Atlas Engineered Products Reports 14% Revenue Growth and a Solid Cash Position in Q1 2020 Financial and Operating Results

June 30, 2020

June 30, 2020 - Nanaimo, British Columbia / Atlas Engineered Products (“AEP” or the “Company”) (TSX-V: AEP; OTC Markets: APEUF) is pleased to announce its financial and operating results for the first quarter ended March 31, 2020. All amounts are presented in Canadian dollars.

Financial Highlights for Q1 2020:

• Overall revenue for the three months ended March 31, 2020 was $7,097,979 compared to revenue of $6,216,908 for the three months ended March 31, 2019. This represents overall growth in revenue of 14% in comparison to the three months ended March 31, 2019. This increase in total revenues was driven by the organic growth of AEP’s existing operations and the first full quarter with the Company’s South Central Building Systems location in Carman, Manitoba.
  
• Gross margins for the three months ended March 31, 2020 was 16%, which was down from a gross margin of 19% for the three months ended March 31, 2019. Gross margins declined in Quarter 1 2020 due to lumber price volatility at the beginning of 2020. The decrease was mainly associated with the prices of lumber rising sharply in anticipation of the 2020 summer and fall building season, as shown in the graph below. The largest of these increases occurred in January and February, when most winter work being completed had already been quoted and ordered in 2019, at lower lumber prices. As lumber prices increased, inventories were purchased at higher pricing in the beginning of 2020 to meet demand. Lumber prices fell sharply from mid-February 2020 as the COVID-19 pandemic hit North America. AEP’s vendor managed inventory had to be depleted at the higher values during a time where the market was scrambling to get volumes at competitive prices.

• The Company’s cash balance has increased to $3,244,684 as at March 31, 2020 from $83,005 (net of bank indebtedness) as at December 31, 2019. This is due to the private placement completed in February of 2020 and has put the Company in a significantly positive cash position moving forward with targeted 2020 acquisition and product expansion activities.

2020 Integration, Optimization, and Expansion Strategy

• AEP continues to work incredibly hard to optimize workflows, productivity, and capitalize on economies of scale such as a new national engineered wood product supply arrangement. This new arrangement is expected to result in cost savings, guaranteed lead times, and improved delivery of products to our locations.

• In June 2020, the Company announced its expansion into pre-fabricated wall panels in British Columbia. This product expansion will assist the Company in its growth and product diversification.

• Significant cost saving and cash preservation strategies were implemented near the end of Quarter 1 2020. This has supported the Company’s ability to handle the impacts of the COVID-19 pandemic and move forward with 2020 activities such as product expansion, targeted acquisitions, and improved workflows and automation.

“The seasonality of the construction industry has, in the past, resulted in supply and delivery challenges for all manufacturers of roof and floor trusses, wall panels, engineered wood, windows and doors,” explained AEP Vice President of Operations, Gurmit Dhaliwal. “This comprehensive approach to engineered wood supply will ensure we maximize our opportunities to expand our current markets and penetrate new geographies. We have been really successful growing our market share with engineered wood products in Western Canada. With our advanced design capabilities and this deal, we can now do the same across Canada.”

Dirk Maritz, President and CEO of AEP stated, “Despite the challenges and effects posed by COVID-19, AEP remains in a solid financial position. AEP has strong liquidity and entered 2020 with an improved financial position over the previous year. We continue to grow our orderbook despite the unprecedented times. I am incredibly proud of my team’s ability to respond quickly, significantly reduce costs from March onwards, return AEP to positive EBITDA margins and protect our cash reserves while increasing productivity and efficiency under physical distancing mandates. The AEP team counteracted the sudden lumber price free-fall as well as the incurred costs in Q4 2019 and Q1 2020 in anticipation of our acquisition plans for 2020. We have successfully eliminated the costs and we are optimistic about our targeted acquisitions for 2020. Upwards. Onwards.”

In closing, the Company believes revenues for Quarter 2 2020 will show further improvement over Quarter 1 2020, and a return to strong, positive normalized EBITDA margins for Quarter 2 2020.

About Atlas Engineered Products Ltd.

AEP is a growth company that is acquiring and operating profitable, well-established operations in Canada’s truss and engineered products industry. We have a well-defined and disciplined acquisition and operating growth strategy enabling us to scale aggressively, giving us a unique opportunity to consolidate a fragmented industry of independent operators.

For further information please contact:
Atlas Engineered Products Ltd.
Phone: 1-250-754-1400
Email: [email protected]
Unit 102, 6551 Aulds Road
Nanaimo, BC V9S 5X9
www.atlasengineeredproducts.com

For investor relations please contact:
Brittany Ray-Wilks, Executive Vice President
Phone: 1-250-754-1400
Email: [email protected]
Atlas Engineered Products Ltd.
Unit 102, 6551 Aulds Road
Nanaimo, BC V9S 5X9
www.atlasengineeredproducts.com

Forward Looking Information

Information set forth in this news release contains forward-looking statements. These statements reflect management’s current estimates, beliefs, intentions and expectations; they are not guarantees of future performance. Although AEP believes that the expectations reflected in the forward looking statements are reasonable, there is no assurance that such expectations will prove to be correct, or that such future events will occur in the disclosed time frames or at all. AEP cautions that all forward looking statements are inherently uncertain and that actual performance may be affected by a number of material factors, many of which are beyond AEP’s control. Such factors include, among other things: Risks and uncertainties relating to AEP, including those to be described in the Management’s Discussion and Analysis (“MD&A”) for AEP’s year ended December 31, 2019. Accordingly, actual and future events, conditions and results may differ materially from the estimates, beliefs, intentions and expectations expressed or implied in the forward-looking information. Except as required under applicable securities legislation, AEP undertakes no obligation to publicly update or revise forward-looking information.

Selected Financial Information

Except as noted below, the financial information provided in this news release is derived from AEP’s unaudited financial statements for the three months ended March 31, 2020 and March 31, 2019, and the related notes thereto as prepared in accordance with International Financial Reporting Standards (“IFRS”) and related IFRS Interpretations Committee (“IFRICs”) as issued by the International Accounting Standards Board (“IASB”). A copy of AEP’s unaudited financial statements for the three months ended March 31, 2020 and the related Management’s Discussion and Analysis is available on AEP’s website at www.atlasengineeredproducts.com or on SEDAR at www.sedar.com.

Financial information for AEP’s acquisitions are included in AEP’s unaudited financial statements from the date of acquisition. Financial information for acquired businesses for periods prior to the date of acquisition were prepared by management and have not been reviewed or audited by independent auditors.

Non-GAAP / Non-IFRS Financial Measures

Certain financial measures in this news release do not have any standardized meaning under IFRS and, therefore are considered non-IFRS or non-GAAP measures. These non-IFRS measures are used by management to facilitate the analysis and comparison of period-to-period operating results for AEP and to assess whether AEP’s operations are generating sufficient operating cash flow to fund working capital needs and to fund capital expenditures. As these non-IFRS measures do not have any standardized meaning under IFRS, these measures may not be comparable to similar measures presented by other issuers. The non-IFRS measures used in this news release include “EBITDA”, “EBITDA margin”, “adjusted EBITDA”, “adjusted EBITDA margin”, “normalized EBITDA” and “normalized EBITDA margin”. “EBITDA” is calculated as revenue less operating expenses before interest expense, interest income, amortization and depletion, impairment charges, and income taxes. “EBITDA margin” is EBITDA expressed as a percentage of revenues. “Adjusted EBITDA” is EBITDA after adjusting for share-based payments, foreign exchange gains or losses and non-recurring items. “Adjusted EBITDA margin” is adjusted EBITDA expressed as a percentage of revenues. “Normalized EBITDA” is EBITDA adjusted for one-time items. “Normalized EBITDA margin” is normalized EBITDA expressed as a percentage of revenues.

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