Tornado Global Hydrovacs Ltd. has released its unaudited financial and operating results for the three months period ended June 30, 2022, with comparisons with the same period last year. The unaudited condensed consolidated financial statements and related management discussion and analysis are available on the company’s issuer profile in Canada on SEDAR, in the United States on 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.

Second quarter 2022 overview and recent developments:

  • Revenue of $13,362 in Q2 2022 increased 89 per cent compared with $7,071 in Q2 2021 as customer demand continued to recover. The company achieved its highest quarterly revenue since Q3 2019.
  • The company earned net income of $570 in Q2 2022, which represents an increase of $654 compared with net loss of $84 in Q2 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 $1,220 in Q2 2022 increased by 80 per cent compared with $678 in Q2 2021. In Q2 2021, the company recorded $411 of recoveries from the Canada Emergency Wage Subsidy program, resulting in the adjusted EBITDAS from operations in Q2 2021 of $267, an increase of $953 (357 per cent) in Q2 2022 compared with Q2 2021. The company achieved its highest-ever quarterly EBITDAS. This significant increase in EBITDAS was due to increased revenue and improved cost-efficiencies. EBITDAS and adjusted EBITDA are non-IFRS (international financial reporting standard) financial measures and readers are cautioned that they should not be considered to be more meaningful than net income determined in accordance with IFRS.
  • On July 4, 2022, the company entered into a product supply and development agreement for the co-development and supply of customized hydrovac trucks with Ditch Witch, a division of The Toro Company. The supply contract contains a commitment for the delivery of a number of innovative, proprietary hydrovac trucks to Ditch Witch that are estimated to generate minimum gross revenue for Tornado in the amount of $43.85-million (U.S.) during the four-year term. This strategic alliance brings together two strong brands with a collective purpose to better serve customers and meet future demand, including the outlook on infrastructure spending and the effect this spending will have on hydrovac demand globally. The sale and delivery of the first customized hydrovac truck to Ditch Witch commenced in July, 2022.
  • The company’s Class A common shares began trading on the OTCQX Best Market under the symbol TGHLF on May 5, 2022. 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.

Outlook

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 its Red Deer facility over the long term for the following reasons:

 

  • The positive impact of the supply contract with Ditch Witch;
  • The improved economic environment experienced during the second half of 2021 and to date in 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 since it was purchased in 2020;
  • 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 the U.S. to meet the expected demand increase. The company anticipates increasing benefits from the exclusive sales agreement with its U.S. strategic partner, which has an integrated network of 23 locations across North America, that the company entered into in 2019;
  • 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, other supply chain issues related to key hydrovac components caused by the pandemic, including the current COVID lockdowns in China, and exacerbated by the Russian invasion of Ukraine and tensions between China and Taiwan, and general inflationary increases in components and labour. 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.

We seek Safe Harbor.