Dexterra Announces Results for Q3 2023 and Declares Dividend

Toronto, Ontario--(Newsfile Corp. - November 7, 2023) - Dexterra Group Inc. (TSX: DXT)

Highlights

• The Corporation generated record results for Q3 2023 with consolidated revenue of $310.8 million, an increase of 20% compared to Q3 2022 and 16% compared to Q2 2023. The strong results in Q3 were primarily driven by high support services activity in the WAFES business unit supporting the continued and unprecedented wildfire activity in Alberta and British Columbia, as well as robust natural resources market activity;

• The Corporation's Adjusted EBITDA for Q3 2023 was $39.6 million. The increase from the prior year quarter reflected both the high WAFES business activity level as well as a stronger IFM footprint which is well positioned for improving results in Q4 with new contracts on stream;

• The Corporation reported consolidated net earnings of $13.9 million for Q3 2023 compared to $5.2 million in Q3 2022 and $8.5 million in Q2 2023;

• For the three and nine months ended September 30, 2023, Adjusted Free Cash Flow was $19.8 million and $26.4 million, respectively. The year-to-date basis Adjusted Free Cash Flow is up 54% in 2023 after investments in working capital. Adjusted Free Cash Flow conversion of EBITDA is expected to continue to approximate 50% on an annual basis;

• In connection to the ongoing Normal Course Issuer Bid ("NCIB"), Dexterra repurchased 323,700 common shares in Q3 2023 at a weighted average price per share of $5.82 for a total cash cost of $1.9 million; and

• Dexterra declared a dividend for Q4 2023 of $0.0875 per share for shareholders of record at December 31, 2023, to be paid January 15, 2024.

This news release contains certain measures and ratios, such as Adjusted EBITDA, Adjusted EBITDA as a percentage of revenue, Adjusted Free Cash Flow and backlog, that do not have any standardized meaning as prescribed by GAAP and, therefore, are considered non-GAAP measures. The method of calculating these measures may differ from other entities and accordingly, may not be comparable to measures used by other entities. See "Non-GAAP measures" and "Reconciliation of Non-GAAP measures" of the Corporation's MD&A for the three months and nine months ended September 30, 2023 and 2022 for details which is incorporated by reference herein.

Third Quarter Financial Summary

(1) Please refer to the "Non-GAAP measures" section for the definition of Adjusted EBITDA, Adjusted EBITDA as a percentage of revenue and Adjusted Free Cash Flow and to the "Reconciliation of non-GAAP measures" section for the related calculations.
(2) Non-recurring charges included in pre-tax earnings are described in the reconciliation of Non-GAAP measures and include $4.7 million and $7.2 million in the three and nine months ended September 30, 2023, respectively (three and nine months ended September 30, 2022 - $0.7 million and $5.0 million).

Third Quarter Operational Analysis

Integrated Facilities Management ("IFM")

For Q3 2023, IFM revenues were $79.6 million, an increase of 11% from Q3 2022 and a 4% increase compared to Q2 2023 despite the normal lower summer seasonal activity in the educational sector. The increase from Q3 2022 is primarily related to the mobilization of new contracts in higher education and the Hotel, Rail and Leisure areas over the past year.

IFM Adjusted EBITDA for the quarter was $4.5 million compared to $2.8 million for Q3 2022 and is consistent with Q2 2023. The increase from the same period of the prior year is primarily attributed to the aforementioned organic growth and continued margin improvement in the business. Adjusted EBITDA as a percentage of revenue in our recurring base business, with the ramp-up of new contracts in the education sector, is expected to approach our target of 7% in the near term.

For the nine months ended September 30, 2023, IFM revenues were $242.5 million, an increase of 21% and reflected strong organic growth. Adjusted EBITDA is 32% higher compared to the same period in the prior year as the Corporation continues to focus on margin improvement.

Workforce Accommodations, Forestry and Energy Services ("WAFES")

Revenue from the WAFES business unit for Q3 2023 was $186.2 million, an increase of 40% compared to Q3 2022 and a 35% increase compared to Q2 2023. Adjusted EBITDA for Q3 2023 was $39.5 million compared to $20.9 million in Q3 2022 and $25.0 million in Q2 2023. The record results in WAFES are primarily due to the unprecedented wildfire support services activity that continued into Q3 with revenue of approximately $30 million combined with strong camp utilization, sales and rentals of access mats, and rentals of modular space equipment.

For the nine months ended September 30, 2023, revenue was $453.5 million, an increase of 24%, and Adjusted EBITDA was 56% higher compared to the same period in the prior year. Adjusted EBITDA as percentage of revenue was 18%, compared to 14% in 2022 due to the factors noted above.

Modular Solutions

Modular Solutions revenues for Q3 2023 were $44.9 million, compared to $54.5 million in Q3 2022 and $53.1 million in Q2 2023. Adjusted EBITDA for Q3 2023 was $1.4 million, an increase of $0.6 million when compared to Q3 2022 and a decrease of $0.5 million compared to Q2 2023. Differences in the period-to-period comparative results are due primarily to modular manufacturing production levels and field construction activity.

Revenue for the nine months ended September 30, 2023 was $150.1 million, an increase of 2% compared to the same period in 2022. Adjusted EBITDA for the nine months ended September 30, 2023 was $4.8 million, an increase of $6.5 million compared to the same period in the prior year when various business challenges were encountered.

Non-Recurring Items

Non-recurring items recorded in direct costs for the three months ended September 30, 2023 include $2.0 million related to future losses on an onerous IFM contract which expires in June 2024. For the nine months ended September 30, 2023, non-recurring items include the onerous contract referenced above as well as other contract loss provisions, demobilization and restructuring costs of $1.1 million prior to the quarter.

Non-recurring items recorded in Selling, general & administrative ("SG&A") costs for the three and nine months ended September 30, 2023 include $0.5 million and $1.9 million, respectively, related to CFO and CEO transition costs.

The Corporation has also entered into an agreement to sell excess camp assets and recorded a related impairment on these assets of $2.2 million in the quarter ended September 30, 2023.

Liquidity and Capital Resources

Debt was $133.9 million at September 30, 2023, compared to $126.5 million at Q2 2023 and $94.0 million at December 31, 2022. The increase from Q2 2023 is primarily related to increased working capital demands associated with high activity levels and completion of the program to revise the payment practices for suppliers. On a year-to-date basis, the debt increase also reflected a one-time special investment in the matting business of $11.8 million. Debt levels are expected to be substantially lower by year end with a significant reduction in working capital and the impact from the normal seasonality of the business.

The conversion of Adjusted EBITDA to Adjusted Free Cash Flow for 2023 is expected to be 50%.

Additional Information

A copy of Dexterra's Condensed Consolidated Interim Financial Statements ("Financial Statements") for the three and nine months ended September 30, 2023 and 2022 and related Management's Discussion and Analysis ("MD&A") have been filed with the Canadian securities regulatory authorities and are available on SEDAR at sedar.com and Dexterra's website at dexterra.com. The Financial Statements have been prepared in accordance with International Financial Reporting Standards and the reporting currency is in Canadian dollars.

Conference Call

Dexterra will host a conference call and webcast to begin promptly at 8:30 Eastern time on November 8, 2023 to discuss the third quarter results.

To access the conference call by telephone the conference call dial in number is 1-800-319-4610.

A live webcast of the conference call will be accessible on Dexterra Group's website at dexterra.com/investor-presentations-events/ by selecting the webcast link. An archived recording of the conference call will be available approximately one hour after the completion of the call until December 8, 2023 by dialing 1-855-669-9658, passcode 0121.

About Dexterra

Dexterra employs more than 8,500 people, delivering a range of support services for the creation, management, and operation of infrastructure across Canada.

Powered by people, Dexterra brings best-in-class regional expertise to every challenge and delivers innovative solutions, giving clients confidence in their day-to-day operations. Activities include a comprehensive range of integrated facilities management services, industry leading workforce accommodation solutions, innovative modular building capabilities, and other support services for diverse clients in the public and private sectors.

For further information contact:

Christos Gazeas, EVP Legal, General Counsel and Corporate Secretary
Head office: Airway Centre, 5915 Airport Rd., 4th Floor Mississauga, Ontario L4V 1T1
Telephone: (416) 767-1148

You can also visit our website at dexterra.com.

Reconciliation of non-GAAP measures

The following provides a reconciliation of non-GAAP measures to the nearest measure under GAAP for items presented throughout the News Release.

Adjusted EBITDA

(1) Contract loss provisions for the three and nine months ended September 30, 2023 were $2.0 million and $2.3 million, respectively (2022 - $1.0 million and $3.2 million). The costs in 2022 include losses from a contractual dispute and remediation work on pre-acquisition contracts from the Acquisition of Horizon North Logistics Inc. in May 2020.
(2) Restructuring and other costs for the three months and nine months ended September 30, 2023 of $0.5 million and $2.7 million, respectively, include costs related to the CEO and CFO transition of $1.9 million (Q3 2023 - $0.5 million) and restructuring costs of $0.8 million (Q3 2023 - $nil). The three and nine months ended September 30, 2022 include a recovery of $0.3 million and costs of $1.9 million, respectively, including transaction costs related to the 2022 Acquisitions, restructuring costs and Canada Emergency Wage Subsidy clawback.
(3) For the three and nine months ended September 30, 2023, the Corporation recognized an asset impairment of $2.2 million on excess camp assets which it is selling.

Adjusted Free Cash Flow

(1) Adjusted Free Cash Flow is not adjusted for growth working capital in the 2022 comparative periods.

Forward-Looking Information

Certain statements contained in this news release may constitute forward-looking information under applicable securities law. Forward-looking information may relate to Dexterra Group's future outlook and anticipated events, business, operations, financial performance, financial condition or results and, in some cases, can be identified by terminology such as "continue"; "forecast"; "may"; "will"; "project"; "could"; "should"; "expect"; "plan"; "anticipate"; "believe"; "outlook"; "target"; "intend"; "estimate"; "predict"; "might"; "potential"; "continue"; "foresee"; "ensure" or other similar expressions concerning matters that are not historical facts. In particular, statements regarding Dexterra Group's future operating results and economic performance; management market and inflationary environment expectations, lodge occupancy levels, its leverage, Adjusted Free Cash Flow, NRB Modular Solutions backlog and revenue, wildfire activity expectations and its objectives and strategies are forward-looking statements. These statements are based on certain factors and assumptions, including expected growth, market recovery, results of operations, performance and business prospects and opportunities regarding Dexterra Group, which Dexterra Group believes are reasonable as of the current date. While management considers these assumptions to be reasonable based on information currently available to Dexterra Group, they may prove to be incorrect. Forward-looking information is also subject to certain known and unknown risks, uncertainties and other factors that could cause Dexterra Group's actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward- looking information, including, but not limited to: the ability to retain clients, renew existing contracts and obtain new business; an outbreak of contagious disease that could disrupt its business; the highly competitive nature of the industries in which Dexterra Group operates; reliance on suppliers and subcontractors; cost inflation; volatility of industry conditions could impact demand for its services; a reduction in the availability of credit could reduce demand for Dexterra Group's products and services; Dexterra Group's significant shareholder may substantially influence its direction and operations and its interests may not align with other shareholders; its significant shareholder's 49% ownership interest may impact the liquidity of the common shares; cash flow may not be sufficient to fund its ongoing activities at all times; loss of key personnel; the failure to receive or renew permits or security clearances; significant legal proceedings or regulatory proceedings/changes; environmental damage and liability is an operating risk in the industries in which Dexterra Group operates; climate changes could increase Dexterra Group's operating costs and reduce demand for its services; liabilities for failure to comply with public procurement laws and regulations; any deterioration in safety performance could result in a decline in the demand for its products and services; failure to realize anticipated benefits of acquisitions and dispositions; inability to develop and maintain relationships with Indigenous communities; the seasonality of Dexterra Group's business; inability to restore or replace critical capacity in a timely manner; reputational, competitive and financial risk related to cyber-attacks and breaches; failure to effectively identify and manage disruptive technology; economic downturns can reduce demand for Dexterra Group's services; its insurance program may not fully cover losses. Additional risks and uncertainties are described in Note 22 of the Corporation's Consolidated Financial Statements for the year ended December 31, 2022 and 2021 contained in its most recent Annual Report filed with securities regulatory authorities in Canada and available on SEDAR at sedar.com. The reader should not place undue importance on forward-looking information and should not rely upon this information as of any other date. Dexterra Group is under no obligation and does not undertake to update or alter this information at any time, except as may be required by applicable securities law.

To view the source version of this press release, please visit https://www.newsfilecorp.com/release/186601