1
ANNUAL
REPORT
2018
About Redishred
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 $40 million USD.
Growth Strategy
Redishred’s strategy is to:
§ Maximize organic same location revenue (particularly scheduled/recurring revenue),
§ Expand the location footprint in North America by way of franchising and
acquisitions, and
§ Drive service depth and cash flows in current locations by way of tuck-in
acquisitions.
Vision | Purpose | Goals
2
Redishred Capital Corp. | Annual Report 2018
2018 Highlights
30.0%
Corporate Location
Return on Invested Capital
$2.3M
16%
Consolidated Operating Income
Annual Increase in
Operating Income Less Interest
16.0%
System Sales Growth
(Same Locations)
47.0%
Scheduled
(Recurring System Sales)
63.4%
Operating Income Less Interest
Compound Annual Growth Rate
Since 2013
$40M
System Sales (USD)
40+ Markets
Serviced in the United States
Redishred Capital Corp. | Annual Report 2018
3
Financial and Operational Highlights
(Value in 000's, except per unit amounts and where noted)
Operations in Canadian Dollars
Franchise system royalty revenue
Corporate location revenue
Corporate location EBITDA
Consolidated Operating Income ("OI")
Consolidated Net Income
Normalized Operating Income/Share (diluted)
Financial Position
Total assets
Total liabilities
Total equity
Shares outstanding (At Dec 31)
Working capital
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)
2018
2017 % Change
$2,166
$12,015
$4,409
$2,340
$2,712
$0.041
$2,015
$9,315
$3,594
$2,176
$1,056
$0.046
$27,943
$7,995
$19,880
66,557
$7,288
0.29
1.94
1.69
$11,506
$5,461
$6,044
47,503
$1,411
0.42
2.30
1.28
$39,841
47%
$39,343
47%
$34,070
48%
$33,869
48%
7%
29%
23%
8%
157%
-11%
143%
46%
229%
40%
417%
31%
16%
32%
17%
16%
4
Redishred Capital Corp. | Annual Report 2018
Charts related to Financial and Operational Highlights
System Sales (USD)
In Millions
Service Recycling
$8
$6
$5
$32
$28
$25
$4
$4
$21
$17
$3
$3
$12
$14
2012 2013 2014 2015 2016 2017 2018
Corporate Location
Operating Income
(CAD- In 000's)
Debt as a % of Total
Assets
$3,300
106% 106% 104%
95% 94%
$2,600
$2,000 $2,000
$1,700
$900
$373
42%
29%
2012 2013 2014 2015 2016 2017 2018
2012 2013 2014 2015 2016 2017 2018
Consolidated Operating
Income per Share (diluted)
Return on Invested Capital
- Corporate Locations
$0.065
$0.059
$0.046
$0.041
31.3%
31.5%
28.6%
30.0%
26.6%
$0.017
14.1%
2012 2013 2014 2015 2016 2017 2018
7.3%
-$0.009
-$0.027
Letter from CEO
2012 2013 2014 2015 2016 2017 2018
Redishred Capital Corp. | Annual Report 2018
5
Dear Shareholders:
I am pleased to report that 2018 was another 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 13% to $31.1 million USD; when we include
paper revenue we were $40 million in system sales. We attained $3.5 million CAD in
EBITDA with $3.0 million in EBITDA from existing locations. Finally, we expanded our foot
print into two new markets, including Northern New Jersey, via $7.8M CAD in accretive
acquisitions. Our corporate locations continued to provide a strong return on invested
capital of 30.0% in 2018.
The strong returns in 2017 and the first quarter of 2018 provided Redishred with the
opportunity to raise $11M CAD in new equity at $0.60 per share. The new equity was
issued to five new institutional investors and to a broadened retail investor base, creating
increased liquidity for our shareholders. Redishred’s share price from December 30, 2017
to December 31, 2018 increased by 20.0%.
The PROSHRED® system continued to perform, with system sales increasing by 17% in
2018 over 2017. Scheduled recurring system sales continued its steady climb, reaching
$18.6M USD, representing 47% 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 2018. As noted, we raised $11 million
of new equity in July. In the fall of 2018, Redishred’s truck financing line of credit was
increased from $1M USD to $1.7M USD. With these transactions, we reduced debt as a
percentage of total assets to 29%, which is a reduction of 31% from December 31, 2017.
As at December 31, 2018, Redishred had $10M in existing banking facilities and cash on
hand to react quickly to acquisition opportunities.
Redishred invested just under $8 million in acquisitions in 2018. These acquisitions
included the purchase of Shred Con in Up-State New York, On Guard Shredding in New
York City and Safe Shred in Northern New Jersey. All the acquisitions have been cash
flow positive since they were acquired, including transition costs.
6
Redishred Capital Corp. | Annual Report 2018
The Safe Shred acquisition in particular provided Redishred with the opportunity to enter
the North New Jersey market, increasing the PROSHRED® location footprint. I am very
pleased with the results of the acquisitions conducted in 2018, and we are looking forward
to conducting further acquisitions in 2019 and beyond.
As we enter 2019, we continue to be optimistic and poised for growth as we continue to
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.
to ensure we create automated yet
We took the initial steps of investing in and developing an integrated technology platform.
The technology goals included 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
individualized
communication with our clients. The investment made in 2017 and early 2018 has allowed
for enhanced and easy client interactions with PROSHRED® on the phone, email and other
communication channels, as well as created 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 2019 will be a strong year for Redishred, we expect stronger system sales
(particularly scheduled recurring sales), better earnings from our franchised and corporate
locations, and continued franchising and 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 28, 2019 at 1:00 PM Atlantic Time at the
Courtyard Marriott Hotel, Halifax. I am looking forward to providing updates on our 2019
progress at that time.
Yours truly
Jeffrey Hasham
Redishred Capital Corp. | Annual Report 2018
7
Performance Compared to 2018 Targets
Growth of Same Location Service System Sales(1):
2018 Target
Growth of 10% to $30.25M USD.
2018 Performance
Exceeded target
Redishred’s same location service system sales (scheduled and
unscheduled sales) grew by 13% over 2017, achieving $31.1M
USD.
Consolidated EBITDA and Operating Income from existing operations(2):
2018 Target
Attain EBITDA of $3.3M from existing locations, growing by 14%
over 2017 EBITDA.
Attain operating income of $2.3M from existing operations,
growing by 10% over 2017 normalized operating income.
During 2018, Redishred earned $3.0M in EBITDA from existing
operations, an increase of 2% over 2017. Redishred earned
$1.9M in consolidated operating income from existing operations
in 2018, a decrease of 3% over 2017. The Company did not
achieve its target as a result of:
2018 Performance
(1) the additional investment in four salespeople and increased
Did not achieve target
Franchise Development:
2018 Target
2018 Performance
Did not achieve target
management in two of our largest locations;
(2) Board stock option grants were expensed at full value as the
options vested immediately. The Company has increased both
Board and management compensation as the Company has
enhanced its performance and compensation for both was less
than peer public companies; and
(3) no new franchises were awarded.
Open two to four new markets in the United States by way of
franchising.
The Company did not award any new franchise locations during
2018. Redishred continues to pursue franchise opportunities in
open markets and has increased its exposure with broker
agencies and at International Franchise Association events.
Expand by way of Accretive Acquisitions:
2018 Target
Conduct between $3M and $4M of acquisitions.
2018 Performance
Exceeded Target
During 2018, the Company conducted $7.8M of acquisitions.
Redishred continues to identify and market to acquisition targets
in the United States.
(1)
(2)
(3)
The performance targets do not include the IFRS 15 adjustments related to the adoption of the new accounting standard.
Service related sales excludes recycling sales.
Existing operations includes the same store corporate operations and the existing infrastructure. Existing operations for 2018 do not
include the three acquisitions conducted during the year.
8
Redishred Capital Corp. | Annual Report 2018
2019 & Long-Term Targets
Growth of Same Location Service System Sales(1):
2019 Target
Growth of 10% to $43.7M USD.
Longer-term target
Growth between 8% and 10% per annum.
Consolidated EBITDA and Operating Income from existing operations(2):
2019 Target
Longer-term target
Attain EBITDA of $3.5M from existing locations, growing by 14%
over 2018 EBITDA from existing locations.
Attain operating income of $2.1M from existing locations,
growing by 11% over 2018 operating income from existing
locations.
This does not include the North New Jersey results as the
acquisition was completed on October 1, 2018 or the Kansas
results as the acquisition was completed on January 31, 2019.
Attain EBITDA and Operating Income growth of 5% to 10% from
existing locations.
EBITDA and Operating Income from acquired operations:
2019 Target
Longer-term target
Franchise Development:
2019 Target
Attain EBITDA margin of at least 35% and operating income
margin of 27%.
Maintain EBITDA and operating income margins of 35% and
27% respectively.
Open one new market in the United States by way of
franchising.
Longer-term target
Continue to add one new market per annum.
Expand by way of Accretive Acquisitions:
2019 Target
Conduct between $7M and $10M of acquisitions.
Longer-term target
Increase the Corporately operated portfolio from 8 to 12
locations by 2020. Expand the PROSHRED® footprint by at least
one location per year.
(1)
(2)
Service related sales excludes recycling sales.
Existing operations includes the same store corporate operations and the existing infrastructure. Existing operations for 2018 and 2019 do not include the
North New Jersey and Kansas City acquisitions.
Redishred Capital Corp. | Annual Report 2018
9
Raising Funds for the American Institute for Cancer Research
A Letter from Jeffrey Hasham, CEO
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 over $150,000 USD for AICR
since 2014. This year marks the 6th 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
10
Redishred Capital Corp. | Annual Report 2018
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 2018
11
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.
Francesco Marascia, MBA, CM
Vice President of Marketing
Mr. Francesco Marascia joined Redishred in July 2016. Prior to be appointed to his
position, Mr. Marascia was the National Marketing Director for Redishred.
Mr. Marascia brings over 15 years of experience developing Omni-Channel
strategies across a range of sectors with a strong emphasis on digital technologies.
12
Redishred Capital Corp. | Annual Report 2018
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
Charlotte, North Carolina
803 Pressley Rd - Suite 108
Charlotte, NC 28217
Fort Lauderdale, Florida
5217 NW 35th Avenue
Fort Lauderdale, FL 33309
Watertown, New York
118 N Massey St.
Watertown, NY 13601
Northern Virginia
44845 Falcon Pl #104,
Sterling, VA 20166
Miami, Florida
201 South Biscayne Blvd Suite 2800
Miami, FL 33131
Milwaukee, Wisconsin
1425 Commerce Ave – Unit C
Brookfield, WI 53045
Northern New Jersey, New Jersey
152 Eagle Rock Avenue
Roseland, NJ 07068
Redishred Capital Corp. | Annual Report 2018
13