EDMONTON, AB, Nov. 12, 2025 /CNW/ - K-Bro Linen Inc. ("K-Bro" or the "Corporation") today announces its Q3 2025 financial and operating results.
Q3 2025 Financial and Operating Highlights
Revenue
Revenue increased by 49.3% in Q3 2025 to $155.9 million compared to $104.5 million in Q3 2024.
Healthcare revenue increased to $82.4 million for Q3 2025 compared to $49.4 million in Q3 2024, or by 66.8%.
Hospitality revenue increased to $73.5 million for Q3 2025 compared to $55.1 million in 2024, or by 33.6%.
Adjusted EBITDA1, Adjusted EBITDA Margin1 & Adjusted Net Earnings1
Adjusted EBITDA increased by 45.9% to $33.5 million in Q3 2025 compared to $23.0 million in Q3 2024.
Adjusted EBITDA margin decreased by 0.5% to 21.5% in Q3 2025 compared to 22.0% in Q3 2024 as a result of the combination of the Stellar Mayan cost profile.
Adjusted net earnings increased by 45.8% to $12.0 million in Q3 2025 from $8.3 million in Q3 2024.
EBITDA, EBITDA Margin & Net Earnings
EBITDA increased by $9.2 million to $32.0 million for Q3 2025 compared to $22.8 million in Q3 2024.
EBITDA margin for the quarter decreased to 20.5% in 2025 compared to 21.9% in 2024 as a result of the combination of the Stellar Mayan cost profile and one-time costs.
Net earnings for the quarter increased by $0.8 million to $8.9 million in 2025 from $8.1 million in 2024.
For the third quarter of 2025, K-Bro declared dividends of $0.300 per common share.
Debt net of cash at the end of Q3 2025 was $220.3 million compared to $114.4 million at the end of fiscal 2024 due to the amortizing term loan to finance the Stellar Mayan acquisition.
Linda McCurdy, President & CEO of K-Bro, commented that "On June 11, 2025, we completed the acquisition of Stellar Mayan establishing a national footprint in the UK commercial laundry and textile rental sector and enhancing K-Bro's revenue diversification by geographic and business mix. We are excited to become a strategic supplier to the healthcare sector in the UK like we are in Canada. We're proud of our talented combined team that focuses tirelessly on being dependable partners to our existing and new healthcare and hospitality customers."
"Q3 marks our sixth consecutive quarter of record results and includes early contributions from Stellar Mayan. While still early, we're pleased with the progress of our ongoing integration efforts as we work towards optimizing our local and national footprints, and positioning K-Bro for long-term growth. Concurrently, our transition team is reviewing cost synergies, operational efficiencies and platform optimizations and we anticipate run-rate cost synergies will be realized over the contemplated twenty four month time horizon. Both of K-Bro's healthcare and hospitality segments continue to experience steady volume trends. We continue to monitor the evolving state of tariffs and other trade policies. We are not currently anticipating meaningful impacts on our business, as key customers and suppliers are not US-based."
(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 Q3 2025
Business Acquisition - Stellar Mayan
On May 13, 2025, the Corporation announced the signing of a share purchase agreement to acquire 100% of UK based Stellar Mayan. Stellar Mayan includes three operating businesses: (i) Synergy Health Managed Services Limited ("Synergy"); (ii) Grosvenor Contracts (London) Limited ("Grosvenor Contracts", "GC"); and (iii) Aeroserve (MSP) Limited and Aeroserve Euro Limited, jointly referred to as Aeroserve Linen Services ("AeroServe").
On June 11, 2025, the Corporation announced that it completed the previously announced acquisition of Stellar Mayan, a leading commercial laundry business in England serving the healthcare and hospitality markets. The Acquisition is highly complementary to K-Bro's existing UK businesses, Fishers and Shortridge, and creates a national footprint in the UK's commercial laundry and textile rental sector.
The Corporation partially financed the Stellar Mayan Acquisition through the issuance of 2,334,500 common shares (initially issued as subscription receipts) at a price of $34.55 per common share (initially issued as subscription receipts). The remainder of the Acquisition was funded by the Corporation's new $134.3 million four-year amortizing term loan. Based on the Corporation's evaluation of the Stellar Mayan Acquisition and the criteria in the identification of a business combination established in IFRS 3, the Stellar Mayan 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 Stellar Mayan Acquisition. This includes the accounting for the amounts attributable to property, plant and equipment, intangible assets and the associated goodwill.
The preliminary purchase price allocated to the net assets acquired, based on their estimated fair values, is as follows:
(in thousands)
Cash consideration
$ 194,695
Total purchase price (1)
$ 194,695
1)
This is presented net of cash acquired. Cash acquired was $5,156.
The assets and liabilities recognized as a result of the Stellar Mayan Acquisition are as follows:
(in thousands)
Net Assets Acquired:
Accounts receivable
25,017
Prepaid expenses and deposits
3,867
Linen in service
28,553
Accounts payable and accrued liabilities
(27,911)
Lease liabilities
(27,892)
Provisions
(220)
Deferred income taxes
(8,938)
Property, plant and equipment (1)
90,863
Intangible assets
44,542
Net identifiable assets acquired
127,881
Goodwill
66,814
Net assets acquired
$ 194,695
1)
Includes ROUA from the UK Division of $32,556.
The provisional intangible assets acquired are made up of $33.2 million related to customer contracts and $11.3 million related to the brands. 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 nine months ended September 30, 2025, $7,334 in professional fees associated with the Stellar Mayan Acquisition has been included in Corporate expenses.
Revenue and profit information
The acquired business contributed revenues of $53,867 to the Corporation for the period from June 12, 2025 to September 30, 2025. If the Acquisition had occurred on January 1, 2025, consolidated pro-forma revenue for the period ended September 30, 2025 would have been $436,171.
The acquired business contributed a net deficit of ($605) to the Corporation for the period from June 12, 2025 to September 30, 2025. If the Acquisition had occurred on January 1, 2025, consolidated pro-forma net earnings for the period ended September 30, 2025 would have been $23,677, including the recognition of a non-recurring tax loss carryforward of $8,133.
Common Share Offering
On June 11, 2025, the Corporation closed the Stellar Mayan Acquisition. Through a bought deal, the Corporation issued 2,334,500 common shares at $34.55 per share, which included full exercise of the over-allotment option. The proceeds of the common share offering were used to finance a portion of the Stellar Mayan Acquisition and pay certain fees and expenses related to acquisition and offering. The net proceeds of the offering after deducting expenses of the offering and the underwriter's fee were $75.6 million.
Revolving Credit Facility
On June 11, 2025, the Corporation amended its existing three-year committed Syndicated Credit Facility Agreement to include a $134.3 million four-year amortizing term loan and to extend the term of the facility from March 25, 2027 to June 10, 2029. The amendment included a reduction in the accordion to $50 million from $75 million.
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 million revolving credit facility plus a $75 million accordion.
The term loan and revolving credit facility are collateralized by a general security agreement, bear interest at prime or the applicable banker's acceptance rate, plus an interest margin dependent on certain financial ratios. Interest payments only are due during the term for the revolving portion of the syndicated credit facility. For the term loan portion of the syndicated credit facility, repayments of the principal amount shall be repaid in quarterly installments commencing September 30, 2025, in addition to required interest payments. The additional interest margin can range between 0.00% to 2.00% dependent upon the calculated Total Funded Debt / Credit Facility EBITDA financial ratio, with a range between 0 to 3.50x. The Funded Debt to EBITDA Ratio requirement has an increase to 4.00x for the first four quarters following any material acquisition. The required calculated Funded Debt / Credit Facility EBITDA financial ratio is subject to change based off certain terms and conditions. As at September 30, 2025 the combined interest rate was 5.70%.
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.
Business Acquisition - Shortridge
In the nine months ended September 30, 2025, the provisional amounts that were previously disclosed in the December 31, 2024 Annual Financial Statements, associated with the 100% share capital acquisition of Shortridge Ltd, a private hospitality laundry provider based in the North West of England were finalized. No new information which resulted in adjustments to the fair value of net identifiable assets acquired was obtained during the quarter ended September 30, 2025.
Business Acquisition - Buanderie C.M.
In the nine months ended September 30, 2025, the provisional amounts that were previously disclosed in the December 31, 2024 Annual Financial Statements, associated with the 100% share capital acquisition of Buanderie C.M., a private laundry and linen operator located in Montreal serving the healthcare market were finalized. No new information which resulted in adjustments to the fair value of net identifiable assets acquired was obtained during the quarter ended September 30, 2025.
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. These amounts are not reflective of incremental capital required for Stellar Mayan, for which the capital investment is anticipated to be $9.3 million ($5.0 million GBP). 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
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.
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. Changes in interest rates, both domestically and internationally, could negatively affect the Corporation's cost of financing its operations and investments.
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 changing 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.
Financial Results
For The Three Months Ended September 30,
(thousands, except per share amountsand percentages)
CanadianDivision2025
UKDivision2025
2025
CanadianDivision2024
UKDivision2024
2024
$ Change
% Change
Revenue
$ 72,727
$ 83,221
$ 155,948
$ 69,610
$ 34,859
$ 104,469
51,479
49.3 %
Expenses included in EBITDA
56,323
67,591
123,914
55,229
26,397
81,626
42,288
51.8 %
EBITDA(1)
16,404
15,630
32,034
14,381
8,462
22,843
9,191
40.2 %
EBITDA as a % of revenue
22.6 %
18.8 %
20.5 %
20.7 %
24.3 %
21.9 %
-1.4 %
-6.4 %
Adjusted EBITDA(1)
16,599
16,924
33,523
14,510
8,462
22,972
10,551
45.9 %
Adjusted EBITDA as a % of revenue
22.8 %
20.3 %
21.5 %
20.8 %
24.3 %
22.0 %
-0.5 %
-2.3 %
Net earnings
3,870
4,985
8,855
3,659
4,470
8,129
726
8.9 %
Basic earnings per share
$ 0.301
$ 0.388
$ 0.689
$ 0.350
$ 0.428
$ 0.778
$ (0.089)
-11.4 %
Diluted earnings per share
$ 0.299
$ 0.385
$ 0.684
$ 0.347
$ 0.424
$ 0.771
$ (0.087)
-11.3 %
Dividends declared per diluted share
$ 0.300
$ 0.300
$ -
0.0 %
Adjusted net earnings (1)
4,065
7,975
12,040
3,788
4,470
8,258
3,782
45.8 %
Adjusted basic earnings per share (1)
$ 0.316
$ 0.620
$ 0.936
$ 0.363
$ 0.428
$ 0.791
$ 0.145
18.3 %
Adjusted diluted earnings per share (1)
$ 0.314
$ 0.615
$ 0.929
$ 0.359
$ 0.424
$ 0.783
$ 0.146
18.6 %
Total assets
718,556
452,077
266,479
58.9 %
Debt (excludes lease liabilities) (2)
246,318
135,875
110,443
81.3 %
Cash provided by operating activities
20,609
18,384
2,225
12.1 %
Net change in non-cash working capital items
(4,100)
603
(4,703)
-779.9 %
Share-based compensation expense
564
443
121
27.3 %
Maintenance capital expenditures
99
464
(365)
-78.7 %
Principal elements of lease payments
4,452
2,670
1,782
66.7 %
Distributable cash flow (1)
19,594
14,204
5,390
37.9 %
Dividends declared
3,897
3,174
723
22.8 %
Payout ratio (1)
19.9 %
22.3 %
-2.4 %
-10.8 %
For The Nine Months Ended September 30,
(thousands, except per share amountsand percentages)
CanadianDivision2025
UKDivision2025
2025
CanadianDivision2024
UKDivision2024
2024
$ Change
% Change
Revenue
$ 208,686
$ 151,305
$ 359,991
$ 196,979
$ 81,184
$ 278,163
81,828
29.4 %
Expenses included in EBITDA
167,979
126,192
294,171
161,732
65,410
227,142
67,029
29.5 %
EBITDA(1)
40,707
25,113
65,820
35,247
15,774
51,021
14,799
29.0 %
EBITDA as a % of revenue
19.5 %
16.6 %
18.3 %
17.9 %
19.4 %
18.3 %
0.0 %
0.0 %
Adjusted EBITDA(1)
43,196
29,047
72,243
38,372
16,282
54,654
17,589
32.2 %
Adjusted EBITDA as a % of revenue
20.7 %
19.2 %
20.1 %
19.5 %
20.1 %
19.6 %
0.5 %
2.6 %
Net earnings
7,568
7,532
15,100
7,113
7,357
14,470
