Zedcor Inc. Announces First Quarter Results for 2024, MobileyeZ Manufacturing Update and USA Operations Update

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Calgary, Alberta--(Newsfile Corp. - May 22, 2024) - Zedcor Inc. (TSXV: ZDC) (the "Company") today announced its financial and operating results for the three months ended March 31, 2024.

Q1 2024 revenues were $6.1 million and the Company generated adjusted EBITDA of $1.9 million. The Company's successfully continued its customer diversification and revenue growth efforts during the quarter. Midway through February 2024, Zedcor started generating record daily revenues from its fleet of MobileyeZ^TM security towers and utilization rates for the Company's fleet of Electric MobileyeZ^TM security towers was above 90%. In addition, the Company's growth efforts in the United States are progressing well with 5% of Q1 2024 revenues being generated from US operations in three months of sales efforts. Furthermore, the Company's revenue base is now largely diversified across customers and geographies.

During the quarter, the Company had approximately 40% of its MobileyeZ^TM security tower fleet in Ontario. In addition, the Company exited Q1 2024 with 72 towers at its Houston equipment and service center which has subsequently increased to 107. These security towers have reached 100% utilization and the Company is starting to build a backlog of demand at its Houston service center. The fleet is fully deployed across a number of different customers, including the largest home builder in the US.

Subsequent to the end of the quarter, the Company also completed a $15.0 million equity financing. These funds will allow the Company to expedite its growth in the US, build more MobileyeZ^TM, and expand its offerings to additional regions in the southern US. Specifically, the Company has plans to expand to Dallas, Austin, San Antonio, West Texas and Phoenix, Arizona.

US Operations and Manufacturing Update:

Zedcor's MobileyeZ^TM manufacturing operations are continuing to ramp up. We built over 20 Solar Electric MobileyeZ^TM security towers in April and have the capacity to build 15 - 20 Solar Electric MobileyeZ^TM security towers. The Company anticipates bringing the total US fleet to 400 or more security towers by the end of 2024.

Zedcor's Solar Electric MobileyeZ^TM will be a fully standalone security tower with battery backup. It can also be plugged in to power in winter months if there is not enough sunlight. This is an innovative security tower and first of its kind in the North American market with dual power capabilities, allowing it to function in any environment across the USA and Canada. It is also zero emissions, helping customers reduce their carbon footprint and meet environmental targets.

Todd Ziniuk said: "We are continuing to see the effects of our strategic initiatives from 2023. As we expanded our equipment and service centers across Canada and into the US, we are achieving growing revenues across the Company and adding new customers every day. We anticipate strong revenue and EBITDA growth to persist in Q2 and throughout the rest of 2024 and The additional capital we received from our equity financing completed in May will allow us to accelerate our expansion in the United States. We remain excited about our growth prospects in Canada and the US, by the demand we are seeing in Texas, and the backlog that we are building in the US. With our manufacturing operations ramping up, we will be able to meet this demand, and also start to look internally for efficiencies."

FINANCIAL & OPERATING RESULTS FOR THE THREE & TWELVE MONTHS ENDED DECEMBER 31, 2023:

Zedcor recorded $6,134 of revenue for the three months ended March 31, 2024. This compares to $6,443 of revenue from for the three months ended March 31, 2023. The revenue decrease of 5% year over year was due to reductions in revenue for Zedcor's ancillary services of security personnel, cameras sales and other service revenue. The decrease was driven largely by reduced service revenues as non-pipeline security towers do not need significant service. The Company's core security and surveillance service revenue was up slightly year over year. Quarter over quarter, the Company's total revenue was up $335 or 6% and EBITDA was up $497 or 35%. Revenue increased both year over year and quarter over quarter as a result of a larger fleet of security towers, revenue growth in the US and recovering utilization rates in the latter half of Q1 2024 as the Company was able to redeploy security towers returned from its large pipeline security project which ended in Q4 2023.

Adjusted EBITDA was to $1,898 for the three months ended March 31, 2024, compared to $2,135 and for the three months ended March 31, 2023. While EBITDA decreased year over year due, in part, to higher G&A costs as a result of a larger geographical footprint and increases in sales staff, EBITDA increased quarter over quarter by 35% as a result of reduced repairs & maintenance costs and headcount reductions in Canada as we streamlined our operational G&A.

The Company's security and surveillance services continued to see strong demand and growth in revenues for the three months ended March 31, 2024 due largely to increased customer demand of its larger fleet of MobileyeZ security towers and expanded US presence. The increased revenue was offset in the first half of Q1 2024 by: 1) reduced service work and third-party revenue; and 2) reduced revenue from a two large pipeline construction projects that were completed in the second half of 2023. A majority of the security towers returned from the pipeline construction projects have been rented to new or existing customers across Canada and, therefore, reduced the Company's customer and industry concentration risks. Utilization for the Company's fleet of security towers returned to normalized historical levels in February 2024 and remain strong subsequent to the end of the quarter. Utilization exceeded 90% for the Company's fleet of Electric MobileyeZ^TM throughout Q1 2024. The Company's US based operations also ramped up throughout the quarter. The Company recognized $333 in US revenues and this helped to reduce the negative impact on adjusted EBITDA.

Zedcor exited the period with 870 MobileyeZ^TM security towers which was an increase of 55 when compared to December 31, 2023 and an increase of 306 when compared to March 31, 2023. Of the 870 units, 72 are located in Zedcor's Houston, Texas service center.

Financial and operational highlights for the three months ended March 31, 2024 include:

• For the three months ended March 31, 2024 net loss before tax was $470 compared to net income before tax of $752 for the three months ended March 31, 2023. The decrease in net income year over year is directly attributable to: 1) two of the Company's largest customers wrapping up pipeline construction projects during the second half of 2023 and 2) USA net loss, which totaled $507, negatively impacted net income before tax. When compared to the three months ended December 31, 2023, net loss decreased from ($860) to ($470) for the three months ended March 31, 2024. The decrease in net loss was due to higher revenues, lower general & administrative costs, offset by higher depreciation of equipment and finance costs.

• Diversification away from the Company's core pipeline construction customers. As the Company increases its fleet of MobileyeZ^TM and expands geographically, our risk related to customer concentration has decreased. Zedcor's services are customer and industry agonistic and we continued to see that in 2024 as we were able to diversify our customers across the construction industry and into retail security.

• Continued traction across Ontario and Texas which are key expansion areas for the Company. The Company expanded to Ottawa in Q2 2022, Toronto in Q3 2022 and Texas in Q4 2023. As at March 31, 2024, more than 50% of the Company's MobileyeZ^TM security tower fleet is located in these three service and equipment centers which is a significant change compared to all of the security towers being operated in Western Canada. The Company's intentions to diversify its geographical footprint and grow its customer base is yielding results. We are continuity to see strong demand for the Company's across these three operating regions.

• On track US expansion. In Q3 2023 the Company leased a facility and hired its first employee in the US. In addition, the Company shipped a small number of security towers for research & development purposes to help ensure supply targets are met for its 2024 expansion program. Zedcor exited the Q1 2024 with 72 MobileyeZ^TM, continued positive business development with both existing Canadian customers with operations in the US and potential US based customers, grew the sales team in the Houston market and generated $333 of revenue for the 3 months ended March 31, 2024.

• The Company continued to attract new customers across Canada. For the 3 months ended March 31, 2024, the Company has added 30 new customers.

• The Company continued to manage its supply chain and logistics. Orders were proactively placed for light tower materials, cameras and communication equipment for the Company's 2024 capital program. Zedcor also ramped up manufacturing operations out of its Houston facility in order to resolve bottle necks related to light tower assembly. By addressing this bottleneck, the Company can ramp up production to meet anticipated customer demand for the expansive US market. This will also allow the Company to control its capital costs, while designing innovative solutions in order to proactively meet customer needs.

SELECTED QUARTERLY FINANCIAL INFORMATION

LIQUIDITY AND CAPITAL RESOURCES

The following table shows a summary of the Company's cash flows by source or (use) for the three months ended March 31, 2024 and 2023:

The following table presents a summary of working capital information:

The primary uses of funds are operating expenses, maintenance and growth capital spending, interest and principal payments on debt facilities. The Company has a variety of sources available to meet these liquidity needs, including cash generated from operations. In general, the Company funds its operations with cash flow generated from operations, while growth capital and acquisitions are typically funded by issuing new equity or debt.

Principal Credit Facility

On June 6, 2023, the Company entered into a second amending agreement ("Second Amended Financing Agreement") which increased the Company's equipment financing from $6.0 million to $15.0 million. As at December 31, 2023, the Second Amended Financing Agreement provides the Company with the following:

1. A $6.1 million term loan that is fully committed for five years ("Term Loan"). The Term Loan bears interest at 5.15% and will have monthly blended principal and interest payments of $116.

2. A $15.0 million revolving equipment financing facility ("Revolving Equipment Financing"). The Company is able to draw on this facility at any time for up to 100% of new equipment purchases. The draws bear interest at Prime + 2.0% and each draw will be amortized over 5 years with blended principal and interest payments. As at March 31, 2024 the Prime Interest Rate was 7.20% and the interest rate on the Revolving Equipment Financing was 9.20%. As the Company pays down the Revolving Equipment Financing, it can borrow back up to the facility maximum of $15.0 million.

3. An authorized overdraft facility ("Authorized Overdraft") up to $3.0 million, secured by the Company's accounts receivable, up to 75%, less priority payables which are GST payable, income taxes payable, employee remittances payable and WCB payables. The Authorized Overdraft is due on demand and any outstanding overdraft bears interest at Prime + 1.5%. As at March 31, 2024 the Prime Interest Rate was 7.20% and the interest rate on the Revolving Equipment Financing was 8.70%.

The Second Amended Financing Agreement is secured with a first charge over the Company's current and after acquired equipment, a general security agreement, a subordination and postponement agreement with a director of the Company with respect to a note payable, and other standard non-financial security.

The agreement has the following quarterly financial covenant requirements, calculated on a trailing twelve month basis:

• a debt servicing covenant of no less than 1.25 to 1.00; and

• a funded debt to EBITDA covenant of no more than 3.00 to 1.00.

As at March 31, 2024, the Company is in compliance with its financial covenant requirements. The debt servicing ratio as calculated based on the Second Amended Financing Agreement was 2.04 to 1.00 and the funded debt to EBITDA was 1.95 to 1.00.

CREDIT RISK

The Company extends credit to customers, primarily comprised of construction companies, energy companies and pipeline construction companies, in the normal course of its operations. Historically, bad debt expenses have been limited to specific customer circumstances. However, the volatility in economic activity may result in higher collection risk on trade receivables. The Company has reviewed its outstanding accounts receivable as at March 31, 2024 and believes the expected loss provision is sufficient.

OUTLOOK

Zedcor continues to execute its long-term strategy of growing its technology enabled security services across North America. The Company continues to effectively use a mix of cash flow, debt and the proceeds from its equity financing to build additional MobileyeZ^TM security towers to provide surveillance services to our expanding customer base. Subsequent to March 31, 2024, the Company completed a $15.0 million equity financing which will help expedite our long-term strategy. While there was a decrease in utilization in Q4 2023 and the start of Q1 2024, this was temporary and revenue and utilization levels increased steadily during Q1 2024. The Company was able to effectively redeploy equipment to new customers throughout the Company's operating regions and grow US revenues to $333 in Q1 2024. The Company has grown its salesforce across Canada in order to obtain contracts for its MobileyeZ^TM and continue to expand its service offering to different industries. The US fleet of security towers is fully utilized and the Company continues to build a backlog of demand.

Priorities that the Company intends to focus on for the remainder for 2024 include:

• 1) Expanding operations in the United States and continuing to grow revenues in Canada. Due to significant spending on infrastructure in North America, along with increased theft and vandalism, the Company is seeing strong demand for its products in both countries. Zedcor's innovative products, coupled with the Company's commitment to customer service, are perfectly situated to disrupt the traditional security market.

• 2) With the strong demand that Zedcor is seeing for its security towers, the Company continues to further take control of its supply chain and remove bottlenecks for its security towers by manufacturing and assembling more of the components of its towers in house. This will allow us to actively manage demand and, over time, reduce our capital costs.

• 3) Building new, innovative products based on customer demand. As the Company has obtained customers in different industry verticals, it has seen an increasing number of use cases for its security solutions coupled with Zedcor's 24/7 Live, Verified^TM video monitoring. This includes a need for additional AI based technology that is actively monitored as well as a mobile security product with a smaller footprint.

• 4) The Company intends to generate customer and shareholder value and positive earnings per share. By effectively managing its growth, executing on the above noted strategies and increasing its capital markets presence, Zedcor will be able to continue to generate positive earnings per share, grow its shareholder base and increase share price.

NON-IFRS MEASURES RECONCILIATION

Zedcor Inc. uses certain measures in this MD&A which do not have any standardized meaning as prescribed by International Financial Reporting Standards ("IFRS"). These measures which are derived from information reported in the consolidated statements of operations and comprehensive income may not be comparable to similar measures presented by other reporting issuers. These measures have been described and presented in this MD&A in order to provide shareholders and potential investors with additional information regarding the Company.

Investors are cautioned that EBITDA, adjusted EBITDA, adjusted EBITDA per share, adjusted EBIT and adjusted free cash flow are not acceptable alternatives to net income or net income per share, a measurement of liquidity, or comparable measures as determined in accordance with IFRS.

EBITDA and Adjusted EBITDA

EBITDA refers to net income before finance costs, income taxes, depreciation and amortization. Adjusted EBITDA is calculated as EBITDA before costs associated with severance, gains and losses on sale of equipment and stock based compensation. These measures do not have a standardized definition prescribed by IFRS and therefore may not be comparable to similar captioned terms presented by other issuers.

Management believes that EBITDA and Adjusted EBITDA are useful measures of performance as they eliminate non-recurring items and the impact of finance and tax structure variables that exist between entities. "Adjusted EBITDA per share - basic" refers to Adjusted EBITDA divided by the weighted average basic number of shares outstanding during the relevant periods.

A reconciliation of net income to Adjusted EBITDA is provided below:

Adjusted EBIT

Adjusted EBIT refers to earnings before interest and finance charges, and taxes.

A reconciliation of net income to Adjusted EBIT is provided below:

Adjusted free cash flow

Adjusted free cash flow is defined by management as net income plus non-cash expenses, plus or minus the net change in non-cash working capital, less maintenance capital. Maintenance capital is also a non-IFRS term. Management defines maintenance capital as the amount of capital expenditure required to keep its operating assets functioning at the same level of efficiency. Management believes that adjusted free cash flow reflects the cash generated from the ongoing operation of the business. Adjusted free cash flow is a non-IFRS measure generally used as an indicator of funds available for re-investment and debt payment. There is no standardized method of determining free cash flow, adjusted free cash flow or maintenance capital prescribed under IFRS and therefore the Company's method of calculating these amounts is unlikely to be comparable to similar terms presented by other issuers.

Adjusted free cash flow from continuing operations is calculated as follows:

No Conference Call

No conference call will be held in conjunction with this release. Full details of the Company's financial results, in the form of the condensed consolidated interim financial statements and notes for the three months ended March 31, 2024 and 2023 and Management's Discussion and Analysis of the results are available on SEDAR+ at www.sedarplus.ca and on the Company's website at www.zedcor.com.

About Zedcor Inc.

Zedcor Inc., a Canadian public corporation, is a technology enabled company that is changing how physical security services are provided to businesses. Zedcor operates throughout Canada with equipment and service centers in British Columbia, Alberta, Manitoba, and Ontario. The Company also operates in Texas with a MobileyeZ^TM assembly facility in Houston and equipment and service centers in Houston, with plans to expand to Dallas, Austin, San Antonio and West Texas by the end of the year. The Company has three main service offerings to customers across all market segments: 1) surveillance and live monitoring through its proprietary MobileyeZ security towers; 2) surveillance and live monitoring of fixed site locations; and 3) security personnel.

The Company operates a fleet of over 950 proprietary MobileyeZ^TM security towers, equipped with high resolution, technology-based cameras, and monitors numerous fixed site locations for customers across various industries. Video from security towers and fixed site locations is streamed to the Company's central monitoring station where video alarms are live verified and responded to based on customer requirements. Zedcor also offers high level security guard services to enterprise level customers who are interested in supplementing video-based security for valuable, high risk, or mission critical operational assets.

FORWARD-LOOKING STATEMENTS

Certain statements included or incorporated by reference in this MD&A constitute forward-looking statements or forward-looking information, including management's belief that streamlining rental assets with newer equipment will drive improvements in equipment rental rates and utilization, and that the expanded market reach and customer base will lead to more diversity in the Company's revenue stream and increase utilization. Forward-looking statements or information may contain statements with the words "anticipate", "believe", "expect", "plan", "intend", "estimate", "propose", "budget", "should", "project", "would have realized', "may have been" or similar words suggesting future outcomes or expectations. Although the Company believes that the expectations implied in such forward-looking statements or information are reasonable, undue reliance should not be placed on these forward-looking statements because the Company can give no assurance that such statements will prove to be correct. Forward-looking statements or information are based on current expectations, estimates and projections that involve a number of assumptions about the future and uncertainties. These assumptions include that the Company's new solar hybrid light tower and related security and surveillance service offerings will lead to more diversity in revenue streams and protect against future down swings in the economic environment. Although management believes these assumptions are reasonable, there can be no assurance that they will prove to be correct, and actual results will differ materially from those anticipated. For this purpose, any statements herein that are not statements of historical fact may be deemed to be forward-looking statements. The forward-looking statements or information contained in this MD&A are made as of the date hereof and the Company assumes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new contrary information, future events or any other reason, unless it is required by any applicable securities laws. The forward-looking statements or information contained in this MD&A are expressly qualified by this cautionary statement.

This MD&A also makes reference to certain non-IFRS measures, which management believes assists in assessing the Company's financial performance. Readers are directed to the section above entitled "Financial Measures Reconciliations" for an explanation of the non-IFRS measures used.

For further information contact:

Todd Ziniuk
Chief Executive Officer
P: (403) 930-5430
E: tziniuk@zedcor.com

Amin Ladha
Chief Financial Officer
P: (403) 930-5430
E: aladha@zedcor.com

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

To view the source version of this press release, please visit https://www.newsfilecorp.com/release/210186