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ANNUAL
REPORT
2016
About Redishred Capital Corp.
Profile
Redishred Capital Corp. (“Redishred” or “the Company”) is a growth-oriented company
that owns the PROSHRED® Platform (“PROSHRED®”) and operates in the information
destruction industry. Redishred through PROSHRED®, provides information destruction
services in over 30 markets in the United States with System Sales of just under $30
million USD.
Growth Strategy
Redishred’s strategy is to:
§ Maximize organic same location revenue (in particular scheduled/recurring revenue)
and earnings,
§ Expand the location footprint in North America by way of franchising and accretive
acquisitions, and
§ Drive depth of service and cash flows in existing locations by way of accretive tuck-
in acquisitions.
Mission
PROSHRED® will consistently and reliably provide the best on-site information security
and liability protection for our clients.
Core Values
Honest and Integrity | Professionalism | Strong Work Ethic and Initiative | Protection of
the Environment | Lifelong Learning | Health | Family and Fun | Team Work.
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Redishred Capital Corp. | Annual Report 2016
2016 Highlights
28.6%
Corporate Location
Return on Invested Capital
$0.066
Normalized Operating
Income per Share
(Fully Diluted)
8.3%
Annual Increase in Normalized
Operating Income per Share
(Fully Diluted)
19.0%
System Sales Growth
(Same Locations)
48.0%
Scheduled
(Recurring System Sales)
23.3%
5 Year Average EBITDA Growth Rate
Corporate Locations
(Same Locations)
$29.7M
System Sales (USD)
30+ Markets
Serviced in the United States
Redishred Capital Corp. | Annual Report 2016
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Financial and Operational Highlights
(Value in 000's, except per unit amounts and where noted)
2016
2015 % Change
Operations
Franchise system revenue
Corporate location revenue
Corporate location EBITDA
Consolidated Normalized Operating Income ("OI (1)")
Consolidated Net Income
Normalized Operating Income/Share (diluted)
Financial Position
Total assets
Total liabilities
Total equity
Shares outstanding (At Dec 31)
Working capital (2)
Debt to total assets ratio
Fixed Charge Coverage ratio
Total funded Debt to EBITDA ratio
System Information
System sales
% scheduled (recurring)
System sales - same location
% scheduled (recurring)
$2,118
$7,482
$2,608
$1,916
$174
$0.066
$1,757
$5,921
$2,537
$1,820
$892
$0.061
$10,001
$9,483
$519
28,885
$116
0.95
1.18
3.39
$10,714
$10,184
$530
28,885
$22
0.95
1.36
3.52
$29,673
48%
$29,498
48%
$24,883
49%
$24,726
49%
21%
26%
3%
5%
-80%
8%
-7%
-7%
-2%
0%
427%
0%
-13%
-4%
19%
19%
(1) Excludes one-time costs that relate to non-capitalized financing costs as a result of the financing process that
commenced in the fourth quarter, accounting and consulting costs related to the corporate structure and stock based
compensation expense for the issuance of options to technical advisors.
(2) Working capital has been increased by $4.5M for this calculation as the Line of Credit that was due to expire on
November 27, 2017 was extended by 2 years shortly after year end. Under IFRS the Line of Credit was fully classified
as current.
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Redishred Capital Corp. | Annual Report 2016
Charts related to Financial and Operational Highlights
System Sales (USD)
In Millions
Service
Recycling
$5
$4
$25
$21
$4
$17
$3
$3
$12
$14
2012 2013 2014 2015 2016
Corporate Location
Operating Income
(CAD - in 000's)
$2,000 $2,000
$1,700
Debt as a % of Total
Assets
106% 106%
104%
$900
$373
95%
94%
2012 2013 2014 2015 2016
2012 2013 2014 2015 2016
Consolidated Operating
Income per Share (diluted)
Excluding one-time costs
$0.066
$0.061
Return on Invested Capital
- Corporate Locations
31.3%
28.6%
26.6%
$0.017
14.1%
7.3%
2012 2013 2014 2015 2016
-$0.009
-$0.027
2012 2013 2014 2015 2016
Redishred Capital Corp. | Annual Report 2016
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Letter from CEO
Dear Shareholders,
I am pleased to report that we had another year of growth in many areas at Redishred. In
2016 Redishred achieved $2.5M in normalized EBITDA, creating a stable base from which
to invest in people, trucks and technology. These investments were taken with a view to
creating sustainable and scalable growth in 2017 and beyond. During 2016, we hired new
operational support specialists as well as a new National Director of Marketing, with a
view to grow sales and penetrate the market. Simultaneously, in our Corporate locations,
we (1) continued to enhance our local management and sales teams by way of hiring
stronger skilled managers and then (2) investing in our managers and in their team’s
success with on-going training and support programs, and (3) continued to review our
truck fleet, replacing trucks where warranted and adding new trucks when capacity is
being achieved. Our goal is to reduce truck downtime and to enhance client service.
The aforementioned investments were all conducted while doubling the principle paid on
our line of credit (we paid down $500K in 2016 versus $250K in 2015). As a result, our
balance sheet continued to improve with debt as a percentage of total assets declining to
94%. Since 2014, the company has reduced debt as a percentage of total assets by 8%.
In 2017, Redishred will be looking to further reduce its’ debt levels as well as the cost of
its’ debt. Management believes that reducing debt levels and the cost of its debt will allow
the Company to reduce operational risk and enhance overall cash generation.
In 2016, the Company also took the opportunity to review its entire order to cash
operations and began the process of transitioning its Corporate location inside sales
functions and invoicing and receivables functions to its National Support Centre in
Mississauga, Canada. This decision was deemed crucial in order to create a platform for
sustainable and scalable growth going forward.
With the aforementioned items all occurring simultaneously, Redishred continued to
perform well financially:
(1) Increasing system sales from close to $25 million US dollars in 2015 to just shy of
$30 million US dollars in 2016.
(2) Corporate location operating income remained steady at $2 million in 2016 versus
2015, including the significant investment made in people, trucks, technology and
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Redishred Capital Corp. | Annual Report 2016
centralization. Management believes that Corporate location operating income is
poised to grow in 2017 as a result of these investments.
(3) Consolidated operating income per share (Excluding one-time costs) increased by
8% in 2016 over 2015 to $.061. Since 2012, that is an increase of $0.092 in
consolidated operating income per share (Excluding one-time costs).
Our management team at Redishred remains committed to maximizing the Company’s
long-term profitability by focusing on its’ key performance areas; (1) maximize organic
same location revenue (in particular scheduled/recurring revenue) and earnings, (2)
expand the location footprint in North America by way of franchising and accretive
acquisitions, and (3) drive depth of service and cash flows in existing locations by way of
accretive tuck-in acquisitions.
Increasing our same location revenue and earnings is a crucial element to achieving
growth. Our franchisees and corporate locations all performed well in 2016, with organic
same location system sales growing 19%. Our Corporate location revenues grew by 14%
not including acquired revenue. The entire PROSHRED® system continues to deliver the
same message and the same client promise, that we will destroy our client’s information
on-site at their door, and this continues to resonate with a broad base of clients in the
United States.
Franchising has always been a core differentiator and feature for PROSHRED®. In 2016,
PROSHRED® launched operations in three new markets, led by Mark Lindgren in
Minnesota, Mark MacMillan in Orlando, FL and Nguyen Violette in St. Louis, MO. As
these locations grow from infancy to maturity, the Company will see an increase in royalty
revenues from these locations.
Looking forward, acquisitions will play a larger role for Redishred and the PROSHRED®
system. During 2016, a number of franchisees conducted acquisitions of smaller
independents, with a view to enhancing service coverage and route density in their
markets.
Redishred also integrated one tuck-in acquisition in the Miami/Fort Lauderdale market.
This acquisition performed well for Redishred, achieving just under 30% return on
invested capital in its first year. Redishred anticipates conducting between $3 million and
$4 million in acquisition value in 2017.
Last, but never least, PROSHRED® continues to commit to social and green causes.
(1) PROSHRED® continues to be a proud partner of the American Institute of Cancer
Research with the goal to raise funds for the cancer prevention research they do.
Redishred Capital Corp. | Annual Report 2016
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On June 3, 2017, PROSHRED® will be holding its 4th annual Shred Cancer Event
in every single PROSHRED® location in the United States.
(2) During 2016, PROSHRED® shred and recycled 40,000 tons of paper, which
equates to 603,000 trees being saved.
In closing, the management team of Redishred Capital Corp. would like to thank our hard
working and dedicated franchisees and employees for their efforts and support in growing
the PROSHRED® brand. Furthermore, we would like to thank our board of directors,
shareholders, suppliers and most importantly our clients for their ongoing support.
PROSHRED® continues to demonstrate that it is the system of choice for on-site
information destruction, and we are looking forward to continuing our growth in 2017 and
onwards.
Yours truly,
Jeffrey Hasham
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Redishred Capital Corp. | Annual Report 2016
Recap of Strategy and 2017 Targets (In Canadian Dollars except where noted)
Growth of Same Location Service System Sales (1):
2017 Target
Longer-term target
Growth of 12% to $27.5M USD.
Growth between 8% and 10% per annum.
Consolidated EBITDA from existing operations:
2017 Target
Longer-term target
Attain EBITDA of $2.8M from existing locations,
growing by 18% over 2016.
Attain EBITDA growth of 5% to 10% from existing
locations.
Consolidated Operating Income from existing operations (2):
2017 Target
Longer-term target
At least $2.0M
Grow existing Operating Income by 10% to 15% per
annum.
Expand by way of Accretive Acquisitions (3):
2017 Target
Conduct between $3M and $4M of acquisitions.
Longer-term target
Increase the Corporately operated portfolio from 6 to
12 locations by 2020.
Franchise Development:
2017 Target
Longer-term target
Award between two and four new franchised locations
per annum.
Continue to add a minimum of 2 new franchised
locations per annum.
(1) Service related sales excludes recycling sales.
(2) Existing operations includes the existing corporate operations, the franchise system and the existing
infrastructure to support up the existing locations.
(3) Acquisitions may include tuck-in acquisitions within existing corporate locations. These would not be
considered as a net new location.
Redishred Capital Corp. | Annual Report 2016
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Management Team
Jeffrey Hasham, CPA, CA
Chief Executive Officer
Mr. Hasham is the Chief Executive Officer of Redishred. He has held this position
since April 2011. Mr. Hasham has worked in franchising and in particular with
logistics based franchise concepts for 16 years. Mr. Hasham is also a Chartered
Professional Accountant, having articled at Ernst & Young LLP.
Kasia Pawluk, CPA, CA
Chief Financial Officer
Mrs. Pawluk is the Chief Financial Officer of Redishred, a position she has held
since April 2011. Prior to being appointed to her current position, Mrs. Pawluk was
the Manager of Finance for Redishred. Mrs. Pawluk is also a Chartered
Professional Accountant, having articled with the accounting firm of Deloitte LLP.
Ron Gable
Senior Vice President of Performance & Operations
Mr. Gable is the Senior Vice President of Performance and Operations. He has held
this position since November 2015 and has been employed with the Company since
July of 2015. Mr. Gable has spent 25 years as a business strategy and performance
consultant. His clients included many multi-national corporations with multiple
branches and with diverse business models, including franchising and logistics.
Jack Pulkinen, CPA, CA
Senior Vice President of Corporate Development
Mr. Pulkinen is the Senior Vice President of Corporate Development. From
October 2015 to October 2016, Mr. Pulkinen was the Chief Financial Officer of
Redishred. Mr. Pulkinen has spent 30 years working with leading Public
Companies and Private Equity backed Companies in senior and NEO roles. Mr.
Pulkinen is also a Chartered Professional Accountant, having articled with
Clarkson Gordon (now Ernst & Young LLP).
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Redishred Capital Corp. | Annual Report 2016
Information
Redishred Capital Corp. – Home Office
Toronto, Ontario
6559 Mississauga Road, Suite B
Mississauga, Ontario, Canada, L5N 1A6
PROSHRED® Franchising Corp.
Syracuse, New York
6067 Corporate Drive
East Syracuse, NY 13057
Redishred Acquisition Inc. – US Offices:
New York City, New York
5 West Main Street Suite #200
Elmsford, NY 10523
Albany, New York
164 Montgomery Street
Albany, NY 12207
Syracuse, New York
6067 Corporate Drive
East Syracuse, NY 13057
Milwaukee, Wisconsin
1425 Commerce Ave – Unit C
Brookfield, WI 53045
Charlotte, North Carolina
803 Pressley Rd - Suite 108
Charlotte, NC 28217
Miami, Florida
201 South Biscayne Blvd Suite 2800
Miami, FL 33131
Fort Lauderdale, Florida
2300 NW 30th Ct
Fort Lauderdale, FL 33311
Northern Virginia
44845 Falcon Pl #104,
Sterling, VA 20166
Redishred Capital Corp. | Annual Report 2016
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