Vertex Resource Group Ltd. Reports Second Quarter 2024 Results

SHERWOOD PARK, AB, Aug. 13, 2024 /CNW/ - (TSXV: VTX) - Vertex Resource Group Ltd. ("Vertex" or the "Company") reports its financial and operational results for the second quarter ended June 30, 2024. The following should be read in conjunction with the Management Discussion and Analysis ("MD&A") and the unaudited condensed consolidated interim financial statements of Vertex for the period ended June 30, 2024, which are available on SEDAR+ at www.sedarplus.ca.

Vertex has successfully navigated through difficult conditions across multiple business lines including wildfires, tornadoes, and production delays, all of which have negatively impacted the business. With our current backlog, demand is expected to be steady throughout the rest of the year and heading into 2025.

Key financial results for the three and six-months June 30, 2024, and 2023 are as follows: 

HIGHLIGHTS
	Three Months ended		Years ended
	June 30,		June 30,
(in thousands of Canadian Dollars)	2024	2023	2024	2023
Gross revenue	57,159	63,147	116,990	121,804
Less flow through subcontractor costs	460	844	1,782	2,693
Net revenue	56,699	62,303	115,208	119,111
Profit margin	16,521	17,401	29,867	32,007
Profit margin %	29 %	28 %	26 %	27 %
Adjusted EBITDA ^(1)	10,047	10,956	16,947	19,571
Adjusted EBITDA %	18 %	18 %	15 %	16 %
Free cash flow ^(1)	1,742	3,964	2,179	8,511
Adjusted EBITDA per share, basic and diluted ^(1)	0.09	0.09	0.15	0.17
Earnings per share, basic and diluted	0.00	0.01	(0.01)	0.02
(1) See "Non-IFRS Financial Measures"

HIGHLIGHTS FOR THE THREE MONTHS ENDED JUNE 30, 2024

• Environmental Consulting net revenue increased by 4.8% compared to Q2 2023.
• Profit margin increased 1.2% compared to Q2 2023.
• Amendments to the $76.0 million Credit Facilities including extension of the maturity date to May 31, 2027 and an increase to the syndicate term loan of $5.0 million.

HIGHLIGHTS FOR THE SIX MONTHS ENDED JUNE 30, 2024

• Environmental Consulting net revenue increased by 12.4% compared to 2023.
• Repurchased common shares throughout the first half at a weighted average of $0.40, for total consideration of $1.0 million. The total amount of common shares repurchased and cancelled during the Normal Course Issuer Bid represents 3.2% of the total issued and outstanding common shares of the Company.

OUTLOOK

Vertex's commitment to operational efficiency and market engagement has been crucial in addressing the challenges posed by natural events, such as the wildfires in Western Canada. Despite these adversities, the company has maintained a stable market presence, albeit at a lower level compared to the previous year. Looking forward, Vertex is poised to meet the anticipated demand for its services in the latter half of 2024, supported by a backlog of scheduled projects.

The strategic focus on sustainable energy and carbon intensity reduction remains at the forefront of Vertex's operations. This approach not only aligns with the global shift towards environmental consciousness but also positions Vertex as a proactive player in assisting clients and undertaking internal projects that contribute to this cause. The emphasis on cross-selling services across various industries and project phases underlines the company's adaptability and commitment to growth.

As Vertex grows and adjusts to customer and market needs, we continually evaluate the return on assets that we deploy to ensure we have a strong balance sheet that supports future strategic initiatives. Operational and administrative efficiencies are identified as key drivers for financial performance, with a clear aim to enhance adjusted EBITDA and net income. By streamlining processes and maintaining a disciplined approach to market engagement, Vertex is navigating through the current landscape with resilience and a forward-looking perspective. The dedication to these strategic pillars is expected to support Vertex's journey through the second half of 2024 and beyond.

ABOUT VERTEX

Since 1962, Vertex has been a leading North American provider of environmental services. Headquartered in Sherwood Park, Alberta, Vertex employs a staff of approximately 1,000 employees and lease operators that provide services to help clients achieve their developmental and operational goals. From initial site selection, consultation and regulatory approval, through construction, operation and maintenance, to conclusion and environmental cleanup, Vertex provides a wide array of services to customers operating in industries such as energy, mining, utilities, private development, public infrastructure, construction, telecommunications, forestry, agriculture and government.

Vertex principally operates in Canada with select locations in the United States.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

NON-IFRS FINANCIAL MEASURES

This release includes certain terms or performance measures that are not defined under International Financial Reporting Standards ("IFRS"), including "Adjusted EBITDA". The data presented is intended to provide additional information that should not be considered in isolation or as a substitute measure of performance prepared in accordance with IFRS. The non-IFRS measures should be read in conjunction with the Company's financial statements and accompanying notes.

A) "Adjusted EBITDA" is a non-IFRS financial measure which is calculated by adjusting net income (loss) for the sum of income taxes, finance costs including interest accretion on lease liabilities, depreciation of property and equipment and right of use assets, amortization of intangible assets, share-based compensation, restructuring costs and impairment. The Company uses Adjusted EBITDA as an indicator of its principal business activities operational performance prior to consideration of how its activities are financed and the impact of taxation, non-cash depreciation and amortization, restructuring costs and other non-cash expenses such as impairments required under IFRS. Adjusted EBITDA does not have a standardized meaning prescribed by IFRS and is not necessarily comparable to similar measures provided by other companies. Adjusted EBITDA is used by many analysts as an important analytical tool and the management of Vertex believes it is useful for providing readers with additional clarity on Vertex's operational performance. This measure is also considered important by the Company's lenders in determining compliance by the Company with the financial covenants under its lending arrangements.

B) "Free cash flow" is a non-IFRS financial measure. The most directly comparable GAAP measure for free cash flow is cash flow from operating activities. A summary of the reconciliation of cash flow from operating activities to free cash flow is set forth in the table below. Management uses the term "free cash flow" for its own performance measure and to provide shareholders and potential investors with a measurement of the Company's efficiency and its ability to generate the cash necessary to fund its future growth expenditures, to repay debt and provide shareholder returns.

C) "Adjusted Working Capital" is a non-IFRS financial measure which is calculated by reducing current liablities by the current portion of loans and borrowings, lease liablities and other liabilities. Adjusted working capital is used by Vertex to monitor its capital structure, liquidity, and it's ability to fund current operations.

D) "Adjusted EBITDA per share, basic and diluted" is a non-financial measure which is calculated by dividing adjusted EBITDA by the weighted average shares outstanding – basic and diluted.

Reconciliations of adjusted EBITDA, free cash flow and adjusted working capital are provided in the following tables.

ADJUSTED EBITDA					Three months ended			Three months ended
					June 30,			June 30,
					2024	2023		2024	2023
Net income (loss) for the period					563	1,604		(808)	2,615
Add:
Depreciation and amortization					6,398	5,727		12,296	11,307
Finance costs					2,853	3,099		5,588	5,596
Share-based compensation					60	100		119	100
Income tax expense (recovery)					173	426		(248)	(47)
Adjusted EBITDA					10,047	10,956		16,947	19,571

FREE CASH FLOW					Three months ended			Three months ended
					June 30,			June 30,
					2024	2023		2024	2023
Cash flows from operating activities					10,805	11,605		20,081	26,990
Changes in non-cash operating working capital items					(860)	(922)		(3,216)	(7,797)
Maintenance capex					(6,092)	(5,631)		(10,093)	(7,845)
Cash interest					(2,125)	(2,395)		(4,133)	(4,243)
Depreciation of right of use assets - real property					(1,001)	(1,041)		(1,903)	(2,078)
Proceeds from disposal of property and equipment					1,015	2,348		1,443	3,484
Free cash flow					1,742	3,964		2,179	8,511

ADJUSTED WORKING CAPITAL						June 30,	December 31,
						2024	2023
Current assets						64,472	70,408
Current liabilities, less						59,024	69,170
	Current portion of loans and borrowings					(15,837)	(14,701)
	Current portion of lease liabilities					(9,248)	(10,722)
	Current portion of other liabilities					(1,333)	(1,532)
Current liabilities (excluding current portion of loans and borrowings, lease liabilities, and other liabilities)						32,606	42,215
Adjusted working capital						31,866	28,193

Forward-Looking Information

This Press Release contains forward-looking statements and information ("forward-looking statements") within the meaning of applicable Canadian securities laws. The forward-looking statements contained in this Press Release are based on the expectations, estimates and projections of management of Vertex as of the date of this Press Release unless otherwise stated. The use of any of the words "believe", "expect", "anticipate", "contemplate", "target", "plan", "outlook", "potential", "estimated", "intends", "continue", "may", "will", "should" and similar expressions are intended to identify forward-looking statements. More particularly and without limitation, this Press Release contains forward-looking statements concerning anticipated financial performance; the outlook for 2024; the Company's ability to grow profitably; sufficiency of working capital; and with respect to Vertex's ability to meet evolving customer demands.

Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. Investors are cautioned that forward-looking statements are based on the opinions, assumptions and estimates of management considered reasonable at the date the statements are made, and actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to the risks associated with the industries in which Vertex operates in general, such as:

• Ability to access sufficient capital from internal and external sources
• Ability to market to new customers
• Ability to obtain equipment in a timely and cost-efficient manner
• Ability to secure work
• Adjustments and cancellations of backlog
• Changes in legislation, including but not limited to tax laws and environmental regulations
• Collection of recognized revenue
• Commodity price, interest rate and exchange rate fluctuations
• Competition, ethics, and reputational risks
• Compliance with environmental laws risks
• Cyber-security risks
• Economy and cyclicality
• Global pandemics
• Health, safety and environmental risks
• Industry and inherent project delivery risks
• Insurance risk
• Joint venture risk
• Labour matters
• Litigation risk
• Loss of key management; ability to hire and retain qualified and capable personnel
• Maintaining safe worksites
• Operational risks
• Potential for non-payment and credit risk and ongoing financing availability
• Third party credit risk
• Unforeseen weather conditions
• Unanticipated shutdowns, work stoppages, and lockouts
• Volatility of market trading

Readers are cautioned that the foregoing list of factors is not exhaustive. Additional information on other factors that could affect the operations or financial results of the parties, and the combined company are included in reports on file with applicable securities regulatory authorities, including but not limited to: Annual Information Form for the year ended December 31, 2023, which may be accessed on Vertex's SEDAR+ profile at www.sedarplus.ca.

The forward-looking statements contained in this Press Release are made as of the date hereof and the Company undertakes no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as, and to the extent required by applicable securities laws.

SOURCE Vertex Resource Group Ltd.

For further information please contact: Terry Stephenson, CEO or Sherry Bielopotocky, CFO at 780-464-3295