Avante Corp Inc Announces First Quarter Financial Results For the Three-Month Period Ended June 30, 2020

The Company is debt free, has cash balances of $11 million and access to $12 million of unused credit facilities.

Second quarter year-over-year revenue growth from continuing operations of 13.4% and
Recurring Monthly Revenues improved by 3.8%.

TORONTO, Sept. 30, 2022 – Avante Corp Inc. (TSX.V: XX) (OTC: ALXXF)(“Avante” or the “Company”) is pleased to announce its financial results for its second fiscal quarter ended September 30, 2022 (all amounts in Canadian dollars thousands, unless otherwise indicated).

SUMMARY FINANCIAL RESULTS FOR THE QUARTER ENDED SEPTEMBER 30, 2022:

1. The Company sold Logixx Security Inc. (“Logixx Security”) on June 1, 2022.  Its financial results are treated as discontinued operations for the reporting periods noted above.  Prior year’s balance sheet information summarized above as at June 30, 2021 has not been restated.
2. The net income (loss) during the fiscal quarters ended March 31, 2022 and June 30, 2022 reflect costs related to the Board’s strategic review initiated in August 2021 and restructuring costs related to the transition of the Board and Management on March 30, 2022.  The estimated gain on sale of Logixx Security is reflected in first quarter fiscal 2023’s net income.
3. Adjusted EBITDA and Recurring Monthly Revenues (“RMR”) are non-IFRS financial measures that have no standard meaning under IFRS and as a result may not be comparable to the calculation of similar measures by other companies.  See Description of Non-IFRS Financial Measures.  Reconciliations of Adjusted EBITDA and RMR to Net Income or Revenues, as applicable, are provided in the Company’s Management Discussion & Analysis (“MD&A”).

“I am pleased with the transition of this company since March 30, 2022 and we now have a solid foundation in place to continue the evolution of our business.” said Manny Mounouchos, Founder, CEO & Board Chair of Avante.  “I am thankful for the support received from Avante’s employees, shareholders and Board of Directors as we continue the momentum towards achieving our objectives.”

Added Stephen Rotz, Chief Financial Officer of the Company, “Reported net income in respect of the first quarter reflects the gain on sale of Logixx Security that closed during the quarter offset by restructuring and related costs arising from the change in Board and Management announced prior to the start of the quarter.  The Company’s first quarter operating expenses did not benefit fully from cost reduction actions implemented during the quarter.”

FINANCIAL HIGHLIGHTS FOR THE FIRST FISCAL QUARTER ENDED SEPTEMBER 30, 2022:

Within continuing operations, the Company reported year-over-year revenue growth of 13.4%, or $539,  during the first quarter of fiscal 2023, increasing to $4,568 from $4,029.  Gross profit margins within continuing operations declined to 43.7% of revenue, versus 44.1% during the prior year’s first quarter, with total gross profit increasing by $219.  During the first quarter of fiscal 2023, revenues declined sequentially versus Q4 of fiscal 2022 by 7.5%, or $370, but gross profit margins improved to 43.7% versus 42.3% and gross profits were largely unchanged sequentially.

The Company’s recurring monthly revenues (“RMR”) from continuing operations during the last eight quarters are summarized below.  The Avante Security segment delivered RMR of $2,463 during the first quarter of fiscal 2023, down slightly from $2,488 during the Company’s fourth quarter of fiscal 2022, but a year-over-year growth of 3.8% versus the $2,372 generated during the prior year’s first quarter.  On a trailing twelve-month basis to June 30, 2022, the Company’s RMR was $9,739 and total revenue was $18,695.

Gross profit margins over the last eight quarters ranged between 40.1% and 45.1%, and were 43.2% on a trailing twelve-month basis to June 30, 2022:

1. The Company’s fiscal year end is on March 31 of each year. “F21” means the fiscal year ended March 31, 2021; “F22” means the fiscal year ended March 31, 2022; and “F23” means the fiscal year ended March 31, 2023.

SEGMENT RESULTS:

The Avante Security segment reported increased Adjusted EBITDA of $765 during the first fiscal quarter ended June 30, 2023, versus $293 during the first fiscal quarter ended June 30, 2022.  This increase of $472 was largely due to lower divisional operating costs and higher year-over-year revenues.

The loss from central corporate costs, net of eliminations, within continuing operations was $199 during the first quarter of fiscal 2022.  This represented an improvement of $456 versus the $655 of net central costs during the first fiscal quarter ended June 30, 2021, as the current quarterly period benefited from corporate overhead reductions that began with the Board and Management changes initiated on March 30, 2022.

On June 1, 2022, the Company sold its ownership interest in Logixx Security.  During first quarter ended June 30 2022, Discontinued Operations reflected two months of operations from the Logixx Security Segment, whereas the first quarter of the prior fiscal year reflected three months.  During the first quarter ended June 30, 2022, Adjusted EBITDA of Discontinued Operations was $526, compared to $2,371 during the first quarter ended June 30, 2021, a decrease of $1,845.  In addition to one less month of operations reflected this quarter, Logixx Security’s prior year quarterly period benefited more significantly from strong margins on COVID-19 related service revenues.

LIQUIDITY HIGHLIGHTS:

On June 1, 2022, all remaining funded debt of the Company was repaid from proceeds of the sale of Logixx Security.  On the same date, the Company entered into amended and restated credit facilities with its bank to provide a $2 million revolving credit facility, provided on a demand basis and subject to a customary borrowing base.  To date, the Company has not drawn on this credit facility.

On July 7, 2022, the Company entered into a definitive loan agreement with affiliates of its largest shareholder.  This agreement permits the Company to draw term loans, on a non-revolving basis, for up to $10 million at a fixed rate of 5.0% with terms to maturity ending July 7, 2027.  Drawings are subject to a minimum senior leverage test and other conditions.  A standby fee on the unused portion of the facility of 0.5% is payable annually in arrears.  To date, the Company has not drawn on this term loan facility.

With cash balances of $12 million, and access to the senior secured revolver of $2 million and to the $10 million unsecured term loan facility, the Company has excess liquidity to more than meet its existing requirements.

Readers should refer to the Company’s financial statements and MD&A in respect of its first fiscal quarter ended June 30, 2022 for additional risk factors, accounting policies, detailed financial disclosures, reconciliation of non-IFRS financial measures to the most directly comparable IFRS financial measures, related party transactions, contingencies and reporting of subsequent events since the fiscal period ended June 30, 2022.  Such financial statements and MD&A are incorporated by reference into this news release and are filed electronically through the System for Electronic Document Analysis and Retrieval (“SEDAR”), which can be accessed at www.sedar.com.

This news release shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the securities described herein in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.  This news release does not constitute an offer of securities for sale in the United States.  The securities described herein have not been, nor will they be, registered under the United States Securities Act of 1933, as amended, and such securities may not be offered or sold within the United States absent registration under U.S. federal and state securities laws or an applicable exemption from such U.S. registration requirements.

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.

About Avante Corp

Avante Corp Inc. (TSXV: XX) is a Toronto based provider of high-end security services. We acquire, manage and build industry leading businesses which provide specialized, mission-critical solutions that address the needs of our customers. Our businesses continuously develop innovative solutions that enable our customers to achieve their objectives. With an experienced team and a proven track record of solid growth, we are taking steps to establish a broad portfolio of security businesses to provide our customers and shareholders with exceptional returns. Please visit our website at www.avantecorp.ca and consider joining our investor email list.

Forward Looking Statements

All statements in this press release, other than statements of historical fact, may constitute “forward looking information” with respect to Avante within the meaning of applicable securities laws. Forward-looking information is often, but not always, identified by the use of words such as “seek”, “anticipate”, “plan”, “continue”, “planned”, “expect”, “project”, “predict”, “potential”, “targeting”, “intends”, “believe”, “potential”, and similar expressions, or describes a “goal”, or a variation of such words and phrases or state that certain actions, events or results “may”, “should”, “could”, “would”, “might” or “will” be taken, occur or be achieved. This forward-looking information includes statements with respect to, among other things, the intention to create a platform capable of supporting a business with significantly greater scale, Avante’s strategic plan, Avante’s intentions to engage in mergers and acquisitions in the near term, Avante’s intentions to identify, acquire and integrate suitable targets for mergers and acquisitions, the ability to achieve operational efficiencies and provide a better overall customer experience, Avante’s run- rate, opportunities to grow Avante’s revenue and Adjusted EBITDA profile, investments in corporate infrastructure, Avante’s ability to execute and integrate larger acquisitions, and the expected trajectory of corporate costs as a percentage of revenue. Forward-looking information is subject to a variety of known and unknown risks, uncertainties and other factors that could cause actual events or results to differ from those expressed or implied by the forward looking information, including, without limitation, the ability to identify, acquire and integrate suitable targets for mergers and acquisitions, the ability to control corporate costs, and the list of risk factors identified in Avante’s Management Discussion & Analysis (MD&A), Annual Information Form (AIF) and other continuous disclosure, which list is not exhaustive of the factors that may affect any of Avante’s forward-looking information. In connection with the forward-looking statements contained in this and subsequent press releases, Avante has made certain assumptions about its business and the industry in which it operates and has also assumed that no significant events occur outside of Avante’s normal course of business. Although management believes that the assumptions inherent in the forward-looking statements are reasonable as of the date the statements are made, forward-looking statements are not guarantees of future performance and, accordingly, undue reliance should not be put on such statements due to the inherent uncertainty therein. Avante’s forward-looking information is based on the beliefs, expectations and opinions of management on the date the statements are made, and Avante does not assume any obligation to update forward-looking information, whether as a result of new information, future events or otherwise, other than as required by applicable law. For the reasons set forth above, readers should not place undue reliance on forward-looking information.

Non-IFRS Financial Measures

This press release includes certain measures which have not been prepared in accordance with IFRS such as EBITDA, Adjusted EBITDA, Gross Profit and Direct Operating Expenses. These non-IFRS measures are not recognized under IFRS and, accordingly, users are cautioned that these measures should not be construed as alternatives to net income determined in accordance with IFRS. The non-IFRS measures presented are unlikely to be comparable to similar measures presented by other issuers.

References to EBITDA are to net income before interest, taxes, depreciation and amortization. References to Adjusted EBITDA are to net income before interest, taxes, depreciation, amortization of intangibles &

capitalized commissions, share-based payments, acquisition, integration and / or reorganization costs, deferred financing costs, loss (gain) in fair value of derivative liability, expensing of CWL fair value adjustment per IFRS less non-controlling interest’s share. References to Direct Operating Expenses are net of interest expense, accretion interest expense, depreciation, amortization and share based payments. EBITDA, Adjusted EBITDA, Gross Profit and Direct Operating Expenses are not earnings measures recognized by International Financial Reporting Standards (“IFRS”) and do not have a standardized meaning prescribed by IFRS. Management believes that Adjusted EBITDA is an appropriate measure in evaluating Avante’s performance. Readers are cautioned that neither EBITDA nor Adjusted EBITDA should be construed as an alternative to net income (as determined under IFRS), as an indicator of financial performance or to cash flow from operating activities (as determined under IFRS) or as a measure of liquidity and cash flow. Avante’s method of calculating Adjusted EBITDA may differ from methods used by other issuers and, accordingly, Avante’s Adjusted EBITDA may not be comparable to similar measures used by other issuers.

Neither the 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.