4 2019, but the performance of AHG's two operating segments continued to result in strong and stable EBITDA margins at the higher end of the Company's historical range. Approximately 0.7% of the higher Q4 2020 EBITDA margin is attributable to support received form the CEWS program. It is uncertain whether we will continue to qualify for the CEWS program.

2020 Financial Results

Revenue for Fiscal 2020 increased 8.4% to $314.3 million, compared with $290.0 million in Fiscal 2019. Although revenue within and between the Company's first and second quarters of 2020 was impacted by the COVID-19 pandemic, revenue growth in 2020 is within the range of AHG's historical growth trend, as revenue growth (excluding the TDS and MCI acquisitions) was approximately 6.5%.

Revenue for the healthcare logistics segment for Fiscal 2020 was $116.4 million, an increase of 6.1%, compared with Fiscal 2019. The increase was primarily attributable to increased volumes in the Company's logistics and distribution product line. The implementation of a large new client contract in July 2020 contributed approximately $6.8 million of the overall $8.7 million increase in the logistics and distribution product line. This growth was partially offset by a 9.0%, or $1.9 million, year-over-year decline in revenue for the packaging product line, as the Company temporarily reduced operating capacity to allow for physical distancing in accordance with public health guidelines, as outlined above.

Revenue for the specialized transportation segment for Fiscal 2020 was $198.0 million, an increase of 9.8% compared with Fiscal 2019. The increase was primarily attributable to: increased volumes in the Company's ground transportation product line, including $1.0 million of incremental revenue from the acquisition of MCI in Q4 2020; and year-over-year growth in AHG's air freight forwarding and dedicated and last mile delivery product lines of 14.4% and 78.5%, respectively.

Operating expenses for Fiscal 2020 totaled $263.4 million, an increase of 7.5% compared with Fiscal 2019. The increase in operating expenses was attributable to increases in SG&A expenses, cost of transportation and services, direct operating expenses and depreciation and amortization expenses, in line with the Company's growth. Operating expenses for Fiscal 2020 also reflect a full year of public company costs and a $1.7 million increase in share-based compensation arrangements for directors and senior management.  Incremental costs in connection with the Company's COVID-19 response measures were also incurred, including: compensation premiums for certain operational associates, additional facility and equipment cleaning activities, expenses for personal protective equipment, and other measures impacting productivity; however, these incremental costs were mitigated through operating leverage arising from incremental volume, productivity management and other cost controls.

Operating income for Fiscal 2020 was $50.9 million, an increase of 13.2% compared with $45.0 million for Fiscal 2019. Net income and comprehensive income for Fiscal 2020 increased by 24.3% to $37.7 million, from $30.3 million for Fiscal 2019. Segment net income before eliminations for both the Company's specialized transportation and healthcare logistics operating segments were in line with segment revenue as margins were materially consistent compared with the prior year.

Dividend

The Company paid a dividend (encompassing the period from October 1, 2020 to December 31, 2020) in the amount of $0.05 per subordinate voting share and multiple voting share on January 15, 2021.

Subject to financial results, capital requirements, available cash flow, corporate law requirements and any other factors that AHG's Board of Directors may consider relevant, it is the Company's intention to declare a quarterly dividend of $0.05 per subordinate voting share and multiple voting share on an ongoing basis.

Shares Outstanding

As at December 31, 2020, there were 12,502,805 subordinate voting shares and 25,100,000 multiple voting shares outstanding. 

Financial Statements

AHG's audited consolidated financial statements and related Management's Discussion & Analysis ("MD&A") for the year ended December 31, 2020 are available on the Company's website at www.andlauerhealthcare.com and on the Company's profile on SEDAR at www.sedar.com.

Conference call

Michael Andlauer, Chief Executive Officer, and Peter Bromley, Chief Financial Officer, will host a conference call for analysts and investors on Thursday, February 25, 2021 at 8:30 a.m. (ET). The dial-in numbers for participants are [phone] or [phone]. The call will be webcast live at: www.andlauerhealthcare.com/presentations-events.

To access a replay of the conference call dial [phone] or [phone], passcode: 332304 #. The replay will be available until March 4, 2021. The webcast will be archived on the Company's website following conclusion of the call.

About AHG

AHG is a leading and growing supply chain management company offering a robust platform of customized third-party logistics ("3PL") and specialized transportation solutions for the healthcare sector. The Company's 3PL services include customized logistics, distribution and packaging solutions for healthcare manufacturers across Canada. AHG's specialized transportation services, including air freight forwarding, ground transportation, dedicated delivery and last mile services, provide a one-stop shop for clients' healthcare transportation needs. Through its complementary service offerings, available across a coast-to-coast distribution network, the Company strives to accommodate the full range of its clients' specialized supply chain needs on an integrated and efficient basis. For more information on AHG, please visit: www.andlauerhealthcare.com.  

Forward-looking Information

This news release contains forward-looking information and forward-looking statements (collectively, "forward-looking information") within the meaning of applicable securities laws. Forward-looking information may relate to the Company's future financial outlook and anticipated events or results and may include information regarding the Company's financial position, business strategy, growth strategies, addressable markets, budgets, operations, financial results, taxes, dividend policy, plans, objectives and responses to the outbreak of COVID-19. Particularly, information regarding the timing, completion and anticipated benefits of the proposed Skelton acquisitions, the Company's expectations of future results, performance, achievements, facility expansions, leases, platform expansions, acquisitions, public company costs, payment of dividends, prospects, financial targets or outlook, intentions, opportunities or the potential impact of, and response measures to be taken with respect to, COVID-19 is forward-looking information. In some cases, forward-looking information can be identified by the use of forward-looking terminology such as "plans", "targets", "expects", "budget", "scheduled", "estimates", "outlook", "forecasts", "projection", "prospects", "strategy", "intends", "anticipates", "believes", "commencing" or variations of such words and phrases or statements that certain actions, events or results "may", "could", "would", "might", "will", "will be taken", "occur" or "be achieved". In addition, any statements that refer to expectations, intentions, projections or other characterizations of future events or circumstances contain forward-looking information. Statements containing forward-looking information are not historical facts but instead represent management's expectations, estimates and projections regarding future events or circumstances. Such forward-looking statements are qualified in their entirety by the inherent risks, uncertainties and changes in circumstances surrounding future expectations which are difficult to predict and many of which are beyond the control of the Company.

Forward-looking information is necessarily based on a number of opinions, estimates and assumptions, including but not limited to those assumptions described under the heading "Cautionary Note Regarding Forward-Looking Information" in the MD&A for the year ended December 31, 2020. Forward-looking information is subject to known and unknown risks, uncertainties, assumptions and other factors that may cause the actual results, level of activity, performance or achievements to be materially different from those expressed or implied by such forward-looking information, including but not limited to factors discussed under the heading "Risk Factors" in the Company's annual information form dated February 24, 2021, which is available, together with the MD&A for the year ended December 31, 2020, on the Company's profile on SEDAR at www.sedar.com. If any of these risks or uncertainties materialize, or if the opinions, estimates or assumptions underlying the forward-looking information prove incorrect, actual results or future events might vary materially from those anticipated in the forward-looking information. Accordingly, investors should not place undue reliance on forward-looking information, which speaks only as of the date made. The forward-looking information contained in this news release represents the Company's expectations as of the date of this news release, and are subject to change after such date and the Company disclaims any intention or obligation or undertaking to update or revise any forward-looking information whether as a result of new information, future events or otherwise, except as required under applicable securities laws.

(1) Non-IFRS Financial Measures

This news release contains certain non-IFRS measures. These measures are not recognized measures under IFRS, do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing further understanding of the Company's results of operations from management's perspective. Accordingly, these measures should not be considered in isolation nor as a substitute for analysis of the Company's financial information reported under IFRS. AHG uses non-IFRS measures including "EBITDA", and "EBITDA Margin". These non-IFRS measures are used to provide investors with supplemental measures of the Company's operating performance and thus highlight trends in its core business that may not otherwise be apparent when relying solely on IFRS financial measures. AHG also believes that securities analysts, investors and other interested parties frequently use non-IFRS measures in the evaluation of issuers. AHG management also uses non-IFRS measures in order to facilitate operating performance comparisons from period to period, to prepare annual operating budgets and to determine components of management compensation.

EBITDA

AHG defines EBITDA as net income (loss) and comprehensive income (loss) for the period before: (i) income tax (recovery) expense; (ii) interest income; (iii) interest expense; and (iv) depreciation and amortization.

AHG believes EBITDA is a useful measure to assess the Company's financial performance because it provides a more relevant picture of operating results by excluding the effects of expenses that are not reflective of the Company's underlying business performance.

EBITDA Margin

AHG defines EBITDA Margin as EBITDA divided by revenue. EBITDA Margin represents a measure of the Company's profitability expressed as a percentage of revenue.

AHG believes EBITDA Margin is a useful measure to assess the Company's financial performance because it helps quantify the Company's ability to convert revenues generated from clients into EBITDA.

For quantitative reconciliations of net income and comprehensive income to EBITDA for Q4 2020, Fiscal 2020, Q4 2019 and Fiscal 2019, please see "Reconciliation of Non-IFRS Measures" in the Company's MD&A for the year ended December 31, 2020, available on the Company's profile on SEDAR (www.sedar.com), or the Company's website (www.andlauerhealthcare.com).  

SOURCE Andlauer Healthcare Group Inc.

Peter Bromley, Chief Financial Officer, Tel: [phone]; Bruce Wigle, Investor Relations, Tel: [phone]