Alaris Equity Partners Income Trust Trust Units Reg S 3c7 · TSX:AD.UN
Alaris Equity Partners Income Trust Trust Units Reg S 3c7 — Alaris Royalty — Investor Presentation (July 2019)
30 slides from Alaris Equity Partners Income Trust Trust Units Reg S 3c7's investor presentation, July 2019
Slide 1: Corporate Presentation
July 2019 C O R P O R AT E P R E S E N TAT I O N Title
Slide 2: Forward Looking Statements
FORWARD LOOKING STATEMENTS Alaris’ communications often include written or oral statements which contain forward-looking information. Statements other than statements of historical fact contained in this corporate presentation may be forward-looking statements under applicable securities legislation
Slide 3: U.S. Investor Disclosure
U.S. INVESTOR DISCLOSURE The securities of Alaris Royalty Corp. have not been and will not be registered under the U.S. Investment Company Act of 1940, as amended (the “US Investment Company Act”) and Alaris Royalty Corp. is relying on the exemption from registration under the US Investment Company
Slide 4: Corporate Profile
CORPORATE PROFILE Corporate Summary Revenue (6 months ended June 30, 2019) $55.1 million Monthly Dividend $0.1375 per share ($1.65 annually) Annualized Total Returns since listing date (Nov 2008) 314% (14% annualized) Number of Employees 14 Market Summary Ticker Symbol: TSX: AD Average Daily Volume
Slide 5: Defining the Corporation
DEFINING THE CORPORATION Alaris’ long term goal is to create the optimal dividend stream available for investors. Alaris provides capital to private businesses using an innovative structure that fills a niche in the private capital markets. 5
Slide 6: Investment Highlights
INVESTMENT HIGHLIGHTS The best companies in the world are never for sale. Alaris’ unique investment structure generates attractive returns from a universe of businesses that would be otherwise unavailable to traditional equity investors • Unique investment strategy combines equity like returns with
Slide 7: Alaris Offers a Unique Asset Class
ALARIS OFFERS A UNIQUE ASSET CLASS Alaris’ preferred shares represent a unique asset class providing equity-like returns with debt-like protections • Attractive initial cash yields with participation in growth through an annual adjustment Equity-Like Returns • Adjustment tied to top-line growth in t
Slide 8: Benefits to Shareholders
BENEFITS TO SHAREHOLDERS Five Pillars to the Optimal Dividend Low Volatility Visibility Diversification Liquidity Growth of Cash Flows of Cash Flows of Revenue Streams for Shareholders in Cash Flow Per Share Alaris’ preferred Alaris adjusts its Currently have 17 Average daily Historic organi
Slide 9: Benefits to Business Owners
BENEFITS TO BUSINESS OWNERS Non-Voting Preferred Equity Allows the entrepreneur to continue to run their successful businesses with minimal interference by Alaris Long-Term Capital Partner Alaris does not require an exit This allows the entrepreneur to focus on long-term goals rather than shor
Slide 10: Alaris' Ideal Partner Criteria
ALARIS’ IDEAL PARTNER CRITERIA Required services or products in mature industries Old Economy Business Businesses with a risk of obsolescence or a declining asset base are not a good fit Alaris looks at historical free cash flow to predict sustainability of its Track Record of Free Cash distri
Slide 11: Partner Revenue Summary
PARTNER REVENUE SUMMARY Annual Distribution % organic change in organic revenue Partner (CAD$000s) % of total (1) Federal Resources 14,964 12.9% 6.00% DNT 14,865 12.8% 5.50% 5.00% SBI 13,900 12.0% PF Growth Partners 11,798 10.1% 4.10% Body Contour Centers 8,501 7.3% Sandbox 8,154 7.0% 2.90% 2.60% 2.
Slide 12: Diversification
DIVERSIFICATION • Alaris has approximately 83% of its fair value of investments in US based companies. • Alaris has historically been weighted to healthcare. However, today, 40% of invested dollars are exposed to business services, 30% to industrials, 22% to consumer products and services and 8% con
Slide 13: Returns From Exits to Date
RETURNS FROM EXITS TO DATE Number of Years Capital Distributions Exit Capital % total $millions CAD Invested Invested Received Received Total Return Return IRR % (1) MAHC 1.0 $ (18.5) $ 8.0 $ 19.2 $ 8.7 47% 50% Sequel 4.2 (77.5) 58.4 119.5 100.4 130% 30% LifeMark (2) 11.3 (67.5) 51.8 123.4 107.7 160
Slide 14: Earnings Coverage Heat Map
EARNINGS COVERAGE HEAT MAP Earnings Coverage Heat Map • The table to the left displays the range of earnings coverage ratios (“ECR”) for each of our Partners over Q3-18 Q4-18 Q1-19 Q2-19 Guide the last 4 quarters. Generally speaking, a ratio above DNT 1.2x-1.5x 1.2x-1.5x 1.2x-1.5x 1.2x-1.5x <1.0x 1.
Slide 15: Cash Flow From Current Investments
CASH FLOW FROM CURRENT INVESTMENTS Financial Summary (millions CAD$) Run-Rate Figure 1 to the left displays the estimated run-rate Run-rate data Run-Rate $ per financial information needed to calculate the run-rate Figure 1 Gross $ share payout ratio as of July 24, 2019. Revenue (USDCAD$1.3200) (1)
Slide 16: Investment History
INVESTMENT HISTORY Capital Deployed $173 $178 $172 $185 $170 $108 $108 2013 2014 2015 2016 2017 2018 2019 Since Inception • Since Inception: • Invested over $1.3 billion in 30 Partners and more than 62 tranches • Collected over $600 million of distributions • Over $500 million of capital received th
Slide 17: Balance Sheet
BALANCE SHEET Summary of Debt Capacity and Covenants • Alaris currently has approximately $81.0 Millions CAD$ Proforma million available to it to invest ($31m current Figure 1 July 24, 2019 capacity and $50m of additional capacity from TTM EBITDA for debt covenant (a) $110.4 the accordion feature of
Slide 18: Dividend History and Sustainability
DIVIDEND HISTORY AND SUSTAINABILITY • Since 2008 Alaris has provided consistent dividend income through its monthly dividend. • 11 consecutive increases sine 2010 (96% gross increase). • Current annualized dividend of $1.65 per share ($0.1375 per month). • Since inception, Alaris has paid over 130 c
Slide 19: Scalable Model
SCALABLE MODEL • Alaris’ unique structure, which gives it protections that allow for a non-controlling investment, allows it to be a monitor of its Partners, not an operator. • For the addition of every 5 new (net) Partners, Alaris would likely have to add 1 employee to the monitoring team. Alaris’
Slide 20: Recent Financial Results
RECENT FINANCIAL RESULTS Three months ended June 30, 2019 vs same Six months ended June 30, 2019 vs same period 2018: period 2018: • -3.7% decreased in revenue from Partners to • 5.7% increase in revenue from Partners to $27.4 million $55.1 million • 18.2% increase in Normalized EBITDA to $24.0 • 20
Slide 21: Historic Financial Summary
HISTORIC FINANCIAL SUMMARY (millions CAD$) 2014A 2015A 2016A 2017A 2018A Revenue $ 69.30 $ 82.80 $ 100.04 $ 89.07 $ 100.08 % change 31% 19% 21% -11% 12% SG&A $ 7.70 $ 7.90 $ 9.17 $ 8.06 $ 12.13 % change 54% 3% 16% -12% 50% Normalized EBITDA $ 57.40 $ 71.40 $ 81.84 $ 76.98 $ 80.81 % change 31% 24% 15
Slide 22: Track Record of Per Share Growth
TRACK RECORD OF PER SHARE GROWTH 5 year CAGR 7% 5 year CAGR 6% 5 year CAGR 6% 5 year CAGR 4% $2.75 $2.74 $2.44 $2.44 $2.28 $2.25 $2.21 $2.15 $2.11 $2.10 $2.02 $1.87 $1.85 $1.65 $1.63 $1.62 $1.62 $1.62 $1.57 $1.48 Partner revenue Normalized EBITDA Net cash from ops Dividend 2014 2015 2016 2017 2018 2
Slide 23: Corporate Information
CORPORATE INFORMATION BOARD OF DIRECTORS COMMITTEES AUDITORS KPMG, LLP Jack C. Lee, Chairman Compensation Mitch Shier, Director Corporate Governance (Chair), BANKING Bank of Montreal (co-lead) Compensation and Transaction SYNDICATE HSBC Bank Canada (co-lead) Mary Ritchie, Director Audit (Chair) and
Slide 24: Appendices
APPENDICES 24
Slide 25: Appendix A: Summary of Partners
APPENDIX A: SUMMARY OF PARTNERS BODY CONTOUR (MILLIONS $) CENTERS (DBA ACCSCIENT LLC SONO BELLO) CCCOMM Industry Business Services: Financial Services: Consumer Consumer Industrials: Business Services: IT Consulting and Mortgage Discretionary: Discretionary: Civil Construction Fleet Management Staff
Slide 26: Appendix A: Summary of Partners (cont)
APPENDIX A: SUMMARY OF PARTNERS (CONT) (MILLIONS $) Industry Industrials: Business Services: Industrials: Business Services: Industrials: Business Services: Distributor of Digital Marketing Masonry Commercial Rebar Fabrication Apparel Design, Products to Solutions Restoration, Janitorial and & Insta
Slide 27: Appendix A: Summary of Partners (cont)
APPENDIX A: SUMMARY OF PARTNERS (CONT) (MILLIONS $) PF GROWTH PARTNERS Industry Consumer Discretionary: Business Services: Business Services: Industrials: Business Services: Health and Fitness Clubs Full Service Marketing Management Mining Services IT Consulting and Advertising Consulting, Sales & A
Slide 28: Appendix B: Offering History
APPENDIX B: OFFERING HISTORY The following table summaries the equity offerings Alaris has completed since its public listing in November 2008. Shares Gross Price on Date of Issued Proceeds Date Closing Announcement Issue Price (000's) ($000's) Closed Date 30-Sep-09 $ 6.00 2,300 $ 13,800 22-Oct-09 $
Slide 29: Non-IFRS Measures
NON-IFRS MEASURES The terms EBITDA, Normalized EBITDA and Payout Ratio are financial measures used in this presentation hat are not standard measures under International Financial Reporting Standards (“IFRS”). The Corporation’s method of calculating EBITDA, Normalized EBITDA and Payout Ratio may dif
Slide 30: Head Office
HEAD OFFICE Suite 250, 333 24th Avenue SW Calgary, Alberta T2S 3E6 Phone: 403.228.0873 Fax: 403.228.0906 Website: www.alarisroyalty.com