Kelowna, British Columbia - TheNewswire - May 14, 2020 – Decisive Dividend Corporation (TSXV:DE) (the “Company” or “Decisive”) reported its financial results for the three months ended March 31, 2020. All amounts are expressed in Canadian dollars. The Company’s Q1 unaudited interim condensed consolidated financial statements as well as its management’s discussion and analysis (“MD&A”) are posted on SEDAR and on Decisive’s website.

James Paterson, Chief Executive Officer of Decisive, noted:

“The impact of COVID-19 and the global oil price decline stalled the progress made by our businesses through the first quarter. Even with the effects of these recent events, first quarter revenue, adjusted EBITDA, and profit showed considerable improvement over last year. We have now refocused our efforts toward preserving liquidity and financial strength to manage through this unpredictable global downturn and deal with unforeseen issues that may arise, which will leave us well positioned once the effects of these recent developments subside. I am very proud of the work being done throughout our organization as we manage through the pandemic. Our leadership teams have shown compassion and commitment to their businesses, their customers, and their employees, all while vigilantly following the recommendations of the applicable health authorities to prevent the spread of COVID-19. All of our businesses have been deemed essential services in the areas in which we operate, and we are fortunate that, at this time, our operating subsidiaries remain in low risk areas. We remain very confident in the long-term prospects of each of our businesses and are fortunate that their operations are diversified in terms of the industries, customers, and geographies they serve. We also remain committed to paying a dividend over the long term and will resume payments when appropriate and prudent to do so.”    

 

Q1 2020 Financial Highlights:

 

- Sales increased by 31% relative to Q1 2019 to $12.9 million.

- Gross profit increased by 24% relative to Q1 2019 to $4.7 million.

- Adjusted EBITDA* increased by 113% relative to Q1 2019 to $1.7 million.

- The overall loss increased to $1.1 million, or $0.09 per share, compared to a loss of $0.2 million, or $0.02 loss per share, in Q1 2019. This Q1 2020 loss included a $1.4 million non-cash impairment loss recorded against Hawk’s goodwill.

- Decisive declared $1.0 million in dividends.

* 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 and restructuring costs, and any unusual non-operating one-time items such as acquisition costs.  Adjusted EBITDA is not a defined performance measure under International Financial Reporting Standards (IFRS) and therefore may not be comparable to similar measures presented by other issuers, but it is used by Management to assess the performance of the Company and its segments. See the MD&A for a reconciliation of applicable IFRS measures to non-IFRS measures.

 

Discussion of Overall Performance

Q1 Consolidated Financial Highlights

Sales for the first quarter increased to $12.9 million from $9.9 million in Q1 2019. An increase in Hawk sales combined with the sales generated by Northside for the quarter, after its acquisition on August 16, 2019, were the primary drivers of the increase relative to Q1 2019. The extent of the year-over-year increase in sales was limited by lower than anticipated March activity due to the onset of the COVID-19 pandemic as well as the significant decline in oil prices.

Overall gross profit increased by $0.9 million, or 24%, in Q1 2020 relative to Q1 2019. The increase was primarily a result of the increase in sales at Hawk, pricing increases and/or cost containment initiatives, and the gross profit generated by Northside.

In each subsidiary, there are substantial fixed costs that do not meaningfully fluctuate with product demand in the short-term. Such costs are included in both manufacturing costs and operating expenses. Overall operating expenses increased from $3.9 million in Q1 2019 to $4.7 million in Q1 2020. Half of the year-over-year quarterly increase was a result of an increase in financing costs driven by the long-term debt incurred in connection with the acquisition of Northside. The remainder of the increase was primarily a result of operating expenses associated with the operation of Northside.

Adjusted EBITDA for the first quarter was $1.7 million, a $0.9 million increase compared to Q1 2019. The overall increase in Adjusted EBITDA was primarily driven by the increase in gross profit.

Other items affecting profit (loss) between the first quarters of 2019 and 2020 included a $1.4 million non-cash impairment loss being recorded against Hawk’s goodwill in Q1 2020, as well as foreign exchange gains and losses in the periods. The Q1 2020 goodwill impairment loss was triggered by the worldwide COVID-19 pandemic and significant decline in global oil prices, and the effect of these events on expected oil and gas activity in Western Canada. There were no impairment losses in Q1 2019. Foreign exchange gains and losses also impacted overall profit differences between Q1 2020 and Q1 2019. In Q1 2020, the Group recorded $0.5 million in foreign exchange gains for the quarter based on a $0.12 increase in the value of the United States dollar, relative to the Canadian dollar in the quarter. The Q1 2019 foreign exchange losses of $0.2 million were a result of the $0.03 decrease in the value of the United States dollar, relative to the Canadian dollar, in the first three months of 2019.

The non-cash impairment loss more than offset the foreign exchange gains and increase in gross profit in the quarter and led to a $1.1 million loss, or $0.09 per share, in Q1 2020, compared to a loss of $0.2 million, or $0.02 per share, in Q12019.

Outlook

A key aspect of Decisive’s business model is diversification. The operations of the Company’s operating subsidiaries are diversified in terms of the industries, customers, and geographies they serve. Management believes that this diversification is valuable especially amidst the current economic uncertainty stemming from the effects of the worldwide COVID-19 pandemic and the significant decline in global oil prices.

The effects of COVID-19, coupled with the decline in oil prices, have had an unprecedented effect on financial markets and the global economy to date in 2020. Decisive expects that each of its subsidiaries will continue to experience some level of negative effect on their supply chains, customer demand, or both, in the near-term. Decisive has been and continues to consult with the senior executives of its operating subsidiaries on a regular basis with a view to safeguarding its business, its workforce and its customers.

The extent and duration of the effects that COVID-19 and declining oil prices will have on the overall economy remains unknown and as such Decisive intends to manage itself with an abundance of caution in this challenging business environment. As of the reporting date, Decisive has ample availability on its operating line and the Group is actively managing liquidity. To date the Group has implemented measures to reduce costs wherever possible, suspended all non-essential capital expenditures, suspended dividend payments, and pursued all available government subsidy programs. Management believes that these measures will provide greater financial strength through this period of uncertainty. In addition, Decisive’s interest only financing is proving beneficial in times like these as it preserves cash flow that can instead be used to pay employees, suppliers and service providers and allow the Company’s businesses to continue to serve their customers.

Despite these recent developments, management remains confident in its long-term strategic and operational plans. The Company’s seasoned leadership is encouraged about the long-term business prospects of each of its subsidiaries and believes that Group is well positioned for future growth. As one of Decisive's objectives is to pay a regular dividend to its shareholders over the long term, Decisive plans to re-commence the declaration and payment of dividends when appropriate and prudent to do so.

Management is also confident that its disciplined acquisition approach is the best path to generating shareholder value in the long term. Decisive continues to identify and evaluate potential acquisitions which, if completed, will bolster its diversity and add strength and resilience to operations. Decisive’s acquisition pipeline includes several target companies, however there can be no assurance that target companies identified from time to time will meet Decisive’s acquisition criteria or that Decisive will successfully acquire identified target companies that meet such criteria. In addition, given the significant impact that COVID-19 has had on financial markets and the global economy, capital availability may be constrained in the near-term. Management believes that preserving financial strength and flexibility during this time of economic uncertainty will better position the Company to take advantage of potential opportunities once the effects of COVID-19 and low oil prices subside.

Decisive is continually assessing the actual and potential impact of these recent developments on the Group. The impact on the Group will depend on a number of factors, including the extent and duration of the impact of these recent developments on the overall economy, as well as their impact on the Group’s customers and the industries in which they operate.

About Decisive Dividend Corporation

Decisive Dividend Corporation is an acquisition-oriented company, focusing on the manufacturing sector. The Company uses a disciplined acquisition strategy to identify already profitable, established companies that have strong management teams, generate steady cash flow, operate in non-cyclical markets, and have opportunity for future growth.

       

FOR FURTHER INFORMATION PLEASE CONTACT:

Rick Torriero, Chief Financial Officer

#201, 1674 Bertram Street

Kelowna, BC V1Y 9G4

Telephone: (250) 870-9146

Sign up for email notifications of all Company press releases at www.decisivedividend.com.

Cautionary Statements

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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 “could”, “intend”, “expect”, “believe”, “will”, “projected”, “estimated” and similar expressions 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, potential future acquisitions, the possible reinstatement of the Company's monthly dividend in the long term, as well as forward-looking information relating to the impact of the ongoing COVID-19 pandemic and the price of oil on the operations and financial results of the Company and its subsidiaries. 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: general economic conditions; pandemic; competition; government regulation; environmental regulation; access to capital; market trends and innovation; climate risk; general uninsured losses; risk 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 warrant claims; litigation; reliance on technology and intellectual property risks; availability of future financing; interest rates and debt financing; income tax matters; foreign exchange; dividends; trading volatility of common shares; dilution risk; 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.sedar.com. 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.

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