K-BRO REPORTS RECORD Q4 AND FULL-YEAR RESULTS AND POSITIVE OUTLOOK

Mar 20 2025 21:21 BST

(TSX: KBL)

EDMONTON, AB , March 20, 2025 /CNW/ - K-Bro Linen Inc. ("K-Bro" or the "Corporation") today announces its 2024 financial and operating results.

2024 Financial and Operating Highlights

Revenue
- Revenue increased by 16.4% in 2024 to $373.6 million compared to $320.9 million in 2023.
- Healthcare revenue for 2024 increased to $195.8 million compared to $184.3 million in 2023, or by 6.2%.
- Hospitality revenue for 2024 increased to $177.8 million compared to $136.6 million in 2023, or by 30.3%.
Adjusted EBITDA¹, Adjusted EBITDA Margin¹ & Adjusted Net Earnings¹
- Adjusted EBITDA increased for 2024 to $72.1 million compared to $58.0 million in 2023.
- Adjusted EBITDA margin increased to 19.3% in 2024 from 18.1% in 2023.
- Adjusted net earnings for the year increased by $2.9 million to $21.7 million in 2024 from $18.8 million in 2023.
EBITDA, EBITDA Margin & Net Earnings
- EBITDA increased for 2024 to $69.0 million compared to $56.8 million in 2023.
- EBITDA margin for the year increased to 19.3% in 2024 from 18.1% in 2023
- Net earnings for the year increased by $1.1 million to $18.7 million in 2024 from $17.6 million in 2023, and as a percentage of revenue decreased by 0.5% to 5.0% in 2024 from 5.5% in 2023.
For fiscal 2024, K-Bro declared dividends of $1.20 per common share.
Long-term debt at the end of fiscal 2024 was $123.8 million compared to $70.2 million at the end of fiscal 2023 due to the acquisitions of Shortridge and C.M.
K-Bro entered into a three-year, $175 million committed, syndicated revolving credit facility on March 26, 2024. The facility includes access to a further $75 million accordion.

Linda McCurdy, President & CEO of K-Bro, commented that "I'm delighted with our record fourth quarter and full year results. As always, we are focused on delivering industry-leading service and we're proud of our growing diverse workforce that operates with our customers in mind. We've worked hard over the past years to meet the changing needs of our new and existing customers, while managing the impact of inflation, volatile energy prices and labour market disruptions, and have restored Adjusted EBITDA margins to 2019 levels.

As we start 2025, we see a positive outlook for our business. Both of K-Bro's healthcare and hospitality segments continue to experience steady volume trends. In our healthcare segment, we expect steady increases to activity levels supported by a continued focus on reducing wait times and enhancing patient care. In our hospitality segment, we expect solid activity levels from both business and leisure travel. We continue to monitor the evolving geopolitical and trade landscape.

We're pleased with the early contributions of our recent acquisitions and are excited about our organic growth prospects and potential future M&A. We have an active M&A pipeline and will look to leverage our strong liquidity position, balance sheet and access to the capital markets to execute on these opportunities, should they arise.

(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 Q4 2024

Business Acquisition - Villeray

On November 1, 2023, the Corporation completed the acquisition of 100% of the share capital of Buanderie Villeray and its affiliate Buanderie La Relance (the "Villeray Acquisition"), a private laundry and linen services company incorporated in Canada and operating in Montréal, Quebec. The Villeray Acquisition was completed through a share purchase agreement consisting of existing working capital, fixed assets, customer relationships and an employee base. Villeray operates in the hospitality and healthcare sector, which complements the existing business of the Corporation. As part of the transaction, the Corporation closed its Granby facility and consolidated existing volumes into Villeray. Based on the Corporation's evaluation of the Villeray Acquisition and the criteria in the identification of a business combination established in IFRS 3, the Villeray Acquisition has been accounted for using the acquisition method, whereby the purchase consideration is allocated to the fair values of the net assets acquired.

The Corporation financed the Villeray Acquisition and transaction costs from existing loan facilities.

The purchase price allocated to the net assets acquired, based on their estimated fair values, is as follows:


Cash consideration	$ 11,204
Contingent consideration	$ 500
Total purchase price	$ 11,704

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

Net Assets Acquired:
Accounts receivable	907
Prepaid expenses and deposits	187
Income tax receivable	69
Accounts payable and accrued liabilities ⁽²⁾	(807)
Lease liabilities	(2,706)
Deferred income taxes	(1,416)
Property, plant and equipment^(1,2)	7,161
Intangible assets	2,530
Net identifiable assets acquired	5,925
Goodwill	5,779
Net assets acquired	$ 11,704

1) Includes ROUA from the Canadian Division of $2,706 related to buildings
2) Includes provision of $97 for asset retirement obligation

The intangible assets acquired are made up of $2,530 related to customer relationships. 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.

Contingent consideration

In the event that a certain EBITDA target was achieved by Villeray for the twelve month period ended October 31, 2024, additional undiscounted consideration ranging from $500 to $1,000 would have been payable in cash during the first quarter of 2025. At the end of September 2024, the former owner-operator of Villeray retired from the business and was replaced by a new Montreal General Manager. Although ongoing employment of the former owner-operator was not a condition required for payment of contingent consideration, amid the leadership transition, the Corporation determined that the target was not achieved. Therefore, no payment will be made.

During the first two quarters of 2024, the estimated fair value of the possible payment was classified as contingent consideration. The fair value of the contingent consideration was estimated by considering the probability-adjusted future expected cash flows in regards to Villeray achieving the target that would result in consideration being paid. The impact of discounting these future cash flows was not considered because the impact would be nominal. Given that the EBITDA target was not achieved for the twelve month period ended October 31, 2024, the contingent consideration amount of $500 has been derecognized and a gain on settlement of contingent consideration has been recorded in Consolidated Statement of Earnings and Comprehensive Income for the year ended December 31, 2024.

Acquisition related costs

For the year ended December 31, 2024, $108 in professional fees associated with the Villeray Acquisition has been included in Corporate expenses.

Business Acquisition - Shortridge

On April 30, 2024 the Corporation completed the acquisition of 100% of the share capital of Shortridge Ltd. ("Shortridge Acquisition"), a private hospitality laundry provider based in the North West of England, expanding K-Bro's geographic footprint in the UK. The Shortridge Acquisition was completed through a share purchase agreement consisting of existing working capital, fixed assets, contracts and an employee base. The contracts acquired are in the hospitality sector in England and Scotland, which complements the existing business of the Corporation. Based on the Corporation's evaluation of the Shortridge Acquisition and the criteria in the identification of a business combination established in IFRS 3, the Shortridge 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 Shortridge Acquisition. This includes the accounting for the amounts attributable to property, plant and equipment, intangible assets and the associated goodwill.

The Corporation financed the Shortridge Acquisition and transaction costs from the syndicated revolving credit facility.

The preliminary purchase price allocated to the net assets acquired, based on their estimated fair values, is as follows:


Cash consideration	35,788
Contingent consideration	9,275
Total purchase price ⁽¹⁾	45,063

1) This is presented net of cash acquired. Cash acquired was $3,878.

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

Net Assets Acquired:
Accounts receivable	2,698
Prepaid expenses and deposits	912
Linen in service	1,943
Accounts payable and accrued liabilities	(5,134)
Lease liabilities	(57)
Deferred income tax asset	8
Property, plant and equipment ⁽¹⁾	8,986
Intangible assets	15,181
Net identifiable assets acquired	24,537
Goodwill	20,526
Net assets acquired	$ 45,063

1) Includes ROUA from the UK Division of $57 related to buildings

The intangible assets acquired are made up of $13,149 related to customer relationships and $2,032 related to the brand. 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.

Contingent consideration

The contingent consideration consists of amounts related to achieving certain profitability and operational targets.

The estimated fair value of the payments has been classified as contingent consideration by exercising significant judgment as to whether it should be classified as such, or as remuneration to the former owners, who will be employed subsequent to the close of the transaction. The Corporation has determined by considering all relevant factors included in the agreements as it pertains to employment terms, valuation of the business, and other relevant terms that the additional consideration is most appropriately reflected as contingent consideration.

An amount of $7,684 was initially funded in cash on April 30, 2024 to be held in trust with a third party escrow agent until certain conditions were met. For the contingent consideration, it was determined that the profitability target was met at September 30, 2024. As such, $3,415 of contingent consideration was released from escrow in Q4 2024. In the event that certain operational targets are achieved by Shortridge, the additional undiscounted consideration will be released from escrow or paid in cash before December 31, 2025. The remaining $1,591 will be payable in cash.

The fair value of the contingent consideration of $9,275 was estimated by considering the probability-adjusted future expected cash flows in regards to Shortridge achieving the targets that would result in consideration being paid.

Acquisition related costs

For the year ended December 31, 2024, $508 in professional fees associated with the Shortridge Acquisition has been included in Corporate expenses.

Revenue and profit information

The acquired business contributed revenues of $17,471 to the Corporation for the period from April 30, 2024 to December 31, 2024. If the Acquisition had occurred on January 1, 2024, consolidated pro-forma revenue for the year ended December 31, 2024 would have been $379,591.

The acquired business contributed net earnings of $1,999 to the Corporation for the period from April 30, 2024 to December 31, 2024. If the Acquisition had occurred on January 1, 2024, consolidated pro-forma net earnings for the year ended December 31, 2024 would have been $19,145.

Business Acquisition - Buanderie C.M.

On June 21, 2024 the Corporation completed the acquisition of 100% of the share capital of Buanderie C.M. Inc. ("C.M. Acquisition"), a private laundry and linen operator located in Montréal serving the healthcare market. The acquisition will enable K-Bro to operate with two facilities in Montreal to service its growing healthcare and hospitality business. Based on the Corporation's evaluation of the C.M. Acquisition and the criteria in the identification of a business combination established in IFRS 3, the C.M. 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 C.M. Acquisition. This includes the accounting for the amounts attributable to property, plant and equipment, intangible assets and the associated goodwill.

The Corporation financed the C.M. Acquisition and transaction costs from the syndicated revolving credit facility.

The preliminary purchase price allocated to the net assets acquired, based on their estimated fair values, is as follows:

Cash consideration	$ 11,795
Total purchase price	$ 11,795

1) This is presented net of cash acquired. Cash acquired was $224.

The assets and liabilities recognized as a result of the C.M. Acquisition are as follows:

Net Assets Acquired:
Accounts receivable	742
Prepaid expenses and deposits	20
Linen in service	201
Accounts payable and accrued liabilities	(377)
Deferred income taxes	(851)
Property, plant and equipment	7,055
Intangible assets	1,800
Net identifiable assets acquired	8,590
Goodwill	3,205
Net assets acquired	$ 11,795

The intangible assets acquired are made up of $1,800 related to customer relationships. 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 year ended December 31, 2024, $683 in professional fees associated with the C.M. Acquisition has been included in Corporate expenses.

Revenue and profit information

The acquired business contributed revenues of $3,967 to the Corporation for the period from June 21, 2024 to December 31, 2024. If the Acquisition had occurred on January 1, 2024, consolidated pro-forma revenue for the year ended December 31, 2024 would have been $377,223.

The acquired business contributed net earnings of $226 to the Corporation for the period from June 21, 2024 to December 31, 2024. If the Acquisition had occurred on January 1, 2024, consolidated pro-forma net earnings for the year ended December 31, 2024 would have been $18,525.

Revolving Credit Facility

On August 31, 2023, the Corporation completed an amendment to its existing revolving credit facility to extend the agreement from July 31, 2026 to July 31, 2027, as previously amended on July 18, 2022. In addition, the agreement expanded the revolving credit facility from $100,000 to $125,000 plus a $25,000 accordion.

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.

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.

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. 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

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. Increases in interest rates, both domestically and internationally, could negatively affect the Corporation's cost of financing its operations and investments.

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.

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 rising 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.

Impairment of Assets

The Corporation performed its annual impairment assessment for goodwill for the Canadian division and for the UK division as at December 31, 2024 and December 31, 2023 in accordance with its policy described in Note 2(k) and Note 2(h). The Corporation also performed impairment indicator assessments where there was no goodwill allocated to the CGU.

For both periods, the recoverable amount for the CGUs was assessed using an earnings multiple or discounted cash flow approach. The earnings multiple approach was used in the case of CGUs that exhibited stable operations. A discounted cash flow approach was used in the case of CGUs that were recently acquired and were undergoing significant integration related activities.

Testing Methodology

The calculation of the recoverable amount was based on the following key assumptions:

	Testing Methodology	Pre-tax Discount Rate	Terminal Value Growth Rate
	December 31 2024	December 31 2024	December 31 2024
Calgary	FVLCD	n/a	n/a
Edmonton	FVLCD	n/a	n/a
Vancouver 2	FVLCD	n/a	n/a
Vancouver 1	FVLCD	n/a	n/a
Victoria	FVLCD	n/a	n/a
Québec City	VIU	12.7 %	3.0 %
Montreal 1	VIU	12.2 %	3.0 %
Montreal 2	FVLCD	n/a	n/a
UK 1	FVLCD	n/a	n/a
UK 2	FVLCD	n/a	n/a

Earnings multiple approach (Fair value less costs to dispose, "FVLCD")

For the years ended December 31, 2024 and 2023, the key assumption utilized was the implied multiple. The implied multiple is calculated by utilizing the average multiples of comparable public companies. The Corporation used an implied average forward multiple of 8.40 (2023 – 9.70) to calculate the recoverable amounts. The implied multiple was applied to the trailing twelve month EBITDA to determine the recoverable amount of the CGU and compare it to the carrying value of the CGU.

Discounted cash flow (Value-in-use, "VIU")

The key assumptions used in the model reflect past experience and expectations for these CGUs and those with similar characteristics. The terminal value growth rate is based on management's best estimate of the long-term growth rate for its CGUs after the forecast period, considering historic performance and future economic forecasts for the next five years with a terminal value assigned to the fifth year based on the Company's plans to operate the CGUs.

Conclusion

a)	Based on testing performed at December 31, 2024 and December 31, 2023, no impairment was determined to exist.

b)	The recoverable amount of each CGU is sensitive to changes in market conditions which could result in material changes. For the year ended December 31, 2024, where discounted cash flow testing was used, the sensitivity of key assumptions to a reasonable change was assessed. The Corporation does not believe there is a reasonable change in the key assumptions that would cause the carrying value of the CGU to exceed its recoverable amount. The table below summarizes the results of the impact on key assumptions to a reasonable change.

	Recoverable Amount	Change in Pre-tax Discount Rate increase of 1%	Change in Terminal Value Growth Rate decrease of 1%
	December 31 2024	December 31 2024	December 31 2024
Calgary	n/a	n/a	n/a
Edmonton	n/a	n/a	n/a
Vancouver 2	n/a	n/a	n/a
Vancouver 1	n/a	n/a	n/a
Victoria	n/a	n/a	n/a
Québec City	$23,486	-$2,715	-$2,174
Montreal 1	$18,849	-$2,600	-$2,084
Montreal 2	n/a	n/a	n/a
UK 1	n/a	n/a	n/a
UK 2	n/a	n/a	n/a

Financial Results

	*For The Three Months Ended December 31,*
*(thousands, except per share amounts* *and percentages)*	*Canadian* *Division* *2024*	UK *Division* *2024*	2024	*Canadian* *Division* *2023*	UK *Division* *2023*	2023	$ Change	% Change
Revenue	$ 67,443	$ 28,003	$ 95,446	$ 63,090	$ 19,374	$ 82,464	12,982	15.7 %
Expenses included in EBITDA	54,739	22,708	77,447	51,378	16,807	68,185	9,262	13.6 %
EBITDA⁽¹⁾	12,704	5,295	17,999	11,712	2,567	14,279	3,720	26.1 %
EBITDA as a % of revenue	18.8 %	18.9 %	18.9 %	18.6 %	13.2 %	17.3 %	1.6 %	9.2 %


Adjusted EBITDA⁽¹⁾	12,110	5,295	17,405	11,913	3,010	14,923	2,482	16.6 %
Adjusted EBITDA as a % of revenue	18.0 %	18.9 %	18.2 %	18.9 %	15.5 %	18.1 %	0.1 %	0.6 %
Net earnings	2,380	1,858	4,238	3,341	908	4,249	(11)	-0.3 %

Basic earnings per share	$ 0.225	$ 0.176	$ 0.401	$ 0.314	$ 0.085	$ 0.399	$ 0.002	0.5 %
Diluted earnings per share	$ 0.224	$ 0.174	$ 0.398	$ 0.311	$ 0.085	$ 0.396	$ 0.002	0.5 %
Dividends declared per diluted share			$ 0.300			$ 0.300	$ -	0.0 %


Adjusted net earnings ⁽¹⁾	1,786	1,858	3,644	3,542	1,351	4,893	(1,249)	-25.5 %
Adjusted basic earnings per share ⁽¹⁾	$ 0.168	$ 0.176	$ 0.344	$ 0.337	$ 0.129	$ 0.466	$ (0.122)	-26.2 %
Adjusted diluted earnings per share⁽¹⁾	$ 0.166	$ 0.174	$ 0.340	$ 0.335	$ 0.128	$ 0.463	$ (0.123)	-26.6 %
Total assets			438,150			364,716	73,434	20.1 %
Long-term debt (excludes lease liabilities)			123,778			70,247	53,531	76.2 %
						-
Cash provided by operating activities			11,011			7,817	3,194	40.9 %
Net change in non-cash working capital items			(2,108)			(3,448)	1,340	38.9 %
Share-based compensation expense			418			410	8	2.0 %
Maintenance capital expenditures			267			1,103	(836)	-75.8 %
Principal elements of lease payments			2,679			2,547	132	5.2 %
Distributable cash flow			9,755			7,205	2,550	35.4 %
Dividends declared			3,174			3,200	(26)	-0.8 %
Payout ratio			32.5 %			44.4 %	-11.9 %	-26.8 %

	*Years Ended December 31,*
*(thousands, except per share amounts* *and percentages)*	*Canadian* *Division* *2024*	UK *Division* *2024*	2024	*Canadian* *Division* *2023*	UK *Division* *2023*	2023	$ Change	% Change
						0
Revenue	$ 264,422	$ 109,187	$ 373,609	$ 241,129	$ 79,755	$ 320,884	52,725	16.4 %
Expenses included in EBITDA	216,471	88,118	304,589	196,430	67,648	264,078	40,511	15.3 %
EBITDA⁽¹⁾	47,951	21,069	69,020	44,699	12,107	56,806	12,214	21.5 %
EBITDA as a % of revenue	18.1 %	19.3 %	18.5 %	18.5 %	15.2 %	17.7 %	0.8 %	4.5 %

Adjusted EBITDA⁽¹⁾	50,482	21,577	72,059	45,473	12,550	58,023	14,036	24.2 %
Adjusted EBITDA as a % of revenue	19.1 %	19.8 %	19.3 %	18.9 %	15.7 %	18.1 %	1.2 %	6.6 %
Net earnings	9,493	9,215	18,708	12,584	5,023	17,607	1,101	6.3 %

Basic earnings per share	$ 0.904	$ 0.879	$ 1.783	$ 1.180	$ 0.471	$ 1.651	$ 0.132	8.0 %
Diluted earnings per share	$ 0.899	$ 0.872	$ 1.771	$ 1.172	$ 0.468	$ 1.640	$ 0.131	8.0 %
Dividends declared per diluted share			$ 1.200			$ 1.200	$ -	0.0 %


Adjusted net earnings ⁽¹⁾	12,024	9,723	21,747	13,358	5,466	18,824	2,923	15.5 %
Adjusted basic earnings per share ⁽¹⁾	$ 1.145	$ 0.929	$ 2.074	$ 1.256	$ 0.514	$ 1.770	$ 0.304	17.2 %
Adjusted diluted earnings per share⁽¹⁾	$ 1.135	$ 0.921	$ 2.056	$ 1.249	$ 0.511	$ 1.760	$ 0.296	16.8 %
Total assets			438,150			364,716	73,434	20.1 %
Long-term debt (excludes lease liabilities)			123,778			70,247	53,531	76.2 %
						-
Cash provided by operating activities			49,950			41,005	8,945	21.8 %
Net change in non-cash working capital items			(4,406)			(6,113)	1,707	27.9 %
Share-based compensation expense			1,915			1,796	119	6.6 %
Maintenance capital expenditures			2,182			3,561	(1,379)	-38.7 %
Principal elements of lease payments			10,648			9,391	1,257	13.4 %
Distributable cash flow			39,611			32,370	7,241	22.4 %
Dividends declared			12,694			12,896	(202)	-1.6 %
Payout ratio			32.0 %			39.8 %	-7.8 %	-19.6 %

(1) See "Terminology" for further details

OUTLOOK

The Corporation's healthcare and hospitality segments continue to experience steady volume trends. For the healthcare segment, management expects steady increases to activity levels supported by a continued focus on reducing wait times and enhancing patient care. For the hospitality segment, management expects solid activity levels from both business and leisure travel reflecting historical seasonal trends.

The volatility K-Bro encountered from energy prices, local labour market shortages and cost inflation throughout the pandemic has stabilized and Adjusted EBITDA margins have stabilized. Going forward, management expects Adjusted EBITDA margins will remain at similar levels, following historical seasonal trends. The Corporation continues to monitor evolving global and Canadian foreign policies, geopolitical events and economic conditions, which could have a direct or indirect impact on the business.

In 2024, the Corporation modified its definition of Adjusted EBITDA. As K-Bro actively pursues its growth opportunities, the Corporation will continue to incur certain transaction, transition, syndication/structural financing costs. In this context, management believes Adjusted EBITDA assists investors to assess our performance on a consistent basis as it is an indication of our capacity to generate income from operations. Adjusting items are detailed in the tables within "Terminology".

With continued momentum in existing operations, management has refocused attention on strategic acquisitions, such as the acquisitions of C.M., Shortridge, Villeray and Paranet, to accelerate growth in North America, Europe, and similar geographies which remain highly fragmented. K-Bro will look to leverage its strong liquidity position, balance sheet and access to the capital markets to execute on these opportunities, should they arise. For further information about the impact of other economic factors on our business, see the "Summary of 2024 Results and Key Events".

CORPORATE PROFILE

K-Bro is the largest owner and operator of laundry and linen processing facilities in Canada and a market leader for laundry and textile rental services in Scotland and the North of England. K-Bro and its wholly-owned subsidiaries operate across Canada and the UK, providing a range of linen services to healthcare institutions, hotels and other commercial accounts 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 two distribution centres in ten Canadian cities: Québec City, Montréal, Toronto, Regina, Saskatoon, Prince Albert, Edmonton, Calgary, Vancouver and Victoria.

The Corporation's operations in the UK include two distinctive brands, Fishers Topco Ltd. ("Fishers") which was acquired by K-Bro on November 27, 2017 and Shortridge Ltd. ("Shortridge"), which was acquired by K-Bro on April 30, 2024.

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.

Additional information regarding the Corporation including required securities filings are available on our website at www.k-brolinen.com and on the Canadian Securities Administrators' website at www.sedarplus.ca; the System for Electronic Document Analysis and Retrieval ("SEDAR +").

TERMINOLOGY

Throughout this news release and other documents referred to herein, and in order to provide a better understanding of the financial results, K-Bro uses the terms "EBITDA", "adjusted EBITDA", "adjusted net earnings", "adjusted net earnings per share", "debt to total capital", "distributable cash" and "payout ratio". These terms do not have any standardized meaning under International Financial Reporting Standards ("IFRS") as set out in the CICA Handbook. Therefore, EBITDA, adjusted EBITDA, adjusted net earnings, adjusted net earnings per share, distributable cash and payout ratio may not be comparable to similar measures presented by other issuers. Specifically, the terms "EBITDA", "adjusted EBITDA", "adjusted net earnings", "adjusted net earnings per share", "distributable cash", and "payout ratio" have been defined as follows:

EBITDA

EBITDA (Earnings before interest, taxes, depreciation and amortization) comprises revenues less operating costs before financing costs, capital asset and intangible asset amortization, and income taxes.

EBITDA is a sub total presented within the statement of earnings in accordance with the amendments made to IAS 1 which became effective January 1, 2016. EBITDA is not considered an alternative to net earnings in measuring K Bro's performance. EBITDA should not be used as an exclusive measure of cash flow since it does not account for the impact of working capital changes, capital expenditures, debt changes and other sources and uses of cash, which are disclosed in the consolidated statements of cash flows.

		Three Months Ended December 31,		Years Ended December 31,
(thousands)		2024	2023	2024	2023


Net earnings		$ 4,238	$ 4,249	$ 18,708	$ 17,607
Add:
	Income tax expense	1,156	1,000	5,331	5,256
	Finance expense	3,173	1,732	11,302	6,649
	Depreciation of property, plant and equipment	8,324	7,043	30,434	26,669
	Amortization of intangible assets	1,108	255	3,245	625

EBITDA		$ 17,999	$ 14,279	$ 69,020	$ 56,806

Non-GAAP Measures

Adjusted EBITDA

K Bro reports Adjusted EBITDA (Earnings before interest, taxes, depreciation and amortization) as a key measure used by management to evaluate performance. We believe Adjusted EBITDA assists investors to assess our performance on a consistent basis as it is an indication of our capacity to generate income from operations before taking into account management's financing decisions as well as costs of acquiring tangible and intangible capital assets. The Corporation has modified its definition for Adjusted EBITDA and has updated its comparative quarters to reflect the modified definition.

"Adjusted EBITDA" is EBITDA (defined above) with the addition or deduction of certain amounts incurred which management does not consider indicative of ongoing operating performance. This includes transaction costs, structural finance costs, transition and integration costs, restructuring costs, gains/losses on settlement of contingent consideration and any other non-recurring transactions.

The Corporation believes these non-GAAP definitions provide more meaningful reflections of normalized financial performance from operations and will enhance period-over-period comparability.

		Three Months Ended December 31,
		Canadian Division	UK Division		Canadian Division	UK Division
(thousands)		2024	2024	2024	2023	2023	2023
EBITDA		$ 12,704	$ 5,295	$ 17,999	$ 11,712	$ 2,567	$ 14,279
Adjusting Items:
	Transaction Costs ¹	-	-	-	476	443	919
	Syndication/Structural Finance Costs ²	-	-	-	161	-	161
	Transition Costs ³	63	-	63	509	-	509
	Restructuring Costs ⁴	250	-	250	-	-	-
	Gain on settlement of contingent consideration ⁵	-	-	-	(945)	-	(945)
	Non-recurring gain ⁶	(907)	-	(907)	-	-	-
					-	-	-
Adjusted EBITDA		$ 12,110	$ 5,295	$ 17,405	$ 11,913	$ 3,010	$ 14,923

	¹Relates to legal, professional and consulting fee expenditures made related to acquisitions.
	²Relates to costs incurred for initial syndication of the Corporation's Credit Agreement. frequently.
	³Relates to transition costs incurred as a result of the Corporation's acquisitions.
	⁴Relates to restructuring provision.
	⁵Relates to derecognition of contingent consideration. This gain is a non-cash item outside of core operations.
	⁶Relates to non-recurring reimbursement received from supplier related to a negotiated contract settlement.

		Years Ended December 31,
		Canadian Division	UK Division		Canadian Division	UK Division
(thousands)		2024	2024	2024	2023	2023	2023
EBITDA		$ 47,951	$ 21,069	$ 69,020	$ 44,699	$ 12,107	$ 56,806
Adjusting Items:							-
	Transaction Costs ¹	822	508	1,330	1,049	443	1,492
	Syndication/Structural Finance Costs ²	1,892	-	1,892	161	-	161
	Transition Costs ³	974	-	974	509	-	509
	Restructuring Costs ⁴	250	-	250	-	-	-
	Gain on settlement of contingent consideration ⁵	(500)	-	(500)	(945)	-	(945)
	Non-recurring gain ⁶	(907)	-	(907)	-	-	-
					-	-	-
Adjusted EBITDA		$ 50,482	$ 21,577	$ 72,059	$ 45,473	$ 12,550	$ 58,023

	¹Relates to legal, professional and consulting fee expenditures made related to acquisitions.
	²Relates to costs incurred for initial syndication of the Corporation's Credit Agreement. frequently.
	³Relates to transition costs incurred as a result of the Corporation's acquisitions.
	⁴Relates to restructuring provision.
	⁵Relates to derecognition of contingent consideration. This gain is a non-cash item outside of core operations.
	⁶Relates to non-recurring reimbursement received from supplier related to a negotiated contract settlement.

Adjusted Net Earnings and Adjusted Earnings per Share

Adjusted Net Earnings and Adjusted Earnings per Share are non-GAAP measures. These non-GAAP measures are defined to exclude certain amounts which management does not consider indicative of ongoing operating performance. This includes transaction costs, structural finance costs, transition and integration costs, restructuring costs, gains/losses on settlement of contingent consideration and any other non-recurring transactions. The Corporation believes these non-GAAP definitions provide more meaningful reflections of normalized financial performance from operations and will enhance period-over-period comparability.

		Three Months Ended December 31,
		Canadian Division	UK Division		Canadian Division	UK Division
(thousands)		2024	2024	2024	2023	2023	2023
Net Earnings		$ 2,380	$ 1,858	$ 4,238	$ 3,341	$ 908	$ 4,249
Adjusting Items:
	Transaction Costs ¹	-	-	-	476	443	919
	Syndication/Structural Finance Costs ²	-	-	-	161	-	161
	Transition Costs ³	63	-	63	509	-	509
	Restructuring Costs ⁴	250	-	250	-	-	-
	Gain on settlement of contingent consideration ⁵	-	-	-	(945)	-	(945)
	Non-recurring gain ⁶	(907)	-	(907)	-	-	-
					-	-	-
Adjusted Net Earnings		$ 1,786	$ 1,858	$ 3,644	$ 3,542	$ 1,351	$ 4,893

	¹Relates to legal, professional and consulting fee expenditures made related to acquisitions.
	²Relates to costs incurred for initial syndication of the Corporation's Credit Agreement. frequently.
	³Relates to transition costs incurred as a result of the Corporation's acquisitions.
	⁴Relates to restructuring provision.
	⁵Relates to derecognition of contingent consideration. This gain is a non-cash item outside of core operations.
	⁶Relates to non-recurring reimbursement received from supplier related to a negotiated contract settlement.

		Years Ended December 31,
		Canadian Division	UK Division		Canadian Division	UK Division
(thousands)		2024	2024	2024	2023	2023	2023
Net Earnings		$ 9,493	$ 9,215	$ 18,708	$ 12,584	$ 5,023	$ 17,607
Adjusting Items:
	Transaction Costs ¹	822	508	1,330	1,049	443	1,492
	Syndication/Structural Finance Costs ²	1,892	-	1,892	161	-	161
	Transition Costs ³	974	-	974	509	-	509
	Restructuring Costs ⁴	250	-	250	-	-	-
	Gain on settlement of contingent consideration ⁵	(500)	-	(500)	(945)	-	(945)
	Non-recurring gain ⁶	(907)	-	(907)	-	-	-
					-	-	-
Adjusted Net Earnings		$ 12,024	$ 9,723	$ 21,747	$ 13,358	$ 5,466	$ 18,824

¹Relates to legal, professional and consulting fee expenditures made related to acquisitions.
²Relates to costs incurred for initial syndication of the Corporation's Credit Agreement. frequently.
³Relates to transition costs incurred as a result of the Corporation's acquisitions.
⁴Relates to restructuring provision.
⁵Relates to derecognition of contingent consideration. This gain is a non-cash item outside of core operations.
⁶Relates to non-recurring reimbursement received from supplier related to a negotiated contract settlement.

		Three Months Ended December 31,
		Canadian Division	UK Division		Canadian Division	UK Division
(thousands)		2024	2024	2024	2023	2023	2023
Basic Earnings per Share		0.225	0.176	0.401	0.314	0.085	0.399
Adjusting Items:
	Transaction Costs ¹	-	-	-	0.048	0.044	0.092
	Syndication/Structural Finance Costs ²	-	-	-	0.016	-	0.016
	Transition Costs ³	0.006	-	0.006	0.049	-	0.049
	Restructuring Costs ⁴	0.025	-	0.025	-	-	-
	Gain on settlement of contingent consideration ⁵	-	-	-	(0.090)	-	(0.090)
	Non-recurring gain ⁶	(0.088)	-	(0.088)	-	-	-
					-	-	-
Adjusted Basic Earnings per Share		0.168	0.176	0.344	0.337	0.129	0.466

	¹Relates to legal, professional and consulting fee expenditures made related to acquisitions.
	²Relates to costs incurred for initial syndication of the Corporation's Credit Agreement. frequently.
	³Relates to transition costs incurred as a result of the Corporation's acquisitions.
	⁴Relates to restructuring provision.
	⁵Relates to derecognition of contingent consideration. This gain is a non-cash item outside of core operations.
	⁶Relates to non-recurring reimbursement received from supplier related to a negotiated contract settlement.

		Years Ended December 31,
		Canadian Division	UK Division		Canadian Division	UK Division
(thousands)		2024	2024	2024	2023	2023	2023
Basic Earnings per Share		0.904	0.879	1.783	1.180	0.471	1.651
Adjusting Items:
	Transaction Costs ¹	0.078	0.050	0.128	0.102	0.043	0.145
	Syndication/Structural Finance Costs ²	0.180	-	0.180	0.015	-	0.015
	Transition Costs ³	0.093	-	0.093	0.048	-	0.048
	Restructuring Costs ⁴	0.024	-	0.024	-	-	-
	Gain on settlement of contingent consideration ⁵	(0.048)	-	(0.048)	(0.089)	-	(0.089)
	Non-recurring gain ⁶	(0.086)	-	(0.086)	-	-	-
					-	-	-
Adjusted Basic Earnings per Share		1.145	0.929	2.074	1.256	0.514	1.770

	¹Relates to legal, professional and consulting fee expenditures made related to acquisitions.
	²Relates to costs incurred for initial syndication of the Corporation's Credit Agreement. frequently.
	³Relates to transition costs incurred as a result of the Corporation's acquisitions.
	⁴Relates to restructuring provision.
	⁵Relates to derecognition of contingent consideration. This gain is a non-cash item outside of core operations.
	⁶Relates to non-recurring reimbursement received from supplier related to a negotiated contract settlement.

		Three Months Ended December 31,
		Canadian Division	UK Division		Canadian Division	UK Division
(thousands)		2024	2024	2024	2023	2023	2023
Diluted Earnings per Share		0.224	0.174	0.398	0.311	0.085	0.396
Adjusting Items:
	Transaction Costs ¹	-	-	-	0.046	0.043	0.089
	Syndication/Structural Finance Costs ²	-	-	-	0.016	-	0.016
	Transition Costs ³	0.006	-	0.006	0.050	-	0.050
	Restructuring Costs ⁴	0.025	-	0.025	-	-	-
	Gain on settlement of contingent consideration ⁵	-	-	-	(0.088)	-	(0.088)
	Non-recurring gain ⁶	(0.089)	-	(0.089)	-	-	-
					-	-	-
Adjusted Diluted Earnings per Share		0.166	0.174	0.340	0.335	0.128	0.463

	¹Relates to legal, professional and consulting fee expenditures made related to acquisitions.
	²Relates to costs incurred for initial syndication of the Corporation's Credit Agreement. frequently.
	³Relates to transition costs incurred as a result of the Corporation's acquisitions.
	⁴Relates to restructuring provision.
	⁵Relates to derecognition of contingent consideration. This gain is a non-cash item outside of core operations.
	⁶Relates to non-recurring reimbursement received from supplier related to a negotiated contract settlement.

		Years Ended December 31,
		Canadian Division	UK Division		Canadian Division	UK Division
(thousands)		2024	2024	2024	2023	2023	2023
Diluted Earnings per Share		0.899	0.872	1.771	1.172	0.468	1.640
Adjusting Items:
	Transaction Costs ¹	0.077	0.049	0.126	0.102	0.043	0.145
	Syndication/Structural Finance Costs ²	0.179	-	0.179	0.016	-	0.016
	Transition Costs ³	0.090	-	0.090	0.047	-	0.047
	Restructuring Costs ⁴	0.023	-	0.023	-	-	-
	Gain on settlement of contingent consideration ⁵	(0.047)	-	(0.047)	(0.088)	-	(0.088)
	Non-recurring gain ⁶	(0.086)	-	(0.086)	-	-	-
					-	-	-
Adjusted Diluted Earnings per Share		1.135	0.921	2.056	1.249	0.511	1.760

¹Relates to legal, professional and consulting fee expenditures made related to acquisitions.
²Relates to costs incurred for initial syndication of the Corporation's Credit Agreement. frequently.
³Relates to transition costs incurred as a result of the Corporation's acquisitions.
⁴Relates to restructuring provision.
⁵Relates to derecognition of contingent consideration. This gain is a non-cash item outside of core operations.
⁶Relates to non-recurring reimbursement received from supplier related to a negotiated contract settlement.

Distributable Cash Flow

Distributable cash flow is a measure used by management to evaluate the Corporation's performance. While the closest IFRS measure is cash provided by operating activities, distributable cash flow is considered relevant because it provides an indication of how much cash generated by operations is available after capital expenditures. It should be noted that although we consider this measure to be distributable cash flow, financial and non financial covenants in our credit facilities and dealer agreements may restrict cash from being available for dividends, re investment in the Corporation, potential acquisitions, or other purposes. Investors should be cautioned that distributable cash flow may not actually be available for growth or distribution from the Corporation. Management refers to "Distributable cash flow" as to cash provided by (used in) operating activities with the addition of net changes in non cash working capital items, less share based compensation, maintenance capital expenditures and principal elements of lease payments.

		Three Months Ended December 31,		Years Ended December 31,
(thousands)		2024	2023	2024	2023

Cash provided by operating activities		$ 11,011	$ 7,817	$ 49,950	$ 41,005
Deduct (add):
	Net changes in non-cash working capital items	(2,108)	(3,448)	(4,406)	(6,113)
	Share-based compensation expense	418	410	1,915	1,796
	Maintenance capital expenditures	267	1,103	2,182	3,561
	Principal elements of lease payments	2,679	2,547	10,648	9,391
Distributable cash flow		$ 9,755	$ 7,205	$ 39,611	$ 32,370

Payout Ratio

"Payout ratio" is defined by management as the actual cash dividend divided by distributable cash. This is a key measure used by investors to value K-Bro, assess its performance and provide an indication of the sustainability of dividends. The payout ratio depends on the distributable cash and the Corporation's dividend policy.

		Three Months Ended December 31,		Years Ended December 31,
(thousands)		2024	2023	2024	2023

	Cash dividends	3,174	3,200	12,694	12,896
	Distributable cash flow	9,755	7,205	39,611	32,370

Payout ratio		32.5 %	44.4 %	32.0 %	39.8 %

Debt to Total Capital

"Debt to total capital" is defined by management as the total long term debt (excludes lease liabilities) divided by the Corporation's total capital. This is a measure used by investors to assess the Corporation's financial structure.

Distributable cash flow, payout ratio, debt to total capital adjusted EBITDA, adjusted net earnings, and adjusted net earnings per share are not calculations based on IFRS and are not considered an alternative to IFRS measures in measuring K Bro's performance. Distributable cash Flow, payout ratio, adjusted EBITDA, adjusted net earnings, and adjusted net earnings per share do not have standardized meanings in IFRS and are therefore not likely to be comparable with similar measures used by other issuers.

FORWARD LOOKING STATEMENTS

This news release contains forward looking information that represents internal expectations, estimates or beliefs concerning, among other things, future activities or future operating results and various components thereof. The use of any of the words "anticipate", "continue", "expect", "may", "will", "project", "should", "believe", and similar expressions suggesting future outcomes or events are intended to identify forward looking information. Statements regarding such forward looking information reflect management's current beliefs and are based on information currently available to management.

These statements are not guarantees of future performance and are based on management's estimates and assumptions that are subject to risks and uncertainties, which could cause K-Bro's actual performance and financial results in future periods to differ materially from the forward-looking information contained in this news release. These risks and uncertainties include, among other things: (i) risks associated with acquisitions, including (a) the possibility of undisclosed material liabilities, disputes or contingencies, (b) challenges or delays in achieving synergy and integration targets, (c) the diversion of management's time and focus from other business concerns and (d) the use of resources that may be needed in other parts of our business; (ii) K-Bro's competitive environment; (iii) utility costs, minimum wage legislation and labour costs; (iv) K-Bro's dependence on long-term contracts with the associated renewal risk and the risks associated with maintaining short term contracts; (v) increased capital expenditure requirements; (vi) reliance on key personnel; (vii) changing trends in government outsourcing; (viii) changes or proposed changes to minimum wage laws in Ontario, British Columbia, Alberta, Quebec, Saskatchewan and the United Kingdom (the "UK"); (ix) the availability and terms of future financing; * textile demand; (xi) availability and access to labour; (xii) rising wage rates in all jurisdictions the Corporation operates and (xiii) foreign currency risk. Material factors or assumptions that were applied in drawing a conclusion or making an estimate set out in the forward-looking information include: (i) volumes and pricing assumptions; (ii) expected impact of labour cost initiatives; (iii) frequency of one-time costs impacting quarterly and annual financial results; (iv) foreign exchange rates; (v) the level of capital expenditures and (vi) the expected impact of the COVID-19 pandemic on the Corporation. Although the forward-looking information contained in this news release is based upon what management believes are reasonable assumptions, there can be no assurance that actual results will be consistent with these forward-looking statements. Certain statements regarding forward-looking information included in this news release may be considered "financial outlook" for purposes of applicable securities laws, and such financial outlook may not be appropriate for purposes other than this news release. Forward looking information included in this news release includes the expected annual healthcare revenues to be generated from the Corporation's contracts with new customers, calculation of costs, including one-time costs impacting the quarterly financial results, anticipated future capital spending and statements with respect to future expectations on margins and volume growth.

All forward looking information in this news release is qualified by these cautionary statements. Forward looking information in this news release is presented only as of the date made. Except as required by law, K Bro does not undertake any obligation to publicly revise these forward looking statements to reflect subsequent events or circumstances.

This news release also makes reference to certain measures in this document that do not have any standardized meaning as prescribed by IFRS and, therefore, are considered non GAAP measures. These measures may not be comparable to similar measures presented by other issuers. Please see "Terminology" for further discussion.

SOURCE K-Bro Linen Inc.