RediShred Capital Corp. (“RediShred”) Announces Q3-2018 Results

MISSISSAUGA, ON / ACCESSWIRE / November 29, 2018

Quarterly Earnings Call:

8:30pm EST, November 30, 2018, Participant call in number is 1-800-319-4610

Third Quarter Highlights:

Consolidated Highlights:

• Total system sales (the revenues produced by all franchise, license and corporate locations) were $10.1 million USD, increasing 15% in Q3 of 2018, compared to Q3 of 2017. (Of the $10.1 million USD, $4.6 million USD or 46% was recurring revenue).
• The Company generated revenue of $3.5 million CDN during Q3 of 2018, growing 24% over Q3 of 2017.
• Consolidated EBITDA for Q3-2018 was $817,000 CDN, a decline of 6% over Q3-2017 due to one-time costs incurred related to the acquisitions conducted and the private placement closed in the quarter.

Corporate Locations Highlights:

• Revenues from corporate locations in Q3 of 2018 were $3 million CDN, growing 27% over Q3 of 2017.
• Corporate locations EBITDA in Q3-2018 were $1.0 million CDN, growing 9% over Q3-2017.
• Subsequent to Q3-2018, the Company completed a US$5 million asset acquisition in North New Jersey, marking its 8^th corporate location.

Capital Management:

• On July 26, 2018, the Company completed a private placement of 18,333,334 common shares of the Company at a price of $0.60 per common share for gross proceeds of $11 million CDN. The net proceeds of the private placement will be used to fund future growth initiatives including both acquisitions and organic growth.
• The Company has strong liquidity ratios that were well within its financial covenants with its banking institution.

Management's Comments on the 3^rd Quarter of 2018

Jeffrey Hasham, the Company's Chief Executive Officer, noted "We made some strong progress on our strategic priorities in the third quarter. Firstly our all-important subscription based scheduled service increased to $4.6M in the third quarter, up 12% over Q3-2017. This revenue category is crucial for creating stable and reliable cash flow streams for our franchisees and our corporate locations. Secondly, we raised $11 million dollars in a private placement in July, and immediately deployed $4 million dollars of the funds to purchase Safe Shred in New Jersey on October 1, 2018. This acquisition fills an important geographic hole in our footprint and allows us to fully service the greater New York City metro area. The acquisition is accretive to our cash flows."

Financial Highlights:

(1)EBITDA is determined as revenue less operating costs.
(2)Operating income is determined as revenue less operating costs less depreciation related to tangible assets. Operating income during the three months ended September 30, 2018 is net of transitional and professional costs of $107,937 associated with the acquisitions conducted (9 months ended September 30, 2018 - $148,709).
(3)Certain amounts have been reclassified to conform to the current period's presentation.

Capital Management – in CDN

Stronger System Sales driving Revenue

System sales increased due to the Company's continued focus on providing recurring scheduled service to small and medium sized enterprise clients. In addition, the Company continued to invest in sales and marketing initiatives designed to capture scheduled revenue as well as one-time unscheduled revenue.

During the first nine months of 2018 Redishred's system sales growth over the first nine months of 2017 was as follows:

Franchise Operations

The Company's roots are founded in franchising and at September 30, 2018, the Company supported 22 franchisees across the United States. The franchise system continued to perform well in Q3-2018 with the following high level sales results (Note: same location system sales represent 100% of total system sales):

Corporate Operations

As of September 30, 2018, the Company operates 7 shredding locations in Syracuse, Albany, Milwaukee, New York City, Charlotte, Miami and Northern Virginia. Subsequent to quarter-end, on October 1, 2018, the Company acquired its 8th corporate location, the Safe Shredding business in North New Jersey.

During the three months ended September 30, 2018, the corporate location revenues grew by 27% and EBITDA grew by 9% over the three months ended September 30, 2017. Same store corporate locations grew sales by 16% and EBITDA declined by 2% over Q3-2017. The decline in EBITDA over Q3-2017 to Q3-2018 is due to the following:

1. Investment in four additional salespeople versus Q3-2017. The Company's investment in salespeople should drive strong recurring revenues in 2019;
2. Investment in stronger management in our two largest locations versus Q3-2017;
3. Driver shortages causing some upward pressure on driver wages;
4. Significant truck repairs across several markets; and
5. One-time transitional costs of $41,280 related to the On Guard acquisition (included in the total and non-same operating costs).

(In CDN, In 000’s)	Total Corporate Locations			Same Corporate Locations			Non-same Corporate Locations(1)
For the 3 months ended September 30,	2018	2017	% Change	2018	2017	% Change	2018	2017
	$	$		$	$		$	$
Revenue:
Shredding service	2,361	1,973	20%	2,173	1,973	10%	188	-
Recycling	616	376	64%	554	376	47%	62	-
Total revenue	2,977	2,349	27%	2,727	2,349	16%	250	-
Operating costs	1,939	1,397	39%	1,793	1,397	28%	146	-
EBITDA	1,038	952	9%	934	952	(2)%	104	-
% of revenue	35%	41%	(6)%	34%	41%	(7)%	42%	-
Depreciation – tangible assets	285	251	14%	263	251	5%	22	-
Corporate operating income	753	701	7%	671	701	(4)%	82	-
% of revenue	25%	30%	(5)%	25%	30%	(6)%	33%	-

1. The results of the acquisitions of Shred Con (purchased April 2, 2018) and On Guard (purchased June 8, 2018) are included under non-same corporate locations.

Corporate Locations Trend:

Community and Social Commitment

Our locations under the PROSHRED^® banner conduct many community shredding events. These events provide an opportunity for our clients, clients' employees, local businesses and local residents to ensure their personal and confidential materials are securely destroyed. In addition to helping to reduce identity theft, several of these events allow for donations to various not-for-profit organizations. PROSHRED^® is also proud that 100% of the shredded material is recycled, as our continued goal is to foster the use of fewer trees in the production of all paper products. Future community shredding event locations can be found at our website, www.proshred.com.

On June 2, 2018, PROSHRED^® held its' 5^th annual Shred Cancer event at most of its locations, raising money for the American Institute for Cancer Research ("AICR"). It is our goal as a Company and Franchise System to support the AICR in their endeavor to conduct research to prevent and possibly cure this disease. So far, PROSHRED^® has raised in excess of $175,000 for this cause. Please visit www.proshred.com/aicr for more information on this effort.

Financial Statements

Redishred's September 30, 2018 Financial Statements, Notes and Management's Discussion and Analysis will be available at www.sedar.com and www.redishred.com.

About Redishred

Redishred Capital Corp. is the owner of the PROSHRED® trademarks and intellectual property in the United States. PROSHRED® shreds and recycles confidential documents and proprietary materials for thousands of customers in the United States in all industry sectors. PROSHRED® is a pioneer in the mobile document destruction and recycling industry and has the ISO 9001:2015 certification. It is PROSHRED®'s vision to be the ‘system of choice' and provide shredding and recycling services on a global basis. Redishred Capital Corp. grants PROSHRED® franchise businesses in the United States and by way of license arrangement in the Middle East. Redishred Capital Corp. also operates seven corporate shredding businesses directly. The Company's plan is to grow its business by way of both franchising and the acquisition and operation of document destruction businesses that generate stable and recurring cash flow through a scheduled client base, continuous paper recycling and concurrent unscheduled shredding service.

FOR FURTHER INFORMATION PLEASE CONTACT:

Redishred Capital Corp. (TSX.V – KUT)
Jeffrey Hasham, MBA, CPA, CA
Chief Executive Officer
[email protected]
www.redishred.com
Phone: (416) 849-3469 Fax: (905) 812-9448

or,

Redishred Capital Corp. (TSX.V – KUT)
Kasia Pawluk, CPA, CA
Chief Financial Officer
[email protected]
www.redishred.com
Phone: (416) 204-0076 Fax: (905) 812-9448

Note: 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.

This news release contains forward looking statements that reflect the current expectations of management of Redishred and Redishred's future results, performance, achievements, prospects and opportunities. Wherever possible, words such as "may", "will", "estimate", "believe", "expect", "intend" and similar expressions have been used to identify these forward looking statements. These statements reflect current beliefs and are based on information currently available to management of Redishred. Forward looking statements necessarily involve known and unknown risks and uncertainties. A number of factors, including those discussed in the 2017 management discussion and analysis under "Risk Factors", could cause actual results, performance, achievements, prospects or opportunities to differ materially from the results discussed or implied in the forward looking statements. These factors should be considered carefully and a reader should not place undue reliance on the forward looking statements. There can be no assurance that the expectations of management of Redishred will prove to be correct. Readers are cautioned that such forward looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from these statements. Redishred can give no assurance that actual results will be consistent with these forward-looking statements.

SOURCE: RediShred Capital Corp.