Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- K-Bro Linen Inc (KBRLF, Financial) reported record second quarter results with revenue of $93 million and adjusted EBITDA of $18.2 million.
- The company successfully completed two acquisitions, Shortridge in the UK and C.M. in Montreal, which are expected to enhance growth prospects.
- Consolidated revenue increased by 15.8% compared to Q2 2023, with significant growth in both healthcare (5.5%) and hospitality (28.9%) segments.
- The company maintains a strong balance sheet and liquidity position, with ample undrawn capacity on its credit facility.
- K-Bro Linen Inc (KBRLF) has a positive outlook for both healthcare and hospitality segments, with continued momentum and strategic acquisition opportunities.
Negative Points
- Net earnings decreased by 3.3% from $4.7 million in 2023 to $4.5 million in 2024, primarily due to increased depreciation and amortization.
- The EBITDA margin decreased slightly to 17.7% in 2024 from 18% in 2023, impacted by non-recurring transaction and financing costs.
- Wages and benefits increased by $4.2 million, reflecting higher costs associated with acquisitions and integration.
- Corporate costs rose by $1.5 million, driven by transaction costs related to acquisitions and credit facility syndication.
- The company anticipates continued one-time costs related to acquisition integration, which may affect short-term financial performance.
Q & A Highlights
Q: Can you discuss the positive outlook for hospitality, considering macroeconomic concerns and potential impacts on travel?
A: Linda McCurdy, CEO, stated that feedback from customers remains positive, with convention and large group travel returning. No significant warning signs have been observed that would affect the hospitality sector's performance for the rest of the year.
Q: What is the relative contribution to growth from pricing versus volume?
A: Kristie Plaquin, CFO, explained that approximately 60% of growth is attributed to acquisitions and volume, while around 40% is due to pricing.
Q: What was the organic growth rate for Q2, excluding M&A contributions?
A: Linda McCurdy, CEO, indicated that organic growth was about 8%, split evenly between hospitality and healthcare sectors.
Q: Can you provide an update on contract renewals and the outlook for organic growth opportunities?
A: Kristie Plaquin, CFO, mentioned that about half of the $70 million in contracts up for renewal have been renewed, with positive discussions ongoing for the remainder. Linda McCurdy added that significant RFP opportunities are expected in the tens of millions of dollars.
Q: How is the integration of the Shortridge acquisition progressing, and are there opportunities to leverage its capacity?
A: Linda McCurdy, CEO, reported a smooth integration with the existing management team remaining in place. The company is exploring synergies and opportunities to expand its geographic reach.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
