Alaris Equity Partners Income Trust Releases Q1 2021 Financial Results

CALGARY, May 6, 2021 - Alaris Equity Partners Income Trust (together, as applicable, with its subsidiaries, "Alaris" or the "Trust") is pleased to announce its results for the three months ended March 31, 2021. The results are prepared in accordance with International Accounting Standard 34. All amounts below are in Canadian dollars unless otherwise noted.

Q1 2021 Highlights:

• Generated revenue of $32.2 million in the quarter, in line with the previous guidance, or $0.79 per unit;
• Normalized EBITDA was $28.8 million, an increase of 22.4% on a per unit basis compared to Q1 2020. The increase is a result of the approximate $350.0 million of capital deployment over the preceding twelve months to March 31, 2021;
• Capital deployment in Q1 2021 of approximately $180.0 million:
• • New partner contribution of US$40.0 million to Falcon Master Holdings LLC ("FNC"), (US$32.2 million of preferred equity and a US$7.8 million minority common equity investment). During the three months ended March 31, 2021, Alaris received US$0.3 million in common distributions from FNC;
  • New partner contribution of US$66.0 million to Brown & Settle Investments, LLC and a subsidiary thereof (collectively, "Brown & Settle"), (US$53.7 million of a combination of subordinated debt and preferred equity and a US$12.3 minority common equity investment);
  • Follow-on contribution to Accscient, LLC ("Accscient") of US$8.0 million; and
  • New partner contribution of US$22.5 million of preferred equity to 3E, LLC ("3E"). An additional US$7.5 million has been placed into an escrow account to fund up to two additional preferred unit tranches, once escrow targets are met by 3E.
• Included in earnings in Q1 2021 is a total increase in the fair value of investments of approximately $5.5 million as well as a bad debt recovery of $4.0 million. The recovery of bad debt is a reversal of previously recorded credit losses related to long-term accounts receivable and promissory notes due from Kimco Holdings, LLC ("Kimco") as their credit risk has improved substantially as a result of the continued success of the business. Also, subsequent to March 31, 2021, Kimco repaid from cash flow US$4.0 million of the total US$18.3 million of accrued long-term accounts receivable and promissory notes due to Alaris;
• Beginning January 2021, PFGP began to pay partial distributions of US$0.33 million per month (US$4.0 million per annum) and will continue to do so until June 2021. While nothing can be assured, based on PFGP's current forecast including membership numbers and bank covenants, Alaris currently expect that beginning in July 2021 distributions will return to full contracted amounts. A return to full distributions would add $0.11 per unit of cash flow and reduce Alaris' pay out ratio by approximately 4%; and
• Both Federal Resources Supply Company ("FED") and Kimco are continuing to evaluate the possibility of a full or partial redemption of Alaris' investment. Nothing is imminent, nor can any redemption be assured; however, the redemption value of FED is estimated to be between US$75.0 million and US$85.0 million and Kimco's is based upon a revised formula factoring in several valuation factors and is estimated to be between US$70.0 million and US$80.0 million.

"We are pleased to be putting out a first quarter as guided, which saw revenues increase from the capital deployed in the last two quarters" said Darren Driscoll, CFO. "Expected redemptions from FED and Kimco will provide capital for further growth while maintaining our low payout ratio", said Mr. Driscoll.

For the three months ended March 31, 2021, revenue per unit decreased by 15.1%; however, after excluding the additional US$7.0 million of distributions from Sales Benchmark Index LLC ("SBI") as part of their redemption in January 2020, revenue would have otherwise increased by approximately $0.11 per unit or 17%, compared to Q1 2020. The increase is due to the distributions in Q1 2021 from Alaris' new investments in Carey Electric, Edgewater, FNC, Brown & Settle and 3E, as well as the additional distributions from follow-on investments in GWM, BCC and Accscient. These were partially offset by the depreciation of the US dollar against the Canadian dollar compared to the prior year, as the quarterly average rate was approximately 6% lower in Q1 2021.

Earnings of $0.56 per unit improved significantly due to the comparable 2020 period including a $84.9 million decrease in the investments at fair value, which was a result of the initial impact to the Partners from COVID-19.

Normalized EBITDA of $0.71 per unit increased by 22.4% due to the new investments and follow-on investments outlined above. The reason for the difference from the decrease in revenue per unit is that the additional US$7.0 million of distributions from SBI were deducted from Normalized EBITDA as a normalizing item.

Net cash from operating activities of $0.66 per unit decreased by 8.3% in the quarter, compared to Q1 2020, due to the additional distributions from SBI that were included in Q1 2020 as part of their redemption.

Outlook

The last twelve months were an incredibly productive period of capital deployment for Alaris as the total invested in the period was approximately $350 million. This included new investments in Carey Electric, Edgewater, FNC, Brown & Settle and 3E, as well as follow-on contributions into current Partners (GWM, BCC and Accscient). This increased level of capital deployment for Alaris, along with consistently positive results amongst the majority of our current portfolio, is contributing to the Run Rate Revenue of approximately $135.4 million over the next twelve months. This includes current contracted amounts, an aggregate $2.0 million of common dividends from Partners, agreed upon partial distributions of US$0.33 million per month from PFGP and no distributions from ccComm. PFGP plans to resume full distributions beginning in July 2021 as long as they are compliant with bank covenants. This would add $6.8 million to Run Rate Revenue and reduce the Run Rate Payout Ratio by approximately 4%. Alaris expects total revenue from its Partners in Q2 2021 of approximately $33.8 million.

Annual general and administrative expenses are currently estimated at $12.5 million and include all public company costs. The Trust's Run Rate Payout Ratio is expected to be within a range of 65% and 70% when including run rate distributions, overhead expenses and its existing capital structure. The table below sets out our estimated Run Rate Cash Flow alongside the after-tax impact of additional PFGP distributions, positive net deployment and the impact of every $0.01 change in the USD to CAD exchange rate.

The senior debt facility was drawn to $312.3 million at March 31, 2021, with the capacity to draw up to another $80.7 million based on covenants and credit terms. The annual interest rate on that debt, inclusive of the standby charges on available capacity, was approximately 3.8% for the three months ended March 31, 2021.

The Consolidated Statement of Financial Position, Statement of Comprehensive Income, and Statement of Cash Flows are attached to this news release. Alaris' financial statements and MD&A are available on SEDAR at www.sedar.com and on our website at www.alarisequitypartners.com.

Earnings Release Date and Conference Call Details

Alaris management will host a conference call at 9am MT (11am ET), Friday, May 7, 2021 to discuss the financial results and outlook for the Trust.

Participants can access the conference call by dialing toll free 1-888-390-0546. Alternatively, to listen to this event online, please click the webcast link and follow the prompts given: Q1 Webcast. Please connect to the call or log into the webcast at least 10 minutes prior to the beginning of the event.

For those unable to participate in the conference call at the scheduled time, it will be archived for instant replay for a week. You can access the replay by dialing toll free 1-888-390-0541 and entering the passcode 461381#. The webcast will be archived and is available for replay by using the same link as above or by finding the link we'll have stored under the "Investor" section - "Presentation and Events", on our website at www.alarisequitypartners.com.

An updated corporate presentation will be posted to the Trust's website within 24 hours at www.alarisequitypartners.com.

Environmental, Social and Governance ("ESG")

Alaris has recently adopted a formal ESG policy, a copy of which is available on our website under the "Investors" section. Alaris expects to begin publishing an ESG report, which will provide its investors with more information on how our ESG policy is being implemented. Alaris expects to release its first ESG report within the next twelve to 18 months, with an annual report following thereafter. Alaris believes that an awareness of ESG issues is an important part of being a responsible investor and that integrating ESG considerations into its investment decisions can help Alaris mitigate risks and identify strong investment opportunities. Alaris is also committed to periodically reviewing the ESG policies and procedures of its existing Private Company Partners to ensure they adequately address emerging market trends and any areas of concern for Alaris, the investment industry in general or the specific industries in which the Partners operate.

About the Trust:

Alaris, through its subsidiaries, provides alternative financing to private companies ("Partners") in exchange for distributions, dividends or interest (collectively, "Distributions") with the principal objective of generating stable and predictable cash flows for distribution payments to its unitholders. Distributions from the Partners are adjusted annually based on the percentage change of a "top-line" financial performance measure such as gross margin or same store sales and rank in priority to the owner's common equity position.

Non-IFRS Measures
The terms EBITDA, Normalized EBITDA, Run Rate Payout Ratio, Actual Payout Ratio, Run Rate Revenue, Run Rate Cash Flow, Earnings Coverage Ratio, Per Unit and IRR are financial measures used in this news release that are not standard measures under International Financial Reporting Standards ("IFRS"). The Trust's method of calculating EBITDA, Normalized EBITDA, Run Rate Payout Ratio, Actual Payout Ratio, Run Rate Revenue, Run Rate Cash Flow, Earnings Coverage Ratio, Per Unit and IRR may differ from the methods used by other issuers. Therefore, the Trust's EBITDA, Normalized EBITDA, Run Rate Payout Ratio, Actual Payout Ratio, Run Rate Revenue, Run Rate Cash Flow, Earnings Coverage Ratio, Per Unit and IRR may not be comparable to similar measures presented by other issuers.

Run Rate Payout Ratio refers to Alaris' total distribution per unit expected to be paid over the next twelve months divided by the estimated net cash from operating activities per unit that Alaris expects to generate over the same twelve month period (after giving effect to the impact of all information disclosed as of the date of this report).

Actual Payout Ratio refers to Alaris' total cash distributions paid during the period (annually or quarterly) divided by the actual net cash from operating activities Alaris generated for the period.

Run Rate Revenue refers to Alaris' total revenue expected to be generated over the next twelve months.

Run Rate Cash Flow refers to Alaris' total cash flows expected to be generated and disbursed over the next twelve months.

EBITDA refers to earnings determined in accordance with IFRS, before depreciation and amortization, net of gain or loss on disposal of capital assets, interest expense and income tax expense. EBITDA is used by management and many investors to determine the ability of an issuer to generate cash from operations. Management believes EBITDA is a useful supplemental measure from which to determine the Trust's ability to generate cash available for debt service, working capital, capital expenditures, income taxes and distributions.

Normalized EBITDA refers to EBITDA excluding items that are non-recurring in nature and is calculated by adjusting for non-recurring expenses and gains to EBITDA. Management deems non-recurring items to be unusual and/or infrequent items that Alaris incurs outside of its common day-to-day operations. For the three months ended March 31, 2021, this includes the unit-based compensation expense related to the quarterly re-valuation of the outstanding RTU's and Options and the reversal of previously recorded credit losses related to the Kimco promissory notes and accounts receivable. For the three months ended March 31, 2020, this includes the distributions received upon the redemption of SBI. Transaction diligence costs are recurring but are considered an investing activity. Foreign exchange unrealized gains and losses are recurring but not considered part of operating results and excluded from normalized EBITDA on an ongoing basis. Changes in investments at fair value are non-cash and although recurring are also removed from normalized EBITDA. Adjusting for these non-recurring items allows management to assess cash flow from ongoing operations.

Earnings Coverage Ratio refers to the Normalized EBITDA of a Partner divided by such Partner's sum of debt servicing (interest and principal), unfunded capital expenditures and distributions to Alaris. Management believes the earnings coverage ratio is a useful metric in assessing our partners continued ability to make their contracted distributions.

Per Unit values, other than earnings per unit, refer to the related financial statement caption as defined under IFRS or related term as defined herein, divided by the weighted average basic units outstanding for the period.

IRR refers to internal rate of return, which is a metric used to determine the discount rate that derives a net present value of cash flows to zero. Management uses IRR to analyze partner returns.

The terms EBITDA, Normalized EBITDA, Run Rate Payout Ratio, Actual Payout Ratio, Run Rate Revenue, Run Rate Cash Flow, Earnings Coverage Ratio, Per Unit and IRR should only be used in conjunction with the Trust's annual audited financial statements while complete versions are available on SEDAR at www.sedar.com.

Forward-Looking Statements
This news release 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 fact contained in this news release are forward-looking statements, including, without limitation, management's expectations, intentions and beliefs concerning the growth, results of operations, performance of the Trust and the Partners, the future financial position or results of the Trust, business strategy and plans and objectives of or involving the Trust or the Partners. Many of these statements can be identified by looking for words such as "believe", "expects", "will", "intends", "projects", "anticipates", "estimates", "continues" or similar words or the negative thereof. In particular, this news release contains forward-looking statements regarding: the anticipated financial and operating performance of the Partners; the timing and impact of restarting or increasing Distributions from Partners not currently paying the full amount or at all; the Trust's Run Rate Payout Ratio, Run Rate Cash Flow and Run Rate Revenue; the continued deferral of PFGP's Distributions and the timing to restart full distributions; the impact of the new investments in Carey Electric, FNC, Edgewater, Brown & Settle, 3E as well as the follow-on investments in GWM, BCC and Accscient, including, without limitation, the expected yield therefrom and the impact on the Trust's net cash from operating activities, Run Rate Revenue and Run Rate Payout Ratio; expected resets of Distributions in 2021; the Trust's consolidated expenses; expectations regarding receipt (and amount of) any common equity distributions from Partners in which Alaris holds common equity, including the impact on the Trust's net cash from operating activities, Run Rate Revenue, Run Rate Cash Flow and Run Rate Payout Ratio; the impact of investing in common equity on Alaris' ability to deploy more capital, overall return and Run Rate Payout Ratio; the amount of the Trust's distributions to unitholders (both quarterly and on an annualized basis); the use of proceeds from the senior credit facility; the Trust's ability to deploy capital; potential Partner redemptions, including the timing, if at all, thereof and the amounts to be received by the Trust; impact of new deployment and restarting Distributions from Partners not paying full contractual amounts; and the impact of Alaris' ESG Policy and the issuance of its ESG report. To the extent any forward-looking statements herein constitute a financial outlook or future oriented financial information (collectively, "FOFI"), including estimates regarding revenues, Distributions from Partners (including expected resets, restarting full or partial Distributions and common equity distributions), Run Rate Payout Ratio, Run Rate Cash Flow, net cash from operating activities, expenses and impact of capital deployment, they were approved by management as of the date hereof and have been included to provide an understanding with respect to Alaris' financial performance and are subject to the same risks and assumptions disclosed herein. There can be no assurance that the plans, intentions or expectations upon which these forward-looking statements are based will occur.

By their nature, forward-looking statements require Alaris to make assumptions and are subject to inherent risks and uncertainties. Assumptions about the performance of the Canadian and U.S. economies over the next 24 months and how that will affect Alaris' business and that of its Partners (including, without limitation, the ongoing impact of COVID-19) are material factors considered by Alaris management when setting the outlook for Alaris. Key assumptions include, but are not limited to, assumptions that: the Canadian and U.S. economies will continue to recover from the ongoing economic downturn created by the response to COVID-19 within the next twelve months, interest rates will not rise in a material way over the next 12 to 24 months, that those Alaris Partners detrimentally affected by COVID-19 will recover from the pandemic's impact and return to their pre-COVID-19 operating environments; following a recovery from the COVID-19 impact, the businesses of the majority of our Partners will continue to grow; more private companies will require access to alternative sources of capital; the businesses of new Partners and those of existing Partners will perform in line with Alaris' expectations and diligence; and that Alaris will have the ability to raise required equity and/or debt financing on acceptable terms. Management of Alaris has also assumed that the Canadian and U.S. dollar trading pair will remain in a range of approximately plus or minus 15% of the current rate over the next 6 months. In determining expectations for economic growth, management of Alaris primarily considers historical economic data provided by the Canadian and U.S. governments and their agencies as well as prevailing economic conditions at the time of such determinations.

There can be no assurance that the assumptions, plans, intentions or expectations upon which these forward-looking statements are based will occur. Forward-looking statements are subject to risks, uncertainties and assumptions and should not be read as guarantees or assurances of future performance. The actual results of the Trust and the Partners could materially differ from those anticipated in the forward-looking statements contained herein as a result of certain risk factors, including, but not limited to, the following: the ongoing impact of the COVID-19 pandemic on the Trust and the Partners (including how many Partners will experience a slowdown or closure of their business and the length of time of such slowdown or closure); management's ability to assess and mitigate the impacts of COVID-19; the dependence of Alaris on the Partners; leverage and restrictive covenants under credit facilities; reliance on key personnel; general economic conditions, including the ongoing impact of COVID-19 on the Canadian, U.S. and global economies; failure to complete or realize the anticipated benefit of Alaris' financing arrangements with the Partners; a failure to obtain required regulatory approvals on a timely basis or at all; changes in legislation and regulations and the interpretations thereof; risks relating to the Partners and their businesses, including, without limitation, a material change in the operations of a Partner or the industries they operate in; inability to close additional Partner contributions or collect proceeds from any redemptions in a timely fashion on anticipated terms, or at all; a change in the ability of the Partners to continue to pay Alaris at expected Distribution levels or restart distributions (in full or in part); a failure to collect material deferred Distributions; a change in the unaudited information provided to the Trust; and a failure to realize the benefits of any concessions or relief measures provided by Alaris to any Partner or to successfully execute an exit strategy for a Partner where desired. Additional risks that may cause actual results to vary from those indicated are discussed under the heading "Risk Factors" and "Forward Looking Statements" in Alaris' Management Discussion and Analysis and Annual Information Form for the year ended December 31, 2020, which is filed under Alaris' profile at www.sedar.com and on its website at www.alarisequitypartners.com.

Readers are cautioned that the assumptions used in the preparation of forward-looking statements, including FOFI, although considered reasonable at the time of preparation, based on information in Alaris' possession as of the date hereof, may prove to be imprecise. In addition, there are a number of factors that could cause Alaris' actual results, performance or achievement to differ materially from those expressed in, or implied by, forward looking statements and FOFI, or if any of them do so occur, what benefits the Trust will derive therefrom. As such, undue reliance should not be placed on any forward-looking statements, including FOFI.

The Trust has included the forward-looking statements and FOFI in order to provide readers with a more complete perspective on Alaris' future operations and such information may not be appropriate for other purposes. The forward-looking statements, including FOFI, contained herein are expressly qualified in their entirety by this cautionary statement. Alaris disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Alaris Equity Partners Income Trust
Condensed consolidated interim statements of financial position

Alaris Equity Partners Income Trust
Condensed consolidated interim statements of comprehensive income / (loss)

Alaris Equity Partners Income Trust
Condensed consolidated interim statements of cash flows

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SOURCE Alaris Equity Partners Income Trust



Contact
Investor Relations, Alaris Equity Partners Income Trust, 403-260-1457, ir@alarisequity.com