Decisive Dividend Corporation Reports Financial Results for the Fourth Quarter and Year Ended December 31, 2023

KELOWNA, BC, March 20, 2024 /CNW/ - Decisive Dividend Corporation (TSXV: DE) (the "Company" or "Decisive") today reported its financial results for the fourth quarter and year ended December 31, 2023.

Highlights of the Company's financial performance include the following:

• Consolidated sales increased 16% to $35.7 million in Q4 2023 compared to $30.8 million in Q4 2022.
• The quarterly sales increase brings consolidated annual sales for 2023 to $134.9 million, an increase of $36.3 million, or 37%, relative to 2022.
• Generated $7.2 million in Adjusted EBITDA* in Q4 2023, an increase of 79% relative to Q4 2022.
• Annual Adjusted EBITDA* in 2023 of $25.2 million represents an 84% increase compared to 2022.
• Generated net profit of $2.4 million, or $0.13 per share, in Q4 2023, an increase of $1.8 million, or $0.09 per share, compared to Q4 2022.
• Annual net profit of $8.3 million, or $0.48 per share, in 2023, represents an increase of $4.2 million, or $0.17 per share, compared to 2022.
• Per share monthly dividend increased twice in 2023 and again in March 2024 to $0.045 per share, representing an aggregate increase of 50% in the annualized per share dividend over the last year.
• Balance sheet strength and flexibility. Conservative leverage ratio of 1.5 times debt to Adjusted EBITDA as of December 31, 2023. Ample liquidity as of the date of this press release with $5.2 million of cash, $48.8 million available on the committed portion of the new syndicated credit facility, plus $75 million of availability on the accordion facility.

Selected Financial Highlights:

The following are selected financial highlights of Decisive for the quarter and year ended December 31, 2023. All amounts are expressed in Canadian dollars. The Company's consolidated financial statements as well as its management's discussion and analysis ("MD&A") are posted on SEDAR+ at www.sedarplus.ca and on Decisive's website (www.decisivedividend.com).

Q42023 Highlights:

• Consolidated sales increased 16% to $35.7 million compared to $30.8 million in Q4 2022.
• Consolidated gross profit increased 38% to $13.8 million from $10.0 million in Q4 2022.
• Consolidated gross profit percentages increased to 39% from 32% in Q4 2022. Both segments contributed to the margin increase that were a result of product mix changes, pricing increases and other margin enhancing activities, as well as the contribution from the four high margin businesses acquired in 2023.
• Consolidated Adjusted EBITDA* increased to $7.2 million, up 79% relative to Q4 2022.
• In the finished product segment, the 17% increase in segment sales in the quarter was driven by the two businesses acquired in 2023, Capital I and IHT, although IHT sales were below pre-acquisition averages. Hearth product sales, Marketing Impact sales and Slimline sales all decreased relative to Q4 2022.
• In the component manufacturing segment, newly acquired businesses Micon and Procore contributed to the overall 22% increase in segment sales in the quarter. Although Unicast sales decreased compared to Q4 2022, both Hawk and Northside sales increased relative to Q4 2022.
• Consolidated net profit in the quarter was $2.4 million, or $0.13 per share, compared to $0.7 million, or $0.04 per share, in Q4 2022.
• Consolidated free cash flow* increased 67% to $4.8 million, or $0.25 per share, relative to Q4 2022.

2023 Annual Highlights:

• Consolidated sales increased 37% to $134.9 million, compared to $98.6 million in 2022.
• Consolidated gross profit increased 61% to $52.8 million from $32.9 million in 2022.
• Consolidated gross profit percentages increased to 39% from 33% in 2022, which was driven by product mix changes, pricing increases and other margin enhancing activities, as well as the effect of higher sales covering a larger percentage of fixed costs and the impact of the high gross margin businesses acquired in 2023.
• Consolidated Adjusted EBITDA* increased to $25.2 million, up 84% relative to 2022, driven by the above noted increases in sales and gross profit.
• The six businesses acquired in the two years ended December 31, 2023 contributed meaningfully to the increased consolidated sales in 2023.
• On an aggregate basis, the five businesses owned prior to 2022 experienced organic revenue growth of 13% in 2023, driven primarily by increased sales at Northside, Hawk and Unicast.
• Sales in the finished product segment increased by $25.0 million, or 44%, relative to 2022.
• Sales for the component manufacturing segment increased by $13.4 million, or 32%, relative to 2022.
• Consolidated net profit was $8.3 million, or $0.48 per share, an increase of $4.2 million, or $0.17 per share compared to 2022.
• Consolidated free cash flow* increased 87% to $15.6 million, or $0.90 per share, relative to 2022.

Jeff Schellenberg, Chief Executive Officer of Decisive, noted:

"Q4 2023 culminated a very successful year for Decisive. We completed four acquisitions of proprietary product, high margin businesses; the five businesses we owned for full year periods prior to 2022 experienced revenue growth of 13% on a year over year basis; and margin enhancing activities bolstered gross profit margins which increased from 33% to 39% on a year over year basis. These factors have contributed to material growth in our pro forma Adjusted EBITDA for the year ended December 31, 2023 to over $31 million, once the pre-acquisition periods of the newly acquired businesses are included (See "Information Relating to Acquisitions" later in this press release), which is 25% higher than our reported Adjusted EBITDA. More importantly our per share Adjusted EBITDA and Free Cash Flow, which grew by 38% and 41% on a year-over-year basis compared to 2022, provide clear evidence of the steps being taken to drive value-creating growth.

We are seeing softening economic activity, due to the ongoing high interest rate environment, geopolitical instability, and ongoing inflation, though this appears to be stabilizing. Lower overall activity is impacting demand at certain subsidiaries, relative to what has been experienced over the last two years. Other subsidiaries are continuing to experience robust demand characteristics. As an example, Blaze King expects Q1 2024 sales to be lower than the record levels achieved in Q1 2023. This is as a result of Blaze King entering 2024 with a significantly lower backlog relative to the start of 2023, but Blaze King's order levels are now tracking ahead of last year. Though Q1 2024 overall sales will be negatively impacted by these factors, we remain encouraged about 2024 overall, and the performance of our business in this period and in the long-term.

From an M&A perspective, our pipeline of acquisition opportunities remains strong, as demonstrated by our recently announced acquisition of Alberta Production Machining Ltd. We remain committed to continue pursuing opportunities to support the many legacy-minded exiting business owners who lack a succession plan and are looking for new ownership of their business that will preserve and build on the legacy they have created."

Outlook:

Decisive remains focused on continuing to drive performance in line with its overall strategic objectives including:

• Executing on the growth strategy, demonstrated by the completion of seven acquisitions in a 24-month span, to the date of this press release.
• Building a strong and growing acquisition prospect pipeline.
• Assembling a diversified portfolio of high quality, high gross margin product manufacturing businesses focused on achieving long-term organic growth to support ongoing strength in per share financial metrics even through periods of seasonality or lower demand.
• Solidifying subsidiary leadership and developing an eco-system of support for its subsidiaries at head office.
• Optimizing operations, with an emphasis on enhancing margins and increasing market share.
• Increasing production capacity and improving operational efficiency, with an aggregate $3.5 million of growth capital expenditures* on manufacturing equipment made over the last 24 months and utilization of third-party manufacturing partners.
• Providing sustainable and growing dividends to shareholders, with three increases of the monthly dividend in the last year, representing an aggregate increase of 50% in the annualized dividend from $0.36 per share to $0.54 per share. Dividend payout ratio 54% in 2023, which would have been 66% had $0.54 dividends per share been paid in 2023.
• Maintaining balance sheet flexibility with conservative leverage ratios and ample availability on the Company's new syndicated credit facility.
• Bolstering Decisive's resilience through a variety of economic conditions by aligning the business with supportive shareholders and lenders, and further diversifying the portfolio via acquisition and organic growth.

Conference Call

Decisive will host a conference call for interested parties on Thursday, March 21, 2024, at 8:00am Pacific Time (11:00am Eastern Time) to discuss the Company's Q4 and year end 2023 results. The call will be hosted by Jeff Schellenberg, Decisive's Chief Executive Officer and Rick Torriero, Chief Financial Officer.

Details for those who wish to participate in this conference call are as follows:

Conference Call Details:
Thursday, March 21, 2024, at 8:00am Pacific Time / 11:00am Eastern Time

(please call 10 minutes ahead of time)

Participant Information:
To join the conference call without operator assistance, you may register and enter your phone number at https://emportal.ink/433gOeL to receive an instant automated call back.

You can also dial direct to be entered into the call by an operator:
Dial in number – North America (toll free): 1-888-664-6392
Dial in number – United Kingdom (toll free): 08006522435
Dial in number – International: +1-416-764-8659

Replay Information (replay available until March 28, 2024):
Replay number – North America (toll free): 1-888-390-0541
Replay number – International: +1-416-764-8677
Replay access code 825060#

About Decisive Dividend Corporation

Decisive Dividend Corporation is an acquisition-oriented company, focused on opportunities in manufacturing. The Company's purpose is to be the sought-out choice for exiting legacy-minded business owners, while supporting the long-term success of the businesses acquired, and through that, creating sustainable and growing shareholder returns. The Company uses a disciplined acquisition strategy to identify already profitable, well-established, high quality manufacturing companies that have a sustainable competitive advantage, a focus on non-discretionary products, steady cash flows, growth potential and established, strong leadership.

For more information on Decisive, or to sign up for email notifications of Company press releases, please visit www.decisivedividend.com.

Cautionary Statements

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.

Information Relating to Acquisitions

This press release contains certain information (including historical financial information) relating to acquisitions completed by Decisive in the last twelve months as well as pre-acquisition historical financial information relating to the acquired businesses. The pre-acquisition historical financial information relating to the acquired businesses has not been audited and is based upon information provided to Decisive by the acquired businesses, and their respective management and previous shareholders.

The table below sets forth the pro forma combined financial information of Decisive and the applicable pre-acquisition periods for the acquisitions completed in the last twelve months:

Non-IFRS Financial Measures

In this press release, reference is made to "Adjusted EBITDA", "Free Cash Flow", "Growth Capital Expenditures", "Maintenance Capital Expenditures" and "Dividend Payout Ratio", which are not recognized financial measures under IFRS Accounting Standards, but are believed to be meaningful in the assessment of the Company's performance as defined below.

"Adjusted EBITDA" is defined as earnings before finance costs, income taxes, depreciation, amortization, foreign exchange gains or losses, other non-cash items such as gains or losses recognized on the fair value of contingent consideration items, asset impairment, share-based compensation, and restructuring costs, and other non-operating items such as acquisition costs.

Adjusted EBITDA is a financial performance measure that management believes is useful for investors to analyze the results of the Company's operating activities prior to consideration of how those activities are financed and the impact of non-operating charges related to planned or completed acquisitions, foreign exchange, taxation, depreciation, amortization, and impairment charges.

The most directly comparable financial measure is profit or loss. Adjusted EBITDA per share is also presented, which is calculated by dividing Adjusted EBITDA, as defined above, by the weighted average number of shares outstanding during the period.

"Free Cash Flow" is defined as cash provided by operating activities, as defined by IFRS Accounting Standards, adjusted for changes in non-cash working capital, timing considerations between current income tax expense and income taxes paid, interest payments, required principal payments on long-term debt and right of use lease liabilities, and any unusual non-operating one-time items such as acquisition and restructuring costs (as described above).

Free Cash Flow is a financial performance measure used by management to analyze the cash generated from operations before the impact of changes in working capital items or other unusual items and after giving effect to expected income taxes thereon, as well as required interest and principal payments on long-term debt and right of use lease liabilities.

The most directly comparable financial measure is cash provided by operating activities. Adjustments made to cash provided by operating activities in the calculation of Free Cash Flow include other IFRS Accounting Standards measures, including changes in non-cash working capital, current income tax expense, income taxes paid, interest paid, and principal payments on long-term debt and right of use lease liabilities.

Free Cash Flow per share is also presented, which is calculated by dividing Free Cash Flow, as defined above, by the weighted average number of shares outstanding during the period.

"Free Cash Flow Less Maintenance Capital" is defined as Free Cash Flow, as defined above, less Maintenance Capital Expenditures, as defined below. Free Cash Flow Less Maintenance Capital is a financial performance measure used by management to analyze the cash generated from operations before the impact of changes in working capital items or other unusual items and after giving effect to expected income taxes thereon, as well as required interest and principal payments on long-term debt and right of use lease liabilities, and capital expenditures required to sustain the current operations of the Company.

The Company presents Free Cash Flow Less Maintenance Capital Expenditures per share, which is calculated by dividing Free Cash Flow Less Maintenance Capital, as defined above, by the weighted average number of shares outstanding during the period.

"Growth and Maintenance Capital Expenditures" maintenance capital expenditures are defined as capital expenditures required to maintain the operations of the Group at the current level and are net of proceeds from the sale of property and equipment. Growth capital expenditures are defined as capital expenditures that are expected to generate incremental cash inflows and are not considered by management in determining the cash flows required to sustain the current operations of the Company. While there are no comparable IFRS Accounting Standards measures for Maintenance Capital Expenditures or Growth Capital Expenditures, the total of Maintenance Capital Expenditures and Growth Capital Expenditures is equivalent to the total purchases of property and equipment, net of proceeds from the sale of property and equipment, on the Company's statement of cash flows.

"Dividend Payout Ratio" the Company presents a dividend payout ratio, which is calculated by dividing dividends declared by the Company by Free Cash Flow Less Maintenance Capital, as defined above. The Dividend Payout Ratio is a financial ratio used by management to analyze the percentage of cash generated from operations, before the impact of changes in working capital items or other unusual items and after giving effect to expected income taxes thereon, as well as required interest and principal payments on long-term debt and right of use lease liabilities, and capital expenditures required to sustain the current operations of the Company, returned to shareholders as dividends. Dividend Payout Ratio is analyzed on a trailing twelve-month basis in order to reduce the impact of seasonality on the analysis.

While the above Non-IFRS financial measures are used by management to assess the historical financial performance of the Company, readers are cautioned that:

• Non-IFRS financial measures, such as Adjusted EBITDA, Free Cash Flow, Growth Capital Expenditures, Maintenance Capital Expenditures and Dividend Payout Ratio, are not recognized financial measures under IFRS Accounting Standards;
• The Company's method of calculating Non-IFRS financial measures may differ from that of other corporations or entities and therefore may not be directly comparable to measures utilized by other corporations or entities;
• Non-IFRS financial measures should not be viewed as an alternative to measures that are recognized under IFRS such as profit or loss or cash provided by operating activities; and
• A reader should not place undue reliance on any Non-IFRS financial measures.

Set forth below are reconciliations of Non-IFRS financial measures to their most relevant IFRS Accounting Standards measures.

Adjusted EBITDA

Free Cash Flow

Free Cash Flow Less Maintenance Capital and Dividend Payout Ratio

Forward-Looking Statements

Certain statements contained in this press release constitute forward-looking information. These statements relate to future events or future performance. The use of any of the words "could", "intend", "expect", "believe", "will", "projected", "estimated" and similar expressions and statements relating to matters that are not historical facts are intended to identify forward-looking information and are based on management's current beliefs, assumptions and expectations as to the outcome and timing of such future events. Actual future results may differ materially. In particular, this press release contains forward-looking information relating to the future prospects of the Company and its operating subsidiaries, 2024 demand levels, demand from customers, potential future acquisitions, and initiatives being explored to enhance margins and increase market share. Risk factors that could cause actual results or outcomes to differ materially from the results expressed or implied by forward-looking information include, among other things: general economic conditions; pandemics; competition; government regulation; environmental regulation; access to capital; market trends and innovation; climate risk; general uninsured losses; risk related to acquisitions; dependence on customers, distributors and strategic relationships; supply and cost of raw materials and purchased parts; operational performance and growth; implementation of the growth strategy; product liability and warranty claims; litigation; reliance on technology, intellectual property, and information systems; availability of future financing; interest rates and debt financing; income tax matters; foreign exchange; dividends; trading volatility of common shares; dilution risk; reliance on management and key personnel; employee and labour relations; and conflicts of interest, all as more particularly described in the most recent annual MD&A of the Company available on the Company's profile at www.sedar.com. There can be no assurance as to the future financial performance of the Company or that the board of directors of the Company will declare or pay any dividends in the future or, if dividends are declared and paid, there can be no assurance as to the frequency or amount of such dividends. The Company cautions the reader that the risk factors referenced above are not exhaustive. The forward-looking information contained in this release is made as of the date hereof and the Company is not obligated to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required by applicable securities laws. Because of the risks, uncertainties and assumptions contained herein, investors should not place undue reliance on forward-looking information. The foregoing statements expressly qualify any forward-looking information contained herein.

SOURCE Decisive Dividend Corporation

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