Atlas Engineered Products Reports First Quarter 2023 Financial and Operating Results
Atlas Engineered Products (“AEP” or the “Company”) (TSXV: AEP) (OTC Markets: APEUF) is pleased to announce its financial and operating results for the three months ended March 31, 2023. All amounts are presented in Canadian dollars.
“I continue to be proud of the AEP team that produced another solid quarter with relatively stable margins in spite of the reduced material prices, increased interest rates causing downward momentum in the contruction sector, and a more overall competitive market,” said Hadi Abassi, CEO & President, Founder. “We continue to work hard to ensure the Company is moving forward with organic and acquisitive growth as more housing is desperately needed in Canada and we strive to be the partner of choice for contractors and homeowners during their construction projects.”
Financial Highlights for Q1 2023:
- Revenue for the three months ended March 31, 2023 was $9,629,368 compared to revenue of $12,434,414 for the three months ended March 31, 2022. Revenues have decreased due to some material prices (ie: lumber) stabilizing at significantly lower prices than the prior two years. The market has also seen a slowdown in some areas across Canada, mainly Ontario, due to rising interest rates resulting in the construction industry pausing to assess affects on new housing demand, which has led to reduced housing starts. The Company expects this slowdown to be short in duration and that markets will strengthen as they adjust to current market conditions and the increased demand due to significant growth in population and the ongoing housing deficit.
- Gross margin for the three months ended March 31, 2023 was 30%, which was down slightly from a gross margin of 31% for the three months ended March 31, 2022. Gross margins reduced slightly due to a more competitive market that resulted in the return of “winter work” compared to the last two years where demand was very high year round. “Winter work” are jobs taken at lower margins to fill the winter months and keep skilled staff.
- Operating expenses increased by $216,481 for the three months ended March 31, 2023 compared to the three months ended March 31, 2022. 45% of this increase is due to non-cash items of depreciation and amortization and share based payments. 55% of the increase is related to cash outlay expenses, mainly salaries and benefits. The Company is preparing for future organic and M&A growth and with this anticipated growth it was required to bolster human resources in advance to ensure the Company is ready and able to handle the growth and geographical expansion.
- Net income was $543,300 for the three months ended March 31, 2023 compared to net income of $1,563,301 for the three months ended March 31, 2022. This decrease primarily due to decreased sales and increased operating expenses.
- Non-IFRS Adjusted EBITDA and normalized EBITDA for the three months ended March 31, 2023 was $1,739,974 with an adjusted EBITDA and normalized EBITDA margin of 18%, which is a decrease from $2,957,446 and 24%, respectively, for the three months ended March 31, 2022. These decreases were mainly due to decreased sales due to market conditions and increase in operating expenses compared to the decreased sales. The Company anticipates this to change as the market stabilizes and future growth occurs.
|SELECTED FINANCIAL RESULTS||Three|
|Cost of Sales||6,773,587||8,548,057|
|Gross Margin %||30 %||31 %|
|Net Income After Adjustments and Taxes||543,300||1,563,301|
|Adjusted EBITDA Margin %||18 %||24 %|
|Normalized EBITDA Margin %||18 %||24 %|
|Weighted Average Number of Shares||57,881,215||58,581,042|
|Adjusted EBITDA per Share ($ per share)||0.03||0.05|
|Income per Share, Basic ($ per share)||0.01||0.03|
|Income per Share, Fully Diluted ($ per share)||0.01||0.02|
|Selected Financial Information as at:|
|Mar 2023||Dec 2022|
|Total Non-Current Liabilities||14,101,878||14,757,079|
Normal Course Issuer Bid (“NCIB”) Update:
From the renewal of the NCIB on December 1, 2022, the Company has acquired 738,000 shares for cancellation. The NCIB is ongoing until December 1, 2023 and the Company may purchase up to 4,732,015 common shares of the Company. All purchases of common shares will be made on the open market through the facilities of the TSXV and will be purchased for cancellation.
Outlook for 2023:
Housing starts in some parts of the country have declined due to the increase in interest rates and colder than normal winter weather. While the company witnessed a slowdown in the Ontario region in the first quarter, business activity in British Columbia and Manitoba remained robust. Quarter 1 revenues were also impacted by a large order that was delayed and is now expected to be recognized in the second and third Quarter.
AEP has built a strong pipeline of M&A opportunities and will continue to assess new M&A opportunities that fit within the Company’s goals and strategies, while also working to bring the latest automation to improve operational efficiencies, and adding new products and services to better serve our customers.
The Company is continuing to operate in a more competitive market for 2023 as interest rates have risen in order to slow inflation. The Company currently anticipates that increased interest rates will have a minimal overall affect on the housing market after the initial impact of the increase given the number of homes that are still needed to support Canada’s continued population growth and immigration. The Company will continue to monitor the effects of interest rates on the housing market, and is prepared to manage pricing and explore new markets in order to continue to drive organic growth as much as possible during fiscal 2023.
For the complete press release, click here.
About Atlas Engineered Products Ltd.
AEP is a growth company that is acquiring and operating profitable, well-established operations in Canada’s truss and engineered products industry. We have a well-defined and disciplined acquisition and operating growth strategy enabling us to scale aggressively and apply new technologies, giving us a unique opportunity to consolidate a fragmented industry of independent operators.
Source: Atlas Engineered Products Ltd.