FLINT Corp. (“FLINT” or the "Company") announced its results for the three and six months ended June 30, 2024. 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.
“Activity levels continued to pick up in the second quarter with revenue 12.8% higher than the first quarter. Adjusted EBITDAS in the second quarter increased by 5.2% from the same period last year. We anticipate continued growth in the second half of the year as we prepare for an active fall turnaround season. Our ongoing safety performance, combined with the delivery of contracts on time and budget will continue to contribute to our ongoing growth,” said Barry Card, Chief Executive Officer.
“We continue to execute our organic growth strategy that targets both industrial end market and geographic diversification. During the second quarter, we fully mobilized to all of our new worksites across Canada with key customers. We continue to realize the benefits from additional investments that we made in our business development team earlier in the year with the booking of new contract awards and renewals during the first half of the year that are estimated to generate approximately $267 million in backlog,” added Mr. Card.
SECOND QUARTER HIGHLIGHTS
Revenue for the three months ended June 30, 2024 was $164.9 million, representing a decrease of $3.6 million or 2.2% from the same period in 2023 and an increase of $18.7 million or 12.8% from the first quarter of 2024.
Gross profit for the three months ended June 30, 2024 was $18.0 million, representing an increase of $0.7 million or 4.2% from the same period in 2023 and an increase of $5.0 million or 38.2% from the first quarter of 2024.
Gross profit margin for the three months ended June 30, 2024 was 10.9%, as compared to 10.2% in the same period in 2023 and 8.9% in the first quarter of 2024.
Adjusted EBITDAS for the three months ended June 30, 2024 was $8.3 million, representing an increase of $0.4 million or 5.2% from the same period in 2023 and an increase of $5.1 million or 160.5% from the first quarter of 2024.
Adjusted EBITDAS margin was 5.0% for the three months ended June 30, 2024 representing an increase of 0.3% from the same period in 2023 and an increase of 2.9% from the first quarter of 2024.
Selling, general and administrative ("SG&A") expenses for the three months ended June 30, 2024 were $10.2 million, representing an increase of $0.6 million or 6.4% from the same period in 2023 and an increase of $0.1 million or 1.2% from the first quarter of 2024. As a percentage of revenue, SG&A expenses for the three months ended June 30, 2024 was 6.2%, as compared to 5.7% in the same period in 2023 and 6.9% in the first quarter of 2024.
Liquidity, including cash and available credit facilities, was $41.7 million at June 30, 2024, as compared to $41.1 million at June 30, 2023.
New contract awards and renewals totaled approximately $65.5 million for the three months ended June 30, 2024 and $6.3 million for the first three weeks of July. Approximately 95% of the work is expected to be completed in 2024.
SECOND QUARTER FINANCIAL RESULTS
Revenue for the three and six months ended June 30, 2024 was $164,922 and $311,185 compared to $168,567 and $319,046 for the same periods in 2023, representing a decrease of 2.2% and 2.5%. The decrease in revenue was primarily due to timing of maintenance and construction work compared to the same period in 2023, partially offset by the increase in revenues coming from environmental services as those services continue to grow.
Gross profit for the three and six months ended June 30, 2024 was $17,978 and $30,988 compared to $17,260 and $30,628 for the same periods in 2023, representing an increase of 4.2% and 1.2%. Gross profit margin for three and six months ended June 30, 2024 was 10.9% and 10.0%, compared 10.2% and 9.6% to for the same periods in 2023. The increase in gross profit and gross profit margin was primarily due to the mix of work compared to the same period of 2023.
SG&A expenses for the three and six months ended June 30, 2024 were $10,181 and $20,237, in comparison to $9,572 and $17,740 for the same periods in 2023, representing an increase of 6.4% and 14.1%. As a percentage of revenue, SG&A expenses for the three and six months ended June 30, 2024 were 6.2% and 6.5% compared to 5.7% and 5.6% for the same periods in 2023. The increase in SG&A expenses, both on an absolute basis and as a percentage of revenue is primarily due to higher personnel costs to support the Company's organic growth strategy and increased professional fees to assist in the ongoing continuous improvements in the business post the implementation of the Company's enterprise resource planning system.
For the three and six months ended June 30, 2024, Adjusted EBITDAS was $8,305 and $11,493 compared to $7,894 and $13,338 for the same periods in 2023. As a percentage of revenue, Adjusted EBITDAS was 5.0% and 3.7% for the three and six months ended June 30, 2024 compared to 4.7% and 4.2% for the same periods in 2023.
Loss from continuing operations for the three and six months ended June 30, 2024 was $588 and $5,374 in comparison to a loss of $12,103 and $15,428 for the same periods in 2023. The loss variance was driven by the impairment of intangible assets, goodwill and property, plant and equipment ("PP&E") recognized in the second quarter of 2023.
CORPORATE UPDATES
On July 2, 2024, Kent Chicilo was appointed Senior Vice President, Legal. Mr. Chicilo has over 22 years of legal experience and has held senior in-house legal and functional management roles at publicly traded companies. Prior to joining FLINT, Mr. Chicilo was an officer of Tidewater Midstream and Infrastructure Ltd. holding the positions of Executive Vice President, Shared Services, Chief Legal Officer and Corporate Secretary. Mr. Chicilo holds Bachelor of Laws and Bachelor of Commerce degrees from the University of Saskatchewan.
Mr. Chicilo succeeded Murray Desrosiers, Senior Vice President, Legal and Corporate Development, who retired on July 19, 2024. Mr. Desrosiers joined FLINT in July 2019 and was a key member of the Executive Leadership Team. We wish to congratulate Murray on a successful legal career that spanned 29 years and wish him the best in retirement.
The annual and special meeting of holders of common shares of the Corporation was held on June 25, 2024. At the meeting, shareholders approved the election of Sean McMaster, Barry Card, H. Fraser Clarke, Katrisha Gibson, Karl Johannson and Dean MacDonald as directors and the appointment of Ernst & Young LLP as auditors and ratified an amendment of the by-laws to reduce the quorum requirement for shareholder meetings to two persons present in person or by proxy at the meeting and holding shares representing 15% (rather than 25%) of the votes entitled to be cast at the meeting.
The Company would like to acknowledge the significant contributions of Mr. Jordan Bitove who did not stand for re-election at the meeting. Mr. Bitove has served as a director of the Company since 2013. The Company would like to thank Mr. Bitove for the guidance he has provided over the past 11 years.
LIQUIDITY AND CAPITAL RESOURCES
On May 31, 2024, FLINT extended the maturity dates of (a) the ABL Facility to April 14, 2027 (previously April 14, 2025), (b) the Term Loan Facility to the earlier of (i) the date that is 180 days following the maturity of the ABL Facility and (ii) October 14, 2027 (previously October 14, 2025), and (c) the Senior Secured Debentures to October 14, 2027 (previously March 23, 2026).
FLINT has an asset-based revolving credit facility (the “ABL Facility”) providing for maximum borrowings of up to $50.0 million with a Canadian chartered bank. 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, 2027.
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. To maintain compliance with its financial covenants through June 30, 2025, the Company has the ability to pay interest on the Senior Secured Debentures in kind, which requires approval by the holder of the Senior Secured Debentures at its sole discretion
As at June 30, 2024, 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 the Company's balance sheet and liquidity position supports the payment. As at June 30, 2024, the accrued and unpaid dividends on the Series 1 and Series 2 shares totaled $101.8 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.
On June 30, 2024, Canso, in its capacity as portfolio manager for and on behalf of certain accounts that it manages and sole holder of the Senior Secured Debentures, agreed to accept the issuance of Senior Secured Debentures on June 30, 2024 with a principal amount of $5,205 in order to satisfy the interest that would otherwise become due and payable on such date.
OUTLOOK
We continue to execute our organic growth strategy that targets both industrial end market and geographic diversification. We are seeing the results of this strategy with renewed and expanded scopes with existing customers and the addition of new customers. We anticipate continued growth in the second half of 2024 as we prepare for an active fall turnaround season.
For our customers in the energy industry, the dichotomy between oil and natural gas pricing continues. The start-up of Trans Mountain Pipeline expansion in the second quarter has provided support for Canadian oil prices, which remained strong throughout the first half of the year. While natural gas prices remain weak, the expected start-up of LNG Canada in 2025 is providing some optimism as it will open up new markets for Canadian natural gas. While these customers continue to prioritize debt repayment and returns to shareholders, they are starting to increase spending on both maintenance projects (to increase operational reliability) and capital projects (to maintain or expand production capacity). For the second half of 2024, we see commodity prices at a level that supports continued modest growth for our business.
The market for skilled labour in Canada remains tight. We remain focused on our programs to attract, retain and develop our people and to deliver high quality services to our valued customers in a safe and efficient manner.
FLINT has a suite of more than 40 service offerings that encompass the full asset lifecycle. 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 our customers. We are also continually working to improve our service delivery to help our customers bring their resources to our world.
