Tornado Global Hydrovacs Ltd. has released its unaudited financial and operating results for the three-month period ended March 31, 2022, with comparisons with the same period last year. The unaudited condensed consolidated financial statements and related management’s discussion and analysis are available on the company’s issuer profile in Canada on SEDAR, in the United States at the OTC Markets website and on the company’s website. All amounts reported in this news release are in thousands of dollars except per-share amounts.
First quarter 2022 overview and recent developments:
- The economic environment continued to improve during first quarter 2022, resulting in the improvement of several key operating financial metrics compared with the same period in 2021. The company achieved its highest quarterly sales since Q1 2020 and highest net income since third quarter 2019 prior to COVID.
- Revenue of $9,939 increased 24.6 per cent in Q1 2022 compared with $7,978 in Q1 2021 as customer demand continued to recover.
- Gross profit of $2,344 increased by $120 in Q1 2022 compared with $2,224 in Q1 2021 due to increased revenue and production efficiencies, including labour utilization, at the company’s Red Deer facility. Gross profit was also positively impacted by the increased benefits from cost savings on parts sourced from China during the quarter. Gross profit was negatively impacted by increased material costs in Q1 2022 due to supply chain issues. In Q1 2021, the company recorded $183 of recoveries from the wage subsidy. This wage subsidy program was terminated in November, 2021.
- General and administrative expense of $1,398 increased by $273 in Q1 2022 compared with $1,125 in Q1 2021. The increase was principally due to general increased employee costs in North America incurred to handle present and anticipated growth. In Q1 2021, the company recorded $127 of recoveries from the wage subsidy program.
- Notwithstanding the termination of the wage subsidy program since November, 2021, EBITDAS (earnings (loss) before interest, tax, depreciation and amortization, non-cash impairment, gain/loss on disposal of fixed assets, and stock-based compensation) of $946 in Q1 2022 decreased only $153 compared with $1,099 in Q1 2021. This decrease was due to the factors discussed above. In Q1 2021, the company recorded $310 (comprising $183 in cost of sales and $127 in general and administrative expense) of recoveries from the wage subsidy.
- The company earned net income of $474 in Q1 2022, which represents an increase of $113 compared with net income of $361 in Q1 2021. This increase was principally due to a gain on disposal of fixed assets of $136.
- The company’s Class A common shares began trading on the OTCQX Best Market under the symbol TGHLF on May 5, 2022. By trading on the OTCQX, the company’s common shares are available to U.S. investors during U.S. trading hours and quoted in U.S. dollars. Trading on the OTCQX provides transparent trading for U.S. investors. Trading on OTCQX will make it easier for U.S. investors to invest in the company by eliminating the requirement for a Canadian trading account and will also promote greater liquidity for the company’s common shares.
Management believes the company’s business will continue to strengthen and expects the company’s production and sales of hydrovac trucks in North America in 2022 to continue to grow and capitalize on the significantly increased production capacity at the Red Deer facility over the long term for the following reasons:
- The improved economic environment experienced during the second half of 2021 and in Q1 2022 is expected to continue in 2022 as customer confidence and spending levels continue to recover;
- Expected increased spending on infrastructure in North America, particularly in the United States, as a result of the U.S. Infrastructure Bill, passed in late 2021;
- Expanded capacity and manufacturing and production efficiencies from the Red Deer facility, which is fully operational;
- The company anticipates adding new and innovative products to its product lines that will support the infrastructure, telecommunications, and oil and gas industries;
- The company’s commitment to continuous improvement of its hydrovac truck design, which in the company’s view will result in compelling advantages over other hydrovac trucks currently offered in the market;
- The company has secured key manufacturing components, including chassis for customers, into future years through strategic relationships;
- The company has strengthened its dealer relationships in both Canada and United States to meet the expected demand increase;
- Expanded North American coverage for maintenance warranty and repair to better serve customers;
- Increased sales pricing to customers to reflect changes in material costs.
Limiting factors on the company’s ability to meet increased demand could include the possibility of chassis supply chain interruption due to chip shortages at the chassis manufacturer level and other supply chain issues related to other key components caused by the pandemic including the current COVID lockdowns in China and exacerbated by the Russian invasion of Ukraine. However, management believes that it will be able to manage these supply chain issues as a result of strategic decisions made by the company.
About Tornado Global Hydrovacs Ltd.
The company designs and manufactures hydrovac trucks, as well as provides heavy-duty truck maintenance operations in central Alberta. It sells hydrovac trucks to excavation service providers in the infrastructure and industrial construction and oil and gas markets. Hydrovac trucks use high-pressure water and vacuum to safely penetrate and cut soil to expose critical infrastructure for repair and installation without damage. Hydrovac excavation methods are quickly becoming a standard in North America to safely excavate in urban areas and around critical infrastructure, greatly reducing infrastructure damage and related fatalities. In China, the company’s subsidiary is used principally to source certain parts to the company’s North America operations.