Andlauer Healthcare Group Reports 2023 Third Quarter Results

TORONTO, Nov. 2, 2023 /CNW/ - Andlauer Healthcare Group Inc. (TSX: AND) ("AHG" or the "Company") today reported its financial results for the three and nine-month periods ended September 30, 2023 ("Q3 2023" and "YTD 2023", respectively).

Q3 2023 Summary

• Revenue totaled $156.8 million, a decline of 4.9% from $164.9 million for the three-month period ended September 30, 2022 ("Q3 2022");
• Operating income was $21.7 million, compared to $27.9 million in Q3 2022;
• Net income totaled $15.3 million, or $0.36 per share (diluted), compared to $19.0 million, or $0.44 per share (diluted), in Q3 2022;
• Total comprehensive income was $20.1 million, compared to $32.9 million in Q3 2022;
• EBITDA totaled $39.0 million, compared to $44.1 million in Q3 2022; and
• EBITDA Margin was 24.9%, compared to 26.7% in Q3 2022.

"Our results for the quarter reflect a return to a more normalized operating environment. Specifically, we are no longer benefitting from certain pandemic-related tailwinds, including temporarily inflated U.S. truckload premiums and significant COVID vaccine related contributions," said Michael Andlauer, Chief Executive Officer of AHG. "Looking ahead, we are confident that we can build off this new baseline in 2024, supported by the positive industry growth fundamentals that characterize the healthcare transportation and logistics markets in Canada and the U.S., and leverage our unique platform to financially perform. In addition, our strong balance sheet positions us to generate incremental growth through complementary acquisitions."

Selected Consolidated Financial Summary

Q3 2023 Financial Results

Revenue for Q3 2023 decreased by 4.9% to $156.8 million, compared with $164.9 million in Q3 2022. The decrease is primarily attributable to lower fuel surcharge revenue, a decline in US-based truckload rates and reduced revenue related to COVID-19 vaccines and ancillary products. The Company's COVID-19 related revenue declined to approximately 0.8% of consolidated revenue in Q3 2023, compared to approximately 2.8% of revenue in Q3 2022.

Revenue for the healthcare logistics segment totaled $42.1 million, a decrease of 12.3%, or approximately $5.9 million, compared with Q3 2022. The decline in segment revenue was attributable to a 9.9% year-over-year decrease in the Company's logistics and distribution product line revenue and a 31.2% decline in packaging revenue.

The decrease in logistics and distribution revenue was due to lower outbound order handling activities for Accuristix and reduced transportation billings impacted by fuel surcharge programs from carriers, which are passed on to customers. The decrease is also partially attributable to $2.3 million of revenue recognized in Q3 2022 related to certain pass-through expenses which were reclassified to logistics and distributions revenue for LSU in accordance with IFRS 15 during the fourth quarter of 2022 ("Q4 2022"). This net revenue treatment has been consistently applied during YTD 2023. The decline in packaging revenue primarily reflects the loss of one of the Company's packaging customers in the first quarter of 2023 and lower volume from AHG's remaining base of packaging customers compared to Q3 2022.

Revenue in the specialized transportation segment totaled $114.7 million, a decrease of 1.9%, or approximately $2.2 million, compared with Q3 2022. The decline in segment revenue reflects a 1.4% decrease in ground transportation revenue and a 4.4% decline in air freight forwarding revenue, partially offset by a 0.3% increase in revenue from AHG's dedicated and last mile delivery product line.

The decrease in ground transportation revenue in the quarter was primarily attributable to lower fuel costs passed on to customers as a component of pricing, and a decline in US-based truckload rates, as opportunities to obtain rate premiums in Fiscal 2022 due to pandemic-related equipment and driver shortages have diminished. The Company believes that its US-based ground transportation revenue and related margins have returned to more normalized levels in YTD 2023, and it does not foresee a return to the premium rates achieved in Fiscal 2022. AHG's ground transportation revenue, excluding fuel, in its Canadian network increased by approximately 6.0% in the quarter, partially offsetting the factors discussed above.

The $0.3 million decline in air freight forwarding revenue reflects a $0.7 million decline in fuel surcharge revenue, partially offset by $0.4 million in organic revenue growth. The Company generated a slight revenue increase in its dedicated and last mile delivery product line reflecting organic growth, partially offset by a $0.3 million reduction in fuel surcharge revenue.

Cost of transportation and services was $79.6 million, or 50.8% of revenue, compared with $81.0 million, or 49.1% of revenue, for Q3 2022. The decrease in costs was primarily attributable to lower fuel costs in line with the decreases in revenue related to fuel prices. The increased operating ratio is attributable to lower pricing in the Company's US-based truckload operations, as discussed above.

Direct operating expenses were $25.3 million, or 16.2% of revenue, compared with $28.3 million, or 17.1% of revenue, for Q3 2022. Direct operating expenses in Q3 2023 reflect a reduction in outbound volume in AHG's Accuristix logistics and distribution operations. The decrease is also partially attributable to the recognition of certain pass-through expenses in Q3 2022 which were reclassified to logistics and distribution revenue for LSU in accordance with IFRS 15 during Q4 2022. This net revenue treatment has been consistently applied during YTD 2023.

Selling, general and administrative ("SG&A") expenses were $12.8 million, or 8.2% of revenue, compared with $11.3 million, or 6.8% of revenue, for Q3 2022. The increase was due to AHG's investments in supporting its business growth. SG&A expenses for Q3 2023 were in line with the Company's expectations on a percentage of revenue basis.

Operating income totaled $21.7 million, a decrease of $6.1 million compared to $27.9 million for Q3 2022. The decrease is primarily attributable to reduced contributions from Boyle Transportation and Skelton USA, and the decline in revenue related to COVID-19 vaccines and ancillary products.

Net income was $15.3 million, or $0.36 per share (diluted), compared with $19.0 million, or $0.44 per share (diluted), in Q3 2022. Lower segment net income before eliminations for AHG's specialized transportation segment was primarily attributable to reduced contributions from Boyle Transportation and Skelton USA, and lower segment net income from the Company's healthcare logistics segment reflects reduced order handling activity, as discussed above.

Total comprehensive income was $20.1 million compared to $32.9 million for Q3 2022. Total comprehensive income differs from net income due to the acquisition of foreign operations (Boyle Transportation and Skelton USA), which resulted in a positive foreign currency translation adjustment of $4.8 million in Q3 2023 compared to a positive foreign currency translation adjustment of $13.9 million in Q3 2022.

Earnings before interest, taxes, depreciation and amortization ("EBITDA")¹ totaled $39.0 million compared with $44.1 million for Q3 2022. The decrease is due to the factors discussed above and primarily reflects lower contributions from the Company's US-based truckload operations, reduced outbound order handling activities for Accuristix and lower revenue related to COVID-19 vaccines and ancillary products. EBITDA Margin¹ was 24.9% in Q3 2023, which is in line with the Company's pre-pandemic historical EBITDA Margin¹ range. The Company's EBITDA Margin¹ was 26.7% in Q3 2022.

Dividend

The Company paid a dividend (encompassing the period from July 1, 2023 to September 30, 2023) in the amount of $0.09 per subordinate voting share and multiple voting share on October 16, 2023.

Subject to financial results, capital requirements, available cash flow, corporate law requirements and any other factors that AHG's Board of Directors may consider relevant, it is the Company's intention to declare a quarterly dividend of $0.09 per subordinate voting share and multiple voting share on an ongoing basis.

Shares Outstanding

On March 24, 2023, the Company announced that the Toronto Stock Exchange had approved its notice of intention to make a normal course issuer bid ("NCIB") for up to a maximum of 1,856,857 of its subordinate voting shares, or approximately 10% of its public float as of March 23, 2023, over the 12-month period commencing on March 29, 2023. As at September 30, 2023, 107,740 Subordinated Voting Shares had been purchased and cancelled pursuant to the NCIB.

As at September 30, 2023, there were 19,974,588 subordinate voting shares and 21,840,000 multiple voting shares issued and outstanding.

Financial Statements

AHG's unaudited interim condensed consolidated financial statements and related Management's Discussion & Analysis ("MD&A") for Q3 2023 are available on the Company's website at www.andlauerhealthcare.com and on the Company's profile on SEDAR+ at www.sedarplus.ca

Conference call and webcast

Michael Andlauer, Chief Executive Officer, and Peter Bromley, Chief Financial Officer, will host a conference call for analysts and investors on Friday, November 3, 2023 at 8:30 a.m. (ET).

To join the conference call without operator assistance, you may register and enter your phone number at: https://emportal.ink/45g4KGl to receive an instant automated call back. Alternatively, you can dial (416) 764-8650 or (888) 664-6383 to reach a live operator that will join you into the call.

You can access a live webcast of the call under the Presentations & Events section of AHG's investor website at: www.andlauerhealthcare.com/andlauer-healthcare-presentations-events

To access a replay of the conference call, dial 416-764-8677 or (888) 390-0541, passcode: 155065 #. The replay will be available until November 10, 2023. The webcast will be archived on the Company's website following the conclusion of the call.

About AHG

AHG is a leading and growing supply chain management company offering a robust platform of customized third-party logistics ("3PL") and specialized transportation solutions for the healthcare sector. The Company's 3PL services include customized logistics, distribution and packaging solutions for healthcare manufacturers across Canada. AHG's specialized transportation services in Canada, including air freight forwarding, ground transportation, dedicated delivery and last mile services, provide a one-stop shop for clients' healthcare transportation needs. Through its complementary service offerings, available across a coast-to-coast distribution network, AHG strives to accommodate the full range of its clients' specialized supply chain needs on an integrated and efficient basis. The Company also provides specialized ground transportation services, primarily to the healthcare sector, across the 48 contiguous U.S. states. For more information on AHG, please visit: www.andlauerhealthcare.com.

Forward-looking Information

This news release contains forward-looking information and forward-looking statements (collectively, "forward-looking information") within the meaning of applicable securities laws. Forward-looking information may relate to the Company's future financial outlook and anticipated events or results and may include information regarding the Company's financial position, business strategy, growth strategies, addressable markets, budgets, operations, financial results, taxes, dividend policy, plans, objectives and expectations with respect to COVID-19. Particularly, information regarding the Company's growth expectations, performance, achievements, payment of dividends, prospects, potential acquisitions, financial targets or outlook is forward-looking information. In some cases, forward-looking information can be identified by the use of forward-looking terminology such as "plans", "targets", "expects", "budget", "scheduled", "estimates", "outlook", "forecasts", "projection", "prospects", "strategy", "intends", "anticipates", "believes", "commencing" or variations of such words and phrases or statements that certain actions, events or results "may", "could", "would", "might", "will", "will be taken", "occur" or "be achieved". In addition, any statements that refer to expectations, intentions, targets, projections or other characterizations of future events or circumstances contain forward-looking information. Statements containing forward-looking information are not historical facts but instead represent management's expectations, estimates and projections regarding future events or circumstances. Such forward-looking statements are qualified in their entirety by the inherent risks, uncertainties and changes in circumstances surrounding future expectations which are difficult to predict and many of which are beyond the control of the Company.

Forward-looking information is necessarily based on a number of opinions, estimates and assumptions, including but not limited to those assumptions described under the heading "Cautionary Note Regarding Forward-Looking Information" in the Company's MD&A for Q3 2023. Forward-looking information is subject to known and unknown risks, uncertainties, assumptions and other factors that may cause the actual results, level of activity, performance or achievements to be materially different from those expressed or implied by such forward-looking information, including but not limited to factors discussed under the heading "Risk Factors" in the Company's annual information form dated March 2, 2023, which is available on the Company's profile on SEDAR at www.sedarplus.ca. If any of these risks or uncertainties materialize, or if the opinions, estimates or assumptions underlying the forward-looking information prove incorrect, actual results or future events might vary materially from those anticipated in the forward-looking information. Accordingly, investors should not place undue reliance on forward-looking information, which speaks only as of the date made. The forward-looking information contained in this news release represents the Company's expectations as of the date of this news release and are subject to change after such date and the Company disclaims any intention or obligation or undertaking to update or revise any forward-looking information whether as a result of new information, future events or otherwise, except as required under applicable securities laws.

(1) Non-IFRS Financial Measures

This news release contains certain non-IFRS measures. These measures are not recognized measures under IFRS, do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing further understanding of the Company's results of operations from management's perspective. Accordingly, these measures should not be considered in isolation nor as a substitute for analysis of the Company's financial information reported under IFRS. AHG uses non-IFRS measures including "EBITDA" and "EBITDA Margin". These non-IFRS measures are used to provide investors with supplemental measures of the Company's operating performance and thus highlight trends in its core business that may not otherwise be apparent when relying solely on IFRS financial measures. AHG also believes that securities analysts, investors and other interested parties frequently use non-IFRS measures in the evaluation of issuers. AHG management also uses non-IFRS measures in order to facilitate operating performance comparisons from period to period, to prepare annual operating budgets and to determine components of management compensation.

EBITDA

AHG defines EBITDA as net income for the period before: (i) income tax expense (recovery); (ii) interest income; (iii) interest expense; and (iv) depreciation and amortization.

AHG believes EBITDA is a useful measure to assess the Company's financial performance because it provides a more relevant picture of operating results by excluding the effects of expenses that are not reflective of the Company's underlying business performance.

EBITDA Margin

AHG defines EBITDA Margin as EBITDA divided by revenue. EBITDA Margin represents a measure of the

Company's profitability expressed as a percentage of revenue.

AHG believes EBITDA Margin is a useful measure to assess the Company's financial performance because

it helps quantify the Company's ability to convert revenues generated from clients into EBITDA.

Reconciliation of EBITDA

SOURCE Andlauer Healthcare Group Inc.

View original content: http://www.newswire.ca/en/releases/archive/November2023/02/c4627.html