K-BRO REPORTS RECORD Q2 RESULTS FOR REVENUE, EBITDA AND ADJUSTED EBITDA

Executive Summary

• K-Bro Linen Inc. reported record Q2 2025 financial results, with revenue increasing 21.0% to $113.1 million and Adjusted EBITDA rising 30.0% to $23.7 million compared to Q2 2024.
• The company completed the acquisition of Stellar Mayan, its largest acquisition to date, establishing a national footprint in the UK commercial laundry sector. The transaction was financed via a $75.8 million net equity offering and a $134.3 million term loan.
• Management highlighted steady volume trends in healthcare and hospitality segments, with expectations for combined Adjusted EBITDA margins to remain consistent with historical levels, while noting a 12-18 month integration period for the new UK assets.

Key Details

• Q2 2025 Financial Performance:
  • Revenue: $113.1 million (up 21.0% from $93.5 million in Q2 2024).
  • Healthcare Revenue: $57.9 million (up 20.7%).
  • Hospitality Revenue: $55.2 million (up 21.2%).
  • Adjusted EBITDA: $23.7 million (up 30.0% from $18.2 million); Margin: 21.0% (up from 19.5%).
  • Adjusted Net Earnings: $7.8 million (up 25.8% from $6.2 million).
  • EBITDA: $21.4 million (up from $16.6 million); Margin: 18.9%.
  • Net Earnings: $5.4 million (up from $4.5 million).
  • Basic EPS: $0.258; Diluted EPS: $0.257.
  • Adjusted Basic EPS: $0.294; Adjusted Diluted EPS: $0.291.
• Stellar Mayan Acquisition Details:
  • Completed on June 11, 2025; includes Synergy, Grosvenor Contracts, and Aeroserve Linen Services.
  • Total Purchase Price: $194.695 million (net of cash acquired).
  • Financing Structure:
    • Equity: Issuance of 2,334,500 common shares at $34.55 per share.
    • Debt: $134.3 million four-year amortizing term loan.
  • Purchase Price Allocation (Preliminary):
    • Net Identifiable Assets: $127.881 million.
    • Goodwill: $66.814 million.
    • Intangible Assets: $44.542 million ($33.2M customer contracts, $11.3M brands).
    • Property, Plant & Equipment: $90.863 million.
  • Acquisition Costs: $7.1 million in professional fees included in Corporate expenses for the six months ended June 30, 2025.
  • Pro-Forma Impact: If acquired Jan 1, 2025, consolidated revenue would have been $280.2 million; pro-forma net earnings would have been $15.1 million (including an $8.1 million non-recurring tax loss carryforward).
• Financing and Balance Sheet Updates:
  • Amended Syndicated Credit Facility: Extended term to June 10, 2029; added $134.3 million amortizing term loan; reduced accordion from $75 million to $50 million.
  • Debt (excludes lease liabilities): $253.3 million at end of Q2 2025 (up from $118.5 million in Q2 2024).
  • Debt net of cash: $228.3 million at end of Q2 2025 (up from $114.4 million at end of fiscal 2024).
  • Combined interest rate: 5.95% as of June 30, 2025.
• Dividends:
  • Q2 2025 Dividend: $0.300 per common share declared.
  • August 2025 Dividend: $0.10 per common share declared, payable September 15, 2025.
• Operational Metrics & Outlook:
  • Capital Investment Plan: $10.0 - $12.0 million for fiscal 2025 (excluding Stellar Mayan incremental capital of $9.3 million).
  • Maintenance Capital Expenditures (Q2): $2.974 million (Canada) + $1.064 million (UK).
  • Distributable Cash Flow (Q2): $8.528 million.
  • Payout Ratio (Q2): 40.1%.
  • Integration Timeline: 12 to 18 months for Stellar Mayan business integration.
  • Market Outlook: Steady volume trends expected in healthcare and hospitality; no meaningful impact anticipated from tariffs as key customers/suppliers are not US-based.

Notable Quotes

• Linda McCurdy, President & CEO: "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... 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."
• Linda McCurdy, President & CEO: "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."