DE Decisive Dividend Corporation

KELOWNA, BC, Aug. 8, 2024 /CNW/ - Decisive Dividend Corporation (TSXV: DE) (the "Company" or "Decisive") today reported its financial results for the three and six months ended June 30, 2024.

Demand for the products produced by certain of Decisive's subsidiaries were challenged in the first half of 2024 due to macroeconomic conditions faced by its subsidiaries, especially in comparison to the strength of the 2023 comparative periods, during which Decisive and its subsidiaries generated record operating performance. 

Recent Operating Highlights

Decisive and its subsidiaries have been undertaking significant efforts to drive revenue and improve operational activities, which resulted in several positive developments that are expected to bolster results in the second half of the year as follows:

• Blaze King positioned with a potential competitive advantage entering the Q3 and Q4 heating season after pro-actively renewing its wood stove compliance certificates under new EPA testing methodologies. In addition, Blaze King and ACR continue to pursue regulatory approval of a new product design that utilizes Blaze King's combustion technology styled and sized for sale into the United Kingdom and European market.
• Slimline received a significant order for its larger scale wastewater evaporator for delivery in the second half of 2024.
• Marketing Impact order levels in Q2 2024 exceeded Q2 2023 orders by nearly 50%, which will positively impact Marketing Impact results in the second half of the year.
• Capital I secured a significant purchase order from a long-standing oil and gas customer, sales from which were muted in the first half of 2024.
• Unicast orders in Q2 2024 exceeded Q2 2023 orders by 80% which will positively impact Unicast results in the second half of the year.
• Hawk sales in Q2 2024 exceeded Q2 2023 by 31% with the March 2024 acquisition of APM.
• Sales under Northside's contract with a new commercial vehicle customer are expected to commence by the start of Q4 2024 with initial work being kicked off in advance of the contract launch date.
• After its acquisition in April 2024, Techbelt's positive sales trajectory continued in Q2 2024 with sales ahead of pre-acquisition averages.
• Cost control initiatives have been undertaken throughout the business and range from staffing right-sizing initiatives to reductions or deferrals of operating and capital expenditures.

Selected Financial Highlights:

The following are selected financial highlights of Decisive for the three and six months ended June 30, 2024. All amounts are expressed in Canadian dollars. The Company's Unaudited - interim condensed 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).

Q2 2024 Highlights:

• Consolidated sales decreased 7% to $28.7 million compared to $30.7 million in Q2 2023. The decrease was driven primarily by decreases in hearth product sales which were impacted by lower demand backlogs, lower energy prices, general macro-economic pressures and warmer weather. In addition, Q2 marks a seasonal slow period for Blaze King, ACR and Hawk, the impacts of which were more pronounced in Q2 2024 compared to Q2 2023.
• Consolidated gross profit decreased 13% to $10.0 million from $11.5 million in Q2 2023, based primarily on the decrease in sales.
• Consolidated gross profit percentages decreased to 35% from 37% in Q2 2023 driven primarily by the negative impact of fixed overhead costs on lower overall sales.
• Consolidated Adjusted EBITDA* decreased to $3.4 million, down 35% relative to Q2 2023. 
• Consolidated net loss in the quarter was ($1.0) million, or $0.05 per share, compared to net profit of $1.2 million, or $0.07 per share, in Q2 2023.
• Consolidated free cash flow* decreased 55% to $1.4 million relative to Q2 2023.
• Lower sales in the quarter, as described above, and the increase in the scale of the organization and the associated operating expenses relative to Q2 2023, were the main drivers of the decrease in Adjusted EBITDA*, net profit, and free cash flow* relative to Q2 2023.

2024 Year-to-Date Highlights:

• Consolidated sales decreased 6% to $58.0 million, compared to $61.6 million in the first half of 2023. The decrease was driven primarily by decreases in hearth product sales which were impacted by lower demand backlogs, lower energy prices, general macro-economic pressures and warmer weather.
• Consolidated gross profit decreased 6% to $21.2 million from $22.6 million in the first half of 2023.
• Consolidated gross profit percentages were consistent with the first half of 2023.
• Consolidated Adjusted EBITDA* decreased to $7.4 million, a decrease of 27% relative to the first half of 2023. 
• Consolidated net loss was ($0.8) million, or $0.04 per share, a decrease of $4.0 million, or $0.24 per share compared to the first half of 2023.
• Consolidated free cash flow* decreased 46% to $3.3 million relative to the first half of 2023.
• Lower sales in the first half of the year, as described above, and the increase in the scale of the organization and the associated operating expenses relative to the first half of 2023, were the main drivers of the decrease in Adjusted EBITDA*, net profit, and free cash flow* relative to the first half of 2023.

Jeff Schellenberg, Chief Executive Officer of Decisive, noted:

"After multiple years of growth driven through both acquisitions and organic growth, this year we have experienced a significant shift in our results, driven by market conditions and various factors discussed in our Q2 2024 MD&A. However, we remain confident in Decisive's long-term growth potential supported by the diversified nature of the portfolio of businesses we own, the differentiated products these businesses produce, the size of the addressable markets these products are sold into, and the decisions and investments being made by our leadership to build teams, strategies and processes that support these longer term growth objectives. In the immediate term, the challenges our businesses have experienced has required that we be very deliberate to focus on near-term revenue generating and cost-saving opportunities that ensure that the dividend payout levels we have set are sustainable while also positioning our businesses with a platform to return to growth. 

Based on these factors, we expect our trailing twelve-month payout ratios to be in excess of our target range in the near-term, as they were in Q2. However we are positioned to sustain current dividend levels, while driving revenue and controlling costs to, first, return earnings to the level where the current dividend falls within our target payout ratio range and then return to growth in our per share financial metrics, supporting dividend growth. Profitability growth of our subsidiaries and enhanced per share financial metrics are the standard of performance and profitability growth in our subsidiaries will be a condition precedent to any future dividend growth, to ensure we achieve the balance of dividend growth and dividend sustainability, which is a priority for all investors.

Finally, we are continuing to build and execute on a strong pipeline of acquisition opportunities. Given the current macro-economic challenges being faced by a wide range of businesses, we are committed to being selective in the types of business we will pursue in the near-term."

Conference Call

Decisive will host a conference call for interested parties on Friday, August 9, 2024, at 8:00am Pacific Time (11:00am Eastern Time) to discuss the Company's Q2 2024 results and outlook for the remainder of the year. 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:
Friday, August 9, 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/4cOQtFc 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): 1-800-836-8184
Dial in number – United Kingdom (toll free): 448002797040
Dial in number – International: +1-289-819-1350

Replay Information (replay available until August 16, 2024):
Replay number – North America (toll free): 1-888-660-6345
Replay number – International: +1-289-819-1450
Replay access code 63724#

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.

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 "believes", "expects", "could", "will", "may", "intends", "projects", "anticipates", "plans", "estimates", "continues" and similar words or the negative and grammatical variations thereof 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, the timing of product sales and/or deliveries under existing customer contracts or significant orders received from customers, potential future acquisitions, and ongoing or planned initiatives 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: (i) operational risks, including risks 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; (ii) financial risks, including risks relating to the availability of future financing; interest rates and debt financing; income tax matters; foreign exchange; dividends; trading volatility of common shares; dilution risk; (iii) external risks, including risks relating to general economic conditions; pandemics; competition; government regulation; environmental regulation; access to capital; market trends and innovation; climate risk; general uninsured losses; and (iv) human capital risks, including 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.sedarplus.ca. There can also 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