Tervita Corporation Announces Double-Digit Adjusted EBITDA Growth for the Fourth Quarter & Year End 2019

CALGARY, March 9, 2020 /CNW/ - Tervita Corporation ("Tervita" or the "Company") (TSX: TEV) announced today the results for the three months and year ended December 31, 2019. All financial figures are in millions of Canadian dollars unless otherwise noted.

"We are pleased to announce our fourth quarter results which underscore the stability and resiliency in our production-based and Industrial businesses," said John Cooper, President and CEO. "Our 2019 double-digit Adjusted EBITDA growth is primarily attributable to the strategic acquisition of Newalta in 2018 and related synergies, which we fully realized in the second quarter of this year well ahead of schedule.  Our results were furthered by targeted efforts in pursuing higher margin projects in Industrial Services and our drive for continuous improvements.

 "In 2020, we will continue to execute our strategy which has been designed for strength in today's environment while paving a path for future success and growth. We remain excited about the opportunities in front of us to leverage our infrastructure and create efficiencies for our customers, including our Montney water disposal infrastructure facility, which is in the process of being commissioned."

Q4 and 2019 Highlights

• Q4 2019 Adjusted EBITDA increased 18% compared to the prior year largely driven by realized synergies, our focus on operational efficiencies and improved Canadian crude oil prices. Full year 2019 Adjusted EBITDA increased 22% over prior year primarily due to the same drivers as the quarter as well as a full year of contributions from the acquired Newalta operations.
• 2019 Adjusted EBITDA margin was 33%, an increase from 30% in 2018.
• Q4 2019 revenue excluding energy marketing decreased by 10% from the prior year primarily due to reduced volumes into our facilities network, declines in drilling activity in the US, and lower ferrous metal volumes and pricing. Full year 2019 revenue excluding energy marketing increased by 12% over prior year, primarily due to a full year of Newalta operations integrated into the business.
• General and administrative expenses of $11 million and $48 million, decreased by 27% and 4% for the quarter and year, respectively, due to fully realized Newalta synergies.
• Generated $90 million of Discretionary Free Cash Flow in 2019, an increase of 14% over 2018 and a 7% increase on a per share basis.
• Growth and expansion capital additions of $106 million and maintenance capital of $33 million in 2019, aligned with the top end of our guidance.
• Our Montney water disposal project is in the process of being commissioned, on schedule.
• During 2019 Tervita proactively repurchased $26 million of the Company's senior secured notes due 2021 on the open market just below par.
• Net debt of $738 million at December 31, 2019 was down from $759 million at December 31, 2018, primarily due to a stronger US-Canadian dollar exchange rate and spending within cash flow. 
• Impairment of $120 million was recognized for the year ended December 31, 2019. These non-cash charges were related to the write down of specific assets within Energy Services, approximately 65% attributable to our drilling-based operations in the United States and Canada, with the remainder primarily associated with closed or suspended facilities that no longer met internal cash and return expectations. These assets did not contribute materially to our 2019 Adjusted EBITDA.

Q4 and 2019 Financial Highlights⁽¹⁾

		Three Months Ended December 31									Twelve Months Ended December 31
		2019		2018		Increase (Decrease)		% Change			2019		2018		Increase (Decrease)		% Change
Energy Services revenue
Facilities and onsite revenue		117		131		(14)		(11) %			475		411		64		16 %
Energy marketing revenue		416		208		208		100 %			1,607		1,337		270		20 %
		533		339		194		57 %			2,082		1,748		334		19 %
Industrial Services revenue		60		63		(3)		5 %			246		231		15		6 %
Intersegment eliminations		(2)		—		(2)		(100) %			(5)		(5)		—		— %
Revenue		591		402		189		47 %			2,323		1,974		349		18 %
Revenue excluding energy marketing		175		194		(19)		(10) %			716		637		79		12 %
Energy Services Divisional EBITDA^(1)		60		58		2		3 %			240		212		28		13 %
Industrial Services Divisional EBITDA^(1)		10		7		3		43 %			39		28		11		39 %
Divisional EBITDA^(1)		70		65		5		8 %			279		240		39		16 %
General and administrative expenses		(11)		(15)		(4)		(27) %			(48)		(50)		(2)		(4) %
G&A (excl. severance) as a % of revenue (excl. energy marketing)		6 %		8 %		(2)%					7 %		8 %		(1) %
Net profit (loss)		(123)		(33)		(90)		(273) %			(116)		(74)		(42)		(57) %
- per share ($), basic and diluted		(1.07)		(0.28)		(0.79)		(282) %			(0.99)		(0.67)		(0.32)		(48) %
Adjusted EBITDA^(1)		59		50		9		18 %			233		191		42		22 %
- per share ($), basic and diluted		0.51		0.43		0.08		19 %			2.00		1.73		0.27		16 %
Adjusted EBITDA margin^(1)		34 %		26 %		8%					33 %		30 %		3 %
Capital additions		52		32		20		63 %			139		83		56		67 %
Growth and Expansion		41		18		23		128 %			106		45		61		136 %
Maintenance		11		14		(3)		(21) %			33		38		(5)		(13) %
Discretionary free cash flow^(1)		9		(2)		11		(550) %			90		79		11		14 %
- per share ($), basic and diluted		0.08		(0.02)		10		(500) %			0.77		0.72		0.05		7 %
		7
Net Debt to Adjusted EBITDA^(1)(2)		3.17		3.51		(0.34)					3.17		3.51		(0.34)
Shares as at December 31 (000's of shares)^(3)
Shares outstanding		114,355		117,557		(3,202)		(3) %			114,355		117,557		(3,202)		(3) %
Weighted average shares - basic		115,260		117,557		(2,297)		(2) %			116,732		110,471		6,261		6 %
Weighted average shares - diluted		115,260		117,751		(2,297)		(2) %			116,732		110,471		6,261		6 %

(1)	Refer to Tervita's Q4 and year end 2019 Management's Discussion and Analysis (MD&A) and audited annual Consolidated Financial Statements for further information. These financial measures are non-GAAP measures and are, therefore, unlikely to be comparable to similar measures presented by other issuers.  These non-GAAP financial measures are defined and reconciled in Tervita's Q4 and year end MD&A
(2)	Net Debt to Adjusted EBITDA in Q4 2019 is Last Twelve Months. Adjusted EBITDA for the year ended December 31, 2018 is inclusive of pro forma Newalta information
(3)	As at March 8, 2020, the Company had 113,276,432 common shares, 2,702,649 common share purchase warrants and 2,471,730 stock options outstanding. Each common share purchase warrant and option outstanding is exercisable for a maximum of one common share

2020 Outlook

Tervita demonstrated strength in its operating and financial results through 2019, delivering a 22% increase in Adjusted EBITDA over the prior year despite reduced energy industry-wide activity. These results in a challenging market are reflective of the majority of our waste volumes coming from a stable base of production-related volumes, continued focus on cost control, and delivery of the Newalta acquisition synergies.

The Western Canadian Sedimentary Basin (WCSB) continues to be challenged by egress as well as oil and gas prices, which have reduced drilling and completions activity and impacted producers' capital investment levels.  Assuming WTI of approximately US$55/bbl, upstream oil and gas production similar to 2019 levels, and a reduction in drilling activity of approximately 10% from 2019 levels, we would expect Adjusted EBITDA growth in 2020, driven by contributions from: 

• our predominantly contracted 2019 investments in growth capital projects, which were primarily focused on increasing our water handling capacity in the Montney region and enhancing our clean oil energy marketing capabilities;
• our ongoing focus on cost control and incremental business improvements in our Energy Services segment; and
• the continued optimization of our waste and environmental services businesses in the Industrial Services segment.

Recent market developments, which have introduced volatility and corresponding declines in commodity prices, could temper these growth expectations.

2020 Capital Allocation
In 2020, we plan to take a measured approach to the allocation of Discretionary Free Cash Flow between the focus areas of delivering projects within our growth capital pipeline of opportunities, de-levering our balance sheet, and returning value to shareholders. Given our outlook for industry activity in 2020 and more recent market uncertainty, we have taken a prudent approach and established our preliminary capital budget at approximately $85 million for the year, including growth and expansion of $50 million, a 53% reduction from our 2019 additions. We anticipate maintenance capital of approximately $35 million. We will continue to exercise capital discipline while remaining responsive to opportunities and market changes and may revise our capital plans accordingly.

MD&A and Analysis and Financial Statements

The 2019 Q4 and year-end MD&A and audited annual Consolidated Financial Statements provide a detailed explanation of Tervita's financial and operating results for the three and twelve months ended December 31, 2019, as compared to the three and twelve months ended December 31, 2018. These documents will be available at www.tervita.com and www.sedar.com.

Fourth Quarter and Year End 2019 Conference Call

Tervita will host a conference call on Monday March 9, 2020 at 11:00 a.m. MST to discuss the fourth quarter results. To participate in the conference call, dial 647-427-7450 or toll free: 1-888-231-8191. To access the simultaneous webcast, please visit tervita.com. For those unable to listen to the live call, a taped broadcast will be available at tervita.com and, until midnight MST on Monday, March 16, 2020 by dialing 855-859-2056 and using the pass code 4287025.

About Tervita

Tervita is a leading waste management and environmental solutions provider offering waste processing, treating, recycling, and disposal services to customers in the oil and gas, mining, and industrial sectors. We serve our customers onsite and through a network of facilities in Canada and the United States.

For 40 years, Tervita has been focused on delivering safe and efficient solutions through all phases of a project while minimizing impact, maximizing returns™. Our dedicated and experienced employees are trusted sustainability partners to our clients.  Safety is our top priority: it influences our actions and shapes our culture.  Tervita trades on the TSX as TEV. For more information, visit tervita.com.

Advisories

Forward-Looking Information 

This news release contains forward-looking statements and forward-looking information (collectively referred to herein as "forward-looking statements") within the meaning of securities legislation. Such forward-looking statements include, without limitation, forecasts, estimates, expectations and objectives for future operations that are subject to assumptions, risks and uncertainties, many of which are beyond the control of Tervita. Forward-looking statements are statements that are not historical facts and are generally, but not always, identified by the words "expects", "plans", "anticipates", "believes", "intends", "estimates", "projects", "potential" and similar expressions, or are events or conditions that "will", "would", "may", "could" or "should" occur or be achieved. These statements are not guarantees of future performance and are subject to risks, uncertainties and other key factors that could cause actual results or events to be materially different from those anticipated in such forward-looking statements.

Specific forward-looking statements contained in this news release includes, amongst others, statements and management's beliefs, expectations or intentions regarding the following: Tervita's outlook for 2020, including expectations regarding Adjusted EBITDA growth, its approach to the allocation of Discretionary Free Cash Flow, its ability to continue to exercise capital discipline, its estimated preliminary growth and expansion budget and its expectations around maintenance capital and the effect of market developments, including the COVID-19 virus, on our growth expectations; market and industry outlook with respect to the egress challenges faced by the Canadian WCSB, upstream oil and gas production levels, a continued decline in drilling activity, producer capital investment levels, and WTI prices; and Tervita's business strategies and objectives.

Forward-looking statements relating to our business contain uncertainties and assumptions, including the following: current economic and operating conditions, including commodity prices, interest rates, and environmental and regulatory matters; the ability of Tervita to obtain equipment, services, supplies and personnel to carry out its business activities; the ability of Tervita to successfully market its business in the areas in which it operates; that Tervita's current business environment will remain substantially unchanged; Tervita's ability to secure financing on acceptable terms, if needed; demand for services in Tervita's businesses can be adversely impacted by general economic conditions and Tervita is dependent on exploration, drilling and production activity levels in the markets where Tervita offers its services; risks related to limited pipeline capacity; the ability of management to execute its business plan; the risks of the environmental solutions industry, such as operational risks and market demand; risks inherent in Tervita's marketing operations, including credit risk; the uncertainty of estimates and projections relating to revenues, costs, expenses and capital expenditures; fluctuations in fuel, raw material costs, oil and natural gas prices, foreign currency exchange rates and interest rates; health, safety and environmental risks; uncertainties as to the availability and cost of financing; general economic conditions in Canada, the United States, and globally; industry conditions; the possibility that government policies or laws may change or governmental approvals may be delayed or withheld; governmental regulation of the environmental solutions industry, including environmental regulation; unanticipated operating events; failure to obtain third-party consents and approvals, when required; risks associated with existing and potential future lawsuits and regulatory actions against Tervita; the highly competitive nature of Tervita's markets, and competition that could adversely impact Tervita's financial position, results of operations, cash flows or its ability to make required payments on debt outstanding; global financial conditions are subject to increased volatility; legislative and regulatory initiatives related to hydraulic fracturing that could result in increased costs and additional operating restrictions or delays as well as adversely affect Tervita's support services. For a more detailed discussion of risks relating to Tervita, see our most recent Annual Information Form ("AIF") dated March 8, 2020. These factors should not be construed as exhaustive. The forward-looking statements included in this news release are made only as of the date hereof and Tervita does not undertake to publicly update these forward-looking statements for new information, future events, or otherwise, except as required by applicable laws. Any forward-looking statements contained herein are expressly qualified by this cautionary statement.

The estimates regarding Tervita's future financial performance, including estimates of preliminary growth and expansion budget of $85 million, growth and expansion capital of $50 million and maintenance capital of approximately $35 million, are based on assumptions about future events, including economic conditions and proposed course of action, based on management's assessment of the relevant information currently available. See the Outlook section. The estimates are based on the same assumptions and risk factors set forth above and are based on Tervita's historical results of operations. The financial outlook or potential financial outlook set forth in this news release was approved by management as of the date of this news release to provide investors with an estimation of the outlook for Tervita for 2020 and onwards, where applicable, and readers are cautioned that any such financial outlook contained herein should not be used for purposes other than those for which it is disclosed herein. The prospective financial information set forth in this news release has been prepared by management. Tervita's management believes that the prospective financial information has been prepared on a reasonable basis, reflecting management's best estimates and judgements, and represents, to the best of management's knowledge and opinion, Tervita's expected course of action in developing and executing its business strategy and growth opportunities relating to its business operations. However, actual results may vary from the prospective financial information set forth in this news release. See above for a discussion of the risks that could cause actual results to vary. The prospective financial information set forth in this news release should not be relied on as necessarily indicative of future results.

For additional information relating to Tervita, including our AIF, please see our profile on SEDAR, available at www.sedar.com.

Non-GAAP Financial Measures

Certain financial measures in this news release are not prescribed by Internal Financial Reporting Standards ("IFRS") and therefore are considered non-GAAP measures.  All non-GAAP measures presented herein do not have any standardized meaning and therefore are unlikely to be comparable to similar measures presented by other companies.  Therefore, these non-GAAP measures should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.  All non-GAAP measures are included because management uses the information to analyze operating performance and results, and therefore may be considered useful information by investors.  Any non-GAAP measure presented herein has been identified and the applicable definition and reconciliation of such non-GAAP measure can be found in MD&A for Q4 2019 available at www.tervita.com or www.sedar.com.

All non-GAAP measures presented herein do not have any standardized meaning and therefore are unlikely to be comparable to similar measures presented by other companies.  Therefore, these non-GAAP measures should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.  All non-GAAP measures are included because management uses the information to analyze operating performance and results, and therefore may be considered useful information by investors. 

Readers should refer to Tervita's most recently filed audited annual Financial Statements and accompanying MD&A filed on www.sedar.com for the reconciliation of these non-GAAP measures to the most directly comparable GAAP measure in Tervita's financial statements for prior completed periods.

SOURCE Tervita Corporation

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