SECURE announces 2024 Third Quarter Results

Press Release

• Adjusted EBITDA¹ of $127 million ($0.53 per basic share¹)
• Reaffirming 2024 full year Adjusted EBITDA guidance at top end of previous range provided of $470 – $490 million
• Discretionary Free Cash Flow¹ of $90 million used to self-fund growth, share buybacks and dividends in the quarter
• September 30, 2024 Total Debt to EBITDA ratio² of 1.1x (0.9x excluding leases) providing significant flexibility to execute strategic priorities
• Shareholder approval received for the corporate name change to SECURE Waste Infrastructure Corp., expected to take effect January 1, 2025

CALGARY, AB, Oct. 30, 2024  – SECURE Energy Services Inc. (“SECURE” or the “Corporation”) (TSX: SES), a leading waste management and energy infrastructure company, reported today its operational and financial results for the three and nine months ended September 30, 2024.

“Positive industry trends and strong operational execution drove financial results on the high end of our expected range in the third quarter,” said Allen Gransch, President & CEO. “We delivered 11% sequential growth in Adjusted EBITDA, resulting in $0.53 per basic share for the quarter. We continued to see improved same store sales across our infrastructure network, driven by higher pricing and strong volumes, particularly within our landfill business which disposed a record 1.2 million tonnes of contaminated solids in the quarter. We are also pleased with the performance of our growth projects in the year. Throughput at the Clearwater heavy oil terminal increased to 55 thousand barrels per day in the third quarter, with further expansion plans underway to handle the production growth in the region.”

“We are reaffirming our 2024 Adjusted EBITDA guidance at the top end of the $470 to $490 million range. We maintain a favourable outlook for the business as increased industrial and production activity is leading to incremental volumes requiring processing, recycling and disposal across SECURE’s facility network,” added Gransch. “In addition to the $75 million organic growth capital planned for this year, we continue to have a robust pipeline of growth opportunities to add recurring volumes and stable cash flows aligned with our core waste management and infrastructure competencies. We expect to provide an update on growth capital anticipated for next year and 2025 Adjusted EBITDA guidance in December of this year.”

SECURE continues to deliver on its capital allocation priorities. In the year to date, the Corporation has repurchased $612 million, or 19%, of outstanding shares at a weighted average price of $11.23, a price management and the Board continue to view as substantially discounted to the intrinsic value of the Corporation. The Corporation has also invested $79 million into strategic organic and acquisition growth initiatives, including the expansion of the Clearwater heavy oil terminal and the construction of a produced water pipeline to an existing disposal facility in the Montney region, both supported by long-term customer contracts. Additionally, in the second quarter, the Corporation completed a tuck-in acquisition to expand our geographic presence in metals recycling and purchased additional rail cars to enhance logistics and drive operational efficiencies.

At September 30, 2024, SECURE’s leverage remains one full turn below its target of 2.0 to 2.5x Total Debt to EBITDA, providing significant financial flexibility. Along with strong discretionary free cash flow, SECURE can continue to grow the business and deliver enhanced returns to shareholders.

THIRD QUARTER HIGHLIGHTS

• Generated revenue (excluding oil purchase and resale) of $374 million, a decrease of 12% from the third quarter of 2023, primarily due to the impact of 29 facilities divested on February 1, 2024 (the “Sale Transaction”), and the divestiture of a non-core oilfield service business unit in December 2023. On a pro forma basis, revenue increased over the third quarter of 2023, driven by strong customer demand, higher pricing, and contributions from capital investments made since the third quarter of 2023, including the Clearwater heavy oil terminal, which began operations in Q4 2023.
• Recorded net income of $94 million or $0.39 per basic share, an increase of $47 million in net income (100% increase) compared to the third quarter of 2023, as lower interest expense following the repayment of debt with proceeds from the Sale Transaction, and a one-time tax recovery in the quarter more than offset the impact of lower Adjusted EBITDA. Net income per share increased by $0.23 per basic share (144% increase) over the same period due to the share buybacks over the past year reducing the weighted average shares outstanding in the quarter by 18%.
• Achieved Adjusted EBITDA¹ of $127 million ($0.53 per basic share¹), a decrease of 20% compared to the third quarter of 2023 (2% decrease on a per share basis) as a result of the same factors described above.
• Recorded an Adjusted EBITDA margin¹ of 34%, down from 37% in the third quarter of 2023, primarily due to the Sale Transaction.
• Generated funds flow from operations of $106 million ($0.44 per basic share¹), a decrease of 18% compared to the third quarter of 2023 (2% decrease on a per share basis). The decrease resulted from lower Adjusted EBITDA and the timing of fixed debt payments, partially offset by lower interest payments due to reduced debt.
• Generated discretionary free cash flow¹ of $90 million ($0.38 per basic share¹), a decrease of 13% compared to the third quarter of 2023 (6% increase on a per share basis) as a result of the factors above, along with reduced spending on sustaining capital due to reduced facility count following the Sale Transaction.
• Incurred growth capital expenditures of $19 million, primarily directed towards ongoing investments in the Clearwater heavy oil terminalling and gathering infrastructure to enhance capacity, as well as a two water pipeline projects to integrate incremental volumes from existing customers.
• Repurchased and cancelled 4,480,700 shares, reducing our shares outstanding by 2% in the quarter. The Corporation incurred a total cost of $53 million to complete the repurchases, representing a weighted average price per share of $11.83.
• Paid a quarterly dividend of $0.10 per common share, which currently represents a yield of 2.9% on our common shares.
• Ended the quarter with a Total Debt¹ to Adjusted EBITDA ratio of 1.1x² (0.9x excluding leases).
• On October 29, 2024, shareholders approved the corporate name change to SECURE Waste Infrastructure Corp., better reflecting SECURE’s core business in waste processing, recovery, recycling, and disposal, as well as the efficient operation of our critical infrastructure network. SECURE expects to formally adopt the new name on or about January 1, 2025, following the receipt of all regulatory approvals.

The Corporation’s operating and financial highlights for the three and nine months ended September 30, 2024 and 2023 can be summarized as follows:

	Three months ended September 30,			Nine months ended September 30,
($ millions except share and per share data)	2024	2023	% change	2024	2023	% change
Revenue (excludes oil purchase and resale)	374	427	(12)	1,071	1,196	(10)
Oil purchase and resale	2,240	1,788	25	7,039	4,708	50
Total revenue	2,614	2,215	18	8,110	5,904	37
Adjusted EBITDA (1)	127	158	(20)	373	428	(13)
Per share ($), basic (1)	0.53	0.54	(2)	1.43	1.44	(1)
Per share ($), diluted (1)	0.52	0.54	(4)	1.41	1.42	(1)
Net income	94	47	100	548	136	303
Per share ($), basic	0.39	0.16	144	2.10	0.46	357
Per share ($), diluted	0.39	0.16	144	2.07	0.45	360
Funds flow from operations	106	130	(18)	305	346	(12)
Per share ($), basic (1)	0.44	0.45	(2)	1.17	1.16	1
Per share ($), diluted (1)	0.44	0.44	—	1.15	1.15	—
Discretionary free cash flow (1)	90	104	(13)	236	267	(12)
Per share ($), basic (1)	0.38	0.36	6	0.90	0.90	—
Per share ($), diluted (1)	0.37	0.35	6	0.89	0.89	—
Capital expenditures (3)	29	56	(48)	91	170	(46)
Dividends declared per common share	0.10	0.10	—	0.30	0.30	—
Total assets	2,186	2,870	(24)	2,186	2,870	(24)
Long-term liabilities	616	1,156	(47)	616	1,156	(47)
Common shares – end of period	236,850,412	289,073,492	(18)	236,850,412	289,073,492	(18)
Weighted average common shares:
Basic	239,290,458	292,043,344	(18)	261,026,100	298,248,498	(12)
Diluted	243,055,638	294,929,189	(18)	265,068,915	301,065,871	(12)

1 Non-GAAP financial measure, non-GAAP ratio, capital management measure or supplementary financial measure (as applicable). Refer to the “Non-GAAP and other specified financial measures” section in this press release for further information.

2 Calculated in accordance with the Corporation’s credit facility agreements. Refer to the “Liquidity and Capital Resources” section in the MD&A for additional information.

3 The Corporation classifies capital expenditures as either growth, acquisition or sustaining capital. Refer to “Operational Definitions” in the MD&A for further information.

Following the receipt of proceeds from asset divestitures earlier this year and continued strong free cash flow generation, SECURE maintains low leverage, providing significant financial capacity to execute on its strategic priorities. With a constructive industry backdrop from new developments in Western Canada enhancing takeaway capacity and providing improved access to global markets, sustained and expanded activity levels are expected to drive higher volumes and demand for SECURE’s infrastructure. Leveraging this solid foundation, SECURE is well-positioned to protect its base business, advance its strategy as a leader in waste management and energy infrastructure, and seize new opportunities to create enhanced value for shareholders.

SECURE expects to disclose guidance for 2025 in December of this year.

NON-GAAP AND OTHER SPECIFIED FINANCIAL MEASURES

The Corporation uses accounting principles that are generally accepted in Canada (the issuer’s “GAAP”), which includes International Financial Reporting Standards (“IFRS”). This news release contains certain measures that are considered “specified financial measures” (being either “non-GAAP financial measures”, “non-GAAP ratios”, “capital management measures” or “supplementary financial measures”, as applicable) as defined in National Instrument 52-112 – Non-GAAP and Other Financial Measures Disclosures, including: Adjusted EBITDA and discretionary free cash flow (non-GAAP financial measures); Adjusted EBITDA margin, Adjusted EBITDA per basic and diluted share, and discretionary free cash flow per basic and diluted share (non-GAAP ratios); Total Debt (capital management measure); and funds flow from operations per basic and diluted share (supplementary financial measures), which do not have any standardized meaning as prescribed by IFRS. These measures are intended as a complement to results provided in accordance with IFRS. The Corporation believes these measures provide additional useful information to analysts, shareholders and other users to understand the Corporation’s financial results, profitability, cost management, liquidity and ability to generate funds to finance its operations.

However, these measures should not be used as an alternative to IFRS measures because they are not standardized financial measures under IFRS and therefore might not be comparable to similar financial measures disclosed by other companies. See the “Non-GAAP and other specified financial measures” section of the Corporation’s MD&A for the three and nine months ended September 30, 2024 and 2023 for further details, which is incorporated by reference herein and available on SECURE’s profile at www.sedarplus.ca and on our website at www.SECURE-energy.com.

Adjusted EBITDA, Adjusted EBITDA margin and Adjusted EBITDA per basic and diluted share

Adjusted EBITDA is calculated as noted in the table below and reflects items that the Corporation considers appropriate to adjust given the irregular nature and relevance to comparable operations. Adjusted EBITDA margin is defined as Adjusted EBITDA divided by revenue (excluding oil purchase and resale). Adjusted EBITDA per basic and diluted share is defined as Adjusted EBITDA divided by basic and diluted weighted average common shares. For the three and nine months ended September 30, 2024 and 2023, transaction and related costs have been adjusted as they are costs outside the normal course of business.

The following table reconciles the Corporation’s net income, being the most directly comparable financial measure disclosed in the Corporation’s financial statements, to Adjusted EBITDA for the three and nine months ended September 30, 2024 and 2023.

	Three months ended September 30,			Nine months ended September 30,
	2024	2023	% Change	2024	2023	% Change
Net income	94	47	100	548	136	303
Adjustments:
Depreciation, depletion and amortization (1)	45	50	(10)	131	151	(13)
Interest, accretion and finance costs	12	25	(52)	43	72	(40)
Current tax (recovery) expense	(15)	2	(850)	27	6	350
Deferred tax (recovery) expense	(15)	13	(215)	92	37	149
Share-based compensation (2)	5	5	—	25	19	32
Gain on asset divestitures	—	—	—	(520)	—	100
Other expense (income)	—	6	(100)	15	(10)	(250)
Unrealized loss on mark to market transactions (3)	1	6	(83)	10	6	67
Transaction and related costs	—	4	(100)	2	11	(82)
Adjusted EBITDA	127	158	(20)	373	428	(13)

1 Included in cost of sales and/or G&A expenses on the Consolidated Statements of Comprehensive Income.

2 Included in G&A expenses on the Consolidated Statements of Comprehensive Income.

3 Includes amounts reported in revenue on the Consolidated Statements of Comprehensive Income.

Discretionary Free Cash Flow and Discretionary Free Cash Flow per basic and diluted share

Discretionary free cash flow is defined as funds flow from operations adjusted for sustaining capital expenditures, and lease payments. The Corporation may deduct or include additional items in its calculation of discretionary free cash flow that are unusual, non-recurring, or non-operating in nature. Discretionary free cash flow per basic and diluted share is defined as Discretionary Free Cash Flow divided by basic and diluted weighted average common shares. For the three and nine months ended September 30, 2024 and 2023, transaction and related costs have been adjusted as they are costs outside the normal course of business.

The following table reconciles the Corporation’s funds flow from operations, being the most directly comparable financial measure disclosed in the Corporation’s financial statements, to discretionary free cash flow.

	Three months ended September 30,				Nine months ended  September 30,
	2024	2023		% Change	2024		2023		% Change
Funds flow from operations	106	130		(18)	305		346		(12)
Adjustments:
Sustaining capital (1)	(10)	(23)		(57)	(50)		(70)		(29)
Lease liability principal payments and other	(6)	(7)		(14)	(21)		(20)		5
Transaction and related costs	—	4		(100)	2		11		(82)
Discretionary free cash flow	90	104		(13)	236		267		(12)

1 The Corporation classifies capital expenditures as either growth, acquisition or sustaining capital. Refer to “Operational Definitions” in the MD&A for further information.

FINANCIAL STATEMENTS AND MD&A

The Corporation’s consolidated financial statements and notes thereto and Management’s Discussion and Analysis for the three and nine months ended September 30, 2024 and 2023 are available on SECURE’s website at www.secure-energy.com and on SEDAR+ at www.sedarplus.ca.

THIRD QUARTER 2024 CONFERENCE CALL

SECURE will host a conference call Wednesday, October 30, 2024, at 9:00 a.m. MST to discuss the third quarter results. To participate in the conference call, dial 437-900-0527 or toll free 1-888-510-2154. To access the simultaneous webcast, please visit www.SECURE-energy.com. For those unable to listen to the live call, a taped broadcast will be available at www.SECURE-energy.com and, until midnight MST on Wednesday, October 6, 2024, by dialing 1-888-660-6345 and using the pass code 64603#.

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