Zedcor Inc. Announces Fourth Quarter Results for 2021, Record Revenues from Security & Surveillance Business and Appointment of Chief Revenue Officer

Calgary, Alberta--(Newsfile Corp. - April 6, 2022) - Zedcor Inc. (TSXV: ZDC) (the "Company") today announced its financial and operating results for the three and twelve months ended December 31, 2021.

The fourth quarter results reflect the Company's continued execution of its strategy and pivot away from its traditional oilfield equipment rentals business. Q4 2021 revenues increased to $4.1 million and annual revenues increased to $13.6 million for the year ended December 31, 2021. This was a 66% increase compared to the Q4 2020 and a 94% increase for the year. Both numbers are also a high point for Company as it continues to expand its security & surveillance business. The transition away from oilfield equipment rentals was fully completed in the fourth quarter with the announcement of a $6.1 million fully committed 5-year term loan and a $3.0 million equipment financing facility. This will significantly reduce financing costs, improve cash flow and provide additional financing for continued expansion.

Financial and Operating Results for the three and twelve months ended December 31, 2021:



Three months ended December 31



Twelve months ended December 31

(in $000s, except per share amounts)


2021



2020



2021



2020

Revenue from continuing operations


4,076



2,458



13,550



7,001

Revenue from discontinued operations


-



1,509



3,052



6,761


Adjusted EBITDA1,2


961



1,789



5,968



5,913

Adjusted EBITDA from continuing operations1,2


965



1,181



4,407



3,019


Adjusted EBIT from continuing operations1,2


431



926



1,628



1,661


Net income (loss) from continuing operations


(535

)


(39

)


(1,580

)


(1,810

)

Net income (loss) from operations


(804

)


(2,250

)


(3,901

)


(4,678

)

Net income (loss) per share from continuing operations









Basic


(0.01

)


0.00



(0.03

)


(0.03

)

Diluted


(0.01

)


0.00



(0.03

)


(0.03

)



1 Adjusted for severance costs and discontinued operations
2 See Financial Measures Reconciliations below

On June 30, 2021, the Company announced the sale of its Rental Segment assets. Accordingly, these operations were classified as discontinued operations on the Company's financial statements. The discussion throughout our MD&A reflect continuing operations of the Company's security and surveillance services, unless otherwise noted. Zedcor recorded $961 and $4,407 of adjusted EBITDA from continuing operations for the three and twelve months ended December 31, 2021. This compares to $1,181 and $3,019 of adjusted EBITDA from continuing operations for the three and twelve months ended December 31, 2020. The Company's security and surveillance services segment saw increased revenues and EBITDA for the year ended December 31, 2021 compared to 2020 due to increased customer demand of its larger fleet of MobileyeZ security towers. Zedcor exited the year with 265 MobileyeZ security towers which was an increase of 115 units throughout 2021.

Zedcor is actively managing the increased customer demand for security solutions by adding to its fleet of towers. The Company has also opened an equipment branch in British Columbia to service customers in the Lower Mainland and Fraser Valley.

Financial and operational highlights for the three and twelve months ended December 31, 2021 include:

  • Revenue for the quarter ended December 31, 2021 increased by $1,618 from $2,458 to $4,076. This increase was driven by a larger fleet of MobileyeZ security towers. In Q4 2020, the Company completed retrofitting its fleet of existing solar hybrid light towers to MobileyeZ security towers. Subsequent to this completion, Zedcor continued to add to its fleet allowing it to generate additional revenues throughout 2021. The Company also developed and deployed two additional types of MobileyeZ: a fully electric security tower and a diesel security tower. Zedcor exited 2021 with 54 Electric MobileyeZ which are used largely for civil and municipal construction and 21 Diesel MobileyeZ which can be used for a variety of different applications as they can offset an onsite power generator.

  • Net loss from continuing operations was ($535) for the three months ended December 31, 2021. This compares to a net loss of ($39) for the three months ended December 31, 2020. The ($535) net loss from continuing operations for Q4 2021 included a $585 one-time charge recorded in finance costs relating to the Company refinancing its debt in October 2021. Without this one-time charge, the Company would have $50 of net income from continuing operations.

  • For the twelve months ended December 31, 2021, net loss from continuing operations was ($1,580) compared to ($1,810) for the twelve months ended December 31, 2020. The reduction in net loss was a result of higher revenues driven by an increased fleet size and higher utilization for the Company's security tower fleet.

  • Reducing debt and finance lease liabilities in the first twelve months of the year. The Company exited the year with $7,948 outstanding on its credit facilities compared to $17,317 as at December 31, 2020. In October 2021, the Company announced that it had entered into a new credit facility which includes a $6.1 million fully committed 5 year term loan, a $3.0 million revolving equipment financing facility and a $3.0 million revolving line of credit. This facility will significantly reduce financing costs and provide additional capital for growth.

  • The Company announcing the closing of the sale of its Rental Segment assets for total proceeds of $11.3 million on June 30, 2021 in line with its strategy to sell these assets and reduce debt on the balance sheet. The proceeds were used entirely to reduce high interest debt. In addition to the proceeds of $11.3 million the Company will continue to help manage those assets and will be paid a monthly management fee of $25 per month for up to 36 months. This transaction also allows the Company to capitalize on potential oilfield activity upside by providing for a 35% annual bonus if certain targets are exceeded. This transaction resulted in a $2.7 million loss on sale but significantly reduced the Company's balance sheet leverage and allows the Company to focus on expanding its security business throughout North America. In addition, this allowed the Company to access traditional financing subsequent to the end of the quarter. This financing will reduce financing costs and increase cash flow going forward.

  • The Company announcing the award of two long term contracts for its Solar Hybrid MobileyeZ. One contract was for the rental and service of 100 Solar Hybrid MobileyeZ to a pipeline contractor. The second contract was a 21 month rental contract for 15 Solar Hybrid MobileyeZ to a large engineering and construction joint venture. These contracts were expanded in Q3 2021 allowing the Company to maintain its high utilization rates.

  • The Company continued to manage its supply chain and logistics. Orders have been placed for light towers, cameras and communication equipment for the Company's 2022 capital program. In addition, the Company will continue to actively manage demand and will proactively place orders for equipment; additional security towers may be constructed based on customer demand, expansion plans into other strategic markets in Canada and availability of capital.

SELECTED QUARTERLY FINANCIAL INFORMATION

(Unaudited - in $000s)


Dec
31
2021



Sept
30
2021



June
30
2021



Mar
31
2021



Dec
31
2020



Sept
30
2020



Jun
30
2020



Mar
31
2020

Revenue from continuing operations


4,076



3,684



3,103



2,687



2,458



1,673



1,441



1,429


Net income (loss) from continuing operations


(535

)


296



(935

)


(406

)


26



(443

)


(1,341

)


(52

)

Adjusted EBITDA¹


961



1,353



1,492



2,162



1,789



1,157



874



2,093


Adjusted EBITDA per share - basic¹


0.02



0.02



0.03



0.04



0.03



0.02



0.02



0.04


Net income (loss) per share from continuing operations

















Basic


(0.01

)


0.01



(0.02

)


(0.01

)


(0.00

)


(0.01

)


(0.01

)


(0.01

)

Diluted


(0.01

)


0.01



(0.02

)


(0.01

)


(0.00

)


(0.01

)


(0.01

)


(0.01

)


















Net income (loss) per share from discontinued operations

















Basic


0.00



0.00



(0.05

)


0.01



(0.04

)


(0.01

)


(0.01

)


0.01


Diluted


0.00



0.00



(0.05

)


0.01



(0.04

)


(0.01

)


(0.01

)


0.01


Adjusted free cash flow¹


345



2,068



198



(280

)


(279

)


518



1,860



(1,861

)




1 See Financial Measures Reconciliations below

LIQUIDITY AND CAPITAL RESOURCES

Sources and Uses of Cash

The following table shows a summary of the Company's cash flows by source or (use) for the twelve months ended December 31, 2021 and 2020:




Twelve months ended December 31

(in $000s)


2021



2020



$ Change



% Change

Cash flow from continuing operating activities


2,982



(65

)


3,110



4,688%


Cash flow used in continuing investing activities


(5,250

)


(1,200

)


(4,050

)


(338%)


Cash flow used by financing activities


(11,771

)


(2,974

)


(8,797

)


(296%)

The following table presents a summary of working capital information:



Twelve months ended December 31

(in $000s)


2021



2020



$ Change



% Change

Current assets


4,442



4,657



(215

)


(5%)


Current liabilities *


5,962



6,061



(183

)


(2%)


Working capital


(1,520

)


(1,404

)


(116

)


(8%)

*Includes $2.2 million of debt and $1.4 million of lease liabilities in 2021 and $2.9 million of debt and $1.5 million of lease liabilities in 2020

The primary uses of funds are operating expenses, maintenance and growth capital spending, interest and principal payments on debt facilities. The Company has a variety of sources available to meet these liquidity needs, including cash generated from operations. In general, the Company funds its operations with cash flow generated from operations, while growth capital and acquisitions are typically funded by issuing new equity or debt.

Principal Credit Facility



Interest rate



Final maturity



Facility maximum



Outstanding as at December 31, 2021



Outstanding as at December 31, 2020

Term Loan


5.15%



Oct 2026



6,100



5,861



n/a

Revolving Equipment Financing


Prime + 2.00%



Revolving



3,000



1,182



n/a

Authorized Overdraft


Prime + 1.50%



Revolving



3,000



905



n/a

Loan and Security Facility


12.75%



Jan 2023



19,309



-



17,317

Operating Loan Facility


Prime + 5.00%



Revolving



3,000



n/a



-









7,948



17,317


Current portion








(2,331

)


(2,940

)

Long term debt








5,717



14,377

On October 18, 2021, the Company repaid its existing credit facilities and entered into a new financing agreement ("Financing Agreement") which consists of:

  1. A $6.1 million term loan that is fully committed for five years ("Term Loan"). The Term Loan bears interest at 5.15% and will have monthly blended principal and interest payments of $116. $4.4 million of the proceeds of the term loan was used to repay the Company's outstanding Loan and Security Facility.

  2. A $3.0 million revolving equipment financing facility ("Revolving Equipment Financing"). The Company is able to draw on this facility at any time for up to 75% of new equipment purchases. The draws bear interest at Prime + 2.0% and each draw will be amortized over 5 years with blended principal and interest payments. As the Company pays down the debt, it can borrow back up to the facility maximum of $3.0 million.

  3. An authorized overdraft facility ("Authorized Overdraft") up to $3.0 million, secured by the Company's accounts receivable, up to 75%, less priority payables. The Authorized Overdraft is due on demand and any outstanding overdraft bears interest at Prime + 1.5%.

The Financing Agreement is secured with a first charge over the Company's current and after acquired equipment, a general security agreement, a subordination and postponement agreement with a director of the Company with respect to a note payable, and other standard non-financial security.

The agreement has the following annual financial covenant requirements:

  • For the fiscal year end December 31, 2021, a modified debt servicing covenant of 1.25 to 1.00. The modification relates to the amount of debt payments for 2021 being assumed as $2.2 million.

  • For the fiscal year ends December 31, 2022 and onwards, a debt servicing covenant of 1.25 to 1.00 and a funded debt to EBITDA covenant of 3.00 to 1.00.

As part of the repayment of the Company's previous credit facilities, the Company incurred a one time payout of $202 on its Loan and Security facility. In addition, the Company expensed $414 of costs related to the issuance of the previous credit facilities. These items are recorded as interest expense on the Statement of Loss.

As at December 31, 2021, the Company is in compliance with its financial covenant requirements. The debt servicing ratio as calculated based on the Financing Agreement was 2.01 to 1.00, the funded debt to EBITDA was 1.53 to 1.00 and the funded debt to EBITDA from continuing operations was 2.08 to 1.00.

OUTLOOK

Despite the challenging operating environment and reduced economic activity as a result of the COVID-19 pandemic, the Company continues to execute on its long-term strategy of growing its S&S segment. We continued to effectively use cash flow to purchase additional MobileyeZ security towers in order to use it to provide surveillance services. The Company has also used technological solutions to reduce the capital costs of expanding this service line.

Utilization of the Company's surveillance towers fitted with high resolution cameras and supported by live verified, 24/7 remote monitoring, continues to be high and we expect the utilization rates to remain steady going forward. As Canada starts to emerge from the COVID-19 pandemic, Zedcor is seeing increased activity and demand for its services. The Company has also grown its salesforce to focus on growing on-site security personnel and remote monitoring revenues, in addition to expanding its geographical footprint in British Columbia. With the recently announced financing, additional access to capital available to the Company via the $3.0 million equipment financing facility and lower debt costs, Zedcor is in a strong position to grow all service lines.

As a result of the sale of its Rental segment assets, the Company has significantly reduced leverage on its balance sheet and can focus on its main priorities:

  1. Expand its fleet of security towers. The Company plans to aggressively grow its fleet of security towers throughout 2022. In addition, the Company plans to continue to invest in research & development. Zedcor plans to launch a new type of fully electric security tower in late Q4 2022 which is geared towards residential contractors. This is in addition to the newly developed Hybrid MobileyeZ which was launched in late Q3 2021 and the Battery Electric MobileyeZ which was launched in late Q1 2022. The Hybrid MobileyeZ is targeted towards customers with remote infrastructure projects and power generation needs while the Battery Electric MobileyeZ is an improvement to the Company's Electric MobileyeZ as it has battery backup for up to 24 hours in case of interruptions to power supply.

  2. Expand its geographical footprint in Western Canada and expand to Eastern Canada. In Q4 2021, the Company opened an equipment branch in British Columbia in order to serve the rapidly growing Lower Mainland and Fraser Valley. The Company has plans to expand to Ontario in Q2 2022 with an equipment branch and an Eastern Canada monitoring center.

  3. Increase revenue from fixed monitoring sites allowing for a base of contracted monthly revenues.

NON-IFRS MEASURES RECONCILIATION

Zedcor Inc. uses certain measures in this MD&A which do not have any standardized meaning as prescribed by International Financial Reporting Standards ("IFRS"). These measures which are derived from information reported in the consolidated statements of operations and comprehensive income may not be comparable to similar measures presented by other reporting issuers. These measures have been described and presented in this MD&A in order to provide shareholders and potential investors with additional information regarding the Company.

Investors are cautioned that EBITDA, adjusted EBITDA, adjusted EBITDA per share, adjusted EBIT and adjusted free cash flow are not acceptable alternatives to net income or net income per share, a measurement of liquidity, or comparable measures as determined in accordance with IFRS.

EBITDA and Adjusted EBITDA

EBITDA refers to net income before finance costs, income taxes, depreciation and amortization. Adjusted EBITDA is calculated as EBITDA before costs associated with severance, gains and losses on sale of equipment and stock based compensation. These measures do not have a standardized definition prescribed by IFRS and therefore may not be comparable to similar captioned terms presented by other issuers.

Management believes that EBITDA and Adjusted EBITDA are useful measures of performance as they eliminate non-recurring items and the impact of finance and tax structure variables that exist between entities. "Adjusted EBITDA per share - basic" refers to Adjusted EBITDA divided by the weighted average basic number of shares outstanding during the relevant periods.

A reconciliation of net income to Adjusted EBITDA is provided below:



Three months ended December 31



Twelve months ended December 31

(in $000s)


2021



2020



2021



2020

Net loss from continuing operations


(535

)


(39

)


(1,580

)


(1,810

)

Add (less):








Finance costs


966



988



3,164



3,476


Depreciation of property & equipment


448



292



1,625



1,285


Depreciation of right-of-use assets


255



472



649



670


(Gain) on sale of equipment


(69

)


-



(17

)


-


(Gain) loss on disposal of right-of-use asset


(120

)


11



407



(105

)

(Gain) on substantial debt modification


(45

)


(576

)


(45

)


(576

)

Income tax recovery


-



(23

)


-



(88

)

EBITDA from continuing operations


900



1,125



4,203



2,852

Add:









Stock based compensation


40



49



135



77


Severance costs


-



-



44



83


Foreign exchange loss


21



4



25



7



61



53



204



167

Adjusted EBITDA from continuing operations


961



1,178



4,407



3,019


Discontinued operations


-



611



1,561



2,894

Adjusted EBITDA


961



1,789



5,968



5,913


Adjusted EBIT

Adjusted EBIT refers to earnings before interest and finance charges, taxes, and severance costs.

A reconciliation of net income to Adjusted EBIT is provided below:



Three months ended December 31



Twelve months ended December 31

(in $000s)


2021



2020



2021



2020

Net loss


(804

)


(2,250

)


(3,901

)


(4,678

)

Add:









Finance costs


966



988



3,164



3,476


Income tax recovery


-



(23

)


-



(88

)

Severance costs


-



-



44



83

Discontinued operations


269



2,211



2,321



2,868


Adjusted EBIT from continuing operations


431



926



1,628



1,661


Adjusted free cash flow

Adjusted free cash flow is defined by management as net income plus non-cash expenses, plus or minus the net change in non-cash working capital, plus severance costs, less maintenance capital. Maintenance capital is also a non-IFRS term. Management defines maintenance capital as the amount of capital expenditure required to keep its operating assets functioning at the same level of efficiency. Management believes that adjusted free cash flow reflects the cash generated from the ongoing operation of the business. Adjusted free cash flow is a non-IFRS measure generally used as an indicator of funds available for re-investment and debt payment. There is no standardized method of determining free cash flow, adjusted free cash flow or maintenance capital prescribed under IFRS and therefore the Company's method of calculating these amounts is unlikely to be comparable to similar terms presented by other issuers.

Adjusted free cash flow from continuing operations is calculated as follows:



Three months ended December 31



Twelve months ended December 31


(in $000s)


2021



2020



2021



2020

Net income (loss) from continuing operations


(535

)


26



(1,580

)


(1,810

)

Add non-cash expenses:









Depreciation of property & equipment


448



292



1,625



1,285


Depreciation of right-of-use assets


255



472



649



670


Stock based compensation


40



49



135



77


Finance costs (non-cash portion)


619



172



1,395



538


Current taxes


-



(23

)


-



(88

)



827



988



2,224



672


Add non-recurring expenses:









Severance


-



-



44



83



827



988



2,268



755


Change in non-cash working capital


(482

)


(1,267

)


63



(517

)

Adjusted free cash flow from continuing operations


345



(279

)


2,331



238

Appointment of Chief Revenue Officer

Zedcor is pleased to announce that due to the Company's growth plans in 2022, James Leganchuk, the Company's Chief Operating Officer, will transition to become the Company's Chief Revenue Officer in order to focus on revenue expansion across Canada. Mr. Leganchuk was previously the Company's VP of Sales and has an extensive background in growing revenues. Mr. Leganchuk's operational responsibilities will be split amongst the Company's executive team and the Company intends to eventually appoint a Chief Operating Officer as it continues to grow.

No Conference Call

No conference call will be held in conjunction with this release. Full details of the Company's financial results, in the form of the condensed consolidated interim financial statements and notes for the three and twelve months ended December 31, 2021 and 2020 and Management's Discussion and Analysis of the results are available on SEDAR at www.sedar.com and on the Company's website at www.zedcor.ca.

About Zedcor Inc.

Zedcor Inc. is a Canadian public corporation and parent company to Zedcor Security Solutions Corp. Driven by our guiding principles of being pioneers, innovators and honest, Zedcor is engaged in providing technology based security & surveillance services in Western and Central Canada. The Company is disrupting the security industry with its three main service offerings to customers across all market segments: 1) rental, service and remote monitoring of its proprietary MobileyeZ security towers; 2) live monitoring of fixed site locations; and 3) security personnel. The Company trades on the TSX Venture Exchange under the symbol "ZDC".

FORWARD-LOOKING STATEMENTS

Certain statements included or incorporated by reference in this MD&A constitute forward-looking statements or forward-looking information, including management's belief that streamlining rental assets with newer equipment will drive improvements in equipment rental rates and utilization, and that the expanded market reach and customer base will lead to more diversity in the Company's revenue stream and increase utilization. Forward-looking statements or information may contain statements with the words "anticipate", "believe", "expect", "plan", "intend", "estimate", "propose", "budget", "should", "project", "would have realized', "may have been" or similar words suggesting future outcomes or expectations. Although the Company believes that the expectations implied in such forward-looking statements or information are reasonable, undue reliance should not be placed on these forward-looking statements because the Company can give no assurance that such statements will prove to be correct. Forward-looking statements or information are based on current expectations, estimates and projections that involve a number of assumptions about the future and uncertainties. These assumptions include that the Company's new solar hybrid light tower and related security and surveillance service offerings will lead to more diversity in revenue streams and protect against future down swings in the economic environment. Although management believes these assumptions are reasonable, there can be no assurance that they will prove to be correct, and actual results will differ materially from those anticipated. For this purpose, any statements herein that are not statements of historical fact may be deemed to be forward-looking statements. The forward-looking statements or information contained in this MD&A are made as of the date hereof and the Company assumes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new contrary information, future events or any other reason, unless it is required by any applicable securities laws. The forward-looking statements or information contained in this MD&A are expressly qualified by this cautionary statement.

This MD&A also makes reference to certain non-IFRS measures, which management believes assists in assessing the Company's financial performance. Readers are directed to the section above entitled "Financial Measures Reconciliations" for an explanation of the non-IFRS measures used.

For further information contact:

Todd Ziniuk
Chief Executive Officer
P: (403) 930-5430
E: tziniuk@zedcor.ca

Amin Ladha
Chief Financial Officer
P: (403) 930-5430
E: aladha@zedcor.ca

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

To view the source version of this press release, please visit https://www.newsfilecorp.com/release/119606