Alaris Equity Partners Income Trust Releases 2022 First Quarter Results

 NOT FOR DISTRIBUTION IN THE UNITED STATES.
FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF UNITED STATES SECURITIES LAW.

CALGARY, Alberta, May 05, 2022 (GLOBE NEWSWIRE) -- Alaris Equity Partners Income Trust (together, as applicable, with its subsidiaries, “Alaris” or the "Trust") is pleased to announce its results for the three months ended March 31, 2022. The results are prepared in accordance with International Accounting Standard 34. All amounts below are in Canadian dollars unless otherwise noted.

Highlights:

• Revenue of $39.6 million and cash from operating, prior to changes in working capital of $35.4 million in the first quarter of 2022 represent 23% and 40% increases, respectively, as compared to the same period in 2021. On a per unit basis, revenue of $0.88 represents an 11% increase and cash from operating, prior to changes in working capital of $0.78 represents a 26% increase, both as compared to Q1 2021;
• Capital deployment of $82.3 million in the quarter which consisted of a US$65.0 million follow-on contribution to Body Contour Centers, LLC (“BCC”) in exchange for preferred equity with an initial annualized Distribution of US$8.5 million;
• During Q1 2022, the Trust issued $65.0 million of senior unsecured subordinated debentures at an interest rate of 6.25% per annum, maturing March 31, 2027;
• Subsequent to March 31, 2022, Kimco Holdings, LLC (“Kimco”) redeemed US$43.6 million of preferred equity with a cost basis of US$34.2 million, repaid outstanding promissory notes of US$9.8 million and paid US$13.7 million of deferred Distributions from prior years for total proceeds to Alaris on the close of the transaction of US$67.1 million. The impact of the redemption to the Trust’s first quarter results was an increase to the fair value of the Kimco units of US$7.9 million. Along with recognizing the additional US$13.7 million of Distributions in Q2 2022, the total pre-tax income related to the Kimco redemption in 2022 will be approximately $0.60 per unit;
• The weighted average combined Earnings Coverage Ratio ⁽⁵⁾ for Alaris’ Partners remains greater than 1.75x with fourteen of eighteen Partners greater than 1.5x; and
• Alaris reduced its outstanding senior debt to approximately $263 million as of the date of this release with $137 million of available capacity based on covenants and credit terms.

“We are pleased to be reporting first quarter revenue exceeding guidance, as well as the prior year, as a result of the record deployment over the last year and a half and the follow-on investment to BCC during the quarter. The redemption of Kimco was also extremely positive for Alaris as it increases our capacity for capital deployment in the remainder of the year as well as crystallizes a positive return and provides an excellent example demonstrating Alaris’ ability to patiently work through difficult times with a Partner company and to still provide a positive result to our unitholders as well as the Partner company’s employees,” said Steve King, President and CEO.

Per Unit Results	Three months ended
Period ending March 31	2022	2021	% Change
Revenue	$0.88	$0.79	+11.4	%
EBITDA (Note 1)	$0.91	$0.84	+8.3	%
Cash from operating, prior to changes in working capital	$0.78	$0.62	+25.8	%
Distributions declared	$0.33	$0.31	+6.5	%
Basic earnings	$0.61	$0.56	+8.9	%
Fully diluted earnings	$0.59	$0.54	+9.3	%
Weighted average basic units (000’s)	45,161	40,803

For the three months ended March 31, 2022, revenue per unit increased by 11.4% compared to the same period in 2021 primarily as a result of new investments during 2021 in Falcon Master Holdings LLC (“FNC”), Brown & Settle Investments, LLC and a subsidiary thereof (collectively, “Brown & Settle”), 3E, LLC (“3E”) and Vehicle Leasing Holdings, LLC (“D&M”). There were also incremental Distributions from current Partners as a result of follow-on investments to BCC and Fleet Advantage, LLC (“Fleet”), as well as full Distributions from PF Growth Partners, LLC (“PFGP”) in Q1 2022 as they were paying partial Distributions in Q1 2021 as a result of the impact of COVID-19. The overall positive reset of approximately 2.4% also contributed to the increase in revenue per unit. These were partially offset by the redemption of Federal Resources Supply Company and its subsidiaries (“FED”) in Q4 2021.

As cash from operating, prior to changes in working capital, excludes primarily all non-cash items in the Trust’s consolidated statement of comprehensive income, the cash from operating, prior to changes in working capital per unit and the changes from period to period is an important tool to use to summarize the ability for Alaris to generate cash. The per unit increase in Q1 2022 of 25.8% was a result of the increase in revenue per unit discussed above as well as a reduction in current taxes and cash taxes paid as compared to in Q1 2021.

Earnings per unit improved by 8.9% in the three months ended March 31, 2022 as compared to in Q1 2021, which is also the result of the improvement in revenue per unit along with relatively consistent expenses in each period.

Outlook

The Trust deployed approximately $82.3 million in the three months ended March 31, 2022, consistent with Alaris’ acquisition of investments in its condensed consolidated interim statement of cash flows. This deployment, along with $357.8 million in the year ended December 31, 2021, has contributed to Alaris’ revenue in Q1 2022 of $39.6 million, slightly ahead of the expected $38.6 million. Total revenue for the quarter was higher than guidance due to revenue generated from a follow-on investment in BCC in March 2022 and incremental common Distributions from FNC, Amur Financial Group Inc. (“Amur”) and D&M. As outlined below, the outlook for the next twelve months remains positive with Run Rate Revenue ⁽³⁾ expected to be approximately $154.8 million. This includes current contracted amounts, an additional US$2.4 million from PFGP related to deferred Distributions during COVID-19 and an estimated $3.6 million of common dividends. This Run Rate Revenue of $154.8 million excludes an additional US$13.7 million of Distributions from Kimco as part of their redemption subsequent to March 31, 2022. These additional Distributions were deferred from prior years and will be recorded as revenue in Q2 2022. Inclusive of these additional Distributions from Kimco, Alaris expects total revenue from its Partners in Q2 2022 of approximately $56.1 million.

The Run Rate Cash Flow ⁽⁶⁾ table below outlines the Trust’s expectation for revenue, general and administrative expenses, interest expense, tax expense and distributions to unitholders for the next twelve months. The Run Rate Cash Flow outlines the net cash from operating activities, net of distributions paid, that Alaris is expecting to have after the next twelve months. This measure is comparable to net cash from operating activities less distributions paid, as outlined in Alaris’ consolidated statements of cash flows. Annual general and administrative expenses are currently estimated at $15.0 million and include all public company costs. The Trust’s Run Rate Payout Ratio ⁽⁴⁾ is expected to be within a range of 60% and 65% when including Run Rate Revenue ⁽³⁾, overhead expenses and its existing capital structure. The table below sets out our estimated Run Rate Cash Flow ⁽⁶⁾ alongside the after-tax impact of positive net deployment and the impact of every $0.01 change in the USD to CAD exchange rate.

Run Rate Cash Flow ($ thousands except per unit)		Amount ($)		$ / Unit
Revenue		$154,800		$3.42
General and administrative expenses		(15,000	)	(0.33	)
Interest and taxes		(46,000	)	(1.02	)
Net cash from operating activities		$93,800		$2.07
Distributions paid		(59,700	)	(1.32	)
Run Rate Cash Flow		$34,100		$0.75
Other considerations (after taxes and interest):
New investments	Every $50 million deployed @ 14%	+3,375		+0.07
USD to CAD	Every $0.01 change of USD to CAD	+/- 900		+/- 0.02

The senior debt facility was drawn to $332.8 million at March 31, 2022 in the Trust’s statement of financial position. The annual interest rate on that debt, inclusive of standby charges on available capacity, was approximately 5.0% for the three months ended March 31, 2022. Subsequent to March 31, 2022, the proceeds from the Kimco redemption in April 2022 of $67.1 million were used to repay senior debt. Following this repayment, the total drawn as of the date of this release is approximately $263 million, with the capacity to draw up to an additional $137 million based on covenants and credit terms.

The Condensed Consolidated Interim Statements of Financial Position, Condensed Consolidated Interim Statements of Comprehensive Income, and Condensed Consolidated Interim Statements of Cash Flows are attached to this news release. Alaris’ financial statements and MD&A are available on SEDAR at www.sedar.com and on our website at www.alarisequitypartners.com.

Earnings Release Date and Conference Call Details

Alaris management will host a conference call at 9am MT (11am ET), Friday, May 6, 2022 to discuss the financial results and outlook for the Trust.

Participants in North America can access the conference call by dialing toll free 1-866-475-5449. Alternatively, to listen to this event online, please click the webcast link and follow the prompts given: Q1 Webcast. Please connect to the call or log into the webcast at least 10 minutes prior to the beginning of the event.

For those unable to participate in the conference call at the scheduled time, it will be archived for instant replay for a week. You can access the replay by dialing toll free 1-855-859-2056 and entering the Conference ID: 5881757.  The webcast will be archived and is available for replay by using the same link as above or by finding the link we’ll have stored under the “Investor” section – “Presentation and Events”, on our website at www.alarisequitypartners.com.  

An updated corporate presentation will be posted to the Trust’s website within 24 hours at www.alarisequitypartners.com.

About the Trust:

Alaris, through its subsidiaries, provides alternative financing to private companies (“Partners”) in exchange for distributions, dividends or interest (collectively, “Distributions”) with the principal objective of generating stable and predictable cash flows for distribution payments to its unitholders.  Distributions from the Partners are adjusted annually based on the percentage change of a “top-line” financial performance measure such as gross margin or same store sales and rank in priority to the owner’s common equity position.

Non-GAAP and Other Financial Measures
The terms EBITDA, Actual Payout Ratio, Run Rate Revenue, Run Rate Payout Ratio, Earnings Coverage Ratio, Run Rate Cash Flow and Per Unit amounts (collectively, the “Non-GAAP and Other Financial Measures”) are financial measures used in this news release that are not standard measures under International Financial Reporting Standards (“IFRS”). The Trust’s method of calculating EBITDA, Actual Payout Ratio, Run Rate Revenue, Run Rate Payout Ratio, Earnings Coverage Ratio, Run Rate Cash Flow and Per Unit amounts may differ from the methods used by other issuers. Therefore, the Trust’s EBITDA, Actual Payout Ratio, Run Rate Revenue, Run Rate Payout Ratio, Earnings Coverage Ratio, Run Rate Cash Flow and Per Unit amounts may not be comparable to similar measures presented by other issuers.

(1) “EBITDA” and “EBITDA per unit” are Non-GAAP financial measures and refer to earnings determined in accordance with IFRS, before depreciation and amortization, interest expense (finance costs) and income tax expense and the same amount divided by weighted average basic units outstanding. EBITDA and EBITDA per unit are used by management and many investors to determine the ability of an issuer to generate cash from operations, aside from still including fluctuations due to changes in exchange rates and changes in the Trust’s investments at fair value. Management believes EBITDA and EBITDA per unit are useful supplemental measures from which to determine the Trust’s ability to generate cash available for servicing its loans and borrowings, income taxes and distributions to unitholders. Refer to the reconciliation of EBITDA and calculation of EBITDA per unit in the table below.

	Three months ended March 31
$ thousands except per unit amounts	2022	2021	% Change
Earnings	$27,405	$22,646	+21.0	%
Depreciation and amortization	53	75	-29.3	%
Finance costs	6,466	5,621	+15.0	%
Total income tax expense	7,287	5,771	+26.3	%
EBITDA	$41,211	$34,113	+20.8	%
Weighted average basic units (000's)	45,161	40,803
EBITDA per unit	$0.91	$0.84	+8.3	%

(2) “Actual Payout Ratio” is a supplementary financial measure and refers to Alaris’ total distributions paid during the period (annually or quarterly) divided by the actual net cash from operating activities Alaris generated for the period. It represents the net cash from operating activities after distributions paid to unitholders available for either repayments of senior debt and/or to be used in investing activities.

(3) “Run Rate Revenue” is a supplementary financial measure and refers to Alaris’ total revenue expected to be generated over the next twelve months based on contracted distributions from current Partners as well as an estimate for common dividends or distributions based on past practices, where applicable. Run Rate Revenue is a useful metric as it provides an expectation for the amount of revenue Alaris can expect to generate in the next twelve months based on information known.

(4) “Run Rate Payout Ratio” is a Non-GAAP financial ratio that refers to Alaris’ distributions per unit expected to be paid over the next twelve months divided by the net cash from operating activities per unit calculated in the Run Rate Cash Flow table. Run Rate Payout Ratio is a useful metric for Alaris to track and to outline as it provides a summary of the percentage of the net cash from operating activities that can be used to either repay senior debt during the next twelve months and/or be used for additional investment purposes. Run Rate Payout Ratio is comparable to Actual Payout Ratio as defined above.

(5) “Earnings Coverage Ratio (“ECR”)” is a supplementary financial measure and refers to the EBITDA of a Partner divided by such Partner’s sum of debt servicing (interest and principal), unfunded capital expenditures and distributions to Alaris. Management believes the earnings coverage ratio is a useful metric in assessing our partners continued ability to make their contracted distributions.

(6) “Run Rate Cash Flow” is a Non-GAAP financial measure and outlines the net cash from operating activities, net of distributions paid, that Alaris is expecting to have after the next twelve months. This measure is comparable to net cash from operating activities less distributions paid, as outlined in Alaris’ consolidated statements of cash flows.

 (7) “Per Unit” values, other than earnings per unit, refer to the related financial statement caption as defined under IFRS or related term as defined herein, divided by the weighted average basic units outstanding for the period.

The terms EBITDA, Actual Payout Ratio, Run Rate Revenue, Run Rate Payout Ratio, Earnings Coverage Ratio, Run Rate Cash Flow and Per Unit amounts should only be used in conjunction with the Trust’s annual audited financial statements, complete versions of which available on SEDAR at www.sedar.com.

Forward-Looking Statements

This news release contains forward-looking information and forward-looking statements (collectively, “forward-looking statements”) under applicable securities laws, including any applicable “safe harbor” provisions. Statements other than statements of historical fact contained in this news release are forward‑looking statements, including, without limitation, management's expectations, intentions and beliefs concerning the growth, results of operations, performance of the Trust and the Partners, the future financial position or results of the Trust, business strategy and plans and objectives of or involving the Trust or the Partners.  Many of these statements can be identified by looking for words such as "believe", "expects", "will", "intends", "projects", "anticipates", "estimates", "continues" or similar words or the negative thereof. In particular, this news release contains forward‑looking statements regarding: the anticipated financial and operating performance of the Partners; the Trust’s Run Rate Payout Ratio, Run Rate Cash Flow and Run Rate Revenue; the impact of recent new investments and follow-on investments; the Trust’s consolidated expenses; expectations regarding receipt (and amount of) any common equity distributions or dividends from Partners in which Alaris holds common equity, including the impact on the Trust’s net cash from operating activities, Run Rate Revenue, Run Rate Cash Flow and Run Rate Payout Ratio; the use of proceeds from the senior credit facility; the Trust’s ability to deploy capital and expectations regarding the same; the yield on the Trust’s investments; the Trust’s return on its investments; potential Partner redemptions, including the timing, if at all, thereof and the amounts to be received by the Trust; Q2 2022 revenue; and the Trust’s expenses for the remainder of 2022. To the extent any forward-looking statements herein constitute a financial outlook or future oriented financial information (collectively, “FOFI”), including estimates regarding revenues, Distributions from Partners (including expected resets, restarting full or partial Distributions and common equity distributions), Run Rate Payout Ratio, Run Rate Cash Flow, net cash from operating activities, expenses and impact of capital deployment, they were approved by management as of the date hereof and have been included to provide an understanding with respect to Alaris' financial performance and are subject to the same risks and assumptions disclosed herein. There can be no assurance that the plans, intentions or expectations upon which these forward-looking statements are based will occur.

By their nature, forward-looking statements require Alaris to make assumptions and are subject to inherent risks and uncertainties.  Assumptions about the performance of the Canadian and U.S. economies over the next 24 months and how that will affect Alaris’ business and that of its Partners (including, without limitation, any ongoing impact of COVID-19) are material factors considered by Alaris management when setting the outlook for Alaris.  Key assumptions include, but are not limited to, assumptions that: the Canadian and U.S. economies will continue to stabilize from the economic downturn created by COVID-19 and will not be detrimentally impacted over the next twelve months, interest rates will not rise in a material way from market expectations over the next 12 months, that those Alaris Partners previously affected by COVID-19 will not see a detrimental impact from COVID-19 over the next 12 months; that those Partners detrimentally affected by COVID-19 will recover from the pandemic’s impact and return to their pre-pandemic operating environments; the businesses of the majority of our Partners will continue to grow; more private companies will require access to alternative sources of capital; the businesses of new Partners and those of existing Partners will perform in line with Alaris’ expectations and diligence; and that Alaris will have the ability to raise required equity and/or debt financing on acceptable terms.  Management of Alaris has also assumed that the Canadian and U.S. dollar trading pair will remain in a range of approximately plus or minus 15% of the current rate over the next 6 months. In determining expectations for economic growth, management of Alaris primarily considers historical economic data provided by the Canadian and U.S. governments and their agencies as well as prevailing economic conditions at the time of such determinations.

There can be no assurance that the assumptions, plans, intentions or expectations upon which these forward‑looking statements are based will occur.  Forward‑looking statements are subject to risks, uncertainties and assumptions and should not be read as guarantees or assurances of future performance. The actual results of the Trust and the Partners could materially differ from those anticipated in the forward‑looking statements contained herein as a result of certain risk factors, including, but not limited to, the following: the ongoing impact of the COVID-19 pandemic on the Trust and the Partners (including how many Partners will experience a slowdown or closure of their business and the length of time of such slowdown or closure); the dependence of Alaris on the Partners; leverage and restrictive covenants under credit facilities; reliance on key personnel; general economic conditions, including any ongoing impact of COVID-19 on the Canadian, U.S. and global economies; failure to complete or realize the anticipated benefit of Alaris’ financing arrangements with the Partners; a failure to obtain required regulatory approvals on a timely basis or at all; changes in legislation and regulations and the interpretations thereof; risks relating to the Partners and their businesses, including, without limitation, a material change in the operations of a Partner or the industries they operate in; inability to close additional Partner contributions or collect proceeds from any redemptions in a timely fashion on anticipated terms, or at all; a change in the ability of the Partners to continue to pay Alaris at expected Distribution levels or restart distributions (in full or in part); a failure to collect material deferred Distributions; a change in the unaudited information provided to the Trust; and a failure to realize the benefits of any concessions or relief measures provided by Alaris to any Partner or to successfully execute an exit strategy for a Partner where desired. Additional risks that may cause actual results to vary from those indicated are discussed under the heading “Risk Factors” and “Forward Looking Statements” in Alaris’ Management Discussion and Analysis and Annual Information Form for the year ended December 31, 2021, which is filed under Alaris’ profile at www.sedar.com and on its website at www.alarisequitypartners.com.

Readers are cautioned that the assumptions used in the preparation of forward-looking statements, including FOFI, although considered reasonable at the time of preparation, based on information in Alaris’ possession as of the date hereof, may prove to be imprecise. In addition, there are a number of factors that could cause Alaris’ actual results, performance or achievement to differ materially from those expressed in, or implied by, forward looking statements and FOFI, or if any of them do so occur, what benefits the Trust will derive therefrom. As such, undue reliance should not be placed on any forward-looking statements, including FOFI.

The Trust has included the forward-looking statements and FOFI in order to provide readers with a more complete perspective on Alaris’ future operations and such information may not be appropriate for other purposes. The forward-looking statements, including FOFI, contained herein are expressly qualified in their entirety by this cautionary statement. Alaris disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. 

For more information please contact:
Investor Relations
Alaris Equity Partners Income Trust
403-260-1457
ir@alarisequity.com

Alaris Equity Partners Income Trust
Condensed consolidated interim statements of financial position
	31-Mar	31-Dec
$ thousands	2022	2021
Assets
Cash and cash equivalents	$23,389	$18,447
Derivative contracts	2,129	71
Accounts receivable and prepayments	4,961	3,181
Income taxes receivable	27,176	28,991
Promissory notes and other assets	13,238	13,555
Current Assets	$70,893	$64,245
Deposits	25,011	24,979
Property and equipment	617	658
Investments	1,250,850	1,185,327
Non-current assets	$1,276,478	$1,210,964
Total Assets	$1,347,371	$1,275,209
Liabilities
Accounts payable and accrued liabilities	$5,439	$8,214
Distributions payable	14,937	14,899
Office Lease	462	500
Income tax payable	771	740
Current Liabilities	$21,609	$24,353
Deferred income taxes	48,581	43,903
Loans and borrowings	332,848	326,569
Convertible debenture	90,524	89,592
Senior unsecured debenture	62,256	-
Other long-term liabilities	1,181	1,933
Non-current liabilities	$535,390	$461,997
Total Liabilities	$556,999	$486,350
Equity
Unitholders' capital	$756,892	$754,622
Translation reserve	1,827	15,052
Retained earnings	31,653	19,185
Total Equity	$790,372	$788,859
Total Liabilities and Equity	$1,347,371	$1,275,209

Alaris Equity Partners Income Trust
Condensed consolidated interim statements of comprehensive income
	Three months ended March 31
$ thousands except per unit amounts	2022		2021
Revenues, including realized foreign exchange gain	$39,564		$32,234
Net unrealized gain of investments at fair value	10,028		5,534
Bad debt recovery	-		4,030
Total revenue and other operating income	$49,592		$41,798
General and administrative	3,487		2,408
Transaction diligence costs	908		1,902
Unit-based compensation	1,877		1,530
Depreciation and amortization	53		75
Total operating expenses	6,325		5,915
Earnings from operations	$43,267		$35,883
Finance costs	6,466		5,621
Unrealized gain on derivative contracts	(2,060	)	(177	)
Unrealized foreign exchange loss	4,169		2,022
Earnings before taxes	$34,692		$28,417
Current income tax expense	1,554		4,490
Deferred income tax expense	5,733		1,281
Total income tax expense	7,287		5,771
Earnings	$27,405		$22,646
Other comprehensive income
Foreign currency translation differences	(13,225	)	(5,092	)
Total comprehensive income	$14,180		$17,554
Earnings per unit
Basic	$0.61		$0.56
Fully diluted	$0.59		$0.54
Weighted average units outstanding
Basic	45,161		40,803
Fully Diluted	49,657		45,400

Alaris Equity Partners Income Trust
Condensed consolidated interim statements of cash flows
	Three months ended March 31
$ thousands	2022		2021
Cash flows from operating activities
Earnings for the period	$27,405		$22,646
Adjustments for:
Finance costs	6,466		5,621
Deferred income tax expense	5,733		1,281
Depreciation and amortization	53		75
Bad debt recovery	-		(4,030	)
Net unrealized gain of investments at fair value	(10,028	)	(5,534	)
Unrealized gain on derivative contracts	(2,060	)	(177	)
Unrealized foreign exchange loss	5,019		2,022
Transaction diligence costs	908		1,902
Unit-based compensation	1,877		1,530
Cash from operating, prior to changes in working capital	35,373		25,336
Changes in working capital:
- accounts receivable and prepayments	(1,780	)	179
- income tax receivable / payable	791		1,456
- accounts payable, accrued liabilities	(2,775	)	2,860
Cash generated from operating activities	31,609		29,831
Cash interest paid	(3,865	)	(3,076	)
Net cash from operating activities	$27,744		$26,755
Cash flows from investing activities
Acquisition of investments	$(82,316	)	$(174,062	)
Transaction diligence costs	(908	)	(1,902	)
Proceeds from partner redemptions	1,263		-
Promissory notes and other assets issued	-		(9,556	)
Net cash used in investing activities	$(81,961	)	$(185,520	)
Cash flows from financing activities
Repayment of loans and borrowings	$(58,912	)	$(99,939	)
Proceeds from loans and borrowings	73,473		185,453
Debt amendment and extension fees	-		(552	)
Issuance of unitholders' capital, net of unit issue costs	-		90,287
Proceeds from senior unsecured debenture, net of fees	62,192		-
Distributions paid	(14,899	)	(12,089	)
Office lease payments	(38	)	(40	)
Net cash from financing activities	$61,816		$163,120
Net increase in cash and cash equivalents	$7,599		$4,355
Impact of foreign exchange on cash balances	(2,657	)	(1,799	)
Cash and cash equivalents, Beginning of period	18,447		16,498
Cash and cash equivalents, End of period	$23,389		$19,054
Cash taxes paid	$352		$3,049