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ANNUAL
REPORT
2017
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 40 markets in the United States with System Sales of just under $35
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
acquisitions, and
§ Drive depth of service and cash flows in existing locations by way of tuck-in
acquisitions.
Vision | Purpose | Goals
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Redishred Capital Corp. | Annual Report 2017
2017 Highlights
31.5%
Corporate Location
Return on Invested Capital
$0.05
Normalized Operating
Income per Share
(Fully Diluted)
25.4%
Annual Increase in Normalized
Operating Income
15.0%
System Sales Growth
(Same Locations)
48.0%
Scheduled
(Recurring System Sales)
72.9%
Operating Income Growth Since 2014
$34.1M
System Sales (USD)
40+ Markets
Serviced in the United States
Redishred Capital Corp. | Annual Report 2017
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Financial and Operational Highlights
(Value in 000's, except per unit amounts and where noted)
Operations in Canadian Dollars
2017
2016 % Change
Franchise system revenue
Corporate location revenue
Corporate location EBITDA
Consolidated Normalized Operating Income ("OI (1)")
Consolidated Net Income
Normalized Operating Income/Share (diluted)
$2,022
$9,315
$3,594
$2,213
$817
$0.05
$2,118
$7,482
$2,608
$1,923
$174
$0.06
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 (USD)
% scheduled (recurring)
System sales - same location (USD)
% scheduled (recurring)
$11,506
$4,815
$6,690
47,503
$1,411
0.42
2.30
1.28
$10,001
$9,483
$519
28,885
$116
0.94
1.18
3.39
$34,070
48%
$33,869
48%
$29,673
48%
$29,498
48%
-5%
24%
38%
16%
370%
-17%
15%
-49%
1,189%
64%
1,120%
-56%
95%
-62%
15%
15%
(1) 2017: Excludes one-time costs related to the issuance of options as part of the equity financing conducted in the
first quarter of 2017. 2016: 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) The 2016 working capital has been reduced 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 2017
Charts related to Financial and Operational Highlights
System Sales (USD)
In Millions
Service
Recycling
$6
$5
$28
$25
$4
$4
$21
$17
$3
$3
$12
$14
2012 2013 2014 2015 2016 2017
Debt as a % of Total
Assets
106% 106% 104%
95% 94%
43%
Corporate Location
Operating Income
(CAD - In 000's)
$2,600
$2,000 $2,000
$1,700
$900
$373
2012 2013 2014 2015 2016 2017
2012 2013 2014 2015 2016 2017
Consolidated Operating
Income per Share (diluted)
Excluding one-time costs
$0.065
$0.059
Return on Invested
Capital - Corporate
Locations
31.3%
31.5%
28.6%
$0.047
26.6%
$0.017
14.1%
7.3%
2012 2013 2014 2015 2016 2017
-$0.009
-$0.027
2012 2013 2014 2015 2016 2017
Redishred Capital Corp. | Annual Report 2017
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Letter from CEO
Dear Shareholders:
I am pleased to report that 2017 was a successful year for Redishred. We set three key
goals for our operation and we delivered on them; we grew our same location service
system sales (not including paper revenue) by 12% to $27.5 million USD, when we include
paper revenue we were just shy of $35 million in system sales. We attained $2.9 million
CAD in Normalized EBITDA from existing operations and $3.2 million in Normalized
EBITDA when we include newly acquired locations in Northern Virginia and Buffalo, New
York. Finally, we achieved our Normalized Operating Income target from existing
locations, growing 9% over 2016 to $2.1 million in 2017. Our corporate locations provided
a return on invested capital of 31.5% in 2017, resulting in increased capital market
attention, including research coverage from three investment brokerage firms and
increased liquidity for our shareholders. Redishred’s share price from December 30, 2016
to December 29, 2017 increased by 18.3%.
The PROSHRED® system continued to perform, with system sales increasing by 15% in
2017 over 2016. Scheduled recurring system sales continued its steady climb, reaching
$16.2M USD, representing 48% of our total system sales. These results reflect the
dedication and hard work of our franchisees and the employees who support them to
provide our clients with easy and exceptional client service using our on-site information
destruction services.
Redishred’s balance sheet improved materially in 2017. We raised $5 million of equity in
January, $4 million in new cash, and $1 million by way of converting debt to equity. In
July, we secured a new loan facility with a tier one bank and used the proceeds to pay off
our existing line of credit facility with a related party, further reducing debt service and
interest costs. In the fall of 2017, Redishred was provided with a $1 million dollar USD
truck financing line of credit with a tier one bank in the United States. With these
transactions, we reduced debt as a percentage of total assets to 43%, which is a reduction
of 53% from December 31, 2016. As at December 31, 2017, Redishred has $5M in
existing banking facilities and cash on hand to react quickly to acquisition opportunities.
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Redishred Capital Corp. | Annual Report 2017
Redishred invested just under $1.5 million in acquisitions in 2017. These acquisitions
included the purchase of PROSHRED® Northern Virginia in March 2017, and the purchase
of a small book of business in Buffalo, New York in September 2017. Both these
acquisitions have been cash flow positive since they were acquired, including transition
costs. I am very pleased with the results of the acquisitions conducted in 2017, and we
are looking forward to conducting further acquisitions in 2018 and beyond.
As we enter 2018, we continue to be optimistic and poised for growth as we focus on
driving footprint growth by way of franchising and select acquisitions. We also continue to
focus on recurring revenue growth by way of investment into sales and marketing
resources, and operational efficiency by way of the deployment of enabling technology.
In 2016, we invested in centralizing accounting, administrative and sales functions in
Toronto to allow us to scale. In 2017, the impacts were seen in the solid growth in sales
and earnings. Also in 2017, we have taken the initial steps of investing in and developing
an integrated technology platform, with the goals of reducing the time it takes for sales
calls to be transacted; ensuring data from the initial point of contact is replicated in our
Client Relationship Management system, and to ensure we create automated yet
individualized communication with our clients. The investment made here will allow for
enhanced and easy client interactions with PROSHRED® on the phone, email and other
communication channels, as well as create a more efficient work flow for our franchisees
and employees. It is our view that easier communication and easier workflow will allow
us to spend more time educating our clients on the value of using PROSHRED®’s
scheduled and recurring destruction services. This platform is being delivered by
Redishred to our franchisees as part of their standard operating program.
We believe that 2018 will be a strong year for Redishred, we expect stronger system sales
(particularly scheduled recurring sales), better earnings from our existing operations, and
continued acquisition activity.
Thank you for your interest in Redishred. I would like to personally invite you to attend
our Annual Meeting of Shareholders on May 29, 2018 at 1:00PM Atlantic Time at the
Courtyard Marriott Hotel, Halifax. I am looking forward to providing updates on our 2018
progress at that time.
Yours truly
Jeffrey Hasham
Redishred Capital Corp. | Annual Report 2017
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Performance Compared to 2017 Targets
Growth of Same Location Service System Sales(1):
2017 Target
Growth of 12% to $27.5M USD.
2017 Performance
Redishred’s same location service system sales grew by 12% in 2017
over 2016, achieving $27.5M USD.
Redishred achieved its target.
Consolidated EBITDA from existing operations(2):
2017 Target
Earn EBITDA of $2.8M from existing locations, growing by 18% over
2016.
2017 Performance
Redishred exceeded its target when normalizing EBITDA.
Redishred attained $2.9M in normalized EBITDA (excluding one-time
costs related to options issued) in 2017, growing 16% over 2016.
Consolidated Operating Income from existing operations(2):
2017 Target
At least $2.0M.
2017 Performance
Redishred exceeded its target when normalizing operating income.
The Company attained $2.1M in normalized operating income after
adjusting for one-time costs related to options issued. Normalized
operating income grew 9% over 2016.
Expand by way of Accretive Acquisitions:
2017 Target
Conduct between $3M and $4M of acquisitions.
Redishred did not achieve its target.
On March 31, 2017, the Company purchased the Proshred Northern
Virginia franchise for CAD$1.4M. On September 30, 2017, the
Company purchased a small Buffalo, NY business, which is operated
out of the Syracuse, NY office.
2017 Performance
Franchise Development:
2017 Target
Award between two and four new franchised locations per annum.
2017 Performance
During 2017, the Company did not award any new franchise locations.
Redishred is actively pursuing franchise opportunities.
Redishred did not achieve its target.
(1) Service related sales excludes recycling sales.
(2) Existing operations include the existing corporate operations, the franchise system and the existing infrastructure to
support the existing locations. It does not include the North Virginia acquisition which was purchased on March 31, 2017.
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Redishred Capital Corp. | Annual Report 2017
2018 & Long-Term Targets
Growth of Same Location Service System Sales(1):
2018 Target
Growth of 10% to $30.25M USD.
Longer-term target
Growth between 8% and 10% per annum.
Consolidated EBITDA from existing operations(2):
2018 Target
Attain EBITDA of $3.3M from existing locations, growing by 14%
over 2017 normalized EBITDA.
Longer-term target
Attain EBITDA growth of 5% to 10% from existing locations.
Consolidated Operating Income from existing operations(2):
2018 Target
Attain operating income of $2.3M from existing operations,
growing by 10% over 2017 normalized operating income.
Longer-term target
Grow existing Operating Income by 8% to 10% per annum.
Franchise Development:
2018 Target
Open two to four new markets in the United States by way of
franchising.
Longer-term target
Continue to add at least two new markets per annum.
Expand by way of Accretive Acquisitions:
2018 Target
Conduct between $3M and $4M of acquisitions.
Longer-term target
Increase the Corporately operated portfolio from 7 to 12
locations by 2020.
(1) Service related sales excludes recycling sales.
(2) Existing operations includes the existing corporate operations, the franchise system and the existing infrastructure to support
the existing locations.
Redishred Capital Corp. | Annual Report 2017
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Raising Funds for the American Institute for Cancer Research
A Letter from Jeffrey Hasham, CEO
In business, we believe that preventing an information breach is simply good business, in
fact, the result of a breach of information can be permanently damaging or even deadly
to a business. This is why we are in this business, we can help our clients prevent
information breaches and prevent the severe consequences when one occurs.
In life, there are many things we can do to prevent cancer. The American Institute for
Cancer Research (“AICR”) is the cancer charity that fosters research on the relationship
of nutrition, physical activity and weight management to cancer risk. AICR interprets the
scientific literature and educates the public about the results. They have contributed more
than $96 million for innovative research on the prevention of cancer. Cancer can be
prevented.
As a Company and a Franchise System, we have raised almost $150,000 USD for AICR
since 2014. This year marks the 5th anniversary of our annual, national Shred Cancer
event that is held in early June. It is at this moment that many of us at PROSHRED® take
more than a moment to remember David Wright, our former franchisee in Charlotte, North
Carolina. He was a wonderful father and husband, a collaborative and bright business
leader and, unfortunately, did not survive his battle with brain cancer. It is in his honour
that we hold this event every year.
Please join us in early June at your nearest PROSHRED® location to not only Shred your
private information, but more importantly help join us in our endeavor to SHRED
CANCER.
Yours Truly,
Jeffrey Hasham
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Redishred Capital Corp. | Annual Report 2017
Securing Information at Your Door
Redishred and its brand PROSHRED® is the innovator of the on-site destruction process.
We shred at your door and then ensure that your shredded paper is recycled, contributing
to the reduction of waste. We are often asked, how it works and so the following outlines
our process.
Step 1: Place your confidential documents in our PROSHRED®
executive console.
Step 2: Our Customer Service Professional (CSP) will arrive at client
site at a regularly scheduled date/time.
Step 3: The CSP will empty documents into a PROSHRED® security
bin.
Step 4: The CSP brings the locked bin outside to our on-site shredding
truck.
Step 5: The bin is lifted by the truck's automated system.
Step 6: All documents are fully shredded at your door (cross cut). The
process is entirely hands-free and automated by our state-of-the-art
shredding truck.
Redishred Capital Corp. | Annual Report 2017
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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 2017
Information
Redishred Capital Corp. – Home Office
Toronto, Ontario
6505 Mississauga Road, Suite A
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 #104
Elmsford, NY 10523
Albany, New York
164 Montgomery Street
Albany, NY 12207
Syracuse, New York
6067 Corporate Drive
East Syracuse, NY 13057
Rochester, New York
75 South Clinton Ave., Suite 510
Rochester, NY 14604
Buffalo, New York
5384 Ontario Avenue
Hamburg, NY 14075
Jersey City, New Jersey
2500 Plaza 5, 25th floor
Jersey City, NJ 07311
Charlotte, North Carolina
803 Pressley Rd - Suite 108
Charlotte, NC 28217
Northern Virginia
44845 Falcon Pl #104,
Sterling, VA 20166
Fort Lauderdale, Florida
5217 NW 35th Avenue
Fort Lauderdale, FL 33309
Miami, Florida
201 South Biscayne Blvd Suite 2800
Miami, FL 33131
Milwaukee, Wisconsin
1425 Commerce Ave – Unit C
Brookfield, WI 53045
Redishred Capital Corp. | Annual Report 2017
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