Atlas Engineered Products Reports First Quarter 2024 Financial and Operating Results

NANAIMO, BC, May 30, 2024 /CNW/ - Atlas Engineered Products ("AEP" or the "Company") (TSXV: AEP) (OTC Markets: APEUF) is pleased to announce its financial and operating results for the three months ended March 31, 2024. All amounts are presented in Canadian dollars.

"As previously stated, 2023 was an anticipated challenging year in the construction market where new housing starts were impacted in the first part of 2024 by higher interest rates and slowing demand. However I am pleased as our results were in line with expectations," said Hadi Abassi, the Company's CEO & President. "We are excited for the rest of 2024 and beyond as we have been growing our salesforce and taking a more aggressive approach to establishing new partnerships with builders, expanding into new markets, and increasing our wall panel production to support the Company's organic growth goals and anticipated robotic automation."

Financial Highlights for First Quarter 2024:

• Revenue for the three months ended March 31, 2024 was $9,121,059 compared to revenue of $9,629,368 for the three months ended March 31, 2023. Revenue has decreased due to some material prices stabilizing at a lower level which are less than the prior few years and a more competitive construction market fueled by interest rate hikes by the Bank of Canada. The Company does not anticipate that increased interest rates will affect sales long-term as the structural housing shortage will need to be solved.  However sales may continue to be affected in the short-term as the market stabilizes and everyone waits to see if interest rates will be lowered by the Bank of Canada.
  
  
• Gross margin for the three months ended March 31, 2024 decreased to 16% compared to gross margin of 30% for the three months ended March 31, 2023. Gross margins decreased due to the more competitive market for sales but primarily due to the greater seasonality differences at Leon Chouinard & Fils Co. Ltd. ("LCF") between summer and winter, whose results are included for the period ended 2024 but not 2023 due to the timing of the acquisition. The building season in northern New Brunswick is more condensed than the building season at the Company's Ontario locations. As a result, in northern New Brunswick sales are more concentrated to the summer and fall months far more substantially than the winter and early spring months. This combined with the need to keep key labourers and designers employed due to the competitive labour market, leads to this seasonal increase in cost of sales related to revenues and in turn drives gross profit and gross margins lower during winter. This is consistent with this location's history prior to its acquisition. The impact of seasonality to margins is anticipated to average out over the course of a year back to a historical 24-30% range.
  
  
• Net loss after taxes was $993,436 for the three months ended March 31, 2024 compared to net income after taxes of $543,300 for the three months ended March 31, 2023. The Company recorded net loss after taxes mainly due to lower revenues in a market with reduced housing demand and reduced gross margins due to the increased market competition and greater seasonality variations attributable to LCF, whose results are not included for the period ended March 31, 2023.
  
  
• Non-IFRS measure adjusted EBITDA margin decreased to 3% for the three months ended March 31, 2024 from 18% for the three months ended March 31, 2023. This decrease was mainly due mainly to decreased sales, increased cost of sales, decreased gross margins, and increased operating costs. Sales decreased due to the normal seasonal slowdown through winter on top of material prices stabilizing at normal levels compared to prior periods. Additionally, the added costs of LCF increased cost of sales and operating expenses, while more extreme seasonality at LCF decreased gross margins for the winter months.

Outlook for 2024:

The Company has continued to operate in a highly competitive market for the first part of 2024 as the construction industry waits to see if interest rates will decline. Despite these challenges, the macro-backdrop of a nationwide housing shortage remains in place and the Company has seen a steady increase in quote activity and incoming orders across most operations, with some operations already at maximum capacity for the summer building season.

A key focus for AEP in 2024 is the rollout of robotic truss manufacturing automation. Robotic automation can offer improved efficiency and increased manufacturing capacity, which in addition to wall panel production, will help position the Company to support builders for the future and the housing shortage in Canada.

In late 2023, the Company ramped up its salesforce across Canada to drive sales through market expansion and new product offerings, including wall panels and floor cassettes. This strategy aims to bolster organic growth and has started to show results as noted in our recent announcement of a partnership with Westhaven Builders, which marks a significant milestone in AEP's expansion into the U.S. market.

Future strategic acquisitions remain a key part of AEP's growth plans after the successful acquisition of LCF in 2023. The Company will continue to explore M&A opportunities and integrate the latest technology to improve efficiencies and expand its product and service offerings.

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 may include "EBITDA", "EBITDA margin", "adjusted EBITDA", "adjusted EBITDA margin", "normalized EBITDA" and "normalized EBITDA margin". For a description of the composition of these measures, please refer to AEP's Management's Discussion and Analysis for the three months ended March 31, 2024 under "Non-IFRS / Non-GAAP Financial Measures", available on AEP's website at www.atlasengineeredproducts.com or on SEDAR at www.sedar.com.

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 and apply new technologies, giving us a unique opportunity to consolidate a fragmented industry of independent operators.

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 related to the housing market, changes in interest rates and other risks and uncertainties relating to AEP, including those described in the Management's Discussion and Analysis ("MD&A") for AEP's three months ended March 31, 2024.  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 the AEP's audited financial statements for the three months ended March 31, 2024 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 financial statements for the three months ended March 31, 2024 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.

NEITHER THE TSX VENTURE EXCHANGE NOR ITS REGULATION SERVICES PROVIDER (AS THAT TERM IS DEFINED IN THE POLICIES OF THE TSX VENTURE EXCHANGE) ACCEPTS RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE.

SOURCE Atlas Engineered Products Ltd.