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Alaris Equity Partners Announces an Investment of US$59.5 Million into a New Partner

31.08.2023  |  GlobeNewswire

CALGARY, Aug. 31, 2023 - (all numbers in this release are in Canadian dollars (CDN$) unless otherwise noted) Alaris Equity Partners Income Trust (the "Trust") (TSX: AD.UN) is pleased to announce that its subsidiary, Alaris Equity Partners USA, Inc. (collectively with the Trust and its other subsidiaries, "Alaris") has made an investment of US$59.5 million (the "TSY Investment") into The Shipyard, LLC. ("TSY" or "The Shipyard"), with a commitment to fund an additional US$5.5 million ("Tranche 2") if TSY achieves certain financial hurdles.

"We're very excited to be partnering with the founders and management of The Shipyard. The Shipyard team has built a wonderful company that has exhibited the ability to generate steady free cashflow and high growth without any material debt or capital expenditure requirements. The most important part of our investment, though, is the people. From top to bottom, founder and CEO Rick Milenthal has built a culture of trust and integrity that we feel will result in a tremendous long-term partnership for Alaris," said Steve King, President and Chief Executive Officer, Alaris.

"The Alaris model of investment is perfect for a growing successful company like The Shipyard. They back our team and fuel our growth, fully empowering our management team to do what is best for our people and our clients," said Rick Milenthal, Chief Executive Officer, The Shipyard

TSY Investment

The TSY Investment consists of: (i) US$42.5 million (the "TSY Preferred Contribution") of preferred equity, entitling Alaris to an initial annualized distribution of US$5.95 million (the "TSY Distribution"); and (ii) US$17.0 million (the "TSY Common Equity") for a minority common equity ownership in The Shipyard. The TSY Distribution is equivalent to a pre-tax yield of 14% in the first full year after the TSY Contribution. The Shipyard can elect to defer a portion of the TSY Distribution for up to 3% (US$1.28 million in the first full year) of the TSY Preferred Contribution with any such deferred distributions compounding at the current yield of the TSY Distribution. If The Shipyard achieves the financial hurdles, Tranche 2 will consist entirely of additional US$5.5 million of preferred equity and will have the same initial yield and rights as the initial TSY Investment.

Commencing on January 1, 2025, the TSY Distribution will be adjusted annually based on the percentage change in net revenue over the most recently completed 12-month period versus the prior 12-month period, subject to a collar of 7%.

Alaris' management believes that The Shipyard will have an earnings coverage ratio between 1.2x and 1.5x, based on: (i) Alaris' review of TSY's internal pro forma financial results for the most recent trailing twelve-month period in 2023, (ii) certain other changes to TSY's capital structure and (iii) the TSY Distribution payable to Alaris. Proceeds of the TSY Investment were used to provide a partial liquidity event to equity holders.

About The Shipyard

Founded in 2013 and headquartered in Columbus, OH, The Shipyard is an integrated marketing agency renowned for "Engineering Brand Love" by uniquely combining data science with integrated media, creative, and analytical processes. The skilled employee base of over 160 marketing professionals goal is to discover and engage all relevant audience segments via omnichannel marketing campaigns, driving marketing outcomes and accelerating brand growth. The Company's audience discovery approach, "No Customer Left Behind", is supported by a proprietary data intelligence engine, The Helm, combined with a full-suite of end to-end, agency of record marketing solutions to drive measurable and sustainable results for brands. The Shipyard has developed vertical expertise across highly attractive verticals, including Travel & Tourism, Financial & Professional Services, Energy & Sustainability, and Consumer Packaged Goods/Retail, with significant runway and ongoing initiatives to further penetrate each.

ABOUT ALARIS:

The Trust, through its subsidiaries, indirectly provides alternative financing to private companies ("Partners") in exchange for distributions with the principal objective of generating stable and predictable cash flows for payment of distributions to unitholders of the Trust. Distributions from the Partners are adjusted each year based on the percentage change of a "top line" financial performance measure such as gross margin and same-store sales and rank in priority to the owners' common equity position.

NON-IFRS MEASURES:

Earnings Coverage Ratio refers to the Normalized EBITDA of a Partner divided by such Partner's sum of debt servicing (interest and principal), unfunded capital expenditures and distributions to Alaris. Management believes the earnings coverage ratio is a useful metric in assessing our partners continued ability to make their contracted distributions.

Normalized EBITDA refers to EBITDA excluding items that are non-recurring in nature and is calculated by adjusting for non-recurring expenses and gains to EBITDA. Management deems non-recurring charges to be unusual and/or infrequent charges that our Partners incur outside of its common day-to-day operations.

EBITDA refers to earnings determined in accordance with IFRS, before depreciation and amortization, net of gain or loss on disposal of capital assets, interest expense and income tax expense. EBITDA is used by management and many investors to determine the ability of an issuer to generate cash from operations.

The terms Run Rate Payout Ratio, Earnings Coverage Ratio, Normalized EBITDA and EBITDA (the "Non-IFRS Measure") are not standard measures under IFRS. Alaris' calculation of the Non-IFRS Measure may differ from those of other issuers and, therefore, should only be used in conjunction with the Trust's annual audited and unaudited interim financial statements, which are available under the Trust's (and its predecessor's) profile on SEDAR at www.sedar.com.

FORWARD LOOKING STATEMENTS

This news release contains forward-looking information, including within the meaning of "safe harbour" provisions under applicable securities laws ("forward-looking statements"). Statements other than statements of historical fact contained in this news release may be forward-looking statements, including, without limitation, management's expectations, intentions and beliefs concerning: the financial impact of the TSY Investment, including the TSY Distribution and adjustments thereto and the impact on Alaris' revenue and net cash from operating activities; TSY's Earnings Coverage Ratio; and the impact of the TSY Investment thereon; and the timing and impact of Tranche 2. Many of these statements can be identified by words such as "believe", "expects", "will", "intends", "projects", "anticipates", "estimates", "continues" or similar words or the negative thereof. Any forward-looking statements which constitute a financial outlook or future-oriented financial information (including the impact on revenues, net cash from operating activities and Run Rate Payout Ratio) were approved by management as of the date hereof and have been included to explain Alaris' financial performance and are subject to the same risks and assumptions disclosed above. There can be no assurance that the plans, intentions or expectations on which these forward-looking statements are based will occur.

By their nature, forward-looking statements require Alaris to make assumptions and are subject to inherent risks and uncertainties. Assumptions about the performance of the Canadian and U.S. economies over the next 24 months and how that will affect Alaris' business and that of its Partners are material factors considered by Alaris management when setting the outlook for Alaris. Key assumptions include, but are not limited to, assumptions that: interest rates will not rise in a matter materially different from the prevailing market expectations over the next 12 to 24 months; the businesses of the majority of our Partners will continue to grow; the businesses of new Partners and those of existing partners will perform in line with Alaris' expectations and diligence; more private companies will require access to alternative sources of capital and that Alaris will have the ability to raise required equity and/or debt financing on acceptable terms. Management of Alaris has also assumed that the Canadian and U.S. dollar trading pair will remain in a range of approximately plus or minus 15% of the current rate over the next 6 months. In determining expectations for economic growth, management of Alaris primarily considers historical economic data provided by the Canadian and U.S. governments and their agencies as well as prevailing economic conditions at the time of such determinations.

Forward-looking statements are subject to risks, uncertainties and assumptions and should not be read as guarantees or assurances of future performance. The actual results of the Trust and the Partners could materially differ from those anticipated in the forward-looking statements contained herein as a result of certain risk factors, including, but not limited to: the ability of our Partners and, correspondingly, Alaris to meet performance expectations for 2023; any change in the senior lenders under the Facility's outlook for Alaris' business; management's ability to assess and mitigate the impacts of any local, regional, national or international health crises like COVID-19; the dependence of Alaris on the Partners; reliance on key personnel; general economic conditions in Canada, North America and globally; failure to complete or realize the anticipated benefit of Alaris' financing arrangements with the Partners; a failure of the Trust or any Partners to obtain required regulatory approvals on a timely basis or at all; changes in legislation and regulations and the interpretations thereof; risks relating to the Partners and their businesses, including, without limitation, a material change in the operations of a Partner or the industries they operate in; inability to close additional Partner contributions in a timely fashion, or at all; a change in the ability of the Partners to continue to pay Alaris' distributions; a change in the unaudited information provided to the Trust; a failure of a Partner (or Partners) to realize on their anticipated growth strategies; a failure to achieve the expected benefits of the third-party asset management strategy or similar new investment structures and strategies; a failure to achieve resolutions for outstanding issues with Partners on terms materially in line with management's expectations or at all; and a failure to realize the benefits of any concessions or relief measures provided by Alaris to any Partner or to successfully execute an exit strategy for a Partner where desired. Additional risks that may cause actual results to vary from those indicated are discussed under the heading "Risk Factors" and "Forward Looking Statements" in the Trust's Management Discussion and Analysis for the year ended December 31, 2021, which is filed under the Trust's profile at www.sedar.com and on its website at www.alarisequitypartners.com.

This news release contains future-oriented financial information and financial outlook information (collectively, "FOFI") about increases to the Trust's net operating cash per flow per unit and liquidity, each of which are subject to the same assumptions, risk factors, limitations, and qualifications as set forth above. Readers are cautioned that the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, undue reliance should not be placed on FOFI and forward-looking statements. Alaris' actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward-looking statements and FOFI, or if any of them do so, what benefits the Trust will derive therefrom. The Trust has included the forward-looking statements and FOFI in order to provide readers with a more complete perspective on Alaris' future operations and such information may not be appropriate for other purposes. Alaris disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Readers are cautioned not to place undue reliance on any forward-looking information contained in this news release as a number of factors could cause actual future results, conditions, actions or events to differ materially from the targets, expectations, estimates or intentions expressed in the forward-looking statements. Statements containing forward-looking information reflect management's current beliefs and assumptions based on information in its possession on the date of this news release. Although management believes that the assumptions reflected in the forward-looking statements contained herein are reasonable, there can be no assurance that such expectations will prove to be correct.

The forward-looking statements contained herein are expressly qualified in their entirety by this cautionary statement. The forward-looking statements included in this news release are made as of the date of this news release and Alaris does not undertake or assume any obligation to update or revise such statements to reflect new events or circumstances except as expressly required by applicable securities legislation.

Neither the TSX nor its Regulation Services Provider (as that term is defined in the policies of the TSX) accepts responsibility for the adequacy or accuracy of this release.

For further information please contact:

ir@alarisequity.com
P: (403) 260-1457
Alaris Equity Partners Income Trust
Suite 250, 333 24th Avenue S.W.
Calgary, Alberta T2S 3E6
www.alarisequitypartners.com



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