Thank you for standing by. This is the conference operator. Welcome to the RediShred Capital Corp. Q2 2023 financial results and business update conference call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star, then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and zero. I would now like to turn the conference over to Jeffrey Hasham, Chief Executive Officer. Please go ahead. Thank you very much. Good morning, everyone. Welcome to our Q2 of 2023 investor call. First, want to thank everyone for attending on this Friday morning. For those of you in Toronto, another gray, gloomy day. Hopefully, that'll change before the weekend hits. I'm joined by Harjit Brar, who's our CFO, and together we'll be reviewing the Q2 2023 results. As always, we'll conclude with our Q&A session. I do want to remind everyone that all of our information, financials, MD&A, and press release were disseminated yesterday, and of course, they're available on SEDAR. So we can get that information as needed, when needed. I wanna start off with saying, overall, the Q2 results, we were pleased with them. I think when we sort of look at the fundamentals of the business, you know, let's start with the top line. We were able to grow our top line revenue by 15%, compared to the Q2 of last year. I think everyone and anyone who's spoken with us over the last little while and has been following us knows that paper prices have started to come down. We'll talk about that in a moment. Our core shredding revenues, so we look at the service side of the business, that was up 28%. So obviously, that 15% being tempered by the paper markets, which have started to soften, soften. And so when we look at that softening, our consolidated EBITDA remained flat with last year at around CAD 4.5 million, so when we compare the two quarters. If we exclude EBITDA less net recycling revenue, and that's a KPI. We've always had a KPI called operating income less operating income less net recycling revenue. We've added EBITDA just to make it a little bit easier for everyone. And we take out that net recycling revenue. The net recycling revenues take out the paper revenue, and of course, the related baling costs. We actually grew EBITDA by 28%. So that EBITDA growth is very much in line with our shredding revenue growth. You know, we're, we're-- that's what we're pleased about. The core operations were very solid. Look, paper markets we know can go up and go down. In my 18.5 years, I've seen everything from $50 a ton to things close to $300 a ton. And of course, we have a long-run average in the mid hundreds, and for us now, mid- to high 100s because we bale so much paper. So what have we been doing in response to this volatility? And we've been doing this not just for this year, but for many years, and we're gonna really be... Continue to be laser focused on this is drive shredding and service revenue growth. That's really what this comes down to. And again, if you look at our corporate locations, same corporate location shredding revenue is up 14%, compared to last year. And that obviously offsets the lower recycling revenue. At the same time, we're able to grow our margins. When you strip out that revenue from paper, the corporate income less net recycling margin grew 100 basis points. So again, we're improving the margins, and how are we doing that? We're in the routing business, and so we've continued to improve our routing efficiencies. That has absolutely helped margin. And, of course, the pricing of input costs have come down. Driver wages have not necessarily come down, but stabilized, and fuel prices have come down. And I guess the correlation between fuel and paper has continued, which is a very good thing for us. So between good performance on the routing and getting better efficiency between stabilization of driver wages and of course, fuel prices coming down, you know, we've been able to mitigate quite a bit of the paper fall. One other thing that I think is very important is starting towards the end of May and now more or less finished, is we've been rolling out our annual price increases. So we look to see that impact Q3 and Q4 in a positive way. On the acquisition front, we did not complete any deals in the first half of the year. Having said that, the pipeline is strong. You know, look, we've got a three-pronged approach to growth and, of course, organic driving leverage and, of course, growth through our acquisition program. So, all of those three things are there, and the acquisition program is certainly there. The pipeline is strong, and I'm sure we'll have some questions on that a little later. What I'd like to be able to do is have you get a little more of the details. So, let me turn this over to Harjit, and he can walk you through those. ... Thank you, Jeff, and thank you again to everyone who is joining us on this call. In terms of our financial results, our consolidated revenue for Q2 grew to CAD 16.8 million, compared to CAD 14.6 million for the Q2 of 2022, representing an increase of 15%. EBITDA finished at CAD 4.5 million for the quarter, and on a per share basis, that's CAD 0.25 per share, which was unchanged from the Q2 of 2022. If we strip out the effects of paper, EBITDA less net recycling revenue grew to CAD 2.2 million, compared to CAD 1.7 million in the Q2 of 2022. From a cash flow perspective, our free cash flow was -CAD 0.1 million for the quarter. That was driven by CAD 2.7 million in cash generated from operations, which was offset by CAD 2.8 million in CapEx. The CapEx was primarily for shredding truck purchases, and part of it was, again, due to timing. There is some fluctuation quarter to quarter, but the truck purchases, they will help us add service capacity and support the growth of our business. If you look at the free cash flow on a year-to-date basis, that was CAD 2.3 million. Year-to-date revenue, we finished at CAD 33.8 million, compared to CAD 27.1 million for the comparative period in 2022. With EBITDA year-to-date of CAD 9.2 million, compared to CAD 8.6 million for the same period in 2022. Cash on hand right now, we have CAD 5.4 million as of June 30, 2023. And as Jeff alluded to the strong M&A pipeline, you know, we do have that ability to utilize this cash and our available credit facility, or the available space with our credit facility, you know, to help support some of those M&A. And you know, all in all, we were again pleased with our results. We look forward to executing on our plan for the remainder of the year. On that note, I will turn it to Jeff for some closing comments before we open it up to Q&A. Sure. Thanks, Harjit. Appreciate that. Look, I wanted to just make a comment before we open that up to Q&A. You know, we're continuing to focus on growing, scaling. Look, we all know, we all hear the headlines, such as the economic uncertainty. Of course, paper prices impact us. Having said that, we're focused, laser focused, and we keep our head down on operating metrics, driving more leads every day, converting those leads into shredding and service revenue and servicing those clients that in a very efficient manner. And so, look, we've got a great team, and that team is putting their head down every single day, working on really those three things to drive better core operating results. I think when we look at the Q2, we see indication of that, and we'll continue to drive that operating result going into the Q3 and into the Q4. So look, let me open it up to questions. That's always the best part. So I'm available, and as is Harjit. Turn that back over to the operator for a moment. Thank you. We will now begin the question and answer session. To join the question queue, you may press star then one on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then two. We will pause for a moment as callers join the queue. The first question comes from David Ocampo with Cormark Securities. Please go ahead. Thanks. Good morning, Jeff and Harjit. Good morning, David. Jeff, I just want to touch first here on margins. I think if you look at your MD&A and your previous commentary, you guys have been targeting EBITDA margins in the 35% range, and you're above that today. But if I look on a go-forward basis, paper prices have fallen down all the way back down to the long-term average. But you do have some offsets here, so falling fuel and price increases on your shredding business. Do you think that's enough to keep margins in that 35% range, or how should we be thinking about targeted margins on a go-forward basis? Yeah, look, you know, if prices sort of remain in and around where they are, of course, look, even when we look at July, right, paper prices were down quite a bit from the Q2. Having said that, of course, fuel continued to drop a little bit thereafter. And then you add price increases and operational improvements, you know, that 35% is not a bad number. You know, I think if paper, if paper goes back to 2019 levels, where, you know, it dropped dramatically, then that's gonna put pressure on the margins, of course. That's just, there's still this component of paper, even though the paper, you know, the percentage of EBITDA that paper makes up, the paper profits make up is much less than it was even a quarter ago or a year ago. It's still going to put some pressure there. So, look, I'm not a prognosticator on paper. I wouldn't dare. You know, there are some signals out there that say, you know, we should hang in this range, but I've been wrong before, David, so I wouldn't necessarily quote me on that. The long answer. Short answer is, you know, right now we're hanging really, really well, given where paper has dropped to. 35% at the moment seems like a pretty good goal and target, and we're hanging in there. You know, really, it's going to come down to does paper stay where it is, or does it continue to drop? If it drops a little bit more, we can-- we're pretty resilient. We can, we can, we can deal with it. If paper, again, goes to 19%, that's a bit of a different story. But even when it went down to 19%, you can see, you know, we, our consolidated EBITDAs, yes, they were impacted, but they were still not bad. So far so good at this moment in time. Yeah, sorted paper has always been a bit of a black box, but maybe something that you do have a little bit more visibility on is the premium that you guys get on baled paper. Is that 20% higher than kind of what we see on the SOP 37, or just trying to get a better sense on the premiums that you guys are getting today? Yeah. So typically, when you know, if you're dropping paper off loose, so if you sort of look at, let's use that $180 that we're in July, that's a bit of a blended rate for us because that $180 includes a significant amount of baled paper. Because, again, we've got five locations that are baling paper. The typical premium between loose and baled is anywhere between $40-$60 a ton. That's the typical premium. Sometimes when paper prices come down, that premium can be eroded, where when paper prices are really, really high, it can be closer to $60. And when in 2019, we saw erosion there. So far, we haven't seen a lot of erosion, which is good. People are valuing the baled paper, so we're happy about that. So $40-$60 is the typical bonus for baling. Got it. That, that makes sense. And then just last one for me on, on acquisitions. You called out that you're still on target to hit that $5 -$6 million of acquired revenue. But when you're thinking about the mix of that $5 -$6 million, is it tilted towards franchise locations, or are you guys thinking more third-party shredding companies? Good question. We always have a good mix of everything in our pipeline, and we do. I can say that this year there's been a little more migration to the independents. I think, you know, our franchisees, as you know, are very, very well-heeled individually. They've got great businesses. They can, they can, they can withstand things better than a two or three truck independent. So when we get into environments like this, where paper prices are coming down, we have high interest rate environment, trucks cost more, they go to the back of the line for trucks. That puts a lot of pressure on them and so there's no better time to buy independent than now. And so... And we're seeing some of that in our pipeline. We have seen a bit of a migration to independents in our pipeline. Having said that, you know, our franchisees are certainly, you know, getting much closer to retirement age. There's a number that, you know, as we always have, that are looking to retire. So there's always franchisees that we're talking to and trying to move through the pipeline. But I think you make a good point there, that there is a bit of a shift. The shift started earlier this year. I think there's been some expectation of old multiples, that people are expecting. Of course, you know, we've been working people to understand that, you know, you know, you can't get, you can't get 7 multiple of EBITDA like you might have been able to 10 years ago or even 6 years ago. I think those expectations are starting to fall in line. And that's why I think, you know, the pipeline has gotten pretty decent. And, you know, look, we're, you know, obviously, in our strategic targets, we indicated that we still feel pretty good about executing on the pipeline. Got it. That makes perfect sense. Thanks a lot, John. Thank you. Have a great day. The next question comes from Nick Corcoran with Acumen Capital. Please go ahead. Good morning, guys, and thanks for taking my question. Hey, Nick, good to hear it today. Just a couple questions from me. So the first is, paper price appeared to have rolled over a bit in July. Two-part question: What have you seen August to date? And, not expecting too much detail, but are there any macro factors that you think are driving paper price down? Harjit, did you want to speak to August? I don't know, because August, you know, sometimes you get stuck middle, at the beginning of the month, middle of the month, end of the month. It really does depend. But Harjit, is there any commentary we can give at this time? Yeah, sure. So in terms of paper prices, I think the precipitous drops that we sort of saw over the course of the summer or the earlier part of the summer, those seem sort of not to be at play right now. So the prices seem to have stabilized a little bit, but we are seeing still a little bit of a drop. Difficult to predict where we're gonna kind of finish August. But I think the overall sort of, at least from, again, what I've seen so far, is that we're not gonna see that, at least see in the short term, some of the precipitous drops that we saw earlier. To the macro question, you know, I think there's a couple things to think about. You know, number one, more and more people are returning to the office. That creates more supply, and especially in the scheduled revenue side, you're getting more supply. And also the other thing is, you know, where is virgin pulp? Because, you know, our SOP is a raw material, of course, for creating tissue paper and all that type, all those other secondary paper products. Virgin pulp can be used in that process. And typically, a virgin pulp price comes down, or virgin pulp comes down, then that competes, right? That's the other macro piece that can be out there. I think those two things are sort of playing off on the paper markets. You know, the good news right now is, you know, the adjustments that were made in 2019 when China shut the door on paper. China doesn't take paper anymore. They certainly don't take paper directly. They might take it through Vietnam or other markets, but, you know, they're not impacting the U.S. market, which is good for us. The adjustments have been made some time ago. You know, it's a little bit. You know, I do believe that takes out some volatility, and hopefully that remains the case. It's a good color. Just think of the EBITDA less net recycling revenue KPI. Speak to what the sequential change was between the Q1 and Q2. Good question. It was, it was... We had a stronger—I can get you the exact number. It's a good question, and we can get that for everyone. It was a noticeable improvement between the two quarters. And you can just see that even when you look at the quarterly... If you look at the EBITDA on a year-to-date basis, you know, it was, we were at CAD 0.22 on a per share basis, and for the year to date, CAD 0.12 on the quarter. So obviously, it was a CAD 0.02 per share improvement. And so we can get you that spot, that sort of exact number for you. But certainly, there was good improvement and, you know, we actually bought back a few shares during the period of time, so, you know, that, that helps too. But not like we didn't buy a lot of shares back, by the way. So, we had a good operating quarter, let's put it that way, compared to the Q1, and certainly compared to the many, many quarters that went before, you know, where we had a lot of volatility with fuel, a lot of volatility with truck supply. The teams worked hard to get great. Let me not say great yet. We're gonna get to great, but much better operating results, and certainly were there, and the core shredding revenue was certainly there, which we were very happy about. And most importantly, it was scheduled, right? That's what drove it. That's helpful. Then, maybe think about the price increases you put through in May. Can you speak to the percentage increase that you were able to pass through? And has there been any pushback from customers on that? I'm gonna pass that to Harjit, because it's his billing and collection team that has to deal with the pushback. And so Harjit, do you want to talk to the averages in terms of where we landed with the increases, on the scheduled side, of course, and then maybe you can speak to pushback? Sure. So in terms of the quantum of the price increases, so we did start pushing through the price increases in May. Have essentially wrapped them up in August. And, again, they're for sort of our scheduled customers, and then on average, we're looking at about 4%. So, there is some variation between markets and between certain clients. So for example, like we did get around here to the point where we looked at sort of profitability for particular clients that may be a little bit more out of the way, you know, increase those prices a little bit more. But on average, it was about 4%. And in terms of the whether there's been any pushback, so far, again, it's August. Haven't heard too much noise about people not being happy or customers, you know, taking issue with it. So from a churn perspective, don't really expect it to impact churn on any sort of significant basis. Great. And then, just last question for me on the CapEx, it was a bit elevated sequentially. Can you just speak to the number of shops delivered in the quarter and year to date, and what we should expect going forward? Yeah. There was quite a bit of catch up, the Q1. And Harjit, I think the Q1, we took 2, and correct me if I'm wrong, in the Q2, we took 7, and that was sort of the catch-up quarter. I think that's, those are the correct numbers, Harjit. That, that's correct. Exactly. So there definitely was, if you look at it sequentially, there was an uptick in Q2. So I think going forward, when you're kind of looking at it, that's more of an outlier. So I think, you know, typically we'd try to do four to five per quarter, sort of, you know, if you're sort of looking at it from a near-term sort of perspective, on a prospective basis. Thanks. That's helpful. The next question comes from Michael Walthers with Singular Research. Please go ahead. Hey, good morning, Jeff. Mike with Singular. Couple quick ones from me. As you mentioned, U.S. locations at 30. If we're having this call a year from now, do you have a goal number you'd like to see that at, or how do you view that, a year out? Yeah. Good morning, Mike. It's only for you, I know. Thank you. Look, our growth strategy and our growth program obviously has changed a little bit over the years, where our footprint growth will come through acquisitions predominantly. Now we have in our pipeline some independents in new markets, which is positive. And so, you know, when I look at the priority of acquisitions. Obviously franchisees, when they want out, they're a priority. Tuck-ins in existing markets are critical from a depth perspective, and they're critical from a margin expansion perspective. So that's always, you know, those are one and, one and two for us. Having said that, there are some markets where, you know, we can go into a new market and buy a larger independent and an independent that looks a little bit like a franchisee. We have some of those in our pipeline. So look, can we take that number up by a couple new locations a year from now? That's possible. But I will say, you know, from a capital allocation perspective and also in both our team's time and our financial resources, it's always best to grab depth in the marketplace for those obvious, you know, route density, and the ability to drive more bottom line out of that. But I think the pipeline may break where we get a couple new locations, so that that's certainly plausible. Great, great. And just two quick ones to understand your metrics a bit better, and that'll be it for me. As far as the paper pricing, I guess question one: Is there any type of hedging that you can partake in as far as minimizing the volatility? That's question one. Question two: Just in general, with this trend, it seems like more people are going back to the office more days of the week. How that affects your different business lines, and yeah, those are two questions for me, so thanks, thanks for that. Yeah. So the hedging is a great question. You know, we have a bit of a natural hedge with fuel and, you know, the correlation with fuel and paper. We haven't really found sort of a pure hedge. I would imagine someone out there has figured it out, and it's certainly a good idea. We certainly haven't found it, and we would love to find it. So that's it. It's a good idea. The great thing about us, so and here's a, you know, in the US, and we go back to COVID, the nice thing about our client mix is it's dominated a lot of essential services and also dominated by small, medium-sized enterprise. So, you know, they came back quite quickly. And now the larger companies, I mean, it's interesting that Zoom, of all companies, are now mandating a hybrid solution. I find that quite interesting. The more people get into the office, the better it is, because the more they're gonna consume our service. And remember, we've got the many services, right? We've got obviously our shredding and our recurring scheduled shredding benefits from that. But of course, as people get back in the office, they're looking at their space needs, and they're going, "Hey, I've got all this paper. Do I digitize it?" Great, we have a solution. Do we, from a Proscan perspective, we have that solution. Do we shred? Do we have other stuff we need to shred? So the more people get back to the office, of course, that is a positive thing for us. And of course, we're seeing more and more and more of that. You know, we're very big proponents of the benefit of working in the office. So yeah, it's been good. Obviously, it does create more supply of the paper. But look, here's the thing. Our business has always been a service business. We wanna be operationally excellent, and to be operationally excellent, we can't rely purely on the paper profits. We like them, don't get me wrong, but you've got to plan for paper not to be that high. And that's what we've done and, you know, these results in this Q2 are an indication of that. And again, so I know it's a long answer. I just wanted to be as full as possible for you. Great. Yeah, thanks for that. That's it for me. Thanks, Mike. Once again, if you have a question, please press star then one. The next question comes from Devin Schilling with PI Financial. Please go ahead. Hi, good morning, Jason and Harjit. Good morning, Devin. I got early for you. Yeah, no worries. Maybe you guys can just comment a little bit more on, on the strong, shredding revenue growth during the quarter. Like, what was that split for, the new client wins? Like, is this largely winning business from competitors or, or new organic opportunities popping up in your existing markets? Yeah, it's been both. You know, I would say that the investments we made in sales people and professionals over since, you know, the, let's call it, the tail end of COVID, and, and we've continued to, to invest in both outside and inside sales, has allowed us to do both, you know? Yes, we steal from, from our competitors. Our competitors, especially our larger competitors, are not great at dealing with smaller enterprises. I think they're the Shred-it migration, the plant-based shredding, and to, let's call it inflexible client service and inflexible billing and, and all of those kinds of things, doesn't, doesn't really fit well with the smaller type of clients, right? A large client, they're under contract, it's a different deal, but, but the smaller clients. So our sales group has done a great job of converting those opportunities from our competitors. Simultaneously, you know, we're getting leads every single day from people who've never used shredding. I can't believe it, and probably you can't believe it, but certainly that has been the case. It certainly weighed more to stealing. It's probably a 60/40 or 65/35 split towards on the scheduled side to stealing business. On the purge side, you know what? Purge clients are generally newer clients, and here's the reason why. If you have a service provider, you just phone the number on the bin. You know, and our purge clients tend to be our unscheduled clients, tend to be newer clients. So, it's, you know, we're still finding those smaller businesses, which we're so well equipped to go after wanting this service for the first time. And when we get a purge, here's the great news, Devin, you know, we launched Salesforce in April. The team is well entrenched in using Salesforce, and we don't just use Salesforce as a CRM, which is the best, and the team has done a great job taking that on. We use this now as a marketing automation platform. We use this to really create those individual conversations with our clients. So the marketing team has done a great job of, you know, using that weapon, and we just started using that weapon, really. So we're gonna... The nice thing with that type of weapon is you can try different things on the fly and see what messages work and don't. So again, I know it's a long answer, but that sales growth is really it is a two-pronged strategy, taking away from our competitors as well as getting new clients. You know, that was helpful. Thanks, Jeff, for the color there. That's it for me. I think all my other questions were already answered. Thank you. Great. Thanks, Devin. This concludes the question-answer session. I would like to turn the conference back over to Jeffrey Hasham for any closing remarks. Yes, thank you, Charisse, I appreciate that. Look, everyone, you know, it's a Friday. I wanna thank everyone for attending, very nicely attended conference call. As always, many of you on this call are shareholders, and you've stood by us and we appreciate that. And look, as you know, we'll put our head down, and we'll keep working on the fundamentals of this business. And to that end, I wanna thank the team. Many of our team members are on this call. You know, they've been working extra hard, extra time, extra creatively to ensure that, you know, we're one step ahead of Google and one step ahead of the market and deploying these types of tools to drive the revenue. And then, of course, the service team has got to create the right environment, have the right team on the trucks, and have the right trucks and equipment, and they've done it, and we're gonna continue to do it. So, I wanna thank them, of course, thank our board of directors for their support as well, all these many years. And our franchisees who go out there every day as well. So I wanna thank everyone. After this call, we go back to work, and we'll put our hard hats on and work on having a strong Q3. So thank you very much, everyone. Have a great weekend. This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.