Toronto, Ontario--(Newsfile Corp. - November 5, 2024) - Dexterra Group Inc. (TSX: DXT)

Highlights

• Dexterra generated strong results for Q3 2024 with consolidated revenue of $269.7 million, an increase of 1.5% compared to Q3 2023 and an increase of 6.4% compared to Q2 2024. The increase in Q3 2024 was primarily driven by: organic growth and strong market activity in WAFES that was offset by the more normalized wildfire season in 2024 compared to 2023; IFM organic growth; and the contribution from the CMI Management LLC ("CMI") acquisition;

• Q3 2024 Adjusted EBITDA, which excludes the impact of discontinued operations, was $32.0 million compared to $38.2 million and $29.3 million for Q3 2023 and Q2 2024, respectively. The increase from last quarter was due primarily to continued improvement in IFM margins as well as continued strong workforce accommodations occupancy, high asset utilization and large new contracts being fully operational in WAFES. The decrease from Q3 2023 was related to less wildfire activity;

• Free Cash Flow ("FCF") was $11.9 million for Q3 2024, an improvement compared to $10.2 million in the same quarter in 2023 and reflects reduced working capital requirements partially offset by increased seasonal working capital for the quarter due to higher business activity. FCF for the nine months ended September 30, 2024 was $22.0 million with the Adjusted EBITDA conversion rate to FCF expected to exceed 50% on an annualized basis;

• Net Earnings from continuing operations in Q3 2024 of $13.4 million were slightly lower than $13.9 million for the comparable period in 2023 and were higher on year to date basis at $30.0 million (2023 YTD - $27.5 million). Consolidated net earnings were $7.7 million and $13.2 million for the three and nine months ended September 30, 2024, respectively, compared to net earnings of $13.9 million and $27.1 million for the three and nine months ended September 30, 2023. 2024 consolidated net earnings were impacted by the loss from discontinued operations;

• Sale of the Modular business closed on August 30, 2024. This provides Dexterra with the opportunity to simplify our business model and focus on our two continuing core capital-light Support Services businesses and enhance the predictability of our business;

• Earnings per share from continuing operations was $0.21 in Q3 2024 was consistent with $0.21 for the same quarter in 2023. Earnings per share from continuing operations for the nine months ended September 30, 2024 and 2023 were $0.46 and $0.42, respectively;

• The Normal Course Issuer Bid ("NCIB") program was amended effective October 16, 2024 as the Dexterra Board believes the Corporation's shares are undervalued. The NCIB amendment increases the maximum number of common shares that the Corporation can repurchase to 3,207,361; and

• Dexterra declared a dividend for Q4 2024 of $0.0875 per share for shareholders of record at December 31, 2024, to be paid on January 15, 2025.

This news release contains certain measures and ratios, such as Adjusted EBITDA, Adjusted EBITDA as a percentage of revenue, and FCF, 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 and nine months ended September 30, 2024 for details which is incorporated by reference herein.

Third Quarter Financial Summary

(1) The comparative numbers have been restated as the Modular segment is classified as discontinued operations for the three and nine months ended September 30, 2024 and its operations are included in net loss from discontinued operations, net of income taxes.
(2) Please refer to the "Non-GAAP measures" section for the definition of Adjusted EBITDA, Adjusted EBITDA as a percentage of revenue and Free Cash Flow and to the "Reconciliation of non-GAAP measures" section for the related calculations.
(3) Non-recurring charges included in pre-tax earnings are described in the reconciliation of Non-GAAP measures and include $nil and $0.4 million in the three and nine months ended September 30, 2024, respectively (three and nine months ended September 30, 2023 - $4.7 million and $7.2 million, respectively).
(4) Net loss from discontinued operations includes $2.0 million related to transaction and closing costs and a $0.9 million loss on sale in the three and nine months ended September 30, 2024 results (three and nine months ended September 30, 2023 - $nil).

Third Quarter Operational Analysis

Integrated Facilities Management ("IFM")

For Q3 2024, IFM revenues were $99.7 million, an increase of $20.1 million or 25.2% from Q3 2023 primarily related to the acquisition of CMI which contributed $17.5 million, as well as the addition of new contracts across the IFM business and defence contract project work.

IFM Adjusted EBITDA for Q3 2024 was $6.2 million, an increase of $1.7 million compared to Q3 2023. Adjusted EBITDA as a percentage of revenue for Q3 2024 was 6.2%, an improvement over 5.8% in Q2 2024. Improvements in Adjusted EBITDA and Adjusted EBITDA as a percentage of revenue are the result of managing inflationary costs, refining our mix of business, post-secondary education food service contracts ramping up in Q3 as the fall terms for universities began in September, and the positive impact from the CMI acquisition.

For the nine months ended September 30, 2024, IFM revenues were $301.5 million, an increase of $59.0 million or 24.3% over 2023. Adjusted EBITDA of $17.3 million for the same period in 2024 was a 21.2% improvement compared to 2023. Drivers of the increases in revenue and Adjusted EBITDA for the nine months ended September 30, 2024 compared to the prior year period are consistent with the factors mentioned above.

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

Revenue from the WAFES business for Q3 2024 was $170.1 million compared to $186.2 million in Q3 2023, and $153.3 million in Q2 2024. Lower revenue in Q3 2024 compared to Q3 2023 is the result of more normalized wildfire support activities in Q3 2024 compared to the unprecedented levels experienced in 2023. The revenue increase of 11% compared to Q2 2024 was driven by strong market activity generally throughout the business and new longer term workforce accommodations contracts coming on-stream.

Adjusted EBITDA for Q3 2024 was $31.8 million compared to $39.5 million in Q3 2023 and $29.2 million in Q2 2024. The Adjusted EBITDA margin for Q3 2024 was 18.7% compared to 21.2% in Q3 2023 and 19.0% in Q2 2024. As mentioned above, Q3 2023 Adjusted EBITDA included the impact of unprecedented wildfire support activity, which resulted in higher-than-normal Adjusted EBITDA as a percentage of revenue. The Adjusted EBITDA margin for Q3 2024 was strong and benefited from robust market activity including greater than 90% camp and access matting asset utilization and the new long-term contracts which mobilized in Q2.

For the nine months ended September 30, 2024, revenue of $453.8 million was consistent with $453.5 million in 2023. Adjusted EBITDA for the same period was $80.9 million compared to $83.0 million in the prior year. Adjusted EBITDA for the nine months ended September 30, 2024 as a percentage of revenue was 17.8%, compared to 18.3% for the same period in 2023.

Discontinued Operations (Modular Solutions)

Net loss from discontinued operations for Q3 2024 was $5.7 million compared to a nominal loss in the same period for 2023. This business was sold on August 30, 2024.

Liquidity and Capital Resources

Debt was $102.2 million at September 30, 2024, compared to $139.8 million at Q2 2024. The decrease from Q2 2024 was primarily due to the proceeds of $41.8 million received from sale of the Modular business offset by increased seasonal working capital requirements for the quarter due to higher business activity. For the nine months ended September 30, 2024 Adjusted EBITDA conversion to FCF from continuing operations was 27% which is a significant increase compared to the 1% for the nine months ended September 30, 2023. The conversion of Adjusted EBITDA to FCF for 2024 is expected to exceed 50% on an annualized basis with Q4 experiencing the highest conversion of Adjusted EBITDA to FCF as a result of the seasonality of the business. Management intends to continue to manage the Dexterra balance sheet prudently and conservatively.

Additional Information

A copy of Dexterra's Condensed Consolidated Interim Financial Statements ("Financial Statements") for the three and nine months ended September 30, 2024 and 2023 and related Management's Discussion and Analysis ("MD&A") have been filed with the Canadian securities regulatory authorities and are available on SEDAR at sedarplus.ca 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 a.m. Eastern time on November 6, 2024 to discuss the third quarter results.

To access the conference call by telephone the conference call dial in number is 1-844-763-8274.

A live webcast of the conference call will be accessible on Dexterra Group's website at dexterra.com/investor-presentations-events/ by selecting the Q3 2024 Results webcast link. An archived recording of the conference call will be available approximately one hour after the completion of the call until December 6, 2024 by dialing 1-855-669-9658, passcode 5076311.

About Dexterra

Dexterra employs more than 9,000 people, delivering a range of support services for the creation, management, and operation of infrastructure across Canada and the U.S.

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 and other support services for diverse clients in the public and private sectors.

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) For the three and nine months ended September 30, 2023, the Corporation recognized an asset impairment of $2.2 million on the sale of excess camp assets.
(2) Contract loss provisions for the three and nine months ended September 30, 2024 were $nil (three and nine months ended September 30, 2023 were $2.0 million and $2.3 million, respectively).
(3) Restructuring and other costs for the nine months ended September 30, 2024 include $0.4 million (Q3 2024 - $nil), which relates to legal and other expenses for the acquisition of CMI. Restructuring and other costs for the nine months ended September 30, 2023 of $2.7 million include costs related to the CEO and CFO transitions of $1.9 million (Q3 2023 - $0.5 million) and restructuring costs of $0.8 million (Q3 2023 - $nil).

Free Cash Flow

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'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's future operating results and economic performance, including return on equity and Adjusted EBITDA margins; capital allocation priorities, acquisition strategy, reorganization of existing business; its capital light model management, market and inflationary environment expectations, lodge occupancy levels, its leverage, Discontinued Operations, Free Cash Flow, 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. While management considers these assumptions to be reasonable based on information currently available to Dexterra, 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'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 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's products and services; Dexterra'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 operates; climate changes could increase Dexterra'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'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'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, 2023 and 2022 contained in its most recent Annual Report filed with securities regulatory authorities in Canada and available on SEDAR at sedarplus.ca. The reader should not place undue importance on forward-looking information and should not rely upon this information as of any other date. Dexterra 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/228980