Alaris Royalty Corp ALARF

Q2 Highlights

[pierrelebel]

Q2 2019 Highlights:

• Generated revenue of $27.4 million in the quarter, a decrease of 3.8% on a per share basis due to the comparable period including $4.3 million of one-time distributions received on the redemption of Labstat. Normalizing for the three-month period ended June 30, 2019 revenue increased 13.6%. The increase is due to distributions from new investments into GWM, BCC, Fleet and Amur and organic growth through positive resets on the annual distributions in January 2019. This was partially offset by the reduction in distributions stemming from profitable redemptions from Labstat and End of the Roll. Revenue for the six month period was $55.1 million, an increase of 5.6% over the prior year period and 15.3% when normalizing for the one-time distributions in 2018;
   
• Normalized EBITDA for the quarter was $24.0 million and $48.9 million for the six-months ended June 30, 2019, an increase of 17.9% and 20.7% on a per share basis for the three and six-month periods respectively. The increases are a result of net deployment into new and current partners as well as organic growth through positive resets on the annual distributions in January 2019;
   
• The Corporation paid $15.1 million of dividends during the three months ended June 30, 2019, resulting in an Actual Payout Ratio of 94.3% for the three month period as the timing of tax payments resulted in a $3.8 million decrease in current tax liabilities. For the six months ending June 30, 2019, the Corporation paid $30.1 million of dividends, an Actual Payout Ratio of 81.5%, this incorporates the timing of fluctuating tax payments;
   
• Increases to Investments at fair value totalled $9.3 million for the quarter, this includes: SCR Mining and Tunneling, LP ("SCR")  write-up of $3.9 million on an increase in expected future distributions, beginning with an increase in Q3 2019 (increased to $2.4 million annually), Sales Benchmark Index LLC ("SBI") write up of $1.5 million based on recent performance and PF Growth Partners, LLC ("PFGP") increase of $3.9 million to the redemption amount of existing units which were exchanged as part of an additional investment subsequent to June 30, 2019;
   
• Recovered $2.0 million of previously written off bad debt relating to Phoenix Holdings Limited, formerly KMH ("Phoenix");
   
• The Corporation completed an initial investment into Amur Financial Group Inc. ("Amur") for $70.0 million, consisting of $50.0 million of combined debt and preferred equity and a $20.0 million investment in exchange for a minority ownership of the common equity of Amur. Alaris will receive $6.5 million on its $50.0 million contribution and is expecting to receive dividends on its $20.0 million common equity investment;
   
• Subsequent to June 30, 2019 the Corporation invested an additional US$60.2 million into PFGP. The additional contribution consists of a new US$43.7 million preferred equity contribution as well as an investment of US$16.5 million in exchange for a minority ownership of the common equity in PFGP. This transaction also included an exchange of the Corporation's existing preferred units in PFGP valued at US$27.8 million, resulting in a total investment following the transaction of US$88.0 million in PFGP. The new preferred units in PFGP will have a value of US$71.5 million resulting in an initial annualized distribution on these preferred units of US$8.9 million. The PFGP distribution is expected to reset up 5% on January 1, 2020 based on same club sales results, another top of the collar reset for PFGP;
   
• During the quarter, the Corporation issued $100.0 million in convertible debentures. The debentures have an interest rate of 5.5% and a 30% conversion premium ($24.25). Proceeds of the debenture were used to reduce existing indebtedness under Alaris' senior credit facility, which was later used to make contributions in Amur and PFGP;
   
• Total net capital deployment year to date of $150.0 million includes gross deployment of approximately $170.0 million (Amur, PFGP, Accscient, LLC ("Accscient"), and ccCommunications LLC ("ccComm")) and redemptions of redeemable units of approximately $20.0 million (SBI and Fleet Advantage, LLC ("Fleet")).