FLINT Corp. (“FLINT” or the "Company") (TSX: FLNT) today announced
its results for the three months ended March 31, 2023. All
amounts are in Canadian dollars and expressed in thousands of
dollars unless otherwise noted.
“EBITDAS” and “Adjusted EBITDAS” are not
standard measures under IFRS. Please refer to the Advisory
regarding Non-GAAP Financial Measures at the end of this press
release for a description of these items and limitations of their
use.
“The stronger activity levels experienced in
2022 carried over to the first quarter of 2023 with revenue of
$150.5 million, representing an increase of 37.0% from the first
quarter of 2022. Adjusted EBITDAS in the quarter totaled $5.4
million, representing an increase of 81.1% from the first quarter
of 2022. We are pleased by the positive response of our employees,
customers and stakeholders to the rebranding as FLINT. We are
encouraged by the on-going momentum in our served markets, as
evidenced by the booking of new contract awards and renewals
totaling $112.2 million in the first quarter and $860.8 million for
the trailing twelve-month period. The commitment of our workforce
to safety and providing high quality products and services to our
customers has been instrumental in our success,” said Barry Card,
Chief Executive Officer.
FIRST QUARTER
HIGHLIGHTS
- Revenue for the
three months ended March 31, 2023 was $150.5 million, representing
an increase of $40.6 million or 37.0% from the same period in
2022.
- Gross profit for
the three months ended March 31, 2023 was $13.4 million,
representing an increase of $3.6 million or 37.2% from the same
period in 2022.
- Gross profit
margin for the three months ended March 31, 2023 was 8.9%, which
was consistent with the same period in 2022.
- Adjusted EBITDAS
for the three months ended March 31, 2023 was $5.4 million,
representing an increase of $2.4 million or 81.1% from the same
period in 2022.
- Adjusted EBITDAS
margin was 3.6% for the three months ended March 31, 2023 compared
to 2.7% for the same period in 2022.
- Selling, general
and administrative ("SG&A") expenses for three months ended
March 31, 2023 were $8.2 million, representing an increase of
$0.1 million or 1.4% from the same period in 2022. As a percentage
of revenue, SG&A expenses for the three months ended March 31,
2023 were 5.4%, compared to 7.3% for the same period in 2022.
- Liquidity,
including cash and available credit facilities, was $57.8 million
at March 31, 2023, as compared to $37.0 million at December
31, 2022.
- New contract
awards and renewals totaled approximately $112.2 million for
the three months ended March 31, 2023 and $21.7 million
for the month of April. Approximately 75% of the work is expected
to be completed in 2023.
Maintenance and Construction Services
Revenue for the Maintenance and Construction
Services segment was $136.6 million for the three months ended
March 31, 2023, compared to $99.4 million for the same period in
2022, representing an increase of 37.3%. The increase in revenues
was due to continued market momentum in 2023 driven primarily by
strong commodity pricing.
Gross profit margin was 8.3% for the three
months ended March 31, 2023 compared to 7.4% for the same period in
2022. The increase was due to higher activity levels and
management's focus on cost discipline. We continue to focus on
consolidating various scopes of work with existing or new customers
by bundling our services in order to enable more efficient
execution and lower costs for our customers on each work site.
Wear Technology Overlay Services
Revenue for the Wear Technology Overlay Services
segment for the three months ended March 31, 2023 was $13.9
million, compared to $12.3 million for the same period in 2022,
representing an increase of 12.9%. The increase was due to activity
levels for wear technology overlay and fabrication services
continuing to recover as customers in the oil sands seek to operate
at full capacity as well as the additional capacity from our
recently commissioned pipe fabrication facility.
Gross profit margin was 14.7% for the three
months ended March 31, 2023, compared to 19.3% for the same period
in 2022. The decrease was due to the mix of business, job margins
being lower for certain projects and an increase in material and
utility costs.
Environmental Services
We continue to enhance our professional services
capabilities to service our growing customer base in this market
segment. Our customers in the energy sector continue to allocate
expenditures for the closure, reclamation and remediation of oil
and gas wells, pipelines and facilities in Western Canada to comply
with regulatory requirements and to meet their commitments
regarding ESG (environmental, social and governance) matters.
Corporate
On March 1, 2023, James Healey was appointed
Vice President, Finance and Corporate Controlling. Mr. Healey has
over fifteen years of financial reporting, corporate accounting and
business processes and controls experience.
On March 16, 2023, the Company announced that
Randy Watt, Chief Financial Officer, would be retiring from the
Company effective March 31, 2023. Murray Desrosiers, Senior Vice
President, Legal and Corporate Development, was named as Interim
Chief Financial Officer. The Company has engaged an executive
search firm to identify and evaluate both internal and external
candidates for the role.
On March 27, 2023, the Company announced the
appointment of Katrisha (Trisha) Gibson to the Board of Directors
effective March 27, 2023. Ms. Gibson is an accomplished energy
executive with significant experience in marketing, operations, and
commercial activities at both private and public energy companies.
She recently joined Factor Gas Liquids, Inc., a provider of energy
products and refiner/petrochemical feedstocks, as President.
Also on March 27, 2023, the Company announced
the release of its inaugural Sustainability Report as part of its
ongoing commitment to Environment, Social and Governance matters. A
copy of the 2022 Sustainability Report is accessible on the
Company’s website at www.flintcorp.com.
FIRST QUARTER FINANCIAL
RESULTS
($ thousands, except per share amounts) |
Three months ended March 31, |
|
2023 |
|
2022 |
|
% Change |
Revenue |
|
|
|
Maintenance and Construction Services |
136,560 |
|
99,436 |
|
37.3% |
Wear Technology Overlay Services |
13,929 |
|
12,341 |
|
12.9% |
Eliminations(1) |
(10) |
|
(1,929) |
|
(99.5)% |
Total |
150,479 |
|
109,848 |
|
37.0% |
Gross Profit |
|
|
|
Maintenance and Construction Services |
11,322 |
|
7,359 |
|
53.9% |
Wear Technology Overlay Services |
2,046 |
|
2,381 |
|
(14.1)% |
Total |
13,368 |
|
9,740 |
|
37.2% |
Gross Profit Margin (% of revenue) |
|
|
|
Maintenance and Construction Services |
8.3% |
|
7.4% |
|
0.9% |
Wear Technology Overlay Services |
14.7% |
|
19.3% |
|
(4.6)% |
Total |
8.9% |
|
8.9% |
|
—% |
Selling, general and administrative expenses |
8,168 |
|
8,052 |
|
1.4% |
% of revenue |
5.4% |
|
7.3% |
|
(1.9)% |
Adjusted EBITDAS(2) |
|
|
|
Maintenance and Construction Services |
11,200 |
|
7,244 |
|
54.6% |
Wear Technology Overlay Services |
1,974 |
|
2,307 |
|
(14.4)% |
Corporate |
(7,730) |
|
(6,545) |
|
18.1% |
Total |
5,444 |
|
3,006 |
|
81.1% |
% of revenue |
3.6% |
|
2.7% |
|
0.9% |
Loss from continuing operations |
(3,325) |
|
(7,783) |
|
57.3% |
Net loss per share (dollars) from continuing operations (basic and
diluted) |
(0.03) |
|
(0.07) |
|
57.1% |
(1) The eliminations includes eliminations of
inter-segment transactions. FLINT accounts for inter-segment sales
based on transaction price.(2) "Adjusted EBITDAS” is not a standard
measure under IFRS. Please refer to the Advisory regarding Non-GAAP
Financial Measures at the end of this press release for a
description of this measure and limitations of its use.
Revenue for the three months ended March 31,
2023 was $150,479 compared to $109,848 for the same period in 2022,
representing an increase of 37.0%. The increase in revenue was
driven by the continued market momentum in 2023, representing an
increase in activity across all areas of the business with the
largest increase occurring in the Maintenance and Construction
Services segment.
Gross profit for the three months ended March
31, 2023 was $13,368 compared to $9,740 for the same period in
2022, representing an increase of 37.2%. The increase in gross
profit was primarily driven by an increase in the volume of work in
the Maintenance and Construction Services segment. Gross profit
margin for the year ended December 31, 2022 was 8.9%, which was
consistent with the same period in 2022.
SG&A expenses for the three months ended
March 31, 2023 were $8,168, in comparison to $8,052 for the same
period in 2022, representing an increase of 1.4%. As a percentage
of revenue, SG&A expenses for the three months ended March 31,
2023 were 5.4% compared to 7.3% for the same period in 2022. The
decrease in SG&A as a percentage of revenue is largely due to
costs incurred in 2022 in relation to the Company's enterprise
resource planning system implementation.
For the three months ended March 31, 2023,
Adjusted EBITDAS was $5,444 compared to $3,006 for the same period
in 2022. As a percentage of revenue, Adjusted EBITDAS was 3.6% for
the three months ended March 31, 2023 compared to 2.7% for the same
period in 2022.
Loss from continuing operations for the year
ended December 31, 2022 was $3,325 in comparison to a loss of
$7,783 for the same period in 2022. The variance was driven by the
reduction in restructuring expenses and the significant improvement
in gross profit for the Maintenance and Construction Services
segment.
LIQUIDITY AND CAPITAL
RESOURCES
On October 5, 2022, FLINT amended its
asset-based revolving credit facility (the “ABL Facility”) with a
Canadian charted bank to increase the maximum borrowings available
thereunder to $50 million. The amount available under the ABL
Facility will vary from time to time based on the borrowing base
determined with reference to the accounts receivable of FLINT and
certain of its subsidiaries. The maturity date of the ABL Facility
is April 14, 2025. The expanded ABL Facility will provide
additional working capital needed to finance higher levels of
activity.
The Company anticipates that its liquidity (cash
on hand and available credit facilities) and cash flow from
operations will be sufficient to meet its short-term contractual
obligations and maintain compliance with its financial covenants
through March 31, 2024.
As at March 31, 2023, the issued and
outstanding share capital included 110,001,239 Common Shares,
127,732 Series 1 Preferred Shares, and 40,111 Series 2 Preferred
Shares.
The Series 1 Preferred Shares (having an
aggregate value of $127.732 million) are convertible at the option
of the holder into Common Shares at a price of $0.35/share and the
Series 2 Preferred Shares (having an aggregate value of $40.111
million) are convertible into Common Shares at a price of
$0.10/share.
The Series 1 and Series 2 Preferred Shares have
a 10% fixed cumulative preferential cash dividend payable when the
Company has sufficient monies to be able to do so, including under
the provisions of applicable law and contracts affecting the
Company. The Board of Directors of the Company does not intend to
declare or pay any cash dividends until such times as the Company's
balance sheet and liquidity position supports the payment. As at
March 31, 2023, the accrued and unpaid dividends on the Series
1 and Series 2 shares totaled $80.8 million. Any accrued and unpaid
dividends are convertible in certain circumstances at the option of
the holder into additional Series 1 and Series 2 Preferred
Shares.
OUTLOOK
In early March, the collapse of two U.S.
regional banks triggering the worst banking shock since the 2008
financial crisis. This shock was felt in the energy markets, with
oil prices weakening on concerns that a global banking crisis would
impact demand. On April 2, 2023, the Organization of Petroleum
Exporting Countries and its allies announced additional production
cuts totaling approximately 1.66 million barrels per day for the
last eight months of 2023. This provided further support to an oil
market where supply had been impacted by sanctions on Russian
production and a multi-year period of underinvestment in upstream
development.
At current commodity price levels, we anticipate
continued high demand for our products and services as customers
seek to maintain or incrementally grow production levels. However,
broad economic concerns exist with respect to inflation, rising
interest rates and geopolitical instability, the combination of
which may lead to a global recession. These concerns may negatively
impact the spending plans of our customers.
While our customers have been prioritizing debt
repayment and returns to shareholders, they are starting to
increase spending on both maintenance projects (to enhance
operational reliability) and capital projects (to maintain or
expand production capacity). We expect these activity levels to
remain strong in 2023.
FLINT has continued to add new service offerings
that encompass the full asset lifecycle and is now offering a suite
of more than 40 services. Through the extensive regional coverage
provided by our 19 operating facilities, we believe that FLINT is
well-positioned to further consolidate the services required at
various operating sites while generating efficiencies and cost
reductions for its customers. We are also continually working to
improve our service delivery to anticipate our customer’s
requirements and proactively meet their needs.
Additional Information
Our unaudited condensed consolidated interim
financial statements for the three months ended March 31, 2023 and
the related Management's Discussion and Analysis of the operating
and financial results can be accessed on our website at
www.flintcorp.com and will be available shortly through SEDAR at
www.sedar.com.
About FLINT Corp.
With a legacy of excellence and experience
stretching back more than 100 years, FLINT provides solutions for
the Energy and Industrial markets including: Oil & Gas,
Petrochemical, Mining, Power, Agriculture, Forestry, Infrastructure
and Water Treatment. With offices strategically located across
Canada and a dedicated workforce, we provide maintenance,
construction, wear technology and environmental services that keep
our clients moving forward. For more information about FLINT,
please visit www.flintcorp.com or contact:
Barry Card |
Murray Desrosiers |
Chief Executive Officer |
Interim Chief Financial Officer |
FLINT Corp. |
FLINT Corp. |
(587) 318-0997 |
(587) 318-0997 |
bcard@flintcorp.com |
mdesrosiers@flintcorp.com |
|
|
Advisory regarding Forward-Looking
Information
Certain information included in this press
release may constitute “forward-looking information” within the
meaning of Canadian securities laws. In some cases, forward-looking
information can be identified by terminology such as “may”, “will”,
“should”, “expect”, “plan”, “anticipate”, “believe”, “estimate”,
“predict”, “potential”, “continue” or the negative of these terms
or other similar expressions concerning matters that are not
historical facts. This press release contains forward-looking
information relating to: our business plans, strategies and
objectives; contract renewals and project awards, including the
estimated value thereof and the timing of completing the associated
work; the demand for wear technology overlay and fabrication
services; that customers will continue to allocate expenditures for
the closure, reclamation and remediation of oil and gas wells,
pipelines and facilities in Western Canada; the sufficiency of our
liquidity and cash flow from operations to meet our short-term
contractual obligations and maintain compliance with our financial
covenants through March 31, 2024; our dividend policy; the
supply/demand fundamentals for oil and natural gas and its impact
on the demand for our services; and that broad economic concerns
may negatively impact the spending plans of our customers.
Forward-looking information involves significant
risks and uncertainties. A number of factors could cause actual
events or results to differ materially from the events and results
discussed in the forward-looking information including, but not
limited to, compliance with debt covenants, access to credit
facilities and other sources of capital for working capital
requirements and capital expenditure needs, availability of labour,
dependence on key personnel, economic conditions, commodity prices,
interest rates, future actions by governmental authorities in
response to Covid-19 or another pandemic, regulatory change,
weather and risks related to the integration of acquired
businesses. These factors should not be considered exhaustive.
Risks and uncertainties about FLINT’s business are more fully
discussed in FLINT’s disclosure materials, including its annual
information form and management’s discussion and analysis of the
operating and financial results, filed with the securities
regulatory authorities in Canada and available at www.sedar.com. In
formulating the forward-looking information, management has assumed
that business and economic conditions affecting FLINT will continue
substantially in the ordinary course, including, without
limitation, with respect to general levels of economic activity,
regulations, taxes and interest rates. Although the forward-looking
information is based on what management of FLINT consider to be
reasonable assumptions based on information currently available to
it, there can be no assurance that actual events or results will be
consistent with this forward-looking information, and management’s
assumptions may prove to be incorrect.
This forward-looking information is made as of
the date of this press release, and FLINT does not assume any
obligation to update or revise it to reflect new events or
circumstances except as required by law. Undue reliance should not
be placed on forward-looking information. Forward-looking
information is provided for the purpose of providing information
about management's current expectations and plans relating to the
future. Readers are cautioned that such information may not be
appropriate for other purposes.
Advisory regarding Non-GAAP Financial
Measures
The terms ‘‘EBITDAS’’ and “Adjusted EBITDAS”
(collectively, the ‘‘Non-GAAP financial measures’’) are financial
measures used in this press release that are not standard measures
under IFRS. FLINT’s method of calculating the Non-GAAP Financial
Measures may differ from the methods used by other issuers.
Therefore, the Non-GAAP Financial Measures, as presented, may not
be comparable to similar measures presented by other issuers.
EBITDAS refers to income (loss) from continued
operations in accordance with IFRS, before depreciation and
amortization, interest expense, income tax expense (recovery) and
long-term incentive plan expenses. EBITDAS is used by management
and the directors of FLINT as well as many investors to determine
the ability of an issuer to generate cash from operations.
Management also uses EBITDAS to monitor the performance of FLINT’s
reportable segments and believes that in addition to income (loss)
from continued operations and cash provided by operating
activities, EBITDAS is a useful supplemental measure from which to
determine FLINT’s ability to generate cash available for debt
service, working capital, capital expenditures and income taxes.
FLINT has provided a reconciliation of income (loss) from
continuing operations to EBITDAS below.
Adjusted EBITDAS refers to EBITDAS excluding
impairment of goodwill and intangible assets, restructuring
expense, gain on sale of property, plant and equipment, loss
(recovery) of contingent consideration liability, one time incurred
expenses, impairment of right-of-use assets and government
subsidies. FLINT has used Adjusted EBITDAS as the basis for the
analysis of its past operating financial performance. Adjusted
EBITDAS is a measure that management believes (i) is a useful
supplemental measure from which to determine FLINT’s ability to
generate cash available for debt service, working capital, capital
expenditures, and income taxes, and (ii) facilitates the
comparability of the results of historical periods and the analysis
of its operating financial performance which may be useful to
investors. FLINT has provided a reconciliation of income (loss)
from continuing operations to Adjusted EBITDAS below.
Investors are cautioned that the Non-GAAP
Financial Measures are not alternatives to measures under IFRS and
should not, on their own, be construed as an indicator of
performance or cash flows, a measure of liquidity or as a measure
of actual return on the shares. These Non-GAAP Financial Measures
should only be used with reference to FLINT’s consolidated interim
and annual financial statements, which are available on SEDAR at
www.sedar.com or on FLINT’s website at www.flintcorp.com.
Three months ended |
Maintenance and Construction Services |
Wear Technology Overlay Services |
Corporate |
Total |
March 31, |
|
2023 |
|
|
2022 |
|
|
2023 |
|
2022 |
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations |
$ |
9,288 |
|
$ |
5,307 |
|
$ |
1,104 |
$ |
1,465 |
$ |
(13,717 |
) |
$ |
(14,555 |
) |
$ |
(3,325 |
) |
$ |
(7,783 |
) |
Add: |
|
|
|
|
|
|
|
|
Amortization of intangible assets |
|
17 |
|
|
28 |
|
|
115 |
|
115 |
|
— |
|
|
— |
|
|
132 |
|
|
143 |
|
Depreciation expense |
|
1,706 |
|
|
1,677 |
|
|
675 |
|
637 |
|
215 |
|
|
250 |
|
|
2,596 |
|
|
2,564 |
|
Long-term incentive plan expense |
|
— |
|
|
— |
|
|
— |
|
— |
|
995 |
|
|
— |
|
|
995 |
|
|
— |
|
Interest expense |
|
192 |
|
|
234 |
|
|
78 |
|
90 |
|
4,086 |
|
|
3,548 |
|
|
4,356 |
|
|
3,872 |
|
EBITDAS |
|
11,203 |
|
|
7,246 |
|
|
1,972 |
|
2,307 |
|
(8,421 |
) |
|
(10,757 |
) |
|
4,754 |
|
|
(1,204 |
) |
Add (deduct): |
|
|
|
|
|
|
|
|
Gain on sale of property, plant and equipment |
|
(122 |
) |
|
(2 |
) |
|
— |
|
— |
|
— |
|
|
— |
|
|
(122 |
) |
|
(2 |
) |
Restructuring expenses |
|
119 |
|
|
— |
|
|
2 |
|
— |
|
486 |
|
|
2,770 |
|
|
607 |
|
|
2,770 |
|
One-time incurred expenses |
|
— |
|
|
— |
|
|
— |
|
— |
|
205 |
|
|
1,281 |
|
|
205 |
|
|
1,281 |
|
Loss on contingent consideration liability |
|
— |
|
|
— |
|
|
— |
|
— |
|
— |
|
|
161 |
|
|
— |
|
|
161 |
|
Adjusted EBITDAS |
$ |
11,200 |
|
$ |
7,244 |
|
$ |
1,974 |
$ |
2,307 |
$ |
(7,730 |
) |
$ |
(6,545 |
) |
$ |
5,444 |
|
$ |
3,006 |
|
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