VTX Vertex Resource Group Ltd

Revenue of $46.1 million and Adjusted EBITDA of $6.4 million for the fourth quarter of 2021.

Revenue of $159.4 million and Adjusted EBITDA of $26.2 million for the year ended December 31, 2021.

SHERWOOD PARK, AB, March 22, 2022 /CNW/ - (TSXV: VTX) - Vertex Resource Group Ltd. ("Vertex" or the "Company") reports its financial and operational results for the fourth quarter and year ended December 31, 2021.  The following should be read in conjunction with the Management Discussion and Analysis ("MD&A") and the audited consolidated financials statements of Vertex for the year ended December 31, 2021, which are available on SEDAR at www.sedar.com.

In the fourth quarter of 2021, continued building momentum from earlier quarters and delivered the strongest revenue in the last twelve quarters.  The fourth quarter closes with an improved backlog of projects as customers are showing signs of increased spending levels compared to 2020 and 2021.

Vertex's diversification efforts with continued expansion in the utilities, telecommunications and government sectors have helped to grow revenue.  The Company is maintaining its focus on cost containment, operating efficiencies, geographic diversification, and sector diversification.

From an environmental consulting perspective, the expected increase in abandonment and reclamation (A&R) projects from major government funding was realized in 2021 with multiple project awards executed during the year.  Vertex expects significant revenue opportunities in this area through 2022, having already won various projects which are expected to kick off in the near to medium term. 

Key financial results for the three months and years ended December 31, 2021 and 2020 are as follows:

HIGHLIGHTS FOR THE THREE MONTHS ENDED DECEMBER 31, 2021

• The Company generated $46.1 million in revenues which is the highest revenue in the last twelve quarters.
• Gross margin increased to $11.0 million in the quarter compared to $9.0 million in Q4 2020.
• Adjusted EBITDA¹ during the fourth quarter improved to $6.4 million from $5.6 million in Q4 2020.
• Net income for the period was $1.4 million compared to a net loss for the period of $0.9 million in Q4 2020.
• Free cash flow¹ generated was $4.2 million.
• Subsequent to year-end, Vertex issued a $15.0M convertible debenture, with a term of 5 years, 8.0% annual interest paid monthly, at a conversion price of $0.65.
• Subsequent to year-end, the Company entered into an arrangement agreement to acquire Cordy Oilfield Services Inc., with an expected closing in Q2 2022.

HIGHLIGHTS FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2021

• Revenue increased by 17.1% from $136.1 million in 2020 to $159.4 million for the year ended 2021.
• Adjusted EBITDA¹ amounted to $26.2 million for the full year 2021 compared to $24.5 million in the same period of 2020.
• Annual adjusted EBITDA per share of $0.29 is the highest annual adjusted EBITDA per share since Vertex became publicly listed entity.
• Reported net income and comprehensive income of $1.7 million in 2021 compared to a net loss of $5.7 million the prior year.
• Free cash flow¹ generated was $21.8 million.
• Completed the first quarter acquisition strengthening our industrial cleaning business line.
• Senior credit facility was amended to extend the maturity date to May 31, 2023.

OUTLOOK

The momentum generated by Vertex's previous three quarters carried over into the fourth quarter, which achieved the highest quarterly revenue in the last twelve quarters.  Although the North American economy largely recovered in 2021, the situation varied greatly from region to region and jurisdiction to jurisdiction.  Vertex was able to meet the challenges from the pandemic and supply chain disruptions.

Our outlook for 2022 is that North American economies will continue to transition from pandemic recovery-driven growth to more normal growth in 2022.  Global vaccination rates have aided economic growth allowing increased activity across all industry sectors.  The journey to regaining this normality, however, will not be smooth and 2022 will be a year of transition.  With secured backlog reaching record levels, Vertex is well positioned for strong earnings growth for 2022. 

The rapid rebound in demand for raw materials, intermediate goods and various logistics services has been hampered by limited global supply.  Vertex will need to focus on our supply chains and rising costs and will need to continue to develop agile and creative strategies to address labour challenges as this looks like it could persist for many years. 

Moreover, short-term uncertainty remains regarding the macroeconomic conditions, including commodity price fluctuations, potential setbacks in COVID-19 vaccine efficacy, demand for hydrocarbons, and OPEC+ production and supply decisions that may impact the short-term demand for services. The invasion of Ukraine by the Russian Federation may also impact future commodity prices in energy, mining and agriculture.

On February 25, 2022, Vertex entered into a definitive amalgamation agreement with Cordy Oilfield Services Inc. (TSXV: CKK) ("Cordy"), a provider of environmental and hydro-excavating services.  Under the terms of the agreement, Cordy shareholders will receive 0.081818 common shares of Vertex for every one common share of Cordy.  The implementation of this agreement is subject to approval by the shareholders of Cordy with the special meeting scheduled for April 22, 2022.  This acquisition strengthens our environmental services business while providing additional free cash flow generation through savings from integration, elimination of duplicate corporate office costs and by increasing the utilization of the equipment fleet and personnel. 

On March 7, 2022, Vertex issued a $15 million convertible debenture, due March 7, 2027, bearing interest at 8%.  At any time during the term, the holders of the convertible debentures may elect to convert the outstanding net principal amount, or any portion thereof, into common shares of Vertex at a conversion price of $0.65 per share.  Proceeds will be used for general corporate purposes including future acquisitions.

Vertex's vision of being a world leading environmental services company has not changed.  As an Environmental Service business, we believe we are uniquely positioned for ESG performance.  We understand that we have a responsibility to maximize our Internal ESG performance and have made a corporate commitment to do so. More substantially, we understand that our opportunity to support the ESG initiatives of our customers has a significantly broader global impact.   As such our ESG system design includes both an internal and a customer focus.  As our ESG journey evolves so too will our measurement and reporting, holding ourselves accountable to internal and customer metrics.  Ultimately, our intent is to create business resiliency by becoming a primary source of executable ESG supply chain solutions for our customers.

ABOUT VERTEX

Since 1962, Vertex has been a leading North American provider of environmental services. Headquartered in Sherwood Park, Alberta, Vertex employs a staff of approximately 750 employees and lease operators that provide services to help clients achieve their developmental and operational goals. From initial site selection, consultation and regulatory approval, through construction, operation and maintenance, to conclusion and environmental cleanup, Vertex provides a wide array of services to customers operating in industries such as energy, mining, utilities, private development, public infrastructure, construction, telecommunications, forestry, agriculture and government.

Vertex principally operates in Canada with select locations in the United States.

NON-IFRS FINANCIAL MEASURES
This news release includes certain terms or performance measures that are not defined under International Financial Reporting Standards ("IFRS"), including "Adjusted EBITDA". The data presented is intended to provide additional information that should not be considered in isolation or as a substitute measure of performance prepared in accordance with IFRS. The non-IFRS measures should be read in conjunction with the Company's financial statements and accompanying notes.

"Adjusted EBITDA" is a non-financial measure which is calculated by adjusting net (loss) income for the sum of income taxes, finance costs including interest accretion on lease liabilities, depreciation of property and equipment and right of use assets, amortization of intangible assets, share-based compensation, restructuring costs and impairment.  The Company uses Adjusted EBITDA as an indicator of its principal business activities operational performance prior to consideration of how its activities are financed and the impact of taxation, non-cash depreciation and amortization, restructuring costs and other non-cash expenses such as impairments required under IFRS. Adjusted EBITDA does not have a standardized meaning prescribed by IFRS and is not necessarily comparable to similar measures provided by other companies. Adjusted EBITDA is used by many analysts as an important analytical tool and management of Vertex believes it is useful for providing readers with additional clarity on Vertex's operational performance. This measure is also considered important by the Company's lenders in determining compliance by the Company with the financial covenants under its lending arrangements.

"Free cash flow" is a non-financial measure which is calculated by reducing adjusted EBITDA by maintenance capital expenditures net of disposal proceeds.

Reconciliations of Adjusted EBITDA and free cash flow are provided in the MD&A under the heading "8.0 Non-IFRS Financial Measures".

FORWARD-LOOKING INFORMATION
Any "financial outlook" or "future oriented financial information" in this MD&A, as defined by applicable securities laws, has been approved by management of Vertex.  Such financial outlook or future oriented financial information is provided for the purpose of providing information about management's current expectations and plans relating to the future.  Readers are cautioned that reliance on such information may not be appropriate for other circumstances.

Certain statements contained in this document constitute "forward-looking information". When used in this document or by any of the Company's management, the words "may", "would", "will", "intend", "plan", "propose", "anticipate" and "believe" are intended to identify forward-looking information. In particular, but without limiting the foregoing, this document contains forward-looking information and statements pertaining to the following: the Company's key strategies, objectives and competitive strengths; anticipated expenses; the Company's ability to integrate and capitalize on underutilized equipment through cross-selling opportunities across service lines and reducing redundant costs in 2022; growth opportunities in the Company's Environmental Services segment in 2022; supply and demand for the Company's services; activity levels in the oil and gas industry and other industries in which the Company operates; annual gross maintenance capital expenditures for 2022; future development activities; and the Company's ability to retain existing clients and attract new business, particularly business outside of the oil and gas industry. Such statements reflect the Company's forecasts, estimates and expectations, as they relate to the Company's current views based on its experience and expertise with respect to future events, and are subject to certain risks, uncertainties and assumptions.

The forward-looking information and statements contained in this document reflect several material factors and expectations and assumptions of the Company, including, without limitation: that the Company will continue to conduct its operations in a manner consistent with past operations; positive future trends in revenue, gross profit margin, Adjusted EBITDA, Bank EBITDA and net income; the general continuance of current or, where applicable, assumed industry conditions; the mix of revenue from non-oil and gas customers in 2022 pricing of the Company's services; the Company's ability to market successfully to current and new clients; the Company's ability to obtain qualified personnel and equipment in a timely and cost-effective manner; the Company's future debt levels; the impact of competition on the Company; the Company's ability to obtain financing on acceptable terms; the general continuance of current or, where applicable, assumed industry conditions; the continuance of existing tax, royalty and regulatory regimes; the impact of seasonal weather conditions; client activity levels; anticipated market recovery; the Company's anticipated business strategies and expected success; the Company's ability to utilize its equipment; levels of deployable equipment; and future sources of funding for the Company's capital program.

The forward-looking information and statements included in this document are not guarantees of future performance and should not be unduly relied upon. Such information and statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking information or statements, including, without limitation: volatility of the oil and natural gas industry; dependence on customer contracts and market acceptance; the Company's growth strategy may not achieve anticipated results; potential litigation claims; difficulty in attracting and retaining skilled personnel; adverse litigation judgments, settlements and exposure to liability resulting from legal proceedings could reduce profits of limit Vertex's ability to operate; the market for Vertex's products and services is subject to extensive government and regulatory approvals; health, safety and environment laws and regulations may require the Company to make substantial expenditures or cause it to incur substantial liabilities; the Company may fail to realize anticipated benefits of future acquisitions; Vertex's indebtedness may adversely affects its financial flexibility and competitive position; competition in the industries in which Vertex operates; downturns in general economic and market conditions; operational hazards and unforeseen interruptions for which Vertex may not be adequately insured; positive covenants in Vertex's material contracts could limit its ability to operate; third part credit risk; conservation measures and technological advances may reduce demand for hydrocarbons; loss of the Company's information and computer systems or cyber-attacks; director and officer conflicts of interest; a reassessment by tax authorities of Vertex's income calculations; volatility in the price of the Common Shares; and the risk factors set forth under the heading "Risk Factors" in the AIF.

Vertex's business is subject to a number of risks and uncertainties. Readers are encouraged to review and carefully consider the risk factors described in the AIF, which risk factors are specifically incorporated by reference herein.

The forward-looking statements contained in this MD&A are expressly qualified in their entirety by this cautionary statement. The forward-looking statements included in this MD&A are made as of the date of this MD&A. The Company does not intend and does not assume any obligation to update any such factors or to publicly announce the result of any revisions to any of the forward-looking statements contained herein to reflect future results, events or developments, unless required by law.

SOURCE Vertex Resource Group Ltd.