AND Andlauer Heathcare Group Inc

-- Company reports strong growth in revenue, EBITDA¹ and net income, excluding prior-year one-time, non-cash gain --

TORONTO, March 2, 2023 /CNW/ - Andlauer Healthcare Group Inc. (TSX: AND) ("AHG" or the "Company") today reported its financial results for the three-month period ("Q4 2022") and year ended December 31, 2022 ("Fiscal 2022").

Q4 2022 Summary

• Revenue increased 24.6% to $165.8 million, compared to $133.0 million for the three-month period ended December 31, 2021 ("Q4 2021");
• Operating income increased 31.3% to $28.2 million, compared to $21.5 million in Q4 2021;
• Net income totaled $19.8 million in Q4 2022, compared to $53.1 million, or $15.2 million excluding the one-time, non-cash gain of $37.9 million on the step acquisition of Skelton USA (the "gain on step acquisition"), in Q4 2021;
• Total comprehensive income was $17.1 million in Q4 2022 compared to $56.0 million, or $18.1 million excluding the gain on step acquisition, in Q4 2021;
• EBITDA was $44.7 million in Q4 2022 compared to $73.7 million, or $35.8 million excluding the gain on step acquisition, in Q4 2021;
• EBITDA Margin was 27.0% in Q4 2022, compared to 55.4% or 26.9%, excluding the gain on step acquisition in Q4 2021; and
• AHG continued to provide logistics and distribution, specialized transportation, and packaging solutions to certain of its manufacturer, 3PL provider, wholesaler and government clients that are involved in the Canadian supply of COVID-19 vaccines and ancillary products. In Q4 2022, the Company's COVID-19 vaccine-related revenue comprised approximately 2.3% of total revenue, compared to approximately 5.2% in Q4 2021.

Fiscal 2022 Summary

• Revenue increased 47.3% to $648.4 million, compared to $440.1 million for the year ended December 31, 2021 ("Fiscal 2021");
• Operating income increased 49.7% to $110.3 million, compared to $73.7 million in Fiscal 2021;
• Net income was $76.3 million in Fiscal 2022, compared to $90.0 million, or $52.0 million excluding the gain on step acquisition, in Fiscal 2021;
• Total comprehensive income was $91.0 million in Fiscal 2022, compared with $92.8 million, or $54.9 million excluding the gain on step acquisition, in Fiscal 2021;
• EBITDA was $174.5 million in Fiscal 2022, compared to $157.2 million, or $119.3 million excluding the gain on step acquisition, in Fiscal 2021;
• EBITDA Margin was 26.9% in Fiscal 2022, compared to 35.7%, or 27.1% excluding the gain on step acquisition, in Fiscal 2021;
• During Fiscal 2022, approximately 3.0% of total revenue was derived from AHG clients that are involved in the Canadian supply of COVID-19 vaccines compared with approximately 4.0% in Fiscal 2021; and
• On March 1, 2022, AHG acquired 100% of the issued and outstanding shares of Logistics Support Unit (LSU) Inc. ("LSU") for consideration of approximately $26.7 million. LSU is a third-party logistics provider offering specialty pharmacy, warehousing, distribution and order management services throughout Canada to national and international companies as well as government clients in the pharmaceutical, medical and biotechnology sectors.

"Since our first full year as a public company in 2020, our revenue and net earnings have both more than doubled, reflecting our success in delivering value to customers and capitalizing on growth opportunities," said Michael Andlauer, Chief Executive Officer of AHG. "With multiple opportunities to strengthen our platform through the addition of complementary services or strategic acquisitions, we expect to continue to better serve our customers and generate strong returns for our shareholders."

Selected Consolidated Financial Summary

Q4 2022 Financial Results

Revenue for Q4 2022 increased by 24.6% to $165.8 million, compared with $133.0 million in Q4 2021. The acquisitions of LSU, Skelton USA Inc. ("Skelton USA") and T.F. Boyle Transportation, Inc. ("Boyle Transportation") accounted for approximately $17.6 million of the $32.7 million increase, with the remaining growth attributable to organic growth and fuel surcharge revenue as described below. The Company's COVID-19 vaccine-related revenue comprised approximately 2.3% of total revenue in Q4 2022, compared to approximately 5.2% in Q4 2021. AHG expects that revenues relating to COVID-19 vaccines and ancillary products may continue to decrease in Fiscal 2023 and does not foresee a return to similar levels of activity in this space as that experienced in Fiscal 2021.

Revenue for the healthcare logistics segment totaled $41.8 million, an increase of 23.5%, or approximately $7.9 million, compared with Q4 2021. The increase was primarily attributable to the 28.4% year-over-year growth in the Company's logistics and distribution product line revenue, reflecting greater outbound order handling activities for Accuristix, increases in transportation billings impacted by fuel surcharge programs from carriers, which are passed on to customers, and $2.4 million in incremental revenue from the acquisition of LSU, net of year-to-date pass-through expenses classified as billings to LSU customers. The overall increase in segment revenue was partially offset by a 9.8% year-over-year decline in AHG's packaging solutions revenue, reflecting lower volume from one of the Company's larger packaging customers due to component supply chain constraints by their suppliers.

Revenue in the specialized transportation segment totaled $123.9 million, an increase of 25.0%, or approximately $24.8 million, compared with Q4 2021. The increase was attributable to: 32.6% growth in the Company's ground transportation product line driven by incremental revenue from the Boyle Transportation and Skelton USA acquisitions of approximately $15.2 million, organic growth, and higher fuel costs passed on to customers as a component of pricing. AHG's dedicated and last mile delivery product line also contributed to segment growth, with a 21.5%, or $3.1 million, year-over-year increase in revenue, reflecting ongoing route expansion and increases in fuel costs passed on to customers. The overall increase in segment revenue was partially offset by a 24.7%, or $2.5 million, year-over-year decline in AHG's air freight forwarding revenue. Air freight forwarding revenue was unusually high in Q4 2021 as the Company's clients attempted to minimize service disruptions in British Columbia arising from weather events that occurred in November 2021, which severed regional road and rail links to Vancouver due to flooding and landslides. The Company's air freight forwarding volumes returned to normal levels during Q1 2022.

Cost of transportation and services was $86.3 million, or 52.1% of revenue, compared with $65.7 million, or 49.4% of revenue, for Q4 2021. The higher cost of transportation and services for Q4 2022 was primarily attributable to the impact of the acquisitions of Boyle Transportation and Skelton USA over a full quarter, compared to two months in Q4 2021, and higher fuel costs in line with the increases in revenue related to fuel prices.

Direct operating expenses were $21.0 million, or 12.7% of revenue, compared with $21.3 million, or 16.0% of revenue, for Q4 2021. Direct operating expenses in Q4 2022 reflect outbound volume growth in AHG's Accuristix logistics and distribution operations, the acquisition of LSU on March 1, 2022, and a year-to-date reclassification of certain pass-through expenses to logistics and distribution billings for LSU in accordance with IFRS 15.

Selling, general and administrative ("SG&A") expenses were $13.8 million, or 8.3% of revenue, compared with $10.9 million, or 8.2% of revenue, for Q4 2021. The increase reflects the impact of the acquisitions of Boyle Transportation and Skelton USA over a full quarter, and LSU.

Operating income totaled $28.2 million, an increase of $6.7 million, or 31.3%, compared to $21.5 million for Q4 2021. Approximately $1.3 million of the increase was attributable to the acquisitions of LSU, Boyle Transportation and Skelton USA, with the remainder attributable to organic growth.

Net income was $19.8 million, or $0.46 per share (diluted), compared with $53.1 million, or $1.26 per share (diluted), in Q4 2021. Net income, excluding the gain on step acquisition, for Q4 2021 was $15.2 million. Higher segment net income before eliminations for both the Company's healthcare logistics and specialized transportation operating segments contributed to the increased profit on a consolidated basis when excluding the gain on step acquisition.

Total comprehensive income was $17.1 million, compared to $56.0 million, or $18.1 million excluding the gain on step acquisition in Q4 2021. Total comprehensive income differs from net income due to the acquisition of foreign operations (Boyle Transportation and Skelton USA), which resulted in a negative foreign currency translation adjustment of $2.8 million in Q4 2022 compared to a positive foreign currency translation adjustment of $2.9 million in Q4 2021.

Earnings before interest, taxes, depreciation and amortization ("EBITDA")¹ totaled $44.7 million compared with $73.7 million, or $35.8 million excluding the gain on step acquisition for Q4 2021. The increase (when excluding the gain on step acquisition) is due to the factors discussed above and reflects the incremental contributions from acquisitions and organic growth in both of the Company's operating segments. EBITDA Margin¹ was 27.0%, compared to 55.4%, or 26.9% excluding the gain on step acquisition in Q4 2021.

2022 Financial Results

Revenue for Fiscal 2022 increased by 47.3% to $648.4 million, compared with $440.1 million in Fiscal 2021. The acquisitions of LSU, Boyle Transportation and Skelton USA accounted for approximately $151.4 million of the $208.3 million increase.

Revenue for the healthcare logistics segment totaled $176.9 million, an increase of 30.7%, or approximately $41.5 million, compared with Fiscal 2021. The increase was primarily attributable to the 35.0% year-over-year growth in the Company's logistics and distribution product line revenue, reflecting $21.3 million in incremental revenue from the acquisition of LSU, volume growth within AHG's existing client base and rate increases primarily related to transportation billings impacted by fuel surcharge programs from carriers. AHG's packaging solutions also contributed to this segment's revenue growth, with a 6.1% year-over-year increase in revenue.

Revenue in the specialized transportation segment totaled $471.6 million, an increase of 54.7% compared with Fiscal 2021. The increase was attributable to 61.2% growth in the Company's ground transportation product line driven by incremental revenue from the Boyle Transportation and Skelton USA acquisitions of approximately $112.5 million, organic growth, and higher fuel costs passed on to customers as a component of pricing. AHG's air freight forwarding and dedicated and last mile delivery product lines also contributed to segment growth with year-over-year revenue increases of 17.7% and 28.0%, respectively. The increase in air freight forwarding revenue reflects volume growth and fuel-related revenue driven by increased fuel surcharges. Growth in dedicated and last mile revenue reflects ongoing route expansion and increases in fuel costs passed on to customers.

Cost of transportation and services for Fiscal 2022 was $322.8 million, or 50.0% of revenue, compared with $201.8 million, or 46.0% of revenue, for Fiscal 2021. The increase is primarily attributable to the acquisitions of Boyle Transportation and Skelton USA, which were consolidated for all of Fiscal 2022 versus only two months in Fiscal 2021. The increase in the operating ratio for Fiscal 2022 as compared to Fiscal 2021 is primarily attributable to higher fuel costs for Fiscal 2022 in line with the increase in ground transportation revenue related to fuel for Fiscal 2022.

Direct operating expenses for Fiscal 2022 were $102.3 million, or 15.8% of revenue, compared with $84.9 million, or 19.3% of revenue, for Fiscal 2021. Approximately $7.0 million of the $17.4 million increase is attributable to the LSU acquisition, with the remaining increase attributable to increased volumes of inbound and outbound receiving and shipping volumes at Accuristix. AHG's specialized transportation acquisitions (Boyle Transportation and Skelton USA) have lower facility-related costs compared to our healthcare logistics segment, which resulted in a lower direct operating expense operating ratio in Fiscal 2022 as compared to Fiscal 2021.

SG&A expenses for Fiscal 2022 were $48.5 million, or 7.5% of revenue, compared with $37.1 million, or 8.4% of revenue, for Fiscal 2021. The increase is primarily attributable to the acquisitions of LSU, Boyle Transportation and Skelton USA. The decrease in SG&A expenses as a percentage of revenue reflects operating leverage generated within SG&A functions compared to revenue growth.

Operating income totaled $110.3 million, an increase of $36.6 million, or 49.7%, compared to $73.7 million for Fiscal 2021. Approximately $14.3 million of the increase was attributable to the acquisitions of LSU, Boyle Transportation and Skelton USA, with the remainder attributable to organic growth.

Net income was $76.3 million, or $1.79 per share (diluted), compared with $90.0 million, or $2.25 per share (diluted), in Fiscal 2021. Net income, excluding the gain on step acquisition, for Fiscal 2021 was $52.0 million. Higher segment net income before eliminations for both the Company's healthcare logistics and specialized transportation operating segments contributed to the increased profit on a consolidated basis when excluding the gain on step acquisition.

Total comprehensive income was $91.0 million, compared to $92.8 million, or $54.9 million excluding the gain on step acquisition in Fiscal 2021. 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 $14.7 million in Fiscal 2022 compared to $2.9 million in Fiscal 2021.

EBITDA¹ totaled $174.5 million compared with $157.2 million, or $119.3 million excluding the gain on step acquisition in Q4 2021. The increase (when excluding the gain on step acquisition) is due to the factors discussed above and reflects the incremental contributions from acquisitions and organic growth in both of the Company's operating segments. EBITDA Margin¹ was 26.9%, compared to 35.7%, or 27.1% excluding the gain on step acquisition in Q4 2021.

Dividend

The Company paid a dividend (encompassing the period from October 1, 2022 to December 31, 2022) in the amount of $0.07 per subordinate voting share and multiple voting share on January 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 $0.08 per subordinate voting share and multiple voting share on an ongoing basis.

Shares Outstanding

As at December 31, 2022, there were 20,074,253 subordinate voting shares and 21,840,000 multiple voting shares issued and outstanding.

Financial Statements

AHG's audited consolidated financial statements and related Management's Discussion & Analysis ("MD&A") for Fiscal 2022 are available on the Company's website at www.andlauerhealthcare.com and on the Company's profile on SEDAR at www.sedar.com.

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, March 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://bit.ly/3R8X3MG 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: 172834 #. The replay will be available until March 10, 2023. The webcast will be archived on the Company's website following 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, service expansions, potential acquisitions, financial targets or outlook, intentions, opportunities or the potential impact of, and response measures to be taken with respect to, COVID-19, including expectations with respect to the distribution of COVID-19 vaccines and ancillary products, 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, 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 the year ended December 31, 2022. 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.sedar.com. 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.

Gain on Step Acquisition 

In this news release, AHG has adjusted EBITDA and EBITDA Margin for the step acquisition. As set out in note 5 to AHG's audited consolidated financial statements for Fiscal 2022, AHG completed its acquisition of Skelton USA in two steps (49% on March 1, 2021 and the remaining 51% on November 1, 2021). Accordingly, AHG remeasured its previously held equity interest in Skelton USA at its estimated fair value on November 1, 2021 resulting in a gain of $37.9 being recognized from the step acquisition. AHG has presented EBITDA and EBITDA Margin excluding the step acquisition given the one-time, non-recurring nature of the step acquisition.

Reconciliation of EBITDA

SOURCE Andlauer Healthcare Group Inc.