SEDAR Interim Financial Statements

www.k-brolinen.com | [email protected] Interim Condensed Consolidated Statements of Financial Position (unaudited, thousands of Canadian dollars) September 30, 2025 December 31, 2024 ASSETS Current assets Cash $ 26,011 $ 9,423 Accounts receivable 93,302 56,420 Prepaid expenses and deposits 12,399 7,844 Linen in service 72,884 38,736 204,596 112,423 Assets classified as held for sale 798 1,107 205,394 113,530 Property, plant and equipment (note 4) 304,614 224,825 Intangible assets 64,934 24,747 Goodwill 143,614 75,048 $ 718,556 $ 438,150 LIABILITIES Current liabilities Accounts payable and accrued liabilities $ 79,015 $ 42,822 Provisions 456 456 Current portion of long-term debt (note 5) 7,554 - Lease liabilities 18,806 12,237 Income taxes payable 1,765 1,747 Dividends payable to shareholders 1,300 1,059 108,896 58,321 Long-term debt (note 5) 238,764 123,778 Lease liabilities 61,532 42,900 Provisions 3,398 3,058 Deferred income taxes 28,166 20,682 $ 440,756 $ 248,739 SHAREHOLDERS' EQUITY Share capital 283,693 206,010 Share repurchase deficit (4,356) (4,356) Contributed surplus 3,452 2,397 Deficit (16,900) (21,507) Accumulated other comprehensive income 11,911 6,867 $ 277,800 $ 189,411 $ 718,556 $ 438,150 Contingencies and commitments (note 6) The accompanying notes are an integral part of these interim condensed consolidated financial statements. Interim Condensed Consolidated Statements of Earnings & Comprehensive Income (unaudited, thousands of Canadian dollars, except share and per share amounts) 2025 2024 2025 2024 Revenue 155,948 $ $ 104,469 359,991 $ $ 278,163 Expenses Wages and benefits 60,645 39,169 137,814 105,916 Delivery 16,877 12,163 41,654 33,046 Linen 15,314 9,977 35,287 26,835 Utilities 9,526 7,360 22,681 20,682 Corporate 5,258 4,161 20,906 14,221 Materials and supplies 7,422 3,626 15,283 10,514 Repairs and maintenance 5,883 3,917 14,742 11,536 Occupancy costs 2,943 1,624 7,284 4,749 Gain on settlement of contingent consideration - (500) - (500) Other expense (recovery) (note 4) 46 129 (1,480) 143 123,914 81,626 294,171 227,142 Earnings before interest, taxes, depreciation and amortization (EBITDA) 32,034 22,843 65,820 51,021 Other expenses Depreciation of property, plant and equipment (note 4) 12,069 7,823 29,182 22,110 Amortization of intangible assets 2,845 1,088 5,409 2,137 Finance expense 5,024 3,322 11,920 8,129 19,938 12,233 46,511 32,376 Earnings before income taxes 12,096 10,610 19,309 18,645 Current income tax expense 2,957 1,757 4,530 2,819 Deferred income tax expense (recovery) 284 724 (321) 1,356 Income tax expense 3,241 2,481 4,209 4,175 Net earnings 8,855 $ 8,129 $ 15,100 $ 14,470 $ Items that may be subsequently reclassified to earnings: Foreign currency translation differences on foreign operations 126 5,156 5,044 7,458 Total comprehensive income 8,981 $ 13,285 $ 20,144 $ 21,928 $ Net earnings per share: Basic 0.69 $ $ 0.78 1.32 $ $ 1.38 Diluted 0.68 $ $ 0.77 1.31 $ $ 1.37 Basic 12,859,822 10,446,055 11,470,790 10,523,759 Diluted 12,957,176 10,538,560 11,540,808 10,596,625 The accompanying notes are an integral part of these interim condensed consolidated financial statements. Three Months Ended September 30, Nine Months Ended September 30, Other comprehensive income Weighted average number of shares outstanding: Interim Condensed Consolidated Statements of Changes in Equity (unaudited, thousands of Canadian dollars) Total Share Capital Share repurchase deficit Contributed surplus Deficit Accumulate --- d other comprehensive income Total equity As at December 31, 2024 206,010 $ (4,356) $ 2,397 $ (21,507) $ 6,867 $ 189,411 $ Total comprehensive income - - - 15,100 5,044 20,144 Net proceeds from common shares issued (note 14) 76,838 - - - 76,838 Dividends declared (note 7) - - - (10,493) - (10,493) Employee share based compensation expense (note 10) - - 1,900 - - 1,900 Shares vested during the period 845 - (845) - - - As at September 30, 2025 283,693 $ (4,356) $ 3,452 $ (16,900) $ 11,911 $ 277,800 $ Total Share Capital Share repurchase deficit Contributed surplus Deficit Accumulated other comprehensive income (loss) Total equity As at December 31, 2023 206,453 $ (6,586) $ 2,252 $ (27,521) $ (167) $ 174,431 $ Total comprehensive income - - - 14,470 7,458 21,928 Dividends declared (note 7) - - - (9,520) - (9,520) Employee share based compensation expense (note 10) - - 1,497 - - 1,497 Repurchase of shares (note 14) (2,213) (1,737) - - - (3,950) Share repurchase liability (note 14) - 3,967 - - - 3,967 Shares vested during the period 614 (614) - As at September 30, 2024 204,854 $ (4,356) $ 3,135 $ (22,571) $ 7,291 $ 188,353 $ The accompanying notes are an integral part of these interim condensed consolidated financial statements. Interim Condensed Consolidated Statements of Cash Flow (unaudited, thousands of Canadian dollars) 2025 2024 2025 2024 OPERATING ACTIVITIES Net earnings 8,855 $ $ 8,129 15,100 $ $ 14,470 Depreciation of property, plant and equipment (note 4) 12,069 7,823 29,182 22,110 Amortization of intangible assets 2,845 1,088 5,409 2,137 Accretion (recovery) expense (3) (55) 39 24 Employee share based compensation expense 564 443 1,900 1,497 Other expense (recovery) (note 4) 46 129 (1,480) 143 Gain on settlement of contingent consideration - (500) - (500) Amortization of term loan fees (note 5) 49 - 49 - Deferred income tax expense (recovery) 284 724 (321) 1,356 24,709 17,781 49,878 41,237 Change in non-cash working capital items (note 8) (4,100) 603 (8,864) (2,298) Cash provided by operating activities 20,609 18,384 41,014 38,939 FINANCING ACTIVITIES Net proceeds (expenditures) from issuance of common shares (note 14) (204) - 75,611 - Net (repayments) proceeds from revolving debt (note 5) (5,367) 1,086 (9,341) 65,628 Repayments of term loan (note 5) (1,679) - (1,679) - Fees paid relating to term loan (note 5) - - (789) - Net proceeds from term loan (note 5) - - 134,300 - Repurchase of shares (note 14) - - - (3,950) Principal elements of lease payments (4,452) (2,670) (10,308) (7,969) Dividends paid to shareholders (3,897) (3,173) (10,252) (9,525) Cash (used in) provided by financing activities (15,599) (4,757) 177,542 44,184 INVESTING ACTIVITIES Purchase of property, plant and equipment (4,128) (2,262) (9,186) (13,597) Proceeds from disposal of property, plant and equipment (note 4) - 12 1,874 12 Purchase of intangible assets (37) (242) (257) (386) Acquisition of businesses, net of cash (notes 11, 12, 13) - - (194,695) (54,905) Cash used in investing activities (4,165) (2,492) (202,264) (68,876) Change in cash and cash equivalents during the period 845 11,135 16,292 14,247 Effect of exchange rate changes on cash 103 509 296 701 Cash and cash equivalents, beginning of period 25,063 9,161 9,423 5,857 Cash and cash equivalents, end of period 26,011 $ 20,805 $ 26,011 $ 20,805 $ Supplementary cash flow information Interest paid 4,935 $ 3,313 $ 11,745 $ 7,966 $ Income taxes paid 1,602 $ 4,286 $ 4,532 $ 4,286 $ The accompanying notes ar --- e an integral part of these interim condensed consolidated financial statements. Three Months Ended September 30, Nine Months Ended September 30, Notes to the Interim Condensed Consolidated Financial Statements (unaudited, thousands of Canadian dollars except share and per share amounts, three and nine months ended September 30, 2025 and 2024) K-Bro Linen Inc. (the "Corporation" or “K-Bro”) is incorporated in Canada under the Business Corporations Act (Alberta). 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 services in the UK. K-Bro and its wholly owned subsidiaries, operate across Canada and the United Kingdom (“UK”), provide a range of linen services to healthcare institutions, hotels and other commercial organizations 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 one distribution centre in nine Canadian cities: Québec City, Montréal, Toronto, Regina, Saskatoon, Edmonton, Calgary, Vancouver and Victoria. The processing facilities operate under the brands of K-Bro Linen Systems Inc. (“K-Bro”), Buanderie HMR, Paranet, Villeray and C.M. 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 Limited (“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 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. Fishers' 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. The Corporation’s common shares are traded on the Toronto Stock Exchange under the symbol “KBL”. The address of the Corporation’s registered head office is 14 --- 903 – 137 Avenue, Edmonton, Alberta, Canada. These unaudited Interim Condensed Consolidated Financial Statements were approved and authorized for issuance by the Board of Directors (“the Board”) on November 12, 2025. 1 Basis of Presentation These unaudited Interim Condensed Consolidated Financial Statements have been prepared in accordance with IFRS Accounting Standards (as issued by the International Accounting Standards Board) applicable to preparation of interim financial statements under IAS 34, Interim Financial Reporting, and should be read in conjunction with the annual consolidated audited financial statements for the year ended December 31, 2024 which have been prepared in accordance with IFRS Accounting Standards. The Notes to the Interim Condensed Consolidated Financial Statements (unaudited, thousands of Canadian dollars except share and per share amounts, three and nine months ended September 30, 2025 and 2024) accounting policies followed in these unaudited Interim Condensed Consolidated Financial Statements are consistent with those of the previous year, except as described below. Recent Developments and Impact on Estimation Uncertainty The timely preparation of the consolidated interim financial statements, in conformity with IFRS Accounting Standards, requires management of the Corporation to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. These estimates and judgments have been applied in a manner consistent with prior periods. 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 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, assets, liabilities, and note disclosures could result in a material adjustment to the carrying value of the asset or liability affected. 2 New Accounting Pronouncements Adopted The Corporation adopted the following accounting standards and amendments that were effective for our interim and annual consolidated financial statements commencing January 1, 2025. These changes did not have a material impact on our financial results and are not expected to have a material impact in the future. • Amendments to IAS 21, Lack of Exchangeability, including guid --- ance about the determination of the exchange rate and disclosure when a currency is not exchangeable. 3 New standards and interpretations not yet adopted New standards, interpretations, or amendments that have been issued, or are not yet effective, have not been further described or early adopted, where no material impact is expected on the Corporation's consolidated financial statements. Notes to the Interim Condensed Consolidated Financial Statements (unaudited, thousands of Canadian dollars except share and per share amounts, three and nine months ended September 30, 2025 and 2024) The IASB has issued the following new standard and amendments to existing standards that will become effective in the future. • Amendments to IFRS 7, Classification and Measurement of Financial Instruments, including disclosure requirements relating to contractual financial assets and liabilities referencing a contingent event. • Amendments to IFRS 9, Classification and Measurement of Financial Instruments, including guidance regarding electronic payments and the timing of derecognition of financial liabilities. • Introduction of IFRS 18, Presentation and Disclosure in Financial Statements, specifying new presentation requirements for subtotals and totals within the Statement of Profit or Loss and disclosure requirements for management-defined performance measures. The Corporation has not adopted any standard, interpretation or amendment that has been issued but is not yet effective and no material impact is expected on the Corporation’s consolidated financial statements. The Corporation will continue to assess the impacts, if any, the amendments to existing standards will have on our consolidated financial statements, but we currently do not expect any material impacts from an operational or cash flow perspective; however, there could be material changes to presentation and disclosure. Notes to the Interim Condensed Consolidated Financial Statements (unaudited, thousands of Canadian dollars except share and per share amounts, three and nine months ended September 30, 2025 and 2024) 4 Property, plant and equipment (1) Included in laundry equipment are assets under development in the amount of $3,043 (2024 - $2,019). These assets are not available for service and accordingly are not presently being depreciated. (2) Total property, plant and equipment additions are inclusive of amounts incurred in the period that are yet to be paid, with amounts remaining in accounts payable and accrued liabilities of $330 (2024 - $345). (3) Additions include amounts from the Canadian Division of $9,301 (2024 - $20,042) and from the UK Division of $6,892 (2024 - $10,849). (4) Includes ROUA additions from the Canadian Division of $3,962 (2024 - $7,019), comprised of buildings of $0 (2024 - $5,105) and vehicles of $3,962 (2024 - $1,914). From the UK Division, ROUA additions were $3,060 (2024 - $5,048), comprised of buildings of $0 (2024 - $596) and vehicles of $3,060 (2024 - $4,452). This has resulted in corresponding increases to the lease liabilities in the amount of $3,962 (2024 - $7,019) for the Canadian Division and $3,060 (2024 - $5,048) for the UK Division. (5) Assets classified as held for sale included an amount from the Canadian Division of $338. This was comprised of land and a building in Granby, Quebec. Upon the acquisition of Villeray on November 1, 2023, Granby volumes were consolidated into Villeray, resulting in the facility being put up for sale. In May 2025, --- the sale of the Granby facility was completed. Proceeds of $1,857 were received from the sale and a gain on disposal of $1,519 was recognized in the Statement of Earnings & Comprehensive Income within the ‘Other (recovery) expense’ line. Land Buildings Laundry Equipment(1) Office Equipment Delivery Equipment Computer Equipment Leasehold Improvements Spare Parts Total Year ended, December 31, 2024 Opening net book amount $ 3,338 $ 49,649 $ 114,228 $ 212 $ 10,221 $ 305 $ 26,752 $ 2,093 $ 206,798 Additions (2)(3)(4) $ - $ 5,700 $ 16,772 $ 64 $ 7,080 $ 772 $ 399 $ 104 $ 30,891 Change in asset retirement obligation $ - $ - $ - $ - $ - $ - $ 8 $ - $ 8 Acquisition of businesses (notes 11, 12) $ 1,216 $ 5,809 $ 7,556 $ 51 $ 1,377 $ 32 $ - $ - $ 16,041 Disposals $ - $ - $ (249) $ - $ (560) $ - $ - $ (41) $ (850) Assets classified as held for sale (5) $ (55) $ (283) $ - $ - $ - $ - $ - $ - $ (338) Depreciation charge $ - $ (7,423) $ (13,985) $ (99) $ (4,998) $ (437) $ (3,492) $ - $ (30,434) Effect of movement in exchange rates $ 75 $ 693 $ 1,330 $ 10 $ 572 $ 1 $ 28 $ - $ 2,709 Closing net book amount $ 4,574 $ 54,145 $ 125,652 $ 238 $ 13,692 $ 673 $ 23,695 $ 2,156 $ 224,825 At December 31, 2024 Cost 4,574 $ 94,690 $ 250,672 $ 1,478 $ 36,554 $ 4,777 $ 61,303 $ 2,156 $ $ 456,204 Accumulated impairment losses - (207) (2,113) - (5) (14) - - (2,339) Accumulated depreciation - (40,338) (122,907) (1,240) (22,857) (4,090) (37,608) - (229,040) Net book amount $ 4,574 $ 54,145 $ 125,652 $ 238 $ 13,692 $ 673 $ 23,695 $ 2,156 $ 224,825 Period ended, September 30, 2025 Opening net book amount 4,574 $ 54,145 $ 125,652 $ 238 $ 13,692 $ 673 $ 23,695 $ 2,156 $ 224,825 $ Additions (2)(3)(4) - 15 8,270 33 7,032 408 49 386 16,193 Change in asset retirement obligation - - - - - - 62 - 62 Acquisition of business (note 13) - 40,828 41,022 874 7,662 477 - - 90,863 Disposals - - (51) - (11) - - - (62) Depreciation charge - (7,745) (12,507) (324) (5,490) (545) (2,571) - (29,182) Effect of movement in exchange rates 44 486 984 4 388 - 9 - 1,915 Closing net book amount 4,618 $ 87,729 $ 163,370 $ 825 $ 23,273 $ 1,013 $ 21,244 $ 2,542 $ 304,614 $ At September 30, 2025 Cost 4,618 $ 135,766 $ 301,516 $ 2,406 $ 51,869 $ 5,664 $ 61,432 $ 2,542 $ 565,813 $ Accumulated impairment losses - (207) (2,113) - (5) (14) - - (2,339) Accumulated depreciation - (47,830) (136,033) (1,581) (28,591) (4,637) (40,188) - (258,860) Net book amount 4,618 $ 87,729 $ 163,370 $ 825 $ 23,273 $ 1,013 $ 21,244 $ 2,542 $ 304,614 $ Notes to the Interim Condensed Consolidated Financial Statements (unaudited, thousands of Canadian dollars except share and per share amounts, three and nine months ended September 30, 2025 and 2024) 5 Long-term debt (1) The revolving credit facility is collateralized by a general security agreement, bears interest at prime or the applicable banker’s acceptance rate, plus an interest margin dependent on certain financial ratios, with a monthly repayment of interest only, maturing on June 10, 2029. (2) The term loan is collateralized by a general security agreement, bears interest at prime or the applicable banker’s acceptance rate, plus an interest margin dependent on certain financial ratios, with quarterly principal repayments, maturing on June 10, 2029. The original principal amount of the term loan is required to be repaid in quarterly installments commencing September 30, 2025. The principal repayment amounts per year are equal to: Year 1: 5.00%, Year 2: 7.50%, Year 3: 7.50 --- %, Year 4: 10.00%. (3) The additional interest margin can range between 0.0% 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 September 30, 2025 the combined interest rate was 5.70% (December 31, 2024 – 6.20%). (4) The term loan had drawdowns of $134,300 and a principal repayment of $1,679, as well as term loan fees of $789, of which $49 were amortized. The revolving credit facility had repayments of $9,000 and net outflows of $341 as a result of operating activities for the nine months ended September 30, 2025. (For the nine months ended September 30, 2024, the revolving credit facility had drawdowns of $66,694, repayments of $0 and net inflows of $1,066.) On June 11, 2025, the Corporation amended its existing three-year committed Syndicated Credit Facility Agreement to include a $134,300 four-year amortizing term loan and to extend the term of the facility from March 25, 2027 to June 10, 2029. The amendment included a reduction in the accordion to $50,000 from $75,000. 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 $175,000 revolving credit facility plus a $75,000 accordion. Under the credit facility, the Corporation is required, among other conditions, to respect certain covenants on a consolidated basis. The main covenants are in regard to its Funded Debt to Credit Facility EBITDA ratio and Total Fixed Charge Coverage ratio. Management reviews compliance with these covenants on a quarterly basis in conjunction with filing requirements under its credit facility. All covenants have been met as at September 30, 2025 and December 31, 2024. Revolving Credit Facility (1, 3, 4) Term Loan (2, 3, 4) Total At January 1, 2024 70,247 $ - $ 70,247 $ Net proceeds from debt 53,531 - 53,531 Closing balance at December 31, 2024 123,778 $ - $ 123,778 $ At January 1, 2025 123,778 $ - $ 123,778 $ Net repayments of debt (9,341) $ (1,679) $ (11,020) $ Fees paid related to term loan - (789) (789) Amortization of term loan fees - 49 49 Net proceeds from term loan - 134,300 134,300 Closing balance at September 30, 2025 114,437 $ 131,881 $ 246,318 $ Current portion of long-term debt - 7,554 7,554 Non-current portion of long-term debt 114,437 124,327 238,764 Closing balance at September 30, 2025 114,437 $ 131,881 $ 246,318 $ Notes to the Interim Condensed Consolidated Financial Statements (unaudited, thousands of Canadian dollars except share and per share amounts, three and nine months ended September 30, 2025 and 2024) The Corporation has a syndicated credit facility of up to $309,300 plus a $50,000 accordion comprised of a revolving credit facility and a 4-year amortizing term loan, of which $255,565 is utilized (including letters of credit totaling $8,507) as at September 30, 2025. 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. Drawings under the revolving credit facility are available by way of Bankers’ Acceptances, Canadian prime rate loans, SOFR and CORRA pounds based loans, letters of credit or standby letters of guarantee. Drawings under the revolving credit facility bear interest at a floating rate, plus an applicable margin based on certain financial performance ratios. A general security agreement over all assets, a mortgage against all leasehold interests and real property, insurance policies and an assignment of material agreements have been pledged as collateral. The carrying value of borrowings approximate their fair value as the debt is based on a floating rate and the impact of discounting is not significant. The Corporation has incurred no events of default under the terms of its credit facility agreement. 6 Contingencies and commitments a) Contingencies The Corporation has standby letters of credit issued as part of normal business operations in the amount of $8,507 (December 31, 2024 – $5,022) which will remain outstanding for an indefinite period of time. Grievances for unspecified damages were lodged against the Corporation in relation to labour matters. The Corporation has disclaimed liability and is defending the actions. It is not practical to estimate the potential effect of these grievances but legal advice indicates that it is not probable that a significant liability will arise. b) Commitments and contractual obligations (i) Utility commitments The Corporation was committed to estimated natural gas and electricity commitments for the next five calendar years and thereafter as follows: (ii) Linen purchase commitments At September 30, 2025, the Corporation was committed to linen expenditure obligations in the amount of $7,787 (December 31, 2024 – $8,111) to be incurred within the next year. Remainder of 2025 5,159 $ 2026 12,702 2027 2,122 2028 2,122 2029 1,720 Subsequent 164 23,989 $ Notes to the Interim Condensed Consolidated Financial Statements (unaudited, thousands of Canadian dollars except share and per share amounts, three and nine months ended September 30, 2025 and 2024) (iii) Property, plant and equipment commitments At September 30, 2025, the Corporation was committed to capital expenditure obligations in the amount of $2,241 (December 31, 2024 – $4,426) to be incurred within the next year. (iv) Trust funds on deposit The Corporation maintained funds in trust for a customer to facilitate both parties in achieving their shared objectives and these funds were not available for the Corporation’s general operating activities. In Q2 2025, the account for funds held in trust was closed and funds were issued back to the customer. As at September 30, 2025, the Corporation held trust funds on deposit in the amount of $0 (December 31, 2024 – $1,116). 7 Dividends to shareholders During the three months ended September 30, 2025, the Corporation declared total dividends to shareholders of $3,897 or $0.300 per share (September 30, 2024 - $3,174 or $0.300 per share). During the nine months ended September 30, 2025, the Corporation declared total dividends to shareholders of $10,493 or $0.900 per share (September 30, 2024 - $9,520 or $0.900 per share). 8 Net change in non-cash working capital items 1) Accounts payable and other liabilities, include the net change of accounts payable, accrued liabilities, and current provision, but exclude the net change in non-cash amounts related to the acquisition of property, plant and --- equipment that have been committed to and accrued (paid) for in 2025 of ($15) and 2024 of $(11). 9 Financial instruments The Corporation’s financial instruments at September 30, 2025 and December 31, 2024 consist of cash, accounts receivable, accounts payable and accrued liabilities, lease liabilities, dividends payable to shareholders, and long term debt. The carrying value of accounts receivable, accounts payable and accrued liabilities, lease liabilities, and dividends payable to shareholders, approximate fair value due to the immediate or short-term maturity of these financial instruments. The fair value of the Corporation's interest-bearing debt approximates the respective carrying amount due to the floating rate nature of the debt. Credit Risk As per the Corporation’s existing policy for accounts receivable as disclosed in the Corporation's annual Consolidated Financial Statements for the year ended December 31, 2024, the Corporation applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables and contract assets. 2025 2024 2025 2024 Accounts receivable (7,364) $ 4,926 $ (11,077) $ (231) $ Linen in service (1,769) (45) (4,864) (1,728) Prepaid expenses and deposits 1,089 718 (459) 1,667 Accounts payable and other liabilities (1) 2,607 (2,446) 7,558 444 Income taxes payable / receivable 1,337 (2,550) (22) (2,450) (4,100) $ 603 $ (8,864) $ (2,298) $ Nine Months Ended September 30, Three Months Ended September 30, Notes to the Interim Condensed Consolidated Financial Statements (unaudited, thousands of Canadian dollars except share and per share amounts, three and nine months ended September 30, 2025 and 2024) To measure the expected credit losses, trade receivables are grouped based on shared credit risk characteristics and the days past due, and with an expected loss rate applied. The historical loss rates are adjusted to reflect current and forward-looking information based on macroeconomic factors affecting the ability of the customers to settle the receivables. On that basis, the loss allowance as at September 30, 2025 was reviewed by management and adjusted for accordingly based off adjusted historical loss rates, in addition to considering the impact of rising interest rates and the incremental risk to the hospitality industry. Given the current economic environment, management has taken extra steps to mitigate the additional credit risk with a detailed review of amounts that are not current. This includes detailed assessments of the recoverability of accounts receivable balances of each customer taking into account historic collection trends, the contractual relationship with the customer and the nature of the customer. 10 Segmented information The Chief Executive Officer (“CEO”) is the Corporation’s chief operating decision-maker. The Chief Executive Officer examines the Corporation’s performance and allocation of resources both from geographic perspective and service type, and has identified two reportable segments of its business: 1. Canadian division - provides laundry and linen services to the healthcare and hospitality sectors through eleven operating divisions located in Vancouver, Victoria, Calgary, Edmonton, Regina, Toronto, Montréal, and Québec City. Management has assessed that the services offered and the economic characteristics associated with these divisions are similar, and therefore they have been aggregated into one reporta --- ble segment which operates exclusively in Canada. 2. UK division - provides laundry and linen services to the healthcare and hospitality sectors, with other sectors including healthcare, manufacturing and pharmaceutical, through 14 sites which are located in Cupar, Perth, Newcastle, Livingston, Coatbridge, Lillyhall, Dumfries, Bermondsey, Derby, Dunstable, Sheffield, Slough (2), and St. Helens. The aggregation assessment requires significant judgment by management. Economic indicators used by management to assess the economic characteristics are the gross margin and the growth rate of each division. The CEO primarily uses a measure of EBITDA to assess the performance of the operating segments. In addition, the CEO also receives information about the segments’ revenue and assets on a monthly basis. a) Segment revenue The Corporation disaggregates revenue from contracts with customers by geographic location and customer-type for each of our segments, as we believe it best depicts how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors. Sales between segments are carried out at arm’s length and are eliminated on consolidation. The revenue from external parties is measured in the same manner as in the consolidated statements of earnings & comprehensive income. In Edmonton and Calgary, the Corporation is the significant supplier of laundry and linen services to the entity which manages all major healthcare facilities in the region and is contractually committed to July 31, 2032. In Vancouver a major customer is contractually committed to March 1, Notes to the Interim Condensed Consolidated Financial Statements (unaudited, thousands of Canadian dollars except share and per share amounts, three and nine months ended September 30, 2025 and 2024) 2027, and in Saskatchewan the major customer is contractually committed to June 1, 2031. For the nine months ended September 30, 2025, from these major customers the Corporation has recorded revenue of $110,612 (2024 – $106,261), representing 30.7% (2024 – 38.2%) of total revenue. b) Segment net earnings and EBITDA Segment net earnings and EBITDA are calculated consistent with the presentation in the financial statements. The net earnings and EBITDA is allocated based on the operations of the segment, and where the earnings and costs are generated from. Healthcare 148,213 $ 41.0% 140,040 $ 50.2% Hospitality 60,473 16.8% 56,939 20.5% Canadian division 208,686 $ 57.8% 196,979 $ 70.7% Healthcare 42,682 $ 12.0% 4,801 $ 1.8% Hospitality 108,623 30.2% 76,383 $ 27.5% UK division 151,305 $ 42.2% 81,184 $ 29.3% Total segment revenue 359,991 $ 100.0% 278,163 $ 100.0% Nine Months Ended September 30, 2024 Nine Months Ended September 30, 2025 Canadian division UK division Total Net earnings 7,568 $ 7,532 $ 15,100 $ EBITDA 40,707 $ 25,113 $ 65,820 $ Canadian division UK division Total Net earnings 7,113 $ 7,357 $ 14,470 $ EBITDA 35,247 $ 15,774 $ 51,021 $ Nine Months Ended September 30, 2024 Nine Months Ended September 30, 2025 Notes to the Interim Condensed Consolidated Financial Statements (unaudited, thousands of Canadian dollars except share and per share amounts, three and nine months ended September 30, 2025 and 2024) The Canadian division net earnings includes non-cash employee share based compensation expense of $1,900 (2024 - $1,497). c) Segment assets Segment assets are measured in the same way as in the financial statements. These assets are allocated b --- ased on the operations of the segment and the physical location of the asset. Canadian division UK division Total Revenue 208,686 $ 151,305 $ 359,991 $ Expenses Wages and benefits 82,038 55,776 137,814 Delivery 23,294 18,360 41,654 Linen 18,371 16,916 35,287 Utilities 11,157 11,524 22,681 Corporate 14,854 6,052 20,906 Materials and supplies 7,372 7,911 15,283 Repairs and maintenance 9,015 5,727 14,742 Occupancy costs 3,415 3,869 7,284 Other (recovery) expense (1,537) 57 (1,480) EBITDA 40,707 25,113 65,820 Depreciation of property, plant and equipment (note 4) 17,737 11,445 29,182 Amortization of intangible assets 1,285 4,124 5,409 Finance expense 11,920 Current income tax expense 4,530 Deferred income tax recovery (321) Net Earnings 15,100 Nine Months Ended September 30, 2025 Canadian division UK division Total Revenue 196,979 $ 81,184 $ 278,163 $ Expenses Wages and benefits 79,321 26,595 105,916 Delivery 22,657 10,389 33,046 Linen 17,380 9,455 26,835 Utilities 11,651 9,031 20,682 Corporate 11,723 2,498 14,221 Materials and supplies 7,170 3,344 10,514 Repairs and maintenance 9,120 2,416 11,536 Occupancy costs 3,076 1,673 4,749 Gain on settlement of contingent consideration (500) - (500) Other expense 134 9 143 EBITDA 35,247 15,774 51,021 Depreciation of property, plant and equipment (note 4) 16,790 5,320 22,110 Amortization of intangible assets 1,010 1,127 2,137 Finance expense 8,129 Current income tax expense 2,819 Deferred income tax expense 1,356 Net Earnings 14,470 Nine Months Ended September 30, 2024 Notes to the Interim Condensed Consolidated Financial Statements (unaudited, thousands of Canadian dollars except share and per share amounts, three and nine months ended September 30, 2025 and 2024) The Corporation’s cash is not considered to be a segment asset but is managed by the treasury function. At September 30, 2025 Canadian division UK division Total Total assets 285,819 $ 432,737 $ 718,556 $ Other: Cash (3,154) (22,857) (26,011) Total segment assets 282,665 $ 409,880 $ 692,545 $ At December 31, 2024 Canadian division UK division Total Total assets 288,773 $ 149,377 $ 438,150 $ Other: Cash (9) (9,414) (9,423) Total segment assets 288,764 $ 139,963 $ 428,727 $ Notes to the Interim Condensed Consolidated Financial Statements (unaudited, thousands of Canadian dollars except share and per share amounts, three and nine months ended September 30, 2025 and 2024) d) Segment liabilities Segment liabilities are measured in the same way as in the financial statements. These liabilities are allocated based on the operations of the segment. The Corporation’s borrowings are not considered to be segment liabilities but are managed by the treasury function. At September 30, 2025 Canadian division UK division Total Total liabilities 338,866 $ 101,890 $ 440,756 $ Other: Debt (note 5) (246,318) - (246,318) Total segment liabilities 92,548 $ 101,890 $ 194,438 $ At December 31, 2024 Canadian division UK division Total Total liabilities 215,486 $ 33,253 $ 248,739 $ Other: Debt (note 5) (123,778) - (123,778) Total segment liabilities 91,708 $ 33,253 $ 124,961 $ Notes to the Interim Condensed Consolidated Financial Statements (unaudited, thousands of Canadian dollars except share and per share amounts, three and nine months ended September 30, 2025 and 2024) 11 Business Acquisition – Shortridge In the nine months ended September 30, 2025, the provisional amounts that were previously disclosed in the December 31, 2024 Annual Financial Statements, asso --- ciated 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 September 30, 2025. 12 Business Acquisition – Buanderie C.M. In the nine months ended September 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 September 30, 2025. 13 Business Acquisition – Stellar Mayan On May 13, 2025, the Corporation announced the signing of a share purchase agreement to acquire 100% of UK 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 UK 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 $134,300 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. Cash consideration 194,695 $ Total purchase price (1) 194,695 $ Notes to the Interim Condensed Consolidated Financial Statements (unaudited, thousands of Canadian dollars except share and per share amounts, three and nine months ended September 30, 2025 and 2024) The assets and liabilities recognized as a result of the Stellar Mayan Acquisition are as follows: 1) Includes ROUA from the UK Division of $32,556. The provisional intangible assets acquired are made up of $33,173 related to customer contracts and $11,369 related to the brands. The goodwill is attri --- butable 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. a) Acquisition related costs For the nine months ended September 30, 2025, $7,334 in professional fees associated with the Stellar Mayan Acquisition has been included in Corporate expenses. b) Revenue and profit information The acquired business contributed revenues of $53,867 to the Corporation for the period from June 12, 2025 to September 30, 2025. If the Acquisition had occurred on January 1, 2025, consolidated pro- forma revenue for the period ended September 30, 2025 would have been $436,171. The acquired business contributed a net deficit of ($605) to the Corporation for the period from June 12, 2025 to September 30, 2025. If the Acquisition had occurred on January 1, 2025, consolidated pro-forma net earnings for the period ended September 30, 2025 would have been $23,677, including the recognition of a non-recurring tax loss carryforward of $8,133. 14 Share capital a) Normal Course Issuer Bid On May 15, 2023, the Corporation announced its intention to proceed with a normal course issuer bid (NCIB) to purchase up to 881,481 of its common shares (“Shares”) through the TSX and / or alternative Canadian trading systems, representing approximately 10% of the public float of 8,814,816 shares as at May 9, 2023, during the twelve-month period commencing May 18, 2023 and ending May 17, 2024. 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 $ Notes to the Interim Condensed Consolidated Financial Statements (unaudited, thousands of Canadian dollars except share and per share amounts, three and nine months ended September 30, 2025 and 2024) On May 16, 2024, the Corporation announced the renewal of its normal course issuer bid (NCIB) to purchase up to 754,247 of its common shares (“Shares”) through the TSX and / or alternative Canadian trading systems, representing approximately 10% of the public float of 7,542,474 shares at May 7, 2024 during the twelve-month period commencing May 21, 2024 and ending May 20, 2025. For the nine months ended September 30, 2025, the Corporation repurchased and cancelled 0 common shares (2024 - 113,614) for $0 (2024 - $3,950) under the NCIB. To date, the Corporation has repurchased and cancelled a total of 312,676 common shares for $10,446 under the NCIB. No financial liability existed as at September 30, 2025 relating to automatic share repurchases during the blackout period. b) Issued 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 (Note 13) 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 $75,611. 2025 2024 Balance, beginning of year 10,578,364 10,635,473 Common shares issued under LTI 77,6 --- 53 56,505 Common shares issued under equity offering 2,334,500 - Common shares repurchased - (113,614) As at September 30, 2025 12,990,517 10,578,364 Unvested common shares held in trust for LTI 130,694 114,497 2025 Gross proceeds from share issuance 80,657 $ Underwriter fee (3,460) Costs associated with share issuance (1,586) Net proceeds from share issuance 75,611 Deferred income tax impact of share issuance 1,227 Total impact to share capital 76,838 $ Notes to the Interim Condensed Consolidated Financial Statements (unaudited, thousands of Canadian dollars except share and per share amounts, three and nine months ended September 30, 2025 and 2024) 15 Subsequent events a) Dividends On October 15, 2025, the Board declared an eligible dividend of $0.1000 per common share of the Corporation payable on November 14, 2025 to shareholders of record on October 31, 2025. On November 12, 2025, the Board declared an eligible dividend of $0.1000 per common share of the Corporation payable on December 15, 2025 to shareholders of record on November 30, 2025.