K-Bro Linen Inc. (KBL) Earnings Call Transcript & Summary

Ladies and gentlemen, my name is Mike Percy, and I'm a Director of K-Bro Linen inc. It gives me great pleasure to welcome you today to our 2022 Annual Meeting of Shareholders. Joining me and presenting today are Linda McCurdy, President and CEO; and Kristie Plaquin, CFO. As you can see, we are holding today's meeting fully virtually to mitigate cost as well as for the convenience of our shareholders who are now able to log virtually from any location. On behalf of the Board, I wish to express thanks to those shareholders who have submitted their proxies in advance of today's meeting. If you have logged into this meeting with a control number or username provided to you by TSX Trust Company, please be sure to vote on the resolutions put forth before the meeting today. As this meeting is being held virtually via live audio webcast, we think it is necessary to set out a few rules for the orderly conduct of the meeting. First, questions in respect of a motion can be submitted by a registered shareholder or duly appointed proxyholder using the questions module of the virtual platform. Second, when asking a question, please indicate your name and which entity you represent, if any. Third, questions will be read aloud by the Secretary and addressed during the question period at the end of the meeting, provided the questions regarding procedural matters or directly related to the motions before the meeting may be addressed during the meeting. Fourth, for the purposes of the meeting today, voting on all matters will be conducted by a single electronic ballot. Registered shareholders and duly appointed proxy holders will be asked to vote on each business item after the presentation of all such business items. Only registered shareholders and duly appointed proxyholders of the corporation are permitted to participate in the voting. Fifth, when you are asked to vote, you will receive a message on the virtual interface requesting you to register your votes. You will have only a certain amount of time to do so when the polls open. We will now proceed with the formal portion of today's meeting. To expedite the formal part of the meeting, I will move and second all motions following the motions, following the 4 motions. Formal the formal meeting, Linda McCurdy, President and CEO of the corporation; and Kristie Plaquin, CFO of the corporation, will give a short presentation. I will now call to order the Annual General Meeting of the corporation shareholders. With the consent of the meeting, I appoint Kristie Plaquin, the corporation's CFO, as Secretary of the meeting. With the consent of the meeting, Kristine Calesso and Odette Ries Bustin from TSX Trust Company, will act as scrutineers to report on the numbers of common shares at this meeting and to tabulate the votes on any ballot taken at this meeting and to report thereon to the chairperson of the meeting. Ms. Plaquin, can you please confirm the presence of a quorum?

Mr. Chair, I've been advised by the scrutineers that there are present, by proxy, a sufficient number of persons holding a sufficient number of shares entitled to vote at the meeting to constitute a quorum. As there is a quorum present, the meeting is regularly called and properly constituted for the transaction of business.

Thank you, Ms. Plaquin. I hereby declare that this meeting has been duly convened and properly constituted to transact the business for which it has been called. Accordingly, unless there is an objection, I will dispense with the reading of the Notice of Meeting. I direct that a copy of the notice with proof of mailing be kept by the Secretary with the minutes of the meeting. The purposes of today's meeting are set out in the Management Information Circular dated April 14, 2022, copies of which were mailed to shareholders together with the Notice of the Meeting, and the form of proxy. Copies of the Management Information Circular and other meeting materials are available on the corporation's website and under the corporation's profile on the SEDAR website. Voting on the items of business today to come before today's meeting is being conducted by poll via a single electronic ballot that is now available on the web portal. Only registered shareholders and duly appointed proxyholders are able to vote or ask questions. Voting can only be done through the virtual voting platform on the webcast. If you are a registered shareholder or proxyholder and wish to vote, click the voting icon at the top of the webcast page. Voting can be completed at any time from now until the polls are closed at the end of the formal business of the meeting. If you have already voted in advance of the meeting and do not wish to change your vote, you do not need to vote again during the meeting. The polls are now open to those who have not yet voted, and we encourage you to vote now. Questions can also be submitted through the webcast platform. Click the question icon at the top of the webcast page, type in your question in the text box at the bottom of the messaging screen and then click the send button. If your question relates to a specific motion, please start your question by identifying the motion. We will respond to questions related to the specific motions before the closing of the polls and we'll save all other questions for the general question-and-answer session at the end of the presentation on the corporation following the formal portion of the meeting. We will receive the questions and read them out in order for everyone to be aware of the question being addressed. If we have a number of questions that are the same or very similar, we will consolidate the questions. We will endeavor to address all questions. However, and please note that, due to the constraints we may not be able to do so at this point. If you have questions, we encourage you to submit them now. Questions can be submitted throughout the meeting. Finally, we would like to remind you that our answers to your questions and our presentation may contain forward-looking information. By its nature, this information contains forecasts, assumptions and expectations about future outcomes, which are subject to the risks and uncertainties discussed more fully in our public disclosure filings. We will now go through each of the items on the agenda in turn. As noted earlier, to further expedite the formal part of the meeting, I will move all motions and no such motion will need to be seconded. I now declare that this meeting is regularly called and properly constituted for the transaction of business. We now move to the formal part of today's agenda. As I mentioned earlier, the polls are now open for voting on all matters of business. The first item of business is the tabling of the annual consolidated financial statements of K-Bro Linen Inc. as of December 31, 2021, and for the year then ended, together with the reports therein of management and the auditor of the corporation. A copy of these documents was made available to all shareholders of the corporation, along with the corporation's Notice of Meeting and information circular dated April 14, 2022. Additional copies are available for anyone wishing. Unless there is an objection, I will dispense with the reading of the auditor's report. The annual report will be tabled at this time, but I would ask that any questions you may have arising from the annual report or financial statements be raised later when shareholder questions are entertained. We now move to the next point on today's agenda. The next matter to be acted upon is the election of 5 individuals to the Board of Directors. As per the management information circular, Mr. Matthew Hills, Mr. Steven Matyas, Mr. Michael Percy, Ms. Linda McCurdy and Ms. Elise Rees have been nominated as directors for the ensuing year or until the successors are elected or appointed. Each of the persons nominated has confirmed that he or she is prepared to serve as a director. Each of them qualifies as a director under the provisions of the Business Corporations Act of Alberta. The motion to elect the 5 nominees is now on the floor. The act requires that the Board of Directors be elected. Proxies have been solicited for each of the 5 proposed qualified persons listed in the Management Information Circular. The form of proxy for voting on the election of directors sets out each proposed nominee separately and allows shareholders to vote for each director accordingly. Is there any discussion on the motion or additional nominations? Thank you. As mentioned at the beginning of this meeting, voting today will be conducted by a single electronic ballot. We will therefore continue with the next item of business, which is the appointment of the corporation's auditors. And you will be prompted to vote on the election of each proposed director after the presentation of all business items for the meeting. Unless there are any questions or discussions, I will move to the next item of business. Thank you. The next item of business is the reappointment of PricewaterhouseCoopers LLP chartered accountants as the auditors of the corporation for the ensuing year and to authorize the directors of the corporation to fix the remuneration of the auditors. I move and second that PricewaterhouseCoopers LLP be appointed auditors of the corporation until the next Annual Meeting of Shareholders and that the Board of Directors be authorized to fix their remuneration. The motion is now on the floor. You will be prompted to vote on the reappointment of the auditors after the presentation of all business items for this meeting. Unless there are any questions or discussions, I will now move to the next item of business. As previously mentioned, voting today will be conducted by a single electronic ballot. You will now be prompted to register your vote in respect of each of today's business items for this meeting. Please register your votes by accessing the voting page when prompted and pressing on the For or Withhold buttons next to the name of each proposed director and next to the resolution with respect to the appointment of PricewaterhouseCoopers LLP as the corporation's auditors. Once the electronic balloting closes, the voting page will disappear and your votes will automatically be submitted. We will now take a short pause to answer any questions that have been submitted and to permit any registered shareholder or proxyholder who has not already done so to record their votes on the motions before the meeting.

Mr. Chair, I confirm there are no questions.

Thank you. Having received no questions. I will close the polls in 30 seconds. [Voting]

The polls are now closed. I have received the preliminary scrutineer's report. With respect to the election of directors, I am advised by the scrutineers that each of the proposed nominees has been duly elected. With respect to the resolutions to appoint the auditors, I am advised by the scrutineers this -- that this resolution has been duly carried. The scrutineer wili prepare the scrutineer's report following the completion of the meeting, and we will announce the results of the meeting in a press release in accordance with the policies of the TSX and file the press release on SEDAR. Is there any other formal business to be properly brought before the meeting? If there is no further business to be brought before this meeting, I move and second that the formal portion of today's meeting be concluded. I will now call upon Linda McCurdy, President and CEO of the corporation; and Kristie Plaquin, CFO of the corporation, to lead a discussion on the corporation and a review of our 2021 annual and first quarter 2022 results.

Thank you, Mr. Chairman. Good morning, everyone, and welcome. Before we begin the formal presentation, I'd like to remind everyone that statements made during our prepared remarks or in the Q&A portion of today's meeting with reference to management's expectations or our predictions of the future are forward-looking statements. All statements made today which are not statements of historical fact are considered to be forward-looking statements. Certain material factors or assumptions were applied in drawing a conclusion or making a forecast or projection is reflected in the forward-looking information. Investors are also cautioned not to place undue reliance on these statements. Actual results could differ materially from those anticipated. Risk factors that could affect the results are detailed in the corporation's public filings. So with that said, let's move to Slide 3, if we could, please. So for a quick overview of the company. K-Bro is the largest health care and hospitality laundry and linen processor in Canada. And with the acquisition of Fishers in the U.K., we are now one of the largest in the U.K. We started over 65 years ago in Edmonton as a family business and was subsequently sold to 2 different PE firms in the '80s and the '90s and owned by them until the company was taken public in 2005. As you can see on Slide 5, we operate 15 facilities and 2 distribution centers, 9 facilities and 2 distribution centers in Canada. And with the acquisition of Fishers at the end of 2017, we operate 6 facilities in the U.K., in Scotland and the Northeast of England. And really, it is this network of strategically positioned modern facilities that enables us to provide the critical services required by our health care and hospitality customers. Our ongoing reinvestment in the latest equipment and technologies enables us to provide the highest levels of service and quality to our health care and hospitality customers. This slide presents our continued -- the continued strength of our business model. We've continued to grow our market share in the laundry and linen processing sector year-over-year. When we went public in 2005, we had 4 plants in 3 provinces in Canada. Today, we have 15 plants in Canada and the U.K.; revenue has more than doubled since 2009, growing from $87 million to $252 million in 2019. And really, this growth has come from all areas: Organic growth from existing customers, greenfield, newbuilds and acquisitions. Our vertically integrated business model provides complete supply chain solutions to our customers at reduced operating and capital cost versus providing the service internally. We're able to take advantage of scale by purchasing large quantities of linen at highly competitive prices, given the quantities, and can spread fixed operating costs over substantially larger volumes of processed laundry. We have deep industry experience and a reputation that spans over 65 years and create value through our operating expertise. We have conservatively managed our balance sheet with significant credit availability for initiatives, including capital expansions and acquisitions, and to weather unusual circumstances such as those that we have faced over the last several years. We have proven strategies for growth and have successfully integrated 7 acquisitions, built 5 new state of the art plants and executed on many plant expansions in the last decade. Slide 6 represents a consolidated financial overview of K-Bro. In terms of our top line, our revenue comes from 2 key areas, that's health care and hospitality. Our revenue for 2019 was $252 million, with approximately 45% of our revenues coming from hospitality and 55% from health care. In both 2020 and 2021, as a result of the impact of COVID, revenue decreased from historical levels, with 2021 coming in at $224 million as a result of the significant impact of COVID to the hospitality industry. Our mix of revenue between health care and hospitality also shifted to 72% health care and 28% hospitality. Compared to 2020 and 2021, revenues increased -- compared to 2020, 2021 revenues increased by close to 14%. Previous to COVID, we've seen nice annual revenue growth year-over-year. EBITDA for 2019 was $47.6 million, with net earnings of $10.9 million and earnings per share of $1.03. Again, due to COVID, we saw a decrease in EBITDA from historical levels to $42.8 million, but an increase of 11.9% over 2020 levels, which were also impacted negatively by COVID. So one of the strengths of our business model is our long-term contracts, which are secured by -- our revenue is secured by long-term contracts. Our health care business is noncyclical and an essential service, backed by 5- to 10-year contracts, and our hospitality contracts are generally 2 to 5 years in length. As you can see on the chart, roughly 40% of our revenue is from contracts that extend into 2024 and beyond. On Slide 8 here, we'll speak to the competitive landscape and the trends that we've experienced over the past decade. In addition to K-Bro, the competitive landscape includes independent, privately owned facilities. And generally, this would be owner-operators with 1 or 2 facilities. There are public and private sector central laundries that are off-site and processed for a number of member hospitals or for their own hotels. And there's also a public and private sector on-premise laundries that are located on-site at the hospital or the hotel. Over the past decade, we have seen an ongoing shift to outsourcing laundry and linen services, and this has been driven by several factors. For example, linen service is considered noncore by most hospitals' mission of patient -- with most hospitals' mission being patient care, and a hotel's desire to provide an excellent guest experience. Laundry services include significant capital and operating costs that can be reduced by outsourcing, as large laundry operators are able to achieve economies of scale. There's oftentimes a desire to repurpose valuable square footage at both hospitals and hotels so they can be used for revenue-generating opportunities. And finally, specialization by experienced operators that use technology to manage inventory and report on linen usage leads to better management of the entire laundry and linen supply chain. In terms of our market on Slide 9, you can see that both the Canadian and the U.K. markets are large with significant organic and acquisition growth opportunities in both the health care and hospitality spaces. In Canada, we estimate the Canadian market to be roughly $600 million, and we have approximately 30% of the market. Other private sector competitors have around 40% of the market and the remain is quite fragmented. 30% remains in-sourced, which represents future opportunities for growth. From the U.K. perspective, we estimate that the size of the market is roughly GBP 756 million, with K-Bro/Fishers having approximately 5% market share. The remaining private sector competitors have about 64%. Approximately 31% is in-sourced, and there are opportunities in both health care and hospitality to gain in-sourced market share. On Slide 10, here, we speak to our market share in Canada. Here, you can see each of our markets throughout Canada and the market share relative to all outsourced volume. We maintain a strong position relative to our private sector competitors. However, as you can see, there are still opportunities for growth in all of our markets as well as in new markets. And in those markets -- in the new markets, volumes are still processed in-house. And we expect as equipment ages over time, this will lead to further outsourcing as we've seen across the country to date. In terms of Fishers. On Slide 11, we speak to the market share here for Fishers in Scotland and the Northeast of England, the markets in the U.K. that we service. In this market, where Fishers was founded and is the strongest, Fishers has about a 37% market share while other private sector participants make up about 30%. Approximately 30% of the market remains in-sourced, and virtually all of the health care remains in-house. We see this as a real growth opportunity as, similar to Canada, where 15 years ago, much of the Canadian health care laundry was in-sourced. From a customer perspective, you'll note our client base consists of large provincial health authorities, such as Alberta Health Services, as well as individually managed hotels, hospitals, such as the Hospital for Sick Kids and St. Mike's in Toronto. Our health care customers also include larger centralized buying groups, for example, in British Columbia, Provincial Health acts as an agent for themselves, as well as Fraser Health, Vancouver Coastal and Providence Health. We're also privileged to include national hoteliers, such as The Fairmont Hotels, Four Seasons, Hyatt, Hilton, Delta, Marriott as well as the Starwood Group of Hotels, all of these who are our clients. In the U.K., where approximately 90% of our business is hospitality, we service large hotel chains, such as Accor, Travelodge, Jurys inn, Hilton and Marriott. In terms of our retention rates, we continue to excel at renewing our existing customers, customer contracts with our valued customers. We have very high retention rates, up in the high 90 percentile, and have been servicing some of our major clients for many decades. The long-term nature of our contracts helps us enable -- helps us to establish strong relationships and offer additional services to our customers, which further strengthens our position. We'll now take a look at our facilities. We have remained focused on growth in regions where we have an existing competitive advantage or can develop a new one. Over the past decade, we've invested more than $250 million in our new plants -- in new plants and equipment, with a significant amount of this reinvestment happening in the last number of years. So for example, in 2017, we opened our new state of the art 90,000 square foot facility in Toronto for a total investment of $37 million, including the purchase of new efficiency-enhancing equipment and leasehold costs. This new plant replaced an old, inefficient operation that was running overcapacity. This investment gives us the platform for further growth in the largest market in Canada and has enabled us to reduce our labor cost by 25%. In B.C., as the result of several major health care contract renewals and new health care contract wins, we moved forward to build a new state of the art facility in the bank in Vancouver, which opened in 2018. This new facility expands current capacity as well as enables us to consolidate our health care business. We also upgraded and replaced equipment at our existing hospitality plant, resulting in significant operating efficiencies. The investments in our 2 Vancouver facilities was approximately $55 million. In terms of capacity, our decade of reinvestment in state of the art facilities has provided us with a network of highly efficient operations that has helped us become the low-cost producer in each of our markets. As you can see in each of our Canadian markets, we have excess capacity for growth to aggressively pursue new profitable business, maximizing the operating leverage and improving EBITDA margins by utilizing excess capacity. Flipping to Slide 16. You'll see we also have excess capacity in each of our Scottish plants as well. Flipping to Slide 17. Acquisitions have played -- have continued to play a meaningful part of our growth strategy, and I expect this to be the case going forward. We entered the Victoria, Montreal and Quebec City market through acquisition and have completed 2 acquisitions in the last number of years. At the end of 2017, we acquired Fishers in the U.K. for a net purchase price of approximately $60 million. And as I mentioned before, Fishers is the largest player in Scotland and Northeast and Northern England and gives K-Bro a strong foothold into the U.K. market. In 2018, we acquired Calgary-based Linitek for just under $5 million and consolidated that volume into our existing Calgary plant. In 2019, we acquired Deeside, an Aberdeen-based hospitality plant, for approximately $1.5 million and consolidated that volume into our existing Fishers infrastructure. On Slide 18, our strategy remains focused on extending core service to new regions and introducing new related services to existing and new customers. We've been successful in this strategy and have entered several new Canadian markets over the past decade. We are also introducing sterilization services to markets that currently -- where we don't currently provide that service, such as Vancouver, and our new facility where we installed sterilizers into our operating room -- into our clean room to sterilize operating -- the operating room linen, which historically would be done by the hospital. During COVID, we have seen a number of health care systems convert to our reusable products from disposable, and we expect there to be continued opportunities of this nature. And as we discussed, we have reached the end of our aggressive strategic capital spending program to build new facilities and upgrade facilities that allow us to be more cost-effective in our industry and to add millions of dollars of new business through our network of highly efficient plants. We'll continue to focus on growth through acquisition and will either consolidate the volume into our existing facilities or operate them independently, depending on the assets that we acquire. If we look at some of our key goals for 2022. One of our key focuses for 2021 was preparing for the transition of the newly awarded provincial AHS volume that we announced in August of 2021. We began this transition in late August last year and transitioned the last account in early April of 2022. With the transition now complete, we are focused on the integration of this volume and operationalizing and optimizing our plants. This volume was transitioned into both our Edmonton and Calgary facility, and now the key goal is to continue to optimize our plants and process it efficiently. We also remain highly focused on pursuing price increases in each of the markets in which we operate in response to the unprecedented supply chain issues and price increases that we are seeing. This will support a return to historical -- our return to historical margin levels. And of course, growing both our Canadian and U.K. business organically and through acquisition will remain a key priority. Finally, we're working with a third party to support us in the development of our ESG strategy and road map. This project consists of several analysis and assessments which ultimately serve as the foundation for the development of an ESG strategy that is aligned to the priorities of K-Bro's stakeholders and builds off our past effort. To date, we've conducted a current state assessment of our ESG performance, a materiality assessment to identify the ESG priorities and needs of K-Bro's business and those of its most critical stakeholders. And we're now developing an ESG strategy and road map that is aligned to the ESG priorities of K-Bro's stakeholders. The strategy will include our strategic objectives, material topics, governance structure and the target state ESG performance. On to Slide 20. I'll provide an overview of our senior management team. I've been with the company now for more than 24 years. And Kristie, our CFO, has been with K-Bro for over 20 years. Sean Curtis, our COO, has been with the company for over 35 years and has been key to all aspects of business development, plant operations and development of future operating talent. In addition to our senior management team, our 9 general managers have extensive experience in the business. Many of our GMs have been with K-Bro for more than 25 years, and the combined years of experience in the group is roughly 230 years. Each member of this team is responsible for all elements of their respective business unit with revenue growth -- from revenue growth to the bottom line. We have the best operators in the business, and we're very proud of this team. I'll spend a few minutes taking everyone through our business model and the process. So here, you can see pictures from our Edmonton plant, which has become the blueprint for all of our newbuilds. In any of our builds, whether it's our Regina, Toronto or Vancouver plant, we're achieving operating efficiencies from using the latest laundry technologies, including generally a 30% reduction in water, a 20% reduction in consumption of natural gas and a 30% gain in productivity. Just to step back and provide you with an overview of the business. It really is a simple and easy business to understand from an investor's point of view, yet it's truly highly specialized, automated and has significant barriers to entry, which puts K-Bro in a very strong market position. So we purchase and manage the limit on behalf of our customers -- on behalf of our health care customers. We start by collecting the soiled from our customers and returning it to our plant. We're processing 365 days a year. All of our plants follow Health Canada rules and regulations and achieve the highest standards of clean linen, adhering to both HLAC and TRSA hygienically clean standards. These strict processing requirements create a barrier of entry for small processors to enter the health care market. The first step in the process is to sort the linen by classification in order to wash it most efficiently and effectively. We wash the linen in tunnel washers which are roughly 75 feet in length and are highly automated and controlled. On the next slide, after washing and drying the linen, you can see here that we iron and fold it and then repackage the linen for distribution based on set quotas by nursing unit or hotel demand and send it back to the customer 365 days a year. Flipping to Slide 23. We also provide our K-Bro operating room services to major health care clients. These are what we refer to as our core services, which is linen processing of reusable operating room linens, including surgical gowns, drapes, towels; and in some cases, sterilization of these products prior to delivery to the hospital. And we provide sterilization in both Toronto and in Vancouver. Our services include the assembly of operating room packs specifically designed by the customer. For example, an open heart surgery pack may contain surgical gowns, drapes and towels, each in predetermined quantity. And that open heart surgery pack may differ in configuration between hospitals or between regions. What really differentiates K-Bro from our competitors is our focus on providing value-added services to our customers and not just washing and drying the linen and dropping it off at the loading dock. Because we manage the entire linen supply chain and distribution function, we're capable of delivering extensive reporting by unit or ward, linen unit and cost to each of our clients. We work very closely with our customers to reduce linen consumption through best practice use of the end product. And it's these types of activities that build tremendous loyalty from our customers, as they see us working closely with them to help them achieve their objectives. On the hospitality side of our business, we also focus on being a complete laundry and linen solution. For certain customers, we deliver the linen directly to the floors. And with our acquisition of Fishers, we use RFID technology that they have used to better understand linen usage and linen life. I'll now turn it over to Kristie, who will provide a financial overview starting on Slide 25.

Thank you, Linda, and good morning, everyone. On the left-hand side of this slide, with the exception of 2020 and 2021, which were impacted significantly by COVID, I'd like to highlight our steady increase in annual revenue. In 2019, we reported consolidated revenue of approximately $252 million compared to $136 million in 2014. This represents an 85% increase on a consolidated basis since 2014. This growth has come from new contract wins, acquisitions and inorganic growth in existing markets as well as the acquisition of Fishers in 2017. In 2020, revenue decreased just over 20% due to the significant impact of COVID-19 on the hospitality industry. Overall for the year, hospitality revenue was down 60% as a result of the various government restrictions put in place throughout the year. This was somewhat offset by stronger health care revenues, which increased about 10% due to the pandemic. In 2021, as COVID restrictions were relaxed to some extent, we saw an increase in revenues to $224 million, which is still below 2019 levels but a significant improvement from 2020. On the right-hand side of the slide, for fiscal 2021, EBITDA was $42.8 million. This represents a decrease of approximately 10% on a year-over-year basis from fiscal 2019 EBITDA. The decrease in EBITDA, again, relates to the COVID-19 pandemic and the significant effect of government restrictions on our hospitality segment. And similar to revenue, we saw an increase in EBITDA compared to 2020 and 2021 due to loosening government restrictions in relation to the pandemic as well as the pickup from the goodwill impairment we took in 2020. Previous to this, other than in 2017, when we saw a significant transition costs associated with new plant builds, we had also seen steady growth in EBITDA. Moving to Slide 26. This slide provides a snapshot of revenue and EBITDA segmentation between our Canadian and U.K. operations as well as our health care and hospitality sectors. And I'll just note that the figures on this slide are based on our 2019 revenue and EBITDA results as they are a better representation of our existing segmentation before the impact of COVID-19. From a revenue perspective, Canada represents approximately 75% of our revenue and Fishers makes up the balance. And from an EBITDA perspective, we see a similar thing, with Canadian EBITDA being about $30 million and Fishers being about $9 million, so a similar split to revenue. On Slide 27. For 2021, revenue increased to approximately $224 million or by about 14% compared to 2020. This increase was again primarily related to loosening of government restrictions related to the COVID-19 pandemic. On a consolidated basis, EBITDA in 2021 was $42.8 million compared to $38.2 million in 2020, which represents a 12% increase year-over-year. Our EBITDA margin for 2021 was 19.1% compared to 19.4% in 2020. And dividends declared remain consistent on a year-over-year basis. Overall, debt levels decreased to $38 million from $40.7 million at the end of 2020. As a result of the COVID-19 pandemic restrictions being eased, consolidated hospitality revenue for the 3 months ended March 31, 2022, increased by almost 300% over the comparable period of 2021, and the corporation saw about 0.5% increase in consolidated health care revenue, for an overall increase in consolidated revenues of approximately close to 30%. In Q1 of 2022, approximately 70% of K-Bro's consolidated revenue was from health care institutions, which is lower than it was in 2021 when it was almost 90%. Again, this is primarily related to the change in government restrictions and the impact on the hospitality segment during the first quarter of 2021. Consolidated EBITDA in the first quarter of 2022 decreased by $3 million to $7.1 million compared to $10 million in the comparative period of 2021, and margin decreased by 9.6% to 11.5%. The decrease is primarily related to higher natural gas costs, particularly in the U.K.; additional labor costs incurred due to temporarily tight labor markets in certain cities in which we operate; repricing of the corporation's existing business in Edmonton and Calgary with AHS, which took effect on August 1, 2021, in advance of new rural business being transitioned to the corporation and the associated transition costs with this business; as well as lower government assistance received in the Canadian division in 2022 compared to 2021. At March 31, 2022, we continued to have moderately low levels of leverage with a funded debt-to-EBITDA ratio of approximately 1x. We also have room under our existing credit facility to fund moderate levels of growth. Turning to Slide 28. As I've noted previously, COVID has had a very significant impact to our business. The table on this slide summarizes the impact month-by-month and quarter-by-quarter of the pandemic on each segment of our business. In 2020, we began the year in a position of strength with strong revenues. As we entered Q2 2020, you'll note from the table that hospitality revenue was down about 90% on a year-over-year basis. This improved in Q3 2020, when government restrictions were temporarily lifted to some extent. But as Q4 progressed, we saw an increased decline year-over-year as COVID restrictions were reimplemented. So overall for 2020, we saw a 60% reduction in hospitality revenues. As we entered 2021, we continue to see reductions on the hospitality side, consistent with what we were seeing in the later part of Q4 2020. However, in June 2021, we began to see stronger hospitality volumes. And by the end of Q3, volumes we're about -- at about 70% of historical norms. For the most part, this trend continued for the balance of Q4 2021 and into Q1 2022, with slight variations occurring as restrictions were imposed and then lifted again. Of significant note is that is, by the end of March 2022, you'll note that hospitality revenues were only 10% lower than those achieved in 2019, so significant improvement. On the health care side, in April 2020, when the most significant lockdown occurred, we saw a decrease in health care revenues of 8%. However, as the year progressed, due to product conversions, usage change practices, we saw increases ranging from 10% to 25% month-over-month, with yearly revenue increasing 9% from that of 2019. As we entered 2021, health care volumes continued to be strong with 2021 finishing 20% higher than those levels seen in 2019. This trend has also continued into Q1 '22, whereby we achieved health care revenues of 27% above those achieved in 2019. Our expectation is that about 10% of the increase in health care volumes that we have seen to date will be permanent due to changes in use practices as well as product conversions as a result of COVID. Now turning to Slide 29. Our -- we'll take a look at our payout ratio and dividend policy. Our trailing 12-month payout ratio is hovering just around 50%, and our ability to maintain or grow our dividends has been made possible through increasing our market share through new customer contracts, extending core services to new markets through greenfield activity and targeted acquisitions, introducing new related services, undertaking accretive strategic capital expenditures and controlling costs by entering into fixed supply contracts. We continue to evaluate our payout ratio and our dividend policy in the context of the current market environment. On Slide 30, you'll notice we continue to have moderately low levels of leverage with a funded debt ratio -- debt-to-EBITDA ratio of about 1x for both March 31, 2022, and December 31, 2021. We have sufficient room under our existing credit facility to fund moderate levels of growth. And at March 31, 2022, we have approximately $60 million in availability under our existing credit facility, which is $100 million plus a $25 million accordion. On Slide 31, you'll note that K-Bro has performed well over the past 10 years relative to the TSX composite, as you see on the graph. I will now turn it back over to Linda for questions and any closing address.

Thank you very much, Kristie. So in summary, what I can say is that we're very confident in the strength of our business model, and I'd like to point out some of the key investment highlights. We have long-term relationships with all of our -- with many of our clients, some spanning in excess of 30 years. We have deep industry experience and a reputation that spans 50-plus years. We have multiyear contracts for large portions of our health care and hospitality business. We have a conservative financial position and credit profile, with significant credit available to manage this current uncertain times and for various initiatives, including acquisitions. And we have a network of state of the art processing facilities in our major health care markets that will enable us to be the low-cost producer and add millions of dollars of additional revenue to profitably grow and increase margins. With that said, I will now open it up to any questions.

And we have no questions.

So confirming there are no questions. So if that is the case, on behalf of management, our Board of Directors and our employees, I would like to take this opportunity to thank everyone for attending the meeting today. I would like to thank all of our shareholders for their commitment and continued support, and we look forward to your attendance again next year. With that being said, I move to adjourn the meeting. Thank you very much.