Alaris Equity Partners Income Trust Trust Units Reg S 3c7 · TSX:AD.UN
Alaris Equity Partners Income Trust Trust Units Reg S 3c7 — Alaris Equity Partners Income Trust — Investor Presentation (October 2020)
31 slides from Alaris Equity Partners Income Trust Trust Units Reg S 3c7's investor presentation, October 2020
Slide 1: Corporate Presentation
October 2020 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 This corporate presentation contains forward-looking information and forward-looking statements (collectively, “forward-looking statements”) under applicable securities laws, including any applicable “safe harbor” provisions. Statements other than statements of historical
Slide 3: Forward Looking Statements
FORWARD LOOKING STATEMENTS Some of the factors that could affect future results and could cause results to differ materially from those expressed in the forward looking statements contained herein include risks relating to: the ongoing impact of the COVID-19 pandemic on the Trust and its Partners (i
Slide 4: U.S. Investor Disclosure
U.S. INVESTOR DISCLOSURE The securities of Alaris Equity Partners Income Trust (“Alaris” or the “Trust”) 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 is relying on the exemption from registration under
Slide 5: Trust Conversion
TRUST CONVERSION • After receiving shareholder approval on August 31, 2020, Alaris Royalty Corp. converted to an income trust on September 1, 2020 and changed its name to “Alaris Equity Partners Income Trust” (“Alaris” or the “Trust”). • The Trust units began trading on the TSX on September 4, 2020
Slide 6: Profile
PROFILE Corporate Summary Revenue (6 months ended June 30, 2020) $54.0 million Quarterly Distribution(1) $0.31 per unit ($1.24 annually) Annualized Total Returns since listing date (Nov 2008) 170% (9% annualized) Number of Employees 15 Market Summary Ticker Symbol: TSX: AD.UN Average Daily Volume (6
Slide 7: Defining the Business
DEFINING THE BUSINESS Alaris’ long term goal is to create the optimal income stream available for investors. Alaris provides capital to private businesses using an innovative structure that fills a niche in the private capital markets. 7
Slide 8: 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 9: Alaris Represents a Unique Asset Class
ALARIS REPRESENTS A UNIQUE ASSET CLASS • Attractive initial cash yields with participation in growth through an annual adjustment Equity-Like Returns • Adjustment tied to top-line growth in the underlying business • Exposure to market-leading businesses that are not otherwise accessible to tradition
Slide 10: Benefits to Unitholders
BENEFITS TO UNITHOLDERS Five Pillars to the Optimal Income Stream Low Volatility Visibility Diversification Liquidity Growth of Cash Flows of Cash Flows of Revenue Streams For Unitholders in Cash Flow Per Unit Alaris’ preferred Alaris adjusts its Currently have 17 Average daily Historic orga
Slide 11: 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 12: 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 13: Partner Revenue Summary
PARTNER REVENUE SUMMARY Annual Distribution Partner (CAD$000s) (1) % of total % organic change in organic revenue GWM Holdings 17,045 14.8% DNT 15,730 13.7% 6.00% Federal Resources 14,436 12.6% 5.50% PF Growth Partners(2) 13,285 11.6% 5.00% Body Contour Centers 9,187 8.0% 4.50% Accscient 7,525 6.5%
Slide 14: Diversification
DIVERSIFICATION • Alaris has approximately 81% of its fair value of investments in US based companies. • Today, 30% of invested dollars are exposed to business services, 39% to industrials, 22% to consumer products and services and 8% consumer financial services. 14
Slide 15: Preferred Equity Returns from Exits to Date
PREFERRED EQUITY RETURNS FROM EXITS TO DATE Number of Years Capital Distributions Exit Capital Total % total $millions CAD Invested Invested Received Received Return Return IRR % (1) MAHC 1.0 $ (18.4) $ 7.2 $ 20.0 $ 8.8 48% 53% Sequel 4.2 (77.4) 59.8 120.9 103.3 133% 29% Agility 5.4 (20.2) 18.5 28.3
Slide 16: 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 Q3-19 Q4-19 Q1-20 Q2-20 Guide the last 4 quarters. Generally speaking, a ratio above DNT 1.2x-1.5x 1.5x-2.0x 1.5x-2.0x 1.5x-2.0x <1.0x 1.
Slide 17: Investment History
INVESTMENT HISTORY Capital Deployed (millions $) $193 $178 $172 $185 $101 $108 2015 2016 2017 2018 2019 2020 Since Inception • Since Inception: • Invested over $1.3 billion in 32 Partners and more than 64 tranches • Collected over $600 million of distributions • Over $665 million of capital received
Slide 18: Balance Sheet
BALANCE SHEET Summary of Debt Capacity and Covenants Millions CAD$ Proforma Figure 1 Oct 9, 2020 Senior debt outstanding $252.5 Senior debt to EBITDA 2.36x Senior debt to EBITDA Covenant(1) 3.00x(1) Credit Available for Investment Purposes $113.2 Convertible Debentures Outstanding $100.0 Current Fix
Slide 19: Distribution History and Sustainability
DISTRIBUTION HISTORY AND SUSTAINABILITY • Since 2008 Alaris has provided consistent dividend income through its monthly dividend, and now, through trust distributions. • In March 2020, Alaris made the decision to change its dividend from monthly to quarterly. The first payment of such quarterly divi
Slide 20: 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 21: Recent Financial Results
RECENT FINANCIAL RESULTS Three months ended June 30, 2020 vs same Six months ended June 30, 2020 vs same period 2019: period 2019: • 23.8% decrease in revenue from Partners to • 0.3% increase in revenue from Partners to $20.2 million $54.2 million • 28.2% decrease in Normalized EBITDA to $17.3 • 20.
Slide 22: Historic Financial Summary
HISTORIC FINANCIAL SUMMARY (millions CAD$) 2015A 2016A 2017A 2018A 2019A Revenue $ 82.80 $ 100.04 $ 89.07 $ 100.08 $ 115.97 % change 19% 21% -11% 12% 16% SG&A $ 7.90 $ 9.17 $ 8.06 $ 12.13 $ 10.72 % change 3% 16% -12% 50% -12% Normalized EBITDA $ 71.40 $ 81.84 $ 76.98 $ 80.81 $ 100.94 % change 24% 15
Slide 23: Track Record of Per Share Growth
TRACK RECORD OF PER SHARE GROWTH 5 year CAGR 7% 5 year CAGR 8% 5 year CAGR 5% 5 year CAGR 2% $3.17 $2.75 $2.74 $2.76 $2.44 $2.44 $2.25 $2.21 $2.15 $2.11 $2.10 $2.02 $2.04 $1.85 $1.65 $1.62 $1.62 $1.62 $1.57 $1.65 Partner revenue Normalized EBITDA Net cash from ops Dividend 2015 2016 2017 2018 2019 2
Slide 24: Corporate Information
CORPORATE INFORMATION BOARD OF DIRECTORS COMMITTEES AUDITORS KPMG, LLP Jay Ripley, Chairman Transaction (Chair), Compensation and Audit Mitch Shier, Director Corporate Governance (Chair), BANKING Bank of Montreal (co-lead) Compensation and Transaction SYNDICATE HSBC Bank Canada (co-lead) Mary Ritchi
Slide 25: Appendices
APPENDICES 25
Slide 26: Appendix A: Summary of Partners
APPENDIX A: SUMMARY OF PARTNERS BODY CONTOUR (MILLIONS $) ACCSCIENT LLC CENTERS (DBA CCCOMM SONO BELLO) Industry Business Services: Financial Services: Consumer Industrials: Consumer Industrials: IT Consulting and Mortgage Discretionary: Electrical Discretionary: Civil Construction Staffing Originat
Slide 27: Appendix A: Summary of Partners (cont)
APPENDIX A: SUMMARY OF PARTNERS (CONT) (MILLIONS $) Industry Business Industrials: Business Services: Industrials: Business Services: Industrials: Services: Fleet Distributor of Digital Marketing Masonry Commercial Janitorial Rebar Fabrication & Management Products to Solutions Restoration, and Hosp
Slide 28: Appendix A: Summary of Partners (cont)
APPENDIX A: SUMMARY OF PARTNERS (CONT) (MILLIONS $) PF GROWTH PARTNERS Industry Business Services: Consumer Discretionary: Industrials: Industry: Business Services: Apparel Design, Health and Fitness Mining Services IT Consulting IT Consulting Engineering and Clubs Sourcing Services Total Alaris Cap
Slide 29: 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 30: 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 Trust’s method of calculating EBITDA, Normalized EBITDA and Payout Ratio may differ fr
Slide 31: Head Office
HEAD OFFICE Suite 250, 333 24th Avenue SW Calgary, Alberta T2S 3E6 Phone: 403.228.0873 Fax: 403.228.0906 Website: www.alarisequitypartners.com
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