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CALGARY, Alberta, Nov. 14, 2024 (GLOBE NEWSWIRE) — High Arctic Energy Services Inc. HWO (the “Corporation” or “High Arctic”) has released its’ third quarter financial and operating results. The unaudited consolidated financial statements and management discussion & analysis (“MD&A”) for the three and nine months ended September 30, 2024 will be available on SEDAR+ at www.sedarplus.ca, and on High Arctic’s website at www.haes.ca. All amounts are denominated in Canadian dollars (“CAD”), unless otherwise indicated.

Mike Maguire, Interim Chief Executive Officer commented on the Corporation’s third quarter 2024 financial and operating results:

“I am very pleased that we completed the strategic re-organization of the Corporation in the third quarter, returning a sizeable amount of capital to our shareholders and spinning out the PNG Business to shareholders via High Arctic Overseas Holdings Corp. listed on the TSX Venture Exchange.

The acquisition and integration of Delta Rental Services has delivered positive adjusted EBITDA and cash generation. We have commenced cost rationalization, particularly focussed on general and administrative costs along with overhead cost reduction initiatives. Combined with our equity investment in Team Snubbing and owned real estate, High Arctic is positioned as an attractive vehicle for future growth and transactions.”   

2024 THIRD QUARTER HIGHLIGHTS

• Completed the re-organization of High Arctic including the return of $37.8 million to shareholders and the spin-out of the PNG Business as High Arctic Overseas Holdings Corp., independently listed on the TSX Venture Exchange. 
• Increased revenue from operations from $2.3 million to $8.0 million year to date on a comparative basis as a result of the Delta Acquisition. 
• Exited Q3 2024 with net positive working capital of $4.9 million and access to $4.1 million of cash at bank. 
• Reconciled and took action to reduce general and administrative costs, including a sizeable reduction in board cost and director compensation. 
• Progressed post-reorganization transitional arrangements towards establishing dedicated stand-alone leadership of the Corporation. 

2024 THIRD QUARTER RESULTS

• Increased revenue from continuing operations by $1,491 or 147% in the quarter when compared to revenue of $1,015 from Q3 2023 as a result of the impact of the Delta Acquisition on the 2024 results.
• Generated net income from continuing operations of $125 in the quarter as compared to $498 in Q3 2023. The decrease is primarily due to the 2023 $615 gain on sale of the nitrogen business, $373 lower interest income with the return of capital to shareholders, and $403 lower equity investment income from Team Snubbing in the quarter.
• Achieved positive Adjusted EBITDA from continuing operations of $383 in the quarter versus negative Adjusted EBITDA for Q3 2023 of $700.
• Production Service’s 42% equity investment share of Team Snubbing Services Inc. (“Team Snubbing”) net income returned to positive earnings of $105 in the quarter compared to a loss of $889 in Q2 2024 and earnings of $508 in the comparative third quarter of 2023.

2024 YEAR TO DATE RESULTS

• Similar to the discrete quarter results, High Arctic’s revenue from continuing operations increased 242% to $8,027 compared to revenue of $2,347 achieved in the first nine months of 2023 as a result of the Delta Acquisition on 2024 results.
• Generated a net loss from continuing operations of $1,402 in the quarter as compared to $1,208 in Q3 2023. The higher loss, despite an improvement of $1,323 in operating income, is primarily due to the 2023 $615 gain on sale of the nitrogen business, $262 lower interest income with the July 2024 return of capital to shareholders, and $745 lower equity investment income from Team Snubbing in the year-to-date period.
• Achieved strong oilfield services operating margins from continuing operations of 50.6% for the nine months in 2024.
• Production Service’s 42% equity investment share of Team Snubbing Services Inc. net loss was $294 for the nine months ended September 30, 2024 as compared to positive net income of $451 in the comparative period in 2023. Regional expansion into Alaska has weighed on earnings during the past twelve months.
• Cash from operating activities from continuing operations was $487 in the quarter and a use of $42 for the nine months ended September 30, 2024, an improvement for the quarter as compared to the respective prior year comparatives of $172 and $359.
• Significantly lowered the use of funds flow from operations from continuing operating activities as the nine months of 2024 generated a use of funds of $46 compared to a use of funds of $957 for the nine months of 2023 driven by strong operational performance from the Delta Acquisition partially offset by the significant additional G&A expenses incurred in 2024 due to the corporate reorganization initiatives.

In the above results discussion, the three months ended September 30, 2024 may be referred to as the “quarter” or “Q3 2024” and the comparative three months ended September 30, 2023 may be referred to as “Q3 2023”. References to other quarters may be presented as “QX 20XX” with X/XX being the quarter/year to which the commentary relates. Additionally, the nine months ended September 30, 2024 may be referred to as “YTD” or “YTD 2024”. References to other nine-month periods ended September 30 may be presented as “YTD 20XX” with XX being the year to which the nine-month period ended September 30 commentary relates. All amounts are expressed as thousands of Canadian dollars.

RESULTS OVERVIEW

The following is a summary of select financial information of the Corporation:

Operating Results

Rental Services segment (previously “Ancillary Services”)

The Rental Services segment consists of High Arctic’s oilfield rental equipment in Canada centred upon pressure control equipment and equipment supporting the high-pressure stimulation of oil and gas wells in the WCSB.

The significant increase in revenue for the three- and nine-month periods ended September 30, 2024 versus the comparable periods in 2023 is a direct result of the contribution from the Delta business that was acquired in late 2023. Specifically, revenues increased $1,491 or 147% in the quarter when compared to Q3 2023 and increased $5,680 or 242% when compared to year-to-date revenues from 2023. Operating margins of 53.3% and 50.6% for the three and nine months ended September 30, 2024, respectively, are approximately nine percent lower to the comparable periods in 2023 due to the impact of the Delta Acquisition as Delta utilizes some third-party rental equipment in its operations, increasing operating expenses.

Production Services segment
The Production Services segment operations consist of High Arctic’s idled snubbing units in Colorado, U.S., and its equity investments in the Seh’ Chene Partnership and Team Snubbing in Canada. Though the Seh’ Chene Partnership has experienced limited business activity since the 2022 Canadian sales transactions, the partnership is still active and the Corporation together with its partner look to reposition its customer offerings and explore other avenues for business activity.

Liquidity and capital resources Liquidity and capital resources

Operating Activities
In Q3 2024, cash from operating activities from continuing operations was $487, as compared with $172 from operating activities from continuing operations in Q3 2023. Funds flow from operating activities from continuing operations totaled $640 in the quarter, versus funds used of $331 for Q3 2023 (see “Non-IFRS Measures”). In Q3 2024, changes in non-cash operating working capital from continuing operations totaled an outflow of $153 versus an inflow of $503 in Q3 2023.

For the nine months ended September 30, 2024, cash used in operating activities from continuing operations was $42, as compared with $359 of cash flow from operating activities from continuing operations in 2023. Funds used in operating activities from continuing operations totaled $46 for the nine months ended September 30, 2024, versus a use of funds of $957 for the same period in 2023. Over the nine months ended September 30, 2024, changes in non-cash operating working capital from continuing operations totaled an inflow of $4 versus $1,316 for the comparable period in 2023.

The general increase in cash from operating activities from continuing operations for both the three and nine months ended September 30, 2024, when compared to the same periods in 2024, was largely the result of the positive impact on the business from the Delta Acquisition, partially offset by higher G&A costs related to the Corporation’s reorganization that was completed in the quarter.

Investing Activities
During the quarter, the Corporation’s cash spent on investing activities from continuing operations totaled $461, compared to $1,155 generated from investing activities for the same period the year prior mainly due to proceeds from asset sales of $1,350 in 2023. In addition to sustaining and growth capital spending related to its rental business, the Corporation’s Q3 2024 investing activity also included spending on new information systems and information technology infrastructure necessary to support the Canadian business going forward after the completion of the Arrangement. Year-to-date spending through September 30, 2024 totaled $1,445 on these same projects.

Financing Activities
During the quarter, the Corporation’s cash used in financing activities from continuing operations was an elevated $37,382, primarily a result of the $37,842 return of capital distribution High Arctic paid to its shareholders in the quarter. In addition, Team Snubbing began making its scheduled repayments in the quarter on the note receivable amounts owed to High Arctic. These payments totaled $589 in the quarter (Q3 2023 – nil). The Corporation also paid $43 (Q3 2023: $544) towards principal payments on its mortgage financing (see “Long-term debt” below) and $86 in lease liability payments (Q3 2023: $62).

For the nine months ended 2024, the Corporation’s cash used in financing activities from continuing operations was also an elevated amount totaling $37,640. The reasons for the elevated amount of cash used in financing activities from continuing operations are the same as above with additional mortgage and lease payments for nine months increasing the total amount of cash used.

Long-term debt

The Corporation has mortgage financing secured by lands and buildings owned by High Arctic located within Alberta, Canada. The mortgage has a remaining initial term of under three years with a fixed interest rate of 4.30% with payments occurring monthly. The Corporation’s mortgage financing contains certain non-financial covenants requiring lenders’ consent including changes to the underlying business. At September 30, 2024, the Corporation was compliant with all covenants associated with the mortgage financing.

Outlook
With the spinoff of the PNG business complete, the resultant High Arctic operations now consist of a high-margin equipment rental business centered upon pressure ‎control and well stimulation, a minority interest in Canada’s largest oilfield snubbing services business, Team Snubbing ‎ and industrial properties at Clairmont and Whitecourt in Alberta. With the current equipment rental business generating steady funds flow from operations combined with the Corporation’s working capital position, High Arctic is positioned to begin executing on an exciting new chapter in its corporate history.

The 2024 transformational developments returned capital to shareholders and enabled a reset of the Corporation’s strategic direction. High Arctic looks to grow its Canadian business and position itself to benefit from positive industry developments. These developments are principally underpinned by upstream activity dynamics to meet, and then sustain, growing oil and natural gas export capacity. This capacity expansion is evident in the commercial start-up of the TransMountain oil pipeline expansion during 2024 and the widely-anticipated LNG expansion in 2025 through tidewater access.

The Corporation has begun executing on its strategic business plan as it has recently made selective investments in its rental business and has started the process of identifying new leadership and potential acquisition candidates for High Arctic.

NON-IFRS MEASURES
This press release contains references to certain financial measures that do not have a standardized meaning prescribed by International Financial Reporting Standards (“IFRS”) and may not be comparable to the same or similar measures used by other companies. High Arctic uses these financial measures to assess performance and believes these measures provide useful supplemental information to shareholders and investors. These financial measures are computed on a consistent basis for each reporting period and include Oilfield services operating margin, EBITDA (Earnings before interest, tax, depreciation and amortization), Adjusted EBITDA, Operating loss, Funds flow from operating activities, Working capital and Net cash. These do not have standardized meanings.

These financial measures should not be considered as an alternative to, or more meaningful than, net income (loss), cash from operating activities, current assets or current liabilities, cash and/or other measures of financial performance as determined in accordance with IFRS.

For additional information regarding non-IFRS measures, including their use to management and investors and reconciliations to measures recognized by IFRS, please refer to the Corporation’s MD&A, which is available online at www.sedarplus.ca and through High Arctic’s website at www.haes.ca.

FORWARD-LOOKING STATEMENTS
This press release contains forward-looking statements. When used in this document, the words “may”, “would”, “could”, “will”, “intend”, “plan”, “anticipate”, “believe”, “seek”, “propose”, “estimate”, “expect”, and similar expressions are intended to identify forward-looking statements. Such statements reflect the Corporation’s current views with respect to future events and are subject to certain risks, uncertainties, and assumptions. Many factors could cause the Corporation’s actual results, performance, or achievements to vary from those described in this press release.

Should one or more of these risks or uncertainties materialize, or should assumptions underlying forward-looking statements prove incorrect, actual results may vary materially from those described in this press release as intended, planned, anticipated, believed, estimated or expected. Specific forward-looking statements in this press release include, among others, statements pertaining to: general economic and business conditions which will include, among other things, the outlook for energy services; right sizing of the general and administrative infrastructure; the performance of the Corporation’s investment in Team Snubbing, and whether Team Snubbing can realize high utilization in its Canadian operations and for its snubbing packages in Alaska in 2024; demand for the Corporation’s Canadian rental equipment in 2024, scaling the Canadian business, executing on one or more corporate transactions; and estimated credit risks.

With respect to forward-looking statements contained in this press release, the Corporation has made assumptions regarding, among other things, its ability to: maintain its ongoing relationship with major customers; successfully market its services to current and new customers; devise methods for, and achieve its primary objectives; source and obtain equipment from suppliers; successfully manage, operate, and thrive in an environment which is facing much uncertainty; remain competitive in all its operations; attract and retain skilled employees; obtain equity and debt financing on satisfactory terms and manage its liquidity risk.

The Corporation’s actual results could differ materially from those anticipated in these forward-looking statements as a result of the risk factors set forth above and elsewhere in this press release, along with the risk factors set out in the most recent Annual Information Form filed on SEDAR+ at www.sedarplus.ca.

The forward-looking statements contained in this press release are expressly qualified in their entirety by this cautionary statement. These statements are given only as of the date of this press release. The Corporation does not assume any obligation to update these forward-looking statements to reflect new information, subsequent events or otherwise, except as required by law.

About High Arctic Energy Services
High Arctic is an energy services provider. High Arctic provides pressure control equipment and equipment supporting the high-pressure stimulation of oil and gas wells and other oilfield equipment ‎on a rental basis to exploration and production companies, from its bases in Whitecourt and Red Deer, Alberta‎.

For further information, please contact:

Lonn Bate
Chief Financial Officer  
P: 587-318-2218
P: +1 (800) 688 7143 

High Arctic Energy Services Inc.
Suite 2350, 330 – 5^th Ave SW
Calgary, Alberta, Canada T2P 0L4
website: www.haes.ca
Email: info@haes.ca

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BURLINGTON, ON, Nov. 14, 2024 /CNW/ – SIR Royalty Income Fund SRV (the “Fund”) today reported its financial results for the third quarter (“Q3 2024”) and nine months (“YTD 2024”) ended September 30, 2024.

“We further strengthened our restaurant portfolio in the third quarter with the opening of a new Scaddabush in Guelph, Ontario, our 13^th Scaddabush location. We have now opened three new Scaddabush restaurants to date in 2024, all of which we expect to add to the Royalty Pool in January of 2025. Scaddabush is currently our top performing restaurant concept, and we believe our investment in expanding this brand will create long-term value for Fund unitholders,” said Peter Fowler, CEO of SIR Corp. “During the quarter, we also continued to advance the development of two additional new Scaddabush restaurants in Barrie and Oshawa, Ontario, which we expect to open in 2025.”

Q3 2024 Summary

• Pooled Revenue totaled $64.8 million compared to $68.8 million for the three months ended September 30, 2023 (“Q3 2023”).
  
  
• Royalty income in the SIR Royalty Limited Partnership (the “Partnership”) was $3.9 million, compared to $4.1 million in Q3 2023.
  
  
• Equity income from the Partnership, which represents the Fund’s pro rata share of the residual distributions of the Partnership, was $2.7 million, compared to $2.8 million in Q3 2023.
  
  
• The Royalty Pooled Restaurants (the “Royalty Pool”) had a same store sales (“SSS”)⁽¹⁾ decline of 4.7%.
  
  
• Net earnings were $3.7 million, compared to $3.0 million in Q3 2023.
  
  
• Distributable cash⁽²⁾ totaled $2.5 million, or $0.30 (basic and diluted) per Fund Unit, and cash distributed to unitholders totaled $2.4 million, representing a payout ratio⁽²⁾ of 95.5%. The payout ratio⁽²⁾ since the Fund’s inception in 2004, up to and including Q3 2024, is 99.8%, in line with the Fund’s target payout ratio⁽²⁾ of 100% per annum.
  
  
• On August 7, 2024, SIR Corp. (“SIR”) opened a new Scaddabush Italian Kitchen & Bar® (“Scaddabush”) restaurant in Guelph, Ontario. This new Scaddabush restaurant is expected to be added to the Royalty Pool effective January 1, 2025.
  
  
• On September 4, 2024, SIR permanently closed the Jack Astor’s® restaurant located in the North York neighbourhood of Toronto, Ontario. This restaurant will be removed from the Royalty Pool effective January 1, 2025.
  
  
• On September 26, 2024 and continuing subsequent to Q3 2024, SIR experienced a cybersecurity incident that has impacted a portion of its IT infrastructure. SIR immediately engaged third-party cybersecurity experts to assist with its containment, remediation and investigation efforts. Despite the related operational disruptions, guest payment platforms remained secure and SIR has continued to operate all 54 of its restaurants. As a result of this incident, SIR experienced a moderate decline in revenue during the first three weeks following the incident while certain restaurant technology was being restored, as well as increased cost of operations, and other associated costs related to investigation and mitigation of loss services. While SIR continues to gather information about the current and longer-term financial and other impacts of this event, the extent of the potential effect on the Fund or Partnership is yet to be determined.

Q3 2024 Financial Results Summary 

Pooled Revenue in Q3 2024 decreased 5.8% to $64.8 million, compared to $68.8 million in Q3 2023. The decrease reflects the permanent closures of three Royalty Pooled Restaurants during the fourth quarter of Fiscal 2023, and the permanent closure of the Jack Astor’s restaurant in North York on September 4, 2024. The decline in Pooled Revenue in Q3 2024 also reflects lower SSS⁽¹⁾ for Jack Astor’s due to declines in dine-in guest traffic at certain locations and reduced take-out and delivery sales. These factors were partially offset by increased pricing and the additional revenue generated from the new Scaddabush located in Whitby, Ontario that was added to the Royalty Pool effective January 1, 2024.

Net earnings for Q3 2024 were $3.7 million, or $0.45 (basic) and $0.43 (diluted) per Fund Unit, compared to net earnings of $3.0 million, or $0.35 (basic and diluted) per Fund Unit, for Q3 2023. The increase in net earnings was primarily attributable to a larger increase in the estimated fair value of the SIR Loan in Q3 2024 compared to Q3 2023, partially offset by lower royalty income. The estimated fair value of the SIR Loan increased by $2.0 million in Q3 2024, compared to an increase of $1.0 million in Q3 2023. Changes to the SIR Loan’s valuation are related to IFRS 9, which requires the Fund to recognize the SIR Loan at fair value, with changes in the fair value being recorded in the statement of earnings.

Same Store Sales (“SSS”)⁽¹⁾

Jack Astor’s SSS⁽¹⁾ performance for Q3 2024 includes all 36 locations currently in operation. Jack Astor’s accounted for approximately 70.6% of Pooled Revenue in Q3 2024 and had a SSS⁽¹⁾ decline of 6.8%. The decline primarily reflected reduced dine-in guest traffic at certain locations and lower take-out and delivery sales, partially offset by price increases.

Scaddabush SSS⁽¹⁾ performance for Q3 2024 includes nine out of the 13 locations currently in operation. Scaddabush had same store sales growth (“SSSG”)⁽¹⁾ of 0.4% in Q3 2024, reflecting price increases and the continued popularity of this restaurant brand.

The Signature Restaurants SSS⁽¹⁾ performance for Q3 2024 includes two restaurants (Reds® Square One and the Loose Moose Tap & Grill®). The Signature Restaurants generated SSSG⁽¹⁾ of 4.0% in Q3 2024, primarily attributable to increased dine-in guest traffic and price increases.

Distributable Cash⁽²⁾

The following table reconciles the relationship between cash provided by operating activities and distributable cash⁽²⁾:

Distributable cash⁽²⁾ for Q3 2024 totaled $2.5 million, or $0.30 per Fund Unit (basic and diluted), and distributions to Unitholders totaled $2.4 million, representing a payout ratio⁽²⁾ of 95.5%. The payout ratio⁽²⁾ since the Fund’s inception in 2004, up to and including Q3 2024, is 99.8%, in line with the Fund’s target payout ratio⁽²⁾ of 100% per annum.  

Outlook

SIR continues to monitor consumer spending behavior in light of current evolving macroeconomic factors, including inflation and elevated interest rates, and their potential impact on the Canadian economy and consumer confidence. Ongoing business impacts due to changes in the minimum wage, rising commodity costs and supply shortages have all been influential in the bar and restaurant industry’s changes in pricing overall.

SIR continues to innovate and provide immersive new product and service offerings to increase dine-in guest visits and to capitalize on the rapid growth of take-out and delivery services in commercial foodservice.

During 2023 and YTD 2024, SIR completed renovations to 13 restaurants (12 Jack Astor’s locations and Reds Square One) to drive enhanced performance. SIR is pleased with the success of these renovations.

The recently opened Scaddabush locations in London and Guelph, Ontario and the Don Mills neighbourhood of Toronto are expected to be added to the Royalty Pool on January 1, 2025.

The permanently closed Jack Astor’s restaurant located in the North York neighbourhood of Toronto will be removed from the Royalty Pool on January 1, 2025.

SIR has two commitments to lease properties in Barrie and Oshawa, Ontario, upon which it plans to develop two new Scaddabush locations. There can be no assurance at this time that these planned new restaurants will be opened or will become part of the Royalty Pool.

In consideration of the ongoing conditions mentioned above and the timing of new restaurant construction and renovations, the related restaurant opening schedules will be reviewed regularly by SIR and adjusted as necessary.

Non-IFRS Financial Measures

 (1) Same store sales (“SSS”) and same store sales growth (“SSSG”) are non-GAAP financial measures and do not have standardized meanings prescribed by International Financial Reporting Standards (“IFRS”). However, the Fund believes that SSS and SSSG are useful measures and provide investors with an indication of the change in year-over-year sales. The Fund’s method of calculating SSS and SSSG may differ from those of other issuers and, accordingly, SSS and SSSG may not be comparable to measures used by other issuers. SSS includes revenue from all SIR Restaurants included in Pooled Revenue except for those locations that were not open for the entire comparable periods in 2024 and 2023. SSSG is the percentage increase in SSS over the prior year comparable period.

(2) Distributable cash and payout ratio are non-GAAP financial measures and do not have standardized meanings prescribed by IFRS. However, the Fund believes that distributable cash and the payout ratio are useful measures as they provide investors with an indication of cash available for distribution. The Fund’s method of calculating distributable cash and the payout ratio may differ from that of other issuers and, accordingly, distributable cash and the payout ratio may not be comparable to measures used by other issuers. Investors are cautioned that distributable cash and the payout ratio should not be construed as an alternative to the statement of cash flows as a measure of liquidity and cash flows of the Fund. The payout ratio is calculated as cash distributed for the period as a percentage of the distributable cash for the period. Distributable cash represents the amount of money which the Fund expects to have available for distribution to Unitholders of the Fund, and is calculated as cash provided by operating activities of the Fund, adjusted for the net change in non-cash working capital items including a reserve for income taxes payable and the net change in the distribution receivable from the SIR Royalty Limited Partnership. For a detailed explanation of how the Fund’s distributable cash is calculated, please refer to the Fund’s Q3 2024 MD&A, which can be accessed via the SEDAR+ website (www.sedarplus.ca).

Q3 2024 Filings

The Fund’s unaudited interim consolidated Financial Statements and Management Discussion & Analysis (“MD&A”), and the Partnership’s Financial Statements, for the three and nine-month periods ended September 30, 2024 are available via the SEDAR+ website at www.sedarplus.ca and SIR’s website at www.sircorp.com.

About SIR Corp.

SIR Corp. (“SIR”) is a privately held Canadian corporation that owns a portfolio of 54 restaurants in Canada. SIR’s Concept brands include Jack Astor’s Bar and Grill® with 36 locations, and Scaddabush Italian Kitchen & Bar® with 13 locations. SIR also operates one-of-a-kind “Signature” brands including The Loose Moose® and Reds® Square One. All trademarks related to the Concept and Signature brands noted above are used by SIR under a License and Royalty Agreement with SIR Royalty Limited Partnership. SIR also owns three additional restaurants, including two Duke’s Refresher® + Bar locations and Edna + Vita^TM, which are currently not part of the Royalty Pool. For more information on SIR or the SIR Royalty Income Fund, please visit www.sircorp.com.

About SIR Royalty Income Fund

The Fund is a trust governed by the laws of the province of Ontario that receives distribution income from its investment in the SIR Royalty Limited Partnership and interest income from the SIR Loan. The Fund intends to pay distributions to unitholders on a monthly basis.

Caution concerning forward-looking statements

Certain statements contained in this report, or incorporated herein by reference, including the information set forth as to the future financial or operating performance of the Fund or SIR, that are not current or historical factual statements may constitute forward-looking information within the meaning of applicable securities laws (“forward-looking statements”). Statements concerning the objectives, goals, strategies, intentions, plans, beliefs, expectations and estimates, and the business, operations, financial performance and condition of the Fund, the SIR Holdings Trust (the “Trust”), the Partnership, SIR, the SIR Restaurants or industry results, are forward-looking statements. The words “may”, “will”, “should”, “would”, ‘could”, “expect”, “believe”, “plan”, “anticipate”, “intend”, “estimate” and other similar terminology and the negative of such expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Fund, the Trust, the Partnership, SIR, the SIR Restaurants or industry results, to differ materially from the anticipated results, performance, achievements or developments expressed or implied by such forward-looking statements. These statements reflect Management’s current expectations, estimates and projections regarding future events and operating performance and speak only as of the date of this document. Readers should not place undue importance on forward-looking statements and should not rely upon this information as of any other date. Risks related to forward-looking statements include, among other things, challenges presented by a number of factors, including; market conditions at the time of this filing; competition; changes in demographic trends; weather; changing consumer preferences and discretionary spending patterns; changes in consumer confidence; changes in national and local business and economic conditions; pandemics or other material outbreaks of disease or safety issues affecting humans or animals or food products; the ability to maintain staffing levels; the impact of inflation, including on input prices and wages; the impact of the war in the Ukraine; changes in tariffs and international trade; changes in foreign exchange and interest rates; changes in availability of credit; legal proceedings and challenges to intellectual property rights; dependence of the Fund on the financial condition of SIR; legislation and governmental regulation, including the cost and/or availability of labour as it relates to changes in minimum wage rates or other changes to labour legislation and forced closures of or other limits placed on restaurants and bars; laws affecting the sale and use of alcohol (including availability and enforcement); changes in cannabis laws; changes in environmental laws; privacy matters; accounting policies and practices; changes in tax laws; and the results of operations and financial condition of SIR. The foregoing list of factors is not exhaustive. Many of these issues can affect the Fund’s or SIR’s actual results and could cause their actual results to differ materially from those expressed or implied in any forward-looking statements made by, or on behalf of, the Fund or SIR. There can be no assurance that SIR will remain compliant in the future with all of its financial covenants under the Credit Agreement and imposed by the lender. Given these uncertainties, readers are cautioned that forward-looking statements are not guarantees of future performance and should not place undue reliance on them. The Fund and SIR expressly disclaim any obligation or undertaking to publicly disclose or release any updates or revisions to any forward-looking statements. Forward-looking statements are based on Management’s current plans, estimates, projections, beliefs and opinions, and the Fund and SIR do not undertake any obligation to update forward-looking statements should assumptions related to these plans, estimates, projections, beliefs and opinions change, except as expressly required by applicable securities laws.

All of the forward-looking statements made herein are qualified by these cautionary statements and other cautionary statements or factors contained herein, and there can be no assurance that the actual results or developments will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, the Fund or SIR.

For more information concerning the Fund’s risks and uncertainties, please refer to the March 14, 2024 Annual Information Form, for the period ended December 31, 2023, and the Fund’s Q3 2024 MD&A, which are available under the Fund’s profile at www.sedarplus.ca.

SOURCE SIR Royalty Income Fund

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In Q2 FY25 the Company strengthened its partner program, enhanced the customer experience, and accelerated product innovation to drive H2 Vantage DX revenue.

• After extensive collaboration with Managed Service Providers (MSPs) and market experts, the Martello Partner Network was launched subsequent to quarter-end, designed directly from partner insights and expertise.
• Vantage DX product innovation in Q2 FY25 included the release of a Microsoft Outage Early Warning feature, leveraging AI to make IT and partner operations more efficient when a Microsoft Teams service outage occurs.
• Martello continues to develop features in Vantage DX that support Microsoft Teams premium services, which are used by more than 75% of Teams Enterprise customers.
• The Company launched a new website, designed to increase traffic from qualified buyers and accelerate visitor conversion into opportunities.
• As part of its commitment to industry-standard data security and privacy, Martello completed a SOC 2 Type 1 audit for Vantage DX.
• The Company introduced initiatives to strengthen the Vantage DX customer experience, including the launch of an Early Adopters Program.
• The Mitel channel remains a large and stable source of margin and revenue in which Martello continues to invest. Multi-vendor solutions are becoming increasingly attractive to telephony and unified communications partners.
• Appointment of IT managed services leader Michael Contento to the Martello board of directors subsequent to quarter-end brings complementing expertise as the Company scales its Partner Network.

OTTAWA, ON, Nov. 14, 2024 /CNW/ – Martello Technologies Group Inc., (“Martello” or the “Company”) MTLO, a provider of user experience management solutions purpose-built for Microsoft Teams, Microsoft 365 and Mitel unified communications, today released financial results for the three months ended September 30, 2024. Martello’s software proactively detects performance issues before they impact users of these enterprise cloud communications and collaboration systems.

Terence Matthews, Chairman of Martello expressed his belief in the value of providing multi-vendor experience management to Mitel and its partners: “Managing the user experience across Mitel and Microsoft Teams delivers substantial value, allowing channel partners to differentiate and reduce the cost of supporting these enterprise communication and collaboration systems,” said Mr. Matthews. “Partners and telephony players recognize the opportunity to boost client satisfaction and retention, while also driving operational savings with Martello’s solutions.”

“Our targeted investments in H1 FY25 have set Martello up to accelerate Vantage DX growth through the partner channel”, said Jim Clark, Chief Executive Officer of Martello. “I’m thrilled that we have successfully launched the Martello Partner Network, onboarding several new partners with growth in our channel pipeline. We will continue to recruit, onboard and activate targeted partners and work together with them to deliver Vantage DX features that provide compelling value, particularly for Microsoft premium services such as Teams Phone, CoPilot for M365 and Teams Rooms, which are seeing rapid adoption globally as businesses seek to drive hybrid workplace productivity.”

Q2 FY25 Financial Highlights

• Revenue in Q2 FY25 was $3.64M representing a 9% decrease compared to Q2 FY24, due to expected declines in legacy product and support and maintenance revenue, partially offset by growth in Vantage DX revenue.
• Vantage DX monthly recurring revenue (“MRR”) increased by 5% in Q2 FY25 compared to Q2 FY24, both from direct sales and activities with partners. Vantage DX is the experience management solution that is purpose-built for Microsoft Teams. Vantage DX has contributed $1.23M in revenue in FY25 to date, a 10% increase compared to the same period in FY24.
• Sunsetting legacy product revenue declined by 11% or $0.18M in Q2 FY25 compared to Q2 FY24. The ongoing decline of legacy product revenue is proceeding as expected.
• Revenue from the Mitel business segment decreased by 10% in Q2 FY25 compared to the same period in the prior year. This decrease is attributable to a revenue mix change from various Mitel Performance Analytics offerings. The Mitel business continues to be a large and stable source of revenue and gross margin, representing 43% of total revenues in Q2 FY25 (compared to 44% in Q2 FY24) and 97% gross margin as a percentage of segment revenue.
• Revenue was 98% recurring in both Q2 FY25 and Q2 FY24.
• Gross margin as a percentage of total revenue was 86% in Q2 FY25, compared to 87% in Q2 FY24. The decrease is attributable to the higher cost of hosting software products on the cloud. Management continues to execute a strategy to reduce hosting costs. In addition, as the Company onboards new clients to existing cloud instances, the cost per client will continue to decrease.
• MRR decreased by 9% to $1.19M in Q2 FY25 compared to $1.30M in the prior year. The decrease is primarily attributable to changes in the mix of Mitel’s software assurance program and expected declines in legacy product revenue. MRR is a non-IFRS measure, representing average monthly recurring revenues earned in a fiscal quarter.
• Operating expenses were $4.20M in Q2 FY25 compared to $4.16M in Q2 FY24, a 1% increase. The nominal increase is driven by an increase in software costs, marketing and advertising and professional fees (consulting) partially offset by lower headcount costs and related variable compensation.
• The Company is investing in Vantage DX revenue growth as management monitors value for spend in all functions of the value chain.
• The Q2 FY25 loss from operations of $1.07M represented a 56% increase compared to $0.68M in Q2 FY24, due to the decrease in revenue as described above.
• The Adjusted EBITDA (a non-IFRS measure) was a loss of $0.58M in Q2 FY25, compared to $0.10M in the same period of FY24, attributable to the items described above.
• The Company’s cash and short-term investments balance was $4.57M as of September 30, 2024 (compared to $7.72M at March 31, 2024).

The financial statements, notes and Management Discussion and Analysis (“MD&A”) are available under the Company’s profile on SEDAR+ at www.sedarplus.ca, and on Martello’s website at www.martellotech.com. The financial statements include the wholly-owned subsidiaries of Martello. All amounts are reported in Canadian dollars.

This press release does not constitute an offer of the securities of the Company for sale in the United States. The securities of the Company have not been registered under the United States Securities Act of 1933, (the “1933 Act“) as amended, and may not be offered or sold within the United States absent registration or an exemption from registration under the 1933 Act.

This press 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 in any state in which such offer, solicitation or sale would be unlawful.

About Martello Technologies Group

Martello MTLO is a technology company that provides user experience management solutions purpose-built for Microsoft Teams and Mitel unified communications. The Company’s Vantage DX solution enables IT teams to deliver a frictionless Microsoft Teams experience to their users. With Vantage DX, IT can move from reactive to proactive by detecting potential performance issues before they impact users, and speeding resolution time from days to minutes.  This leads to increased productivity, realizes efficiencies, and allows businesses to harness the full value of Microsoft Teams. Martello is a public company headquartered in Ottawa, Canada with employees in Europe, North America and the Asia Pacific region.  Learn more at http://www.martellotech.com

Neither the TSXV nor its Regulation Services Provider (as that term is defined in the policies of the TSXV) accepts responsibility for the adequacy or accuracy of this news release.

Cautionary Note Regarding Forward-Looking Information

This news release contains “forward-looking information” within the meaning of applicable Canadian securities legislation. Forward-looking information can be identified by words such as: “anticipate,” “intend,” “plan,” “goal,” “seek,” “believe,” “project,” “estimate,” “expect,” “strategy,” “future,” “likely,” “may,” “should,” “will” and similar references to future periods and ” includes, but is not limited to, statements with respect to activities, events or developments that the Company expects or anticipates will or may occur in the future, including the aim to increase Vantage DX revenue growth, the intention that targeted investments in H1 FY25 will accelerate Vantage DX growth through the partner channel, and management’s aim to execute a strategy that will reduce hosting costs.

Forward-looking information is neither a statement of historical fact nor assurance of future performance. Instead, forward-looking information is based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking information relates to the future, such statements are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking information. Therefore, you should not rely on any of the forward-looking information. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking information include, among others, the following:

• Continued volatility in the capital or credit markets and the uncertainty of additional financing.
• Our ability to maintain our current credit rating and the impact on our funding costs and competitive position if we do not do so.
• Changes in customer demand.
• Disruptions to our technology network including computer systems and software, as well as natural events such as severe weather, fires, floods and earthquakes or man-made or other disruptions of our operating systems, structures or equipment.
• Delayed purchase timelines and disruptions to customer budgets, as well as Martello’s ability to maintain business continuity as a result of COVID-19.
• and other risks disclosed in the Company’s filings with Canadian Securities Regulators, including the Company’s annual information form for the year ended March 31, 2021 dated January 7, 2022, which is available on the Company’s profile on SEDAR at www.sedar.com.

Any forward-looking information provided by the Company in this news release is based only on information currently available and speaks only as of the date on which it is made. Except as required by applicable securities laws, we undertake no obligation to publicly update any forward-looking information, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.

SOURCE Martello Technologies Group Inc.

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