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

(TSX:KBL)

EDMONTON, AB, Aug. 13, 2025 /CNW/ – K-Bro Linen Inc. (“K-Bro” or the “Corporation”) today announces its Q2 2025 financial and operating results.

Q2 2025 Financial and Operating Highlights

• Revenue
  • Revenue increased by 21.0% in Q2 2025 to $113.1 million compared to $93.5 million in Q2 2024.
  • Healthcare revenue increased to $57.9 million for Q2 2025 compared to $48.0 million in Q2 2024, or by 20.7%.
  • Hospitality revenue increased to $55.2 million for Q2 2025 compared to $45.5 million in 2024, or by 21.2%.
• Adjusted EBITDA¹, Adjusted EBITDA Margin¹ & Adjusted Net Earnings¹
  • Adjusted EBITDA increased by 30.0% to $23.7 million in Q2 2025 compared to $18.2 million in Q2 2024.
  • Adjusted EBITDA margin increased by 1.5% to 21.0% in Q2 2025 compared to 19.5% in Q2 2024.
  • Adjusted net earnings increased by 25.8% to $7.8 million in Q1 2025 from $6.2 million in Q2 2024.
• EBITDA, EBITDA Margin & Net Earnings
  • EBITDA increased by $4.8 million to $21.4 million for Q2 2025 compared to $16.6 million in Q2 2024.
  • EBITDA margin for the quarter increased to 18.9% in 2025 compared to 17.7% in 2024.
  • Net earnings for the quarter increased by $0.9 million to $5.4 million in 2025 from $4.5 million in 2024, and as a percentage of revenue decreased by 0.1% to 4.8% in 2025 from 4.9% in 2024.
• For the second quarter of 2025, K-Bro declared dividends of $0.300 per common share.
• K-Bro issued 2,334,500 common shares to finance the Stellar Mayan acquisition.
• K-Bro amended its existing three-year committed Syndicated Credit Facility Agreement to include a $134.3 million four-year amortizing term loan and to extend the term of the facility to June 10, 2029.
• Debt net of cash at the end of Q2 2025 was $228.3 million compared to $114.4 million at the end of fiscal 2024 due to the amortizing term loan to finance the Stellar Mayan acquisition.

Linda McCurdy, President & CEO of K-Bro, commented that “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.  We initially entered the UK through the acquisition of Fishers in 2017.  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.  Together, we’re excited to support our existing and new healthcare and hospitality customers.”

“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.  Going forward, we expect combined Adjusted EBITDA margins will remain at similar levels to combined seasonally adjusted historical margins.  We continue to monitor the evolving state of tariffs and other trade policies.  We are not currently anticipating meaningful impacts on our business, as key customers and suppliers are not US-based.”

^{(1) Adjusted EBITDA, Adjusted EBITDA margin and Adjusted Net Earnings are non-GAAP measures. See “Terminology” for further information on the definition and composition of these measures.}

Highlights and Significant Events for Q2 2025

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 $134.3 million 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:

The assets and liabilities recognized as a result of the Stellar Mayan Acquisition are as follows:

The provisional intangible assets acquired are made up of $33.2 million related to customer contracts and $11.3 million related to the brands. The goodwill is attributable 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.

Acquisition related costs

For the six months ended June 30, 2025, $7.1 million in professional fees associated with the Stellar Mayan Acquisition has been included in Corporate expenses.

Revenue and profit information

The acquired business contributed revenues of $9.4 million to the Corporation for the period from June 12, 2025 to June 30, 2025. If the Acquisition had occurred on January 1, 2025, consolidated pro-forma revenue for the period ended June 30, 2025 would have been $280.2 million.

The acquired business contributed a net deficit of ($0.455) million to the Corporation for the period from June 12, 2025 to June 30, 2025. If the Acquisition had occurred on January 1, 2025, consolidated pro-forma net earnings for the period ended June 30, 2025 would have been $15.1 million, including the recognition of a non-recurring tax loss carryforward of $8.1 million.

Common Share Offering

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 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 $75.8 million.

Revolving Credit Facility

On June 11, 2025, the Corporation amended its existing three-year committed Syndicated Credit Facility Agreement to include a $134.3 million 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 million from $75 million.

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 million revolving credit facility plus a $75 million accordion.

The term loan and revolving credit facility are collateralized by a general security agreement, bear interest at prime or the applicable banker’s acceptance rate, plus an interest margin dependent on certain financial ratios. 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. The additional interest margin can range between 0.00% 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 June 30, 2025 the combined interest rate was 5.95%.

The Corporation’s incremental borrowing rate under its existing credit facility is determined by the Canadian prime rate plus an applicable margin based on the ratio of Funded Debt to EBITDA as defined in the credit agreement.

Business Acquisition – Shortridge

In the six months ended June 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 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 June 30, 2025.

Business Acquisition – Buanderie C.M.

In the six months ended June 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 June 30, 2025.

Capital Investment Plan

For fiscal 2025, the Corporation’s planned capital spending is expected to be in the range of $10.0 to $12.0 million on a consolidated basis. This guidance includes both strategic and maintenance capital requirements to support existing base business in both Canada and the UK. These amounts are not reflective of incremental capital required for Stellar Mayan, for which the capital investment is anticipated to be $9.3 million ($5.0 million GBP).   We will continue to assess capital needs within our facilities and prioritize projects that have shorter term paybacks as well as those that are required to maintain efficient and reliable operations.

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 negatively 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.

Financial Results

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