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 (May 2020)
30 slides from Alaris Equity Partners Income Trust Trust Units Reg S 3c7's investor presentation, May 2020
Slide 1: Corporate Presentation May 2020
May 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 Corporation and its Partn
Slide 4: 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 5: Corporate Profile
CORPORATE PROFILE Corporate Summary Revenue (3 months ended March 31, 2020) $34.0 million Quarterly Dividend $0.29 per share ($1.16 annually) Annualized Total Returns since listing date (Nov 2008) 140% (8% annualized) Number of Employees 15 Market Summary Ticker Symbol: TSX: AD Average Daily Volume
Slide 6: 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. 6
Slide 7: 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 8: 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 9: 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 16 Average daily Historic organi
Slide 10: 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 11: 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 12: Partner Revenue Summary
PARTNER REVENUE SUMMARY % organic change in organic revenue 6.00% 5.50% 5.00% 4.50% 4.10% 2.90% 2.60% 2.50% 2.10% 2.00% 1.00% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020E • Based on unaudited results for each partner’s fiscal year end in 2019, Alaris is estimating net positive resets in d
Slide 13: Diversification
DIVERSIFICATION • Alaris has approximately 81% of its fair value of investments in US based companies. • Today, 26% of invested dollars are exposed to business services, 40% to industrials, 25% to consumer products and services and 9% consumer financial services. 13
Slide 14: 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 15: 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 the last 4 quarters. Generally speaking, a ratio above Q2-19 Q3-19 Q4-19 Q1-20 Guide 1.0x provides enough earnings to cover distributions
Slide 16: Investment History
INVESTMENT HISTORY Capital Deployed (millions $) $193 $178 $172 $185 $108 2015 2016 2017 2018 2019 Since Inception • Since Inception: • Invested over $1.3 billion in 31 Partners and more than 62 tranches • Collected over $600 million of distributions • Over $665 million of capital received through e
Slide 17: Balance Sheet
BALANCE SHEET Summary of Debt Capacity and Covenants Millions CAD$ Proforma Figure 1 May 5, 2020 Senior debt to EBITDA 1.69x Senior debt to EBITDA Covenant 3.00x Current Fixed Charge Ratio 1.28:1.00 Fixed Charge Covenant 1.00:1.00 Tangible Net Worth (TNW) $570.4 TNW Covenant $450.0 • Alaris currentl
Slide 18: Dividend History and Sustainability
DIVIDEND HISTORY AND SUSTAINABILITY • Since 2008 Alaris has provided consistent dividend income through its monthly dividend. • In March 2020, Alaris made the decision to change its dividend from monthly to quarterly. The first payment of such quarterly dividend will be in July after declaring the Q
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 Mar 31, 2020 vs same period 2019: • 23.6% increase in revenue from Partners to $34.0 million • 14.4% decrease in Normalized EBITDA to $21.2 million • 29.0% increase in net cash from operating activities to $26.6 million • 0.6% increase in dividends paid to
Slide 21: Historic Financial Summary
HISTORIC FINANCIAL SUMMARY (millions CAD$) 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 22: 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 23: 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 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: Distributor of Products Digital Marketing Masonry Restoration, Commercial Janitorial and Rebar Fabrication & to Federal and Local Solutions Waterproofing and Hosp
Slide 27: 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 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