Earnings release
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(1) Adjusted EBITDA, Adjusted EBITDA margin and Adjusted Net Earnings are non-GAAP measures. See “Terminology” for further information on the definition and composition of these measures. K-BRO REPORTS RECORD Q2 RESULTS FOR REVENUE, EBITDA AND ADJUSTED EBITDA (TSX: KBL) Edmonton, Canada (August 13, 2025) – K-Bro Linen Inc. (“K-Bro” or the “Corporation”) today announces its Q2 2025 financial and operating results. Q2 2025 Financial and Operating Highlights • Revenue o Revenue increased by 21.0% in Q2 2025 to $113.1 million compared to $93.5 million in Q2 2024. o Healthcare revenue increased to $ 57.9 million for Q2 2025 compared to $48.0 million in Q2 2024, or by 20.7%. o Hospitality revenue increased to $ 55.2 million for Q2 2025 compared to $45.5 million in 2024, or by 21.2%. • Adjusted EBITDA1, Adjusted EBITDA Margin1 & Adjusted Net Earnings1 o Adjusted EBITDA increased by 30.0% to $23.7 million in Q2 2025 compared to $18.2 million in Q2 2024. o Adjusted EBITDA margin increased by 1.5% to 21.0% in Q2 2025 compared to 19.5% in Q2 2024. o Adjusted net earnings increased by 25.8% to $7.8 million in Q1 2025 from $6.2 million in Q2 2024. • EBITDA, EBITDA Margin & Net Earnings o EBITDA increased by $4.8 million to $21.4 million for Q2 2025 compared to $16.6 million in Q2 2024. o EBITDA margin for the quarter increased to 18.9% in 2025 compared to 17.7% in 2024. o Net earnings for the quarter increased by $0.9 million to $ 5.4 million in 2025 from $4.5 million in 2024, and as a percentage of revenue decreased by 0.1% to 4.8% in 2025 from 4.9% in 2024. • For the second quarter of 2025, K-Bro declared dividends of $0.300 per common share. • K-Bro issued 2,334,500 common shares to finance the Stellar Mayan acquisition. • K-Bro amended its existing three -year committed Syndicated Credit Facility Agreement to include a $134.3 million four-year amortizing term loan and to extend the term of the facility to June 10, 2029. • Debt net of cash at the end of Q 2 2025 was $228.3 million compared to $114.4 million at the end of fiscal 2024 due to the amortizing term loan to finance the Stellar Mayan acquisition. Linda McCurdy, President & CEO of K -Bro, commented that “We’re delighted to have completed the acquisition of Stellar Mayan, the largest in our history, and welcome the Stellar team to the K- Bro family. We initially entered the UK through the acquisition of Fishers in 2017. Our complementary acquisitions of Shortridge in 2024 and Stellar Mayan in 2025 have helped achieve our vision of building a national platform in the UK, enhancing our scale, reach and diversification. Together, we’re excited to support our existing and new healthcare and hospitality customers.”
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Page 2 of 14 “Our fifth consecutive quarter of record results reflects early contributions of our recent acquisitions and we’re excited about our future potential and outlook of these accretive acquisitions. Both of K-Bro’s healthcare and hospitality segments continue to experience steady volume trends. Going forward, we expect combined Adjusted EBITDA margins will remain at similar levels to combined seasonally adjusted historical margins. We continue to monitor the evolving state of tariffs and other trade policies. We are not currently anticipating meaningful impacts on our business, as key customers and suppliers are not US-based.” Highlights and Significant Events for Q2 2025 Business Acquisition - Stellar Mayan On May 13, 2025, the Corporation announced the signing of a share purchase agreement to acquire 100% of U K based Stellar Mayan . Stellar Mayan includes three operating businesses: (i) Synergy Health Managed Services Limited (“Synergy”); (ii) Grosvenor Contracts (London) Limited (“Grosvenor Contracts”, “GC”); and (iii) Aeroserve (MSP) Limited and Aeroserve Euro Limited, jointly referred to as Aeroserve Linen Services (“AeroServe”). On June 11, 2025, the Corporation announced that it completed the previously announced acquisition of Stellar Mayan, a leading commercial laundry business in England serving the healthcare and hospitality markets. The Acquisition is highly complementary to K -Bro's existing U K businesses, Fishers and Shortridge, and creates a national footprint in the UK's commercial laundry and textile rental sector. The Corporation partially financed the Stellar Mayan Acquisition through the issuance of 2,334,500 common shares (initially issued as subscription receipts) at a price of $34.55 per common share (initially issued as subscription receipts). The remainder of the Acquisition was funded by the Corporation's new $134.3 million four-year amortizing term loan. Based on the Corporation’s evaluation of the Stellar Mayan Acquisition and the criteria in the identification of a business combination established in IFRS 3, the Stellar Mayan Acquisition has been accounted for using the acquisition method, whereby the purchase consideration is allocated to the fair values of the net assets acquired. At the time the financial statements were authorized for issue, and due to the timing of the Acquisition, the Corporation has not yet completed the accounting for the Stellar Mayan Acquisition. This includes the accounting for the amounts attributable to property, plant and equipment, intangible assets and the associated goodwill. The preliminary purchase price allocated to the net assets acquired, based on their estimated fair values, is as follows: 1) This is presented net of cash acquired. Cash acquired was $5,156. The assets and liabilities recognized as a result of the Stellar Mayan Acquisition are as follows: (in thousands) Cash consideration 194,695$ Total purchase price (1) 194,695$
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Page 3 of 14 1) Includes ROUA from the UK Division of $32,556. The provisional intangible assets acquired are made up of $ 33.2 million related to customer contracts and $11.3 million related to the brands. The goodwill is attributable to the workforce, and the efficiencies and synergies created between the existing business of the Corporation and the acquired business. Goodwill will not be deductible for tax purposes. Acquisition related costs For the six months ended June 30, 2025, $7.1 million in professional fees associated with the Stellar Mayan Acquisition has been included in Corporate expenses. Revenue and profit information The acquired business contributed revenues of $9.4 million to the Corporation for the period from June 12, 2025 to June 30, 2025. If the Acquisition had occurred on January 1, 2025, consolidated pro-forma revenue for the period ended June 30, 2025 would have been $280.2 million. The acquired business contributed a net deficit of ($0.455) million to the Corporation for the period from June 12, 2025 to June 30, 2025. If the Acquisition had occurred on January 1, 2025, consolidated pro-forma net earnings for the period ended June 30, 2025 would have been $15.1 million, including the recognition of a non-recurring tax loss carryforward of $8.1 million. Common Share Offering On June 11, 2025, the Corporation closed the Stellar Mayan Acquisition. Through a bought deal, the Corporation issued 2,334,500 common shares at $34.55 per share, which included full exercise of the over-allotment option. The proceeds of the common share offering were used to finance a portion of the Stellar Mayan Acquisition and pay certain fees and expenses related to acquisition and offering. The net proceeds of the offering after deducting expenses of the offering and the underwriter’s fee were $75.8 million. Revolving Credit Facility On June 11, 2025, the Corporation amended its existing three -year committed Syndicated Credit Facility Agreement to include a $1 34.3 million four-year amortizing term loan and to extend the term of the (in thousands) Net Assets Acquired: Accounts receivable 25,017 Prepaid expenses and deposits 3,867 Linen in service 28,553 Accounts payable and accrued liabilities (27,911) Lease liabilities (27,892) Provisions (220) Deferred income taxes (8,938) Property, plant and equipment (1) 90,863 Intangible assets 44,542 Net identifiable assets acquired 127,881 Goodwill 66,814 Net assets acquired 194,695$
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Page 4 of 14 facility from March 25, 2027 to June 10, 2029. The amendment included a reduction in the accordion to $50 million from $75 million. On March 26, 2024, the Corporation entered into a three -year committed Syndicated Credit Facility Agreement from March 26, 2024 to March 25, 2027. The agreement consists of a $175 million revolving credit facility plus a $75 million accordion. The term loan and revolving credit facility are collateralized by a general security agreement, bear interest at prime or the applicable banker’s acceptance rate, plus an interest margin dependent on certain financial ratios. Interest payments only are due during the term for the revolving portion of the syndicated credit facility. For the term loan portion of the syndicated credit facility, repayments of the principal amount shall be repaid in quarterly installments commencing September 30, 2025, in addition to required interest payments. The additional interest margin can range between 0. 00% to 2.00 % dependent upon the calculated Total Funded Debt / Credit Facility EBITDA financial ratio, with a range between 0 to 3.50x. The Funded Debt to EBITDA Ratio requirement has an increase to 4.00x for the first four quarters following any material acquisition. The required calculated Funded Debt / Credit Facility EBITDA financial ratio is subject to change based off certain terms and conditions. As at June 30, 2025 the combined interest rate was 5.95%. The Corporation’s incremental borrowing rate under its existing credit facility is determined by the Canadian prime rate plus an applicable margin based on the ratio of Funded Debt to EBITDA as defined in the credit agreement. Business Acquisition - Shortridge In the six months ended June 30, 2025, the provisional amounts that were previously disclosed in the December 31, 2024 Annual Financial Statements, associated with the 100% share capital acquisition of Shortridge Ltd, a private hospitality laundry provider based in the North West of England were finalized. No new information which resulted in adjustments to the fair value of net identifiable assets acquired was obtained during the quarter ended June 30, 2025. Business Acquisition - Buanderie C.M. In the six months ended June 30, 2025, the provisional amounts that were previously disclosed in the December 31, 2024 Annual Financial Statements, associated with the 100% share capital acquisition of Buanderie C.M., a private laundry and linen operator located in Montreal serving the healthcare market were finalized. No new information which resulted in adjustments to the fair value of net identifiable assets acquired was obtained during the quarter ended June 30, 2025. Capital Investment Plan For fiscal 2025, the Corporation’s planned capital spending is expected to be in the range of $10.0 to $12.0 million on a consolidated basis. This guidance includes both strategic and maintenance capital requirements to support existing base business in both Canada and the UK. These amounts are not reflective of incremental capital required for Stellar Mayan, for which the capital investment is anticipated to be $9.3 million ($5.0 million GBP). We will continue to assess capital needs within our facilities and prioritize projects that have shorter term paybacks as well as those that are required to maintain efficient and reliable operations.
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Page 5 of 14 Economic Conditions Evolving global and Canadian foreign policies, geopolitical events and economic conditions may impact inflation, energy pricing, labour availability, supply chain efficiency, trade policies, tariffs and/or other items, which may have a direct or indirect impact on the Corporation’s business. The Corporation’s Credit Facility is subject to floating interest rates and, therefore, is subject to fluctuations in interest rates which are beyond the Corporation’s control. Changes in interest rates, both domestically and internationally, could negatively affect the Corporation’s cost of financing its operations and investments. Uncertainty about judgments, estimates and assumptions made by management during the preparation of the Corporation’s consolidated financial statements related to potential impacts of geopolitical events and changing interest rates on revenue, expenses, as sets, liabilities, and note disclosures could result in a material adjustment to the carrying value of the asset or liability affected.
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Page 6 of 14 Financial Results (1) See “Terminology” for further details Dividends The Board of Directors has declared a monthly dividend of $0.10 per common share for the period from August 1 to August 31, 2025, to be paid on September 15, 2025, to shareholders of record on August 31, 2025. The Corporation's policy is for shareholders of record on the last business day of a calendar month to receive dividends during the fifteen days following the end of such month. K -Bro designates this dividend as an eligible dividend pursuant to subsection 89(14) of the Income Tax Act (Canada) and similar provincial and territorial legislation. (thousands, except per share amounts and percentages) Canadian Division 2025 UK Division 2025 2025 Canadian Division 2024 UK Division 2024 2024 $ Change % Change0 Revenue 69,387$ 43,687$ 113,074$ 64,669$ 28,798$ 93,467$ 19,607 21.0% Expenses included in EBITDA 55,105 36,587 91,692 53,682 23,212 76,894 14,798 19.2% EBITDA(1) 14,282 7,100 21,382 10,987 5,586 16,573 4,809 29.0% EBITDA as a % of revenue 20.6% 16.3% 18.9% 17.0% 19.4% 17.7% 1.2% 6.8% Adjusted EBITDA(1) 14,656 9,071 23,727 12,244 6,003 18,247 5,480 30.0% Adjusted EBITDA as a % of revenue 21.1% 20.8% 21.0% 18.9% 20.8% 19.5% 1.5% 7.7% Net earnings 2,852 2,567 5,419 1,775 2,760 4,535 884 19.5% Basic earnings per share 0.258$ 0.233$ 0.491$ 0.169$ 0.263$ 0.432$ 0.059$ 13.7% Diluted earnings per share 0.257$ 0.232$ 0.489$ 0.169$ 0.262$ 0.431$ 0.058$ 13.5% Dividends declared per diluted share 0.300$ 0.300$ -$ 0.0% Adjusted net earnings (1) 3,226 4,538 7,764 3,032 3,177 6,209 1,555 25.0% Adjusted basic earnings per share (1) 0.294$ 0.412$ 0.706$ 0.290$ 0.304$ 0.594$ 0.112$ 18.9% Adjusted diluted earnings per share (1) 0.291$ 0.409$ 0.700$ 0.288$ 0.302$ 0.590$ 0.110$ 18.6% Total assets 716,762 444,380 272,382 61.3% Debt (excludes lease liabilities) 253,315 134,789 118,526 87.9% Cash provided by operating activities 3,149 7,863 (4,714) -60.0% Net change in non-cash working capital items (12,173) (6,093) (6,080) -99.8% Share-based compensation expense 687 546 141 25.8% Maintenance capital expenditures 2,974 1,064 1,910 179.5% Principal elements of lease payments 3,133 2,668 465 17.4% Distributable cash flow (1) 8,528 9,678 (1,150) -11.9% Dividends declared 3,422 3,169 253 8.0% Payout ratio (1) 40.1% 32.7% 7.4% 22.6% (thousands, except per share amounts and percentages) Canadian Division 2025 UK Division 2025 2025 Canadian Division 2024 UK Division 2024 2024 $ Change % Change0 Revenue 135,959$ 68,084$ 204,043$ 127,369$ 46,325$ 173,694$ 30,349 17.5% Expenses included in EBITDA 111,656 58,601 170,257 106,503 39,013 145,516 24,741 17.0% EBITDA(1) 24,303 9,483 33,786 20,866 7,312 28,178 5,608 19.9% EBITDA as a % of revenue 17.9% 13.9% 16.6% 16.4% 15.8% 16.2% 0.4% 2.5%0 Adjusted EBITDA(1) 26,597 12,123 38,720 23,861 7,820 31,681 7,039 22.2% Adjusted EBITDA as a % of revenue 19.6% 17.8% 19.0% 18.7% 16.9% 18.2% 0.8% 4.4% Net earnings 3,698 2,547 6,245 3,454 2,887 6,341 (96) -1.5% Basic earnings per share 0.339$ 0.231$ 0.570$ 0.329$ 0.275$ 0.604$ (0.034)$ -5.6% Diluted earnings per share 0.337$ 0.230$ 0.567$ 0.328$ 0.274$ 0.602$ (0.035)$ -5.8% Dividends declared per diluted share 0.600$ 0.600$ -$ 0.0% Adjusted net earnings (1) 5,992 5,187 11,179 6,449 3,395 9,844 1,335 13.6% Adjusted basic earnings per share (1) 0.557$ 0.474$ 1.031$ 0.615$ 0.324$ 0.939$ 0.092$ 9.8% Adjusted diluted earnings per share (1) 0.553$ 0.470$ 1.023$ 0.611$ 0.322$ 0.933$ 0.090$ 9.6% Total assets 716,762 444,380 272,382 61.3% Debt (excludes lease liabilities) 253,315 134,789 118,526 87.9% Cash provided by operating activities 20,405 20,555 (150) -0.7% Net change in non-cash working capital items (4,764) (2,901) (1,863) -64.2% Share-based compensation expense 1,336 1,054 282 26.8% Maintenance capital expenditures 3,694 1,451 2,243 154.6% Principal elements of lease payments 5,856 5,299 557 10.5% Distributable cash flow (1) 14,283 15,652 (1,369) -8.7% Dividends declared 6,596 6,346 250 3.9% Payout ratio (1) 46.2% 40.5% 5.7% 14.1% For The Three Months Ended June 30, For The Six Months Ended June 30,
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Page 7 of 14 OUTLOOK On June 11, 2025, the Corporation completed its acquisition of Stellar Mayan establish ing a national footprint in the UK commercial laundry and textile rental sector , enhancing revenue diversification by geographic mix and business mix. Based on consolidated revenue, K -Bro’s combined business is approximately evenly split between Canada and the UK. A newly created UK Managing Director oversees K-Bro’s UK operations, including the Stellar Mayan business integration plan. The Corporation anticipates business integration will take 12 to 18 months, and a transition team is executing the business integration plan. The Corporation’s healthcare and hospitality segments continue to experience steady volume trends. Management believes the UK healthcare market shares similar characteristics and trends to the Canadian healthcare market. For the healthcare segment, management expects steady increases to activity levels supported by a continued focus on reducing wait times and enhancing patient care. For the hospitality segment, management expects solid activity levels from both business and leisure travel reflecting historical seasonal trends. Going forward, management expects combined Adjusted EBITDA margins will remain at similar levels to seasonally adjusted historical margins. The Corporation continues to monitor evolving global and Canadian foreign policies, geopolitical events and economi c conditions, which could have a direct or indirect impact on the business. The Corporation is not currently expecting meaningful impacts on the business, as key customers and suppliers are not US-based. In 2024, the Corporation modified its definition of Adjusted EBITDA. As K-Bro actively pursues its growth opportunities, the Corporation will continue to incur certain transaction, transition, syndication/structural financing costs. In this context, mana gement believes Adjusted EBITDA assists investors to assess our performance on a consistent basis as it is an indication of our capacity to generate income from operations. Adjusting items are detailed in the tables within “Terminology”. With the completion of the Stellar Mayan acquisition, management’s near -term focus is on business integration. However, K -Bro evaluates potential strategic acquisitions that may complement its platform. Over the medium and longer -term, management sees opportunities to accelerate growth in North America, Europe, and similar geographies which remain highly fragmented. K -Bro will look to leverage its strong liquidity position, balance sheet and access to the capital markets to execute on these opportunities, should they arise. For further information about the impact of other economic factors on our business, see the “Summary of Interim Results and Key Events”. CORPORATE PROFILE K-Bro is the largest owner and operator of laundry and linen processing facilities in Canada and a national market leader for laundry and textile rental services in the UK. K -Bro and its wholly -owned subsidiaries operate across Canada and the UK, providing a range of linen services to healthcare institutions, hotels and other commercial accounts that include the processing, management and distribution of general linen and operating room linen. The Corporation’s operations in Canada include eleven processing facilities and two distribution centres in ten Canadian cities: Québec City, Montréal, Toronto, Regina, Saskatoon, Prince Albert, Edmonton, Calgary, Vancouver and Victoria. The Corporation’s operations in the UK include five distinctive brands, Fishers Topco Ltd. ("Fishers") which was acquired by K -Bro on November 27, 2017 , Shortridge Ltd. (“Shortridge”), which was acquired by K -Bro on April 30, 2024 , and three brands acquired through the acquisition of Stellar Mayan Ltd. (“Stellar Mayan”) on June 11, 2025, previously known as Star Mayan Limited. The three brands acquired were Synergy Health Managed Services Limited (“Synergy”), Aeroserve (MSP) Limited and Aeroserve Euro
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Page 8 of 14 Limited, jointly referred to as Aeroserve Linen (“Aeroserve”) , and Grosvenor Contracts (London) Limited (“Grosvenor Contracts”, “GC”). Fishers was established in 1900 and is an operator of laundry and linen processing facilities in Scotland, providing linen rental, workwear hire and cleanroom garment services to the hospitality, healthcare, manufacturing and pharmaceutical sectors. Fisher s' client base includes major hotel chains and prestigious venues across Scotland and the North of England. The company operates in five cities, in Scotland and the North of England with facilities in Cupar, Perth, Newcastle, Livingston and Coatbridge. Shortridge is headquartered in North West England, with laundry processing sites in Lillyhall and Dumfries and a distribution centre in Darlington. Shortridge, established in 1845, specialises in providing high quality laundry services to local independent hospitality businesses, including hotels, B&Bs, self - catering units and restaurants. Stellar Mayan, doing business as Synergy, Grosvenor Contracts and AeroServe, is a leading commercial laundry business in England, serving the healthcare and hospitality markets. Typical services offered include processing, management and distribution of healthcare and hospitality linens, including sheets, blankets, towels, surgical gowns and other linen. Stellar Mayan has seven operating facilities strategically located across England: Bermondsey, Derby, Dunstable, Sheffield, Slough (2), and St. Helens, in addition to a distribution depot in Manchester. Additional information regarding the Corporation including required securities filings are available on our website at www.k-brolinen.com and on the Canadian Securities Administrators’ website at www.sedarplus.ca; the System for Electronic Document Analysis and Retrieval (“SEDAR +”). TERMINOLOGY Throughout this news release and other documents referred to herein, and in order to provide a better understanding of the financial results, K -Bro uses the terms “EBITDA”, “adjusted EBITDA”, “a djusted net earnings”, “adjusted net earnings per share”, “debt to total capital ”, “distributable cash” and “payout ratio”. These terms do not have any standardized meaning under International Financial Reporting Standards (“IFRS Accounting Standards”) as set out in the CICA Handbook. Therefore, EBITDA, a djusted EBITDA, adjusted net earnings, adjusted net earnings per share, distributable cash and payout ratio may not be comparable to similar measures presented by other issuers. Specifically, the terms “EBITDA”, “adjusted EBITDA”, “adjusted net earnings”, “adjusted net earnings per share”, “distributable cash”, and “payout ratio” have been defined as follows: EBITDA EBITDA (Earnings before interest, taxes, depreciation and amortization) comprises revenues less operating costs before financing costs, capital asset and intangible asset amortization, and income taxes. EBITDA is a sub-total presented within the statement of earnings. EBITDA is not considered an alternative to net earnings in measuring K -Bro’s performance. EBITDA should not be used as an exclusive measure of cash flow since it does not account for the impact of working capital changes, capital expenditures, debt changes and other sources and uses of cash, which are disclosed in the consolidated statements of cash flows.
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Page 9 of 14 Non-GAAP Measures Adjusted EBITDA K-Bro reports Adjusted EBITDA (Earnings before interest, taxes, depreciation and amortization) as a key measure used by management to evaluate performance. We believe Adjusted EBITDA assists investors to assess our performance on a consistent basis as it is an indication of our capacity to generate income from operations before taking into account management’s financing decisions as well as costs of acquiring tangible and intangible capital assets. The Corporation modified its definition for Adjusted EBITDA in 2024 and has updated its comparative quarters to reflect the modified definition. “Adjusted EBITDA” is EBITDA (defined above) with the addition or deduction of certain amounts incurred which management does not consider indicative of ongoing operating performance. This includes transaction costs, structural finance costs, transition and integration costs, restructuring costs, gains/losses on settlement of contingent consideration and any other non-recurring transactions. The Corporation believes these non-GAAP definitions provide more meaningful reflections of normalized financial performance from operations and will enhance period-over-period comparability. (thousands) 2025 2024 2025 2024 Net earnings 5,419$ 4,535$ 6,245$ 6,341$ Add: Income tax expense 1,279 1,125 968 1,694 Finance expense 4,059 2,884 6,896 4,807 Depreciation of property, plant and equipment 9,178 7,281 17,113 14,287 Amortization of intangible assets 1,447 748 2,564 1,049 EBITDA 21,382$ 16,573$ 33,786$ 28,178$ Three Months Ended June 30, Six Months Ended June 30, Canadian Division UK Division Canadian Division UK Division (thousands) 2025 2025 2025 2024 2024 20240 0 0 EBITDA 14,282$ 7,100$ 21,382$ 10,987$ 5,586$ 16,573$ Adjusting Items: Transaction Costs 1 2,412 1,971 4,383 654 417 1,071 Syndication/Structural Finance Costs 2 52 - 52 392 - 392 Transition Costs 3 - - - 211 - 211 Non-recurring gains 4 (2,090) - (2,090) - - - Adjusted EBITDA 14,656$ 9,071$ 23,727$ 12,244$ 6,003$ 18,247$ 1 Relates to legal, professional and consulting fee expenditures made related to acquisitions. 2 Relates to costs related to syndication and credit agreement restructuring costs. 4 Relates to non-recurring gain of $1,519 from the sale of the Granby facility and a gain of $571 related to a one-time gain on a customer contract. 3 Relates to transition costs incurred as a result of the Corporation's acquisitions. Three Months Ended June 30,
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Page 10 of 14 Adjusted Net Earnings and Adjusted Earnings per Share Adjusted Net Earnings and Adjusted Earnings per Share are non- GAAP measures. These non -GAAP measures are defined to exclude certain amounts which management does not consider indicative of ongoing operating performance. This includes transaction costs, structural finance costs, transition and integration costs, restructuring costs, gains/losses on settlement of contingent consideration and any other non-recurring transactions. The Corporation believes these non -GAAP definitions provide more meaningful reflections of normalized financial performance from operations and will enhance period- over-period comparability. Canadian Division UK Division Canadian Division UK Division (thousands) 2025 2025 2025 2024 2024 20240 EBITDA 24,303$ 9,483$ 33,786$ 20,866$ 7,312$ 28,178$ Adjusting Items: - Transaction Costs 1 3,900 2,640 6,540 683 508 1,191 Syndication/Structural Finance Costs 2 484 - 484 1,892 - 1,892 Transition Costs 3 - - - 420 - 420 Non-recurring gains 4 (2,090) (2,090) - - - Adjusted EBITDA 26,597$ 12,123$ 38,720$ 23,861$ 7,820$ 31,681$ 1 Relates to legal, professional and consulting fee expenditures made related to acquisitions. 2 Relates to costs related to syndication and credit agreement restructuring costs. 3 Relates to transition costs incurred as a result of the Corporation's acquisitions. 4 Relates to non-recurring gain of $1,519 from the sale of the Granby facility and a gain of $571 related to a one-time gain on a customer contract. Six Months Ended June 30, Canadian Division UK Division Canadian Division UK Division (thousands) 2025 2025 2025 2024 2024 20240 0 0 Net Earnings 2,852$ 2,567$ 5,419$ 1,775$ 2,760$ 4,535$ Adjusting Items: Transaction Costs 1 2,412 1,971 4,383 654 417 1,071 Syndication/Structural Finance Costs 2 52 - 52 392 - 392 Transition Costs 3 - - - 211 - 211 Non-recurring gains 4 (2,090) - (2,090) - - - Adjusted Net Earnings 3,226$ 4,538$ 7,764$ 3,032$ 3,177$ 6,209$ 1 Relates to legal, professional and consulting fee expenditures made related to acquisitions. 3 Relates to transition costs incurred as a result of the Corporation's acquisitions. 4 Relates to non-recurring gain of $1,519 from the sale of the Granby facility and a gain of $571 related to a one-time gain on a customer contract. Three Months Ended June 30, 2 Relates to costs related to syndication and credit agreement restructuring costs. Canadian Division UK Division Canadian Division UK Division (thousands) 2025 2025 2025 2024 2024 2024 Net Earnings 3,698$ 2,547$ 6,245$ 3,454$ 2,887$ 6,341$ Adjusting Items: Transaction Costs 1 3,900 2,640 6,540 683 508 1,191 Syndication/Structural Finance Costs 2 484 - 484 1,892 - 1,892 Transition Costs 3 - - - 420 - 420 Non-recurring gains 4 (2,090) - (2,090) - - - Adjusted Net Earnings 5,992$ 5,187$ 11,179$ 6,449$ 3,395$ 9,844$ Relates to legal, professional and consulting fee expenditures made related to acquisitions. 3 Relates to transition costs incurred as a result of the Corporation's acquisitions. 4 Relates to non-recurring gain of $1,519 from the sale of the Granby facility and a gain of $571 related to a one-time gain on a customer contract. Six Months Ended June 30, 2 Relates to costs related to syndication and credit agreement restructuring costs.
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Page 11 of 14 Canadian Division UK Division Canadian Division UK Division (thousands) 2025 2025 2025 2024 2024 20240 0 0 Basic Earnings per Share 0.258 0.233 0.491 0.169 0.263 0.432 Adjusting Items: Transaction Costs 1 0.221 0.179 0.400 0.063 0.041 0.104 Syndication/Structural Finance Costs 2 0.005 - 0.005 0.038 - 0.038 Transition Costs 3 - - - 0.020 - 0.020 Non-recurring gains 4 (0.190) - (0.190) - - - Adjusted Basic Earnings per Share 0.294 0.412 0.706 0.290 0.304 0.594 1 Relates to legal, professional and consulting fee expenditures made related to acquisitions. 4 Relates to non-recurring gain of $1,519 from the sale of the Granby facility and a gain of $571 related to a one-time gain on a customer contract. 2 Relates to costs related to syndication and credit agreement restructuring costs. 3 Relates to transition costs incurred as a result of the Corporation's acquisitions. Three Months Ended June 30, Canadian Division UK Division Canadian Division UK Division (thousands) 2025 2025 2025 2024 2024 2024 Basic Earnings per Share 0.339 0.231 0.570 0.329 0.275 0.604 Adjusting Items: Transaction Costs 1 0.367 0.243 0.610 0.066 0.049 0.115 Syndication/Structural Finance Costs 2 0.045 - 0.045 0.180 - 0.180 Transition Costs 3 - - - 0.040 - 0.040 Non-recurring gains 4 (0.194) - (0.194) - - - Adjusted Basic Earnings per Share 0.557 0.474 1.031 0.615 0.324 0.939 1 Relates to legal, professional and consulting fee expenditures made related to acquisitions. 2 Relates to costs related to syndication and credit agreement restructuring costs. 3 Relates to transition costs incurred as a result of the Corporation's acquisitions. 4 Relates to non-recurring gain of $1,519 from the sale of the Granby facility and a gain of $571 related to a one-time gain on a customer contract. Six Months Ended June 30, Canadian Division UK Division Canadian Division UK Division (thousands) 2025 2025 2025 2024 2024 20240 0 0 Diluted Earnings per Share 0.257 0.232 0.489 0.169 0.262 0.431 Adjusting Items: Transaction Costs 1 0.219 0.177 0.396 0.062 0.040 0.102 Syndication/Structural Finance Costs 2 0.005 - 0.005 0.037 - 0.037 Transition Costs 3 - - - 0.020 - 0.020 Non-recurring gains 4 (0.190) - (0.190) - - - Adjusted Diluted Earnings per Share 0.291 0.409 0.700 0.288 0.302 0.590 1 Relates to legal, professional and consulting fee expenditures made related to acquisitions. Three Months Ended June 30, 2 Relates to costs related to syndication and credit agreement restructuring costs. 3 Relates to transition costs incurred as a result of the Corporation's acquisitions. 4 Relates to non-recurring gain of $1,519 from the sale of the Granby facility and a gain of $571 related to a one-time gain on a customer contract. Canadian Division UK Division Canadian Division UK Division (thousands) 2025 2025 2025 2024 2024 2024 Diluted Earnings per Share 0.337 0.230 0.567 0.328 0.274 0.602 Adjusting Items: Transaction Costs 1 0.363 0.240 0.603 0.064 0.048 0.112 Syndication/Structural Finance Costs 2 0.045 - 0.045 0.179 - 0.179 Transition Costs 3 - - - 0.040 - 0.040 Non-recurring gains 4 (0.192) - (0.192) - - - Adjusted Diluted Earnings per Share 0.553 0.470 1.023 0.611 0.322 0.933 1 Relates to legal, professional and consulting fee expenditures made related to acquisitions. Six Months Ended June 30, 2 Relates to costs related to syndication and credit agreement restructuring costs. 3 Relates to transition costs incurred as a result of the Corporation's acquisitions. 4 Relates to non-recurring gain of $1,519 from the sale of the Granby facility and a gain of $571 related to a one-time gain on a customer contract.
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Page 12 of 14 Distributable Cash Flow Distributable cash flow is a measure used by management to evaluate the Corporation’s performance. While the closest IFRS Accounting Standards measure is cash provided by operating activities, distributable cash flow is considered relevant because it provides an indication of how much cash generated by operations is available after capital expenditures. It should be noted that although we consider this measure to be distributable cash flow, financial and non- financial covenants in our credit facilities and dealer agreements may restrict cash from being available for dividends, re -investment in the Corporation, potential acquisitions, or other purposes. Investors should be cautioned that distributable cash flow may not actually be available for growth or dist ribution from the Corporation. Management refers to “Distributable cash flow” as to cash provided by (used in) operating activities with the addition of net changes in non- cash working capital items , less share -based compensation, maintenance capital expenditures and principal elements of lease payments. Payout Ratio “Payout ratio” is defined by management as the actual cash dividend divided by distributable cash. This is a key measure used by investors to value K-Bro, assess its performance and provide an indication of the sustainability of dividends. The payout ratio depends on the distributable cash and the Corporation’s dividend policy. Debt to Total Capital “Debt to total capital” is defined by management as the total long -term debt (excludes lease liabilities) divided by the Corporation’s total capital. This is a measure used by investors to assess the Corporation’s financial structure. Distributable cash flow, payout ratio, debt to total capital adjusted EBITDA, adjusted net earnings, and adjusted net earnings per share are not calculations based on IFRS Accounting Standards and are not considered an alternative to IFRS Accounting Standards measures in measuring K -Bro’s performance. (thousands) 2025 2024 2025 2024 Cash provided by operating activities 3,149$ 7,863$ 20,405$ 20,555$ Deduct (add): Net changes in non-cash working capital items (12,173) (6,093) (4,764) (2,901) Share-based compensation expense 687 546 1,336 1,054 Maintenance capital expenditures 2,974 1,064 3,694 1,451 Principal elements of lease payments 3,133 2,668 5,856 5,299 Distributable cash flow 8,528$ 9,678$ 14,283$ 15,652$ Three Months Ended June 30, Six Months Ended June 30, (thousands) 2025 2024 2025 2024 Cash dividends 3,422 3,169 6,596 6,346 Distributable cash flow 8,528 9,678 14,283 15,652 Payout ratio 40.1% 32.7% 46.2% 40.5% Three Months Ended June 30, Six Months Ended June 30,
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Page 13 of 14 Distributable cash Flow, payout ratio, adjusted EBITDA, adjusted net earnings, and adjusted net earnings per share do not have standardized meanings in IFRS Accounting Standards and are therefore not likely to be comparable with similar measures used by other issuers.
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Page 14 of 14 FORWARD LOOKING STATEMENTS This news release contains forward-looking information that represents internal expectations, estimates or beliefs concerning, among other things, future activities or future operating results and various components thereof. The use of any of the words “anticipate”, “continue”, “expect”, “m ay”, “will”, “project”, “should”, “believe”, and similar expressions suggesting future outcomes or events are intended to identify forward-looking information. Statements regarding such forward -looking information reflect management’s current beliefs and a re based on information currently available to management. These statements are not guarantees of future performance and are based on management’s estimates and assumptions that are subject to risks and uncertainties, which could cause K-Bro’s actual performance and financial results in future periods to differ ma terially from the forward -looking information contained in this news release. These risks and uncertainties include, among other things: (i) risks associated with acquisitions, including (a) the possibility of undisclosed material liabilities, disputes or contingencies, (b) challenges or delays in achieving synergy and integration targets, (c) the diversion of management’s time and focus from other business concerns and (d) the use of resources that may be needed in other parts of our business; (ii) K-Bro's competitive environment; (iii) utility costs, minimum wage legislation and labour costs; (iv) K -Bro's dependence on long -term contracts with the associated renewal risk and the risks associated with maintaining short term contracts; (v) increased capital expenditure requirements; (vi) reliance on key personnel; (vii) changing trends in government outsourcing; (viii) changes or proposed changes to minimum wage laws in Ontario, British Columbia, Alberta, Quebec, Saskatchewan and the United Kingdom (the “UK”); (ix) the availability and terms of future financing; (x) textile demand; (xi) availability and access to labour; (xii) rising wage rates in all jurisdictions the Corporation operates and (xiii) foreign currency risk. Material factors or assumptions that were applied in drawing a conclusion or making an estimate set out in the forward-looking information include: (i) volumes and pricing assumptions; (ii) expected impact of labour cost initiatives; (iii) frequency of one -time costs impacting quarterly and a nnual financial results; (iv) foreign exchange rates; (v) the level of capital expenditures and (vi) the expected impact of the COVID -19 pandemic on the Corporation. Although the forward -looking information contained in this news release is based upon what management believes are reasonable assumptions, there can be no assurance that actual results will be consistent with these forward-looking statements. Certain statements regarding forward -looking information included in this news release may be considered “financial outlook” for purposes of applicable securities laws, and such financial outlook may not be appropriate for purposes other than this news release. Forward looking information included in this news release includes the expected annual healthcare revenues to be generated from the Corporation’s contracts with new customers, calculation of costs, including one -time costs impacting the quarterly financial results, anticipated future capital spending and statements with respect to future expectations on margins and volume growth. All forward-looking information in this news release is qualified by these cautionary statements. Forward -looking information in this news release is presented only as of the date made. Except as required by law, K -Bro does not undertake any obligation to publicly revise these forward- looking statements to reflect subsequent events or circumstances. This news release also makes reference to certain measures in this document that do not have any standardized meaning as prescribed by IFRS Accounting Standards and, therefore, are considered non -GAAP measures. These measures may not be comparable to similar measures presented by other issuers. Please see “Terminology” for further discussion. For more information, please contact: Linda McCurdy Chief Executive Officer K-Bro Linen Inc. (TSX: KBL) Phone: 780.453.5218 Email: inquiries@k-brolinen.com Web: www.k-brolinen.com