Tervita Corporation Announces Strong Fourth Quarter & Year End 2020 Results

  • Q4 2020 Adjusted EBITDA of $54 million represented a decrease of only 8% from last year. The Company's cost savings initiatives, commercial customer strategies, contributions from growth capital investments and the Canadian Emergency Wage Subsidy ("CEWS") moderated the impact of reduced activity and oil prices.

  • Adjusted EBITDA excluding CEWS increased 9% sequentially compared to Q3 2020 as Tervita continued to strengthen from the abrupt slowdown in the first half of the year.

  • Adjusted EBITDA Margin excluding CEWS increased to 37%, compared to 34% in Q4 2019.

  • Industrial Services Divisional EBITDA grew 38% in the second half of 2020 compared to the first half, driven by rapid market recovery from the impacts of the COVID-19 pandemic, increased ferrous prices and the benefit of business optimization and cost savings initiatives.

  • 2020 Adjusted EBITDA of $208 million was a decrease of only 11% from the prior year, continuing to demonstrate the strength and resiliency of our business model.

  • Generated Discretionary Free Cash Flow ("DFCF") of $79 million in 2020, down just $11 million compared to 2019, resulting in a DFCF yield(1) of 19%.

  • Successfully refinanced our existing senior secured notes with a combination of new senior secured notes and a draw on our amended and extended credit facility, enhancing Tervita's ability to reduce debt with free cash flow.

  • Released Tervita's inaugural Sustainability Report highlighting our 2019 accomplishments and targets developed towards our commitment to Environment, Social and Governance ("ESG") & sustainability.

  • Acquired Main Line Industries Ltd. ("Main Line"), a specialty contractor primarily servicing the rail services, excavation and pipe jacking industries near Winnipeg, Manitoba, complementing our metals recycling and rail services business and expanding our footprint in Manitoba.

  • 2020 growth and expansion capital additions of $33 million primarily focused on completing our Montney water disposal facility, increasing water disposal capacity and blending capabilities, landfill expansion and purchasing industrial equipment for long-term customer backed contracts. We prudently managed our 2020 capital in response to the market environment with capital additions of $60 million for the year, in line with our expectations and a 56% reduction from 2019 additions.

  • Non-binding mediation occurred as scheduled in late 2020 with respect to the Secure litigation. The trial is scheduled to commence on January 10, 2022.

CALGARY, AB, March 4, 2021 /CNW/ - Tervita Corporation ("Tervita" or the "Company") (TSX: TEV) announced today the results for the three months and year ended December 31, 2020. All financial figures are in millions of Canadian dollars unless otherwise noted.

"Tervita's results in 2020 reflected the strength of our resilient business model, and with positive momentum exiting the year we are well positioned to capture upside in an energy sector recovery while continuing to grow our Industrial Services business. Our disciplined focus on managing costs, optimizing our locations and achieving business efficiencies drove strong Adjusted EBITDA Margins excluding CEWS of 37% in Q4 2020," said John Cooper, President and CEO.  "Both the Industrial Services and Energy Services business lines contributed to these results, delivering a sequential improvement in overall Divisional EBITDA compared to Q3 2020.

"We successfully completed our debt refinancing in the fourth quarter, which will allow us to execute on our strategic initiatives while providing flexibility to use free cash flow towards de-levering our balance sheet. We also advanced growth in our Industrial Services business with the acquisition of Main Line, providing a platform to expand our market share and geographic reach. 

"Over the past year, we proved our agility to respond to the market and adapt our business to keep our people safe, reduce costs, capture market value, and protect liquidity.  I am incredibly proud of the many significant milestones we achieved in 2020, including advancing our strategic priorities while strengthening our balance sheet, increasing profitability and generating meaningful Discretionary Free Cash Flow despite the challenging environment.  Looking forward to 2021, we remain focused on operational excellence, progressing our ESG initiatives, de-levering our balance sheet, and disciplined cost management while leveraging opportunities to grow our business and provide value for our shareholders and customers."

Q4 2020 Financial Highlights(2)








Three Months Ended December 31


Twelve Months Ended December 31



2020

2019

Increase
(Decrease)

% Change


2020

2019

Increase
(Decrease)

% Change

Facilities revenue


80

115

(35)

(30) %


329

465

(136)

(29) %

Energy marketing revenue


250

416

(166)

(40) %


875

1,607

(732)

(46) %

Energy Services revenue


330

531

(201)

(38) %


1,204

2,072

(868)

(42) %

Industrial Services revenue


56

62

(6)

(10) %


220

256

(36)

(14) %

Intersegment eliminations


(5)

(2)

(3)

(150) %


(7)

(5)

(2)

(40) %

Revenue


381

591

(210)

(36) %


1,417

2,323

(906)

(39) %

Revenue excluding energy marketing


131

175

(44)

(25) %


542

716

(174)

(24) %












Energy Services Divisional EBITDA(2)


47

60

(13)

(22) %


179

238

(59)

(25) %

Industrial Services Divisional EBITDA(2)


11

10

1

10 %


38

41

(3)

(7) %

Divisional EBITDA(2)


58

70

(12)

(17) %


217

279

(62)

(22) %

G&A expenses


(9)

(11)

(2)

(18) %


(39)

(46)

(7)

(15) %

G&A as a % of revenue (excl. energy marketing)


7 %

6 %

1 %



7 %

6 %

1 %













Canada Emergency Wage Subsidy(3)


5

5

100 %


30

30

100 %

Net profit (loss)


(22)

(123)

101

82 %


(43)

(116)

73

63 %

- per share ($), basic and diluted


(0.19)

(1.07)

0.88

82 %


(0.38)

(0.99)

0.61

62 %












Adjusted EBITDA(2)


54

59

(5)

(8) %


208

233

(25)

(11) %

- per share ($), basic and diluted


0.47

0.51

(0.04)

(8) %


1.83

2.00

(0.17)

(9) %

Adjusted EBITDA Margin(2)


41 %

34 %

7 %



38 %

33 %

5 %













Maintenance capital additions


9

11

(2)

(18) %


27

33

(6)

(18) %

Growth and expansion capital additions


7

41

(34)

(83) %


33

106

(73)

(69) %

Capital additions


16

52

(36)

(69) %


60

139

(79)

(57) %

Acquisitions (4)


16

16

100 %


16

16

100 %












Discretionary Free Cash Flow(2)


8

9

(1)

(11) %


79

90

(11)

(12) %

- per share ($), basic and diluted


0.07

0.08

(0.01)

(13) %


0.69

0.77

(0.08)

(10) %












Net Debt to Adjusted EBITDA (LTM)(2)(5)


3.54

3.17

0.37

12 %


3.54

3.17

0.37

12 %












Shares as at December 31 (000's of shares)(6)











Shares outstanding


115,655

114,355

1,300

1 %


115,655

114,355

1,300

1 %

Weighted average shares - basic and diluted


114,202

115,260

(1,058)

(1) %


113,688

116,732

(3,044)

(3) %














1.

DFCF yield is calculated by dividing 2020 DFCF by Tervita's market capitalization of $422 million as at March 4, 2021.

2.

Refer to Tervita's Q4 2020 Management's Discussion and Analysis ("MD&A") and audited annual Consolidated Financial Statements ("Financial Statements") for further information. These financial measures are Non-GAAP measures and are, therefore, unlikely to be comparable to similar measures presented by other issuers. These Non-GAAP financial measures are defined and reconciled in Tervita's Q4 2020 MD&A.

3.

Q4 2020 included $2 million related to employees in Energy Services, $2 million in Industrial Services, and $1 million in Corporate.  2020 included $14 million related to employees in Energy Services, $11 million in Industrial Services, and $5 million in Corporate. Refer to Tervita's Q4 2020 MD&A for further information on CEWS.

4.

Refer to note 3 of the Annual Financial Statements for details regarding acquisitions.

5.

Net Debt to Adjusted EBITDA (LTM) is at December 31, 2020 and 2019 and is based on the Last Twelve Months at that date. See Tervita's Q4 2020 MD&A for further definition and reconciliation.

6.

As at March 4, 2021, the Company had 115,654,851 common shares and 2,696,236 stock options outstanding. Each option outstanding is exercisable for one common share.

Tervita's results for the three and twelve months ended December 31 excluding CEWS(1) were as follows:











Three Months Ended December 31


Twelve Months Ended December 31



2020

2019

Increase
(Decrease)

% Change


2020

2019

Increase
(Decrease)

% Change

Adjusted EBITDA(1)(2)


49

59

(10)

(17)%


178

233

(55)

(24)%

- per share ($), basic and diluted


0.43

0.51

(0.08)

(16)%


1.57

2.00

(0.43)

(22)%

Adjusted EBITDA Margin(1)(2)


37 %

34 %

3 %



33 %

33 %

— %




1.

Refer to Tervita's Q4 2020 MD&A for further information on CEWS.

2.

These financial measures are Non-GAAP measures and are, therefore, unlikely to be comparable to similar measures presented by other issuers. These Non-GAAP financial measures are defined and reconciled in Tervita's Q4 2020 MD&A.

Outlook

Tervita demonstrated the strength of our resilient business model in 2020, delivering Adjusted EBITDA that declined only 11% despite the challenging environment, and we are well positioned for growth as the economy continues to recover. Tervita's performance recovered significantly in the second half of the year from the sharp decline in activity levels and commodity pricing and the negative impact of COVID-19 experienced in the first half.

Looking forward to 2021, we expect our positive momentum from the second half of 2020 to continue. Assuming an environment which includes the ongoing stability of energy pricing combined with general economic and industrial activity improvements associated with a steady reopening following the pandemic-related shutdowns, the Company anticipates Adjusted EBITDA excluding CEWS in 2021 to exceed 2020, driven by contributions from:

  • Stronger business performance in both our Energy Services and Industrial Services businesses in line with our expectations of economic recovery;

  • The full year benefit from the $31 million annualized structural cost savings instituted in the first half of 2020 (savings realized in 2020 of $23 million);

  • Continued benefit of the commercial, organizational and cost strategies implemented within our Industrial Services business;

  • Contributions from investments including a full year of operations at our Montney water disposal facility and our Main Line acquisition; and,

  • Actively working with customers through the early stages of the well abandonment and site rehabilitation program.

Capital Allocation
In 2021, we plan to take a disciplined approach to the allocation of Discretionary Free Cash Flow between our two main priorities of de-levering our balance sheet and delivering low-cost high-impact projects within our growth capital pipeline of opportunities that meet our return on capital hurdle rates, with a focus on  growth projects in the Industrial Services business. Based on current market conditions we anticipate capital additions in 2021 to be in line with 2020 levels. We continue to look for and execute opportunities to reduce costs, improve efficiencies and ensure all open and operating facilities are generating positive cash flows. We remain responsive to opportunities and market changes and may revise our capital plans accordingly.

MD&A and Financial Statements
The Q4 2020 MD&A, Financial Statements, and Annual Information Form, which contain additional notes and disclosures, are available on SEDAR under Tervita Corporation at www.SEDAR.com or on our website at www.tervita.com on the Investor Relations page.

Fourth Quarter and Year End 2020 Conference Call
Tervita will host a conference call on Friday, March 5, 2021 at 7:00 a.m. MST to discuss the fourth quarter results. To participate in the conference call, dial 416-764-8650 or toll free 888-664-6383. To access the simultaneous webcast, please visit www.tervita.com. For those unable to listen to the live call, a taped broadcast will be available at www.tervita.com and, until midnight MST on Friday, March 12, 2021 by dialing 888-390-0541 and using the pass code 639605#.

About Tervita
Tervita is a leading environmentally-focused waste service provider in Canada, providing a broad and integrated array of services and environmental management solutions for customers in the energy, industrial, and natural resource sectors, predominantly in Western Canada.

For over 40 years, Tervita has been focused on delivering safe and efficient solutions through all phases of a project while minimizing impact, maximizing returns™. Our dedicated and experienced employees are trusted sustainability partners to our clients. Safety is our top priority: it influences our actions and shapes our culture. Tervita trades on the TSX as TEV. For more information, visit www.tervita.com.

Advisories

Forward-Looking Information 
This news release contains forward-looking statements and forward-looking information (collectively referred to herein as "forward-looking statements") within the meaning of securities legislation. Such forward-looking statements include, without limitation, forecasts, estimates, expectations and objectives for future operations that are subject to assumptions, risks and uncertainties, many of which are beyond the control of Tervita. Forward-looking statements are statements that are not historical facts and are generally, but not always, identified by the words "expects", "plans", "anticipates", "believes", "intends", "estimates", "projects", "potential" and similar expressions, or are events or conditions that "will", "would", "may", "could" or "should" occur or be achieved. These statements are not guarantees of future performance and are subject to risks, uncertainties and other key factors that could cause actual results or events to be materially different from those anticipated in such forward-looking statements.

Specific forward-looking statements contained in this news release includes, amongst others, statements and management's beliefs, expectations or intentions regarding the following:  economic recovery and business performance; progress on Tervita's ESG initiatives; de-levering its balance sheet; exercising disciplined cost management, anticipated benefits from annualized structural cost savings implemented in the first half of 2020; anticipated benefits from commercial, organizational and cost strategies implemented within Tervita's Industrial Services business; anticipated benefits from investments at Tervita's Montney water disposal facility and business acquisitions; capital allocation plans for 2021, including planned expenditures related to growth and expansion and maintenance; reopening following COVID-19 pandemic-related shutdowns and the impact of reopening on Tervita's business performance; 2021 Adjusted EBIDTA expectations; plans to allocate discretionary free cash flow between Tervita's two main priorities: de-levering its balance sheet and delivering low-cost, high-impact projects and the expected results therefrom; plans to continue looking for cost reduction opportunities and efficiencies and the expected results therefrom; Tervita's business continuity plan in response to the COVID-19 pandemic; and assessments regarding legal matters.

Forward-looking statements relating to our business contain assumptions about, among other things: current economic and operating conditions, including commodity prices, interest rates, and environmental and regulatory matters; the ability of Tervita's customers to recover from the current economic and operating conditions; the ability of Tervita to access government assistance programs as needed; the ability of Tervita to execute on cost savings measures; the ability of Tervita to execute on its business continuity plan in connection with the COVID-19 pandemic; Tervita's ability to maintain sufficient liquidity in the current ever-changing economic and operating conditions; Tervita's ability to obtain equipment, services, supplies and personnel to carry out its business activities; Tervita's ability to successfully market its business in the areas in which it operates; that Tervita's current business environment will remain substantially unchanged; and Tervita's ability to secure financing on acceptable terms, if needed.

Forward-looking statements and information should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether such results will be achieved. Actual results could differ materially from those anticipated in forward-looking statements as a result of uncertainties and risk factors, including but not limited to, those risks relating to Tervita described in our MD&A for Q4 2020 and our most recent Annual Information Form ("AIF") dated March 4, 2021. These factors should not be construed as exhaustive. The forward-looking statements included in this news release are made only as of the date hereof and Tervita does not undertake to publicly update these forward-looking statements for new information, future events, or otherwise, except as required by applicable laws. Any forward-looking statements contained herein are expressly qualified by this cautionary statement. For additional information relating to Tervita, including our AIF, please see our profile on SEDAR, available at www.sedar.com.

Any financial outlook set forth in this news release, including expectations regarding Adjusted EBITDA for 2021 and Tervita's capital spending program, was approved by management as of the date of this news release to provide investors with an estimation of the outlook for Tervita for 2021 and onwards, where applicable, and readers are cautioned that any such financial outlook contained herein should not be used for purposes other than those for which it is disclosed herein. The prospective financial information set forth in this news release has been prepared by management. Tervita's management believes that the prospective financial information has been prepared on a reasonable basis, reflecting management's best estimates and judgements, and represents, to the best of management's knowledge and opinion, Tervita's expected course of action in developing and executing its business strategy and growth opportunities relating to its business operations. However, actual results may vary from the prospective financial information set forth in this news release. See above for a discussion of the risks that could cause actual results to vary. The prospective financial information set forth in this news release should not be relied on as necessarily indicative of future results.

Non-GAAP Financial Measures
Certain financial measures identified in this news release are not prescribed by Internal Financial Reporting Standards ("IFRS") and therefore are considered non-GAAP measures. All non-GAAP measures presented herein do not have any standardized meaning and therefore are unlikely to be comparable to similar measures presented by other companies. Therefore, these non-GAAP measures should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. All non-GAAP measures are included because management uses the information to analyze operating performance and results, and therefore may be considered useful information by investors. Any non-GAAP measure presented herein has been identified and the applicable definition and reconciliation of such non-GAAP measure can be found in MD&A for Q4 2020 available at www.tervita.com or www.sedar.com.

All non-GAAP measures presented herein do not have any standardized meaning and therefore are unlikely to be comparable to similar measures presented by other companies. Therefore, these non-GAAP measures should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. Readers should refer to Tervita's most recently filed Financial Statements and accompanying MD&A filed on www.sedar.com for the definition and reconciliation of these non-GAAP measures to the most directly comparable GAAP measure in Tervita's financial statements for prior completed periods.

SOURCE Tervita Corporation