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

Good morning, ladies and gentlemen. My name is Mike Percy, and I am a Director of K-Bro Linen Inc. It gives me great pleasure to welcome you today to our 2023 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 in 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 user name 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 by a live audio webcast, we think it is necessary to set out a few rules for the orderly conduct. 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 that question 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 proxyholders 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 formal meeting Linda McCurdy, President and CEO of the corporation; and Kristie Plaquin, CFO of the corporation, will give a short presentation. I now call to order the Annual General Meeting of the corporation shareholders. With the consent of the meeting, I appoint Kristie Plaquin, the Corporation Chief Financial Officer as Secretary of the meeting. With the consent of the meeting, Kristine Calesso and Chantal Rondeau from TSX Trust will act as scrutineers to report on the number 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, this 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 13, 2023. 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 to come before today's meeting is being conducted by a 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. Those who have not yet voted, we encourage you to vote now. Questions can only 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 questions relate to a specific motion, please start your question by identifying the motion. We will respond to questions relating to 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 of 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 general questions. However, please note that due to time constraints, we may not be able to do so. 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 can contain forecasts, assumptions and expectations about future incomes -- 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, 2022, and for the year then ended, together with the reports therein on management and the auditors 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 13, 2023. Additional copies are available for anybody, anyone wishing one. 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. I will now entertain questions with respect to the financial statements of the corporation in the general question period. 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 their 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 individually. Is there any discussion on the motion or additional nominations? Thank you. As mentioned at the beginning of the meeting, voting today will be conducted by a single electronic ballot. We will, therefore, continue with the next item of the 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 this meeting. Unless there are any questions or discussions, I will move to the next item of business. The next item 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 Pricewaterhouse 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 the meeting. Unless there are any questions or discussions, I will 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 to 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 be automatically submitted. We will now take a short pause to answer any questions that have been submitted and to permit any registered shareholders or proxyholder who has not already done so to record their votes on the motions before the meeting. Are there any questions on the specific motions before the meeting.

Mr. Chair, I confirm there are no questions.

Thank you. I will close the polls in 30 seconds. [Voting]

The polls are now closed. I have now received the preliminary scrutineers' 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 resolution has been duly carried. The scrutineer will 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 filed the press release on SEDAR. Is there any other formal business to be properly brought before this meeting? Hearing none. If there is no further business to be brought before this meeting, I move and second 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 2022 annual and first quarter 2023 results.

Thank you, Mike, and good morning, everyone, and welcome. So before we begin the formal presentation, I'd just 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 I'll first start by giving you an 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, we're now one of the largest in the U.K. K-Bro started over 65 years ago in Edmonton as a family business and was subsequently sold to 2 different private equity firms in the '80s and '90s and owned by them until the company was taken public in 2005. We operate 15 facilities and 2 distribution centers, 10 facilities and 2 distribution centers in Canada and 5 facilities in the U.K., in Scotland and the northeast of England. And 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. I think it's important to highlight the continued strength of our business model. We've continued to grow our market share in the laundry and linen processing sector. 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 $277 million in 2022. This growth has come from all areas: organic growth from existing customers, greenfield, new builds and acquisitions. Our vertically integrated business model provides complete supply chain solutions to our customers at reduced operating and capital cost versus providing the services internally. We are able to take advantage of scale by purchasing large quantities of linen at highly competitive prices given the volumes, and can spread fixed operating costs over substantially larger volumes of processed linen. 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 available 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 10 acquisitions, built 5 new state of the art plants and executed on many plant expansions in the last decade. The next slide represents a consolidated financial overview of K-Bro. In terms of our top line, our revenue comes from 2 key areas: the health care and the hospitality sector. Our revenue for 2022 was $277 million with approximately 60% of our revenues coming from hospitality and 40% from health care. As hospitality volumes have come back from COVID, this top line mix has become more in line with the historical mix of health care and hospitality revenue, which pre-COVID was closer to 55% health care and 45% hospitality. In both 2020 and '21 as a result of the impact of COVID, revenue decreased from historical levels and a result of the significant impact of COVID to the hospitality industry, our mix of revenue between health care and hospitality shifted to 72% health care and 28% hospitality. Compared to '21 and '22 revenues increased 23.5%. Previous to COVID, we'd see nice annual growth year-over-year. In 2020 and '21, we saw reduced revenue and EBITDA as a result of the impact of the pandemic from historical 2019 levels. As we moved into '22, COVID government restrictions were decreased, but we faced significant inflationary pressures and geopolitical instability that had a negative impact on our cost structure, particularly on the utility, labor and distribution front. We were very focused throughout '22 and the first part of '23 on securing price increases from our customers to offset the negative impact of these pressures and we expect to see the full benefit of these in the second half of '23. With all this said, we finished fiscal '22 with $36.5 million in EBITDA. In terms of our contracts, our revenue is secured -- in terms of our revenue, our -- it is secured by long-term contract. The health care business is a noncyclical essential service industry 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 50% of our revenue is from contracts that extend into '26 and beyond. As you'll note on the right-hand side of this slide, a large number of contracts expire in '24. This represents a number of both health care and hospitality contracts, none of which are individually material to the overall revenue of the company. In terms of these contracts, we have a high degree of confidence from a renewal perspective. On the next slide, this speaks to the competitive landscape and trends that we have experienced over the past decades. In addition to K-Bro, the competitive landscape includes independent privately owned facilities, which are generally owner operator with 1 or 2 facilities, public and private sector central laundries that are offset -- that are off-site and processed for a number of member hospitals or their own hotels, public and private sector on-premise laundries that are located on-site at the hospital or the hotel; and in limited circumstances, particularly in the U.K. there are publicly traded companies. Over the past decade, we've seen an ongoing shift to outsourcing laundry and linen services. This has been driven by several factors, which include the fact that linen is not considered a core function to a hospital's mission of patient care or a hotel's desire to provide an excellent guest experience. Significant capital and operating savings can be achieved through outsourcing as large laundry operators are able to achieve economies of scale. There is a desire to repurpose valuable square footage at both hospitals and hotels that then can be used for revenue-generating opportunities. And specialization by experienced operators that use technology to manage inventory and report on linen usage, leading to better management of the entire laundry and linen supply chain. On the next slide here, we can see that both the Canadian and U.K. markets are large with significant organic and acquisition growth opportunities in both the health care and hospitality spaces. We estimate the Canadian market to be approximately $600 million, and we have approximately 30% market share. Other private sector competitors have around 45% of the market and the rest remains quite fragmented. 25% remains in-sourced, which represents opportunities for further growth. In the U.K., the market is roughly GBP 750 million, with K-Bro, Fishers having about a 5% market share. The remaining private sector competitors have about 65% market share, and approximately 30% is in-sourced, which represents opportunities in both health care and hospitality to gain in-sourced share. Slide 10. This speaks to our market share in Canada. Here, you can see in each of the markets throughout Canada and our 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 growth opportunities in all of our markets. In addition, you can see that many provinces across Canada continue to process their linen in-house, which we expect as equipment ages will lead to further outsourcing opportunities. In the U.K., you can see Fishers in Scotland and the Northeast of England are the markets that we serve. And you can see where Fishers was found -- where Fishers was founded and is the strongest, we have 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. And similar to Canada, where 15 years ago, much of the Canadian health care laundry sector was in-sourced. In terms of our customers, you'll note our client base consists of large provincial health authorities, such as Alberta Health Services as well as individually managed hospitals such as the Hospital for Sick Kids and St. Michaels 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. We're also privileged to include national hoteliers such as Fairmont Hotels, Four Seasons, The Hyatt, Hilton, Delta Marriott among our group of clients. In the U.K., where approximately 90% of our business is hospitality. We service large hotel chains such as Accor, Travel Lodge, Jurys Inn, Hilton and Marriott. We continue to excel at renewing our existing 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 customers for many decades. As an example, we're on our fifth 10-year contract in Alberta. The long-term nature of our contracts helps us establish strong relationships and offer additional services to our customers, with further -- which further strengthens our position. We have remained very focused on growth in regions where we are -- we have an existing competitive advantage or can develop a new one. Over the past decade, we have invested more than $250 million in our business in new plants and equipment, with a significant amount of this reinvestment happening in the last number of years. For example, in 2017, we opened our new state-of-the-art 90,000 square foot facility in Toronto for an 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 over capacity. 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 BC, 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 Vancouver, which opened in 2018. The new facility expands current capacity as well as enabled us to consolidate our health care business. We also upgraded and replaced equipment at our existing hospitality plant, resulting in significant operating efficiencies. The investment in our operating facilities was approximately -- in our Vancouver facilities was approximately $55 million. With these investments, here you can see that our reinvestment in our 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 the next slide, you'll see we also have excess capacity in each of our Scottish plants. Acquisitions 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 just this past month, completed our first acquisition post COVID of our largest competitor in Quebec City for $11.5 million. We anticipate this will contribute about $10 million to the top line. At the end of 2017, we acquired Fishers in the U.K. for a net purchase price of $60 million. As I mentioned before, Fishers is the largest player in Scotland in the Northeast of England and gives K-Bro a strong foothold in the U.K. market. In Q4 2018, we acquired Calgary-based Linitek for $4.7 million and have consolidated that volume into our existing Calgary plant. And in 2019, we acquired Deeside, an Aberdeen-based hospitality plant for $1.4 million and consolidated that volume into our Fishers existing infrastructure. So as I said, acquisitions have played a meaningful role in our growth strategy. Our strategy remains focused on extending our 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've also introduced sterilization services to the Vancouver market from our new facility, whereby we sterilize our operating room linen in our plant, a function that would historically be done by the hospital. Due to COVID, we've seen a number of health systems convert to reusable products from disposable, and we expect there to be continuing opportunities of this nature. As we discussed, we've reached the end of our aggressive strategic capital spending program to build new facilities and upgrade facilities that allows us to be the most efficient processor in our industry and to add millions of dollars of new business through our network of highly efficient plants. We'll also continue to focus on growth through acquisition and will either consolidate the volume into our existing plants or operate them independently depending on the assets acquired. As we have progressed through 2023, we continue to see strong momentum on the health care side. We've seen strong growth from the AHS rural volumes that were awarded to us in '21 as well as continue to see strength in our existing health care volumes. From a hospitality perspective, in '22, hospitality revenues returned to 90% of pre-pandemic levels. Our 2022 results reflect a few key factors. While our revenue had returned to pre-pandemic levels, our EBITDA margins were impacted by temporary labor inefficiencies and higher inflation related and energy costs stemming from COVID and certain geopolitical events. We're actively managing these factors and have successfully worked with many of our Canadian and U.K. customers to implement price increases to offset higher inflation-related costs. We began to see some of this benefit from these price increases in the fourth quarter of '22 and the first quarter of '23, and we will see the full impact of these in the back half of '23. We are actively managing our labor challenges and are pursuing the temporary foreign worker program to supplement our labor needs. As a result of these efforts in the second half of the year, we anticipate returning to historical 2019 margin levels consistent with historical seasonal trends. We continue to make progress on our ESG strategy and road map. The 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 efforts. To date, we've conducted a current state assessment of 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 priorities of our stakeholders. The strategy will include strategic objectives, material topics, governance structure and future objectives. Action items will be identified and mapped for the next 2 to 3 years to support our journey with the end goal for 2023 to publish our inaugural sustainability report. And finally, given our expectation, given recent trading levels for our stock and given our conservative balance sheet, we've also announced an NCIB, which we put in place in mid-May. In terms of our management team, I'll give you a quick overview of the senior team. I've been with the company for more than 25 years now. 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 team, our 10 general managers have extensive experience in the business. Many of our GMs have been with the company for more than 25 years, and the combined years of experience in the group is now roughly 230 years. Each member of the team is responsible for all elements of their respective business units from revenue growth to their bottom line. We believe we have the best operators in the business, and we're very proud of them. I'll quickly give you an overview of our business model and the process. You can see from these pictures, this is our Edmonton plant. Our Edmonton plant actually has become the blueprint for all of our new builds. In any of our new builds like Regina, Toronto or Vancouver, we are achieving operating efficiencies from using the latest technology, which results in a 30% reduction in water, 20% reduction in the consumption of natural gas and generally a 30% gain in productivity. If we just step back for a moment, you can see that our business is a simple and easy business to understand from an investor's point of view, yet it is highly specialized, automated and has significant barriers to entry, which puts K-Bro in a strong market position. We purchased the linen and manage it on behalf of our health care customers. We collect the soiled linen and return it to our plant for processing 365 days a year. All of our plants follow Health Canada regulations and achieved the highest standard of clean linen, adhering to HLAC and TRSA hygienically clean standards. These strict processing requirements create a barrier to entry for small processors trying to enter the health care market. The first step 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. After washing and drying the linen, we iron and fold it, repackage it and send it back to our customers 365 days a year. We also provide a K-Bro operating room linen service to our major health care clients. This service provides reusable operating room linen, including surgical gowns, drapes, towels and in some cases, sterilization of these products prior to delivery to the hospital. Our services include the assembly of operating room packs specifically designed for the customer. We see value -- we see this as a value-added service and as an area for potential growth as more of our clients are focused on environmental initiatives and supply chain sustainability. And finally, 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 whole linen supply chain and distribution function, we're capable of delivering extensive reporting by unit or ward, linen usage 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 is these types of activities that build loyalty from our customers as they see us working closely with them to achieve their objectives. As part of our commitment to provide business intelligence to our customers, we're nearing the end of our process of implementing a new ERP system focusing on these reporting capabilities. 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 expect to use RFID technology and continue to expand that into Canada to have a better understanding of linen usage and linen life. I'll now turn it over to Kristie, who will provide a financial overview.

Thank you, Linda. On the left-hand side of this slide, with the exception of 2020 and 2021, which were impacted significantly by the pandemic, I'd like to highlight our steady increase in annual revenue. In 2022, we reported consolidated revenue of approximately $277 million compared to $136 million in 2014. This represents a 90% increase on a consolidated basis since 2014. The growth has come from new contract wins, acquisitions and organic growth in existing markets as well as the acquisition of Fishers in 2017. In 2022, as COVID restrictions were relaxed, we saw an increase in revenue of 23.5% from 2021 and revenue that was 10% higher than 2019. On the right-hand side of the slide, for fiscal 2022, EBITDA was approximately $36.5 million. This represents a decrease of approximately 15% on a year-over-year basis from fiscal '21. As we moved into 2022, COVID government restrictions were decreased, but we faced significant inflationary pressure and geopolitical instability that had the negative impact on our cost structure, particularly on the utility, labor, and distribution front. This contributed to the reduction in EBITDA for 2022. We were very focused throughout 2022 and will be into Q2 of 2023 on securing price increases from our customers to offset the negative impact of these pressures, and we will see the full benefit of these price increases in the second half of 2023. Previous to this, other than in 2017, we saw significant -- when we saw significant transition costs associated with new plant builds, we had seen a steady growth in EBITDA. This slide provides a snapshot of revenue, EBITDA, segment -- and EBITDA segmentation between our Canadian and U.K. operations as well as our health care and hospitality sectors. From a revenue perspective, Canada represents about 75% of our revenue and Fishers makes up the balance. This slide highlights our 2022 and Q1 2023 results. For 2022, revenue increased to $277 million or 23.5% compared to 2021. For the first quarter of '23 as a result of the COVID-19 pandemic restrictions being eased, consolidated hospitality revenue for the 3 months ended March 31 increased by 48% over the comparable 2022 period. And the corporation saw a 1.4% increase in consolidated health care revenue in the -- for an overall increase in consolidated revenue of 15%. For fiscal 2022, consolidated EBITDA decreased in the year to $36.5 million from $42.8 million in 2021, which is a decrease of 14.7%. The consolidated EBITDA margin decreased to 13.2% in 2022 compared to 19.1% in 2021. For 2022, the decrease in margin primarily reflects timing differences related to the increase in inflation-related costs in the period while the full impact of price increases that we mentioned earlier will not take place until 2023. 2022 results also reflect the corporation's higher costs, which included higher natural gas prices, particularly in the U.K. The additional labor costs incurred due to temporary inefficiencies from unusually competitive labor markets in certain cities in which we operate, higher delivery costs related to higher diesel rates as well as the AHS transitioned, repricing of the corporation's existing business in Edmonton and Calgary with AHS, which took effect on August 1, 2021, in advance of the business being fully transitioned. When we look at Q1 '23, we saw a sizable increase in both EBITDA and EBITDA margin quarter-over-quarter as well as from 2022. This is reflective of the price increases that were secured in Q4 2022 as well as in the first quarter of 2023, as well as improvements in labor, delivery and the impact of the natural gas hedge we put in place in the second quarter of 2022. As we move through the back half of 2023, we anticipate that margins will come back in line with 2019 margins for the respective quarters. Overall, dividends declared remained consistent on a year-over-year and quarter-over-quarter basis. At both March 31, 2023, and December 31, 2022, we continue to have moderately low levels of leverage with a funded debt-to-EBITDA ratio of just over 1.8x at the end of Q1 '23. We also have room under our existing credit facility to fund moderate levels of growth. Our trailing 12-month payout ratio is hovering around 60%, which as we move forward, will decline as margins recover. Our ability to maintain our dividends is made possible through increasing market share through 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 the payout ratio and the dividend policy in the context of the current market environment. As I mentioned previously, we continue to have moderately low levels of leverage with funded debt to EBITDA of just over 1.8x at March 31, 2023. As you can see on this slide, we also have room under our existing credit facility to fund moderate levels of growth. At March 31, '23, we have approximately $44 million in availability under our existing credit facility, which is $100 million plus a $25 million accordion. I'll now turn it back over to Linda for some closing remarks.

Thank you, Kristie. So overall, we are confident in the strength of our business model. And I'd just like to point out a few of the key investment highlights. We have long-term relationships with all of our clients. We have deep industry experience and a reputation that spans over 50 years. We have multiyear contracts for large portions of our health care and hospitality volumes. As Kristie highlighted, we maintain a conservative financial position and credit profile with significant credit available to manage the 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 our margins. So because of this, we are very confident in our continued growth and strong financial performance moving forward. I will now open it up to -- for any questions.

I can confirm that there are no questions at this point.

Great. So on the behalf of management and the Board, I would like to thank everyone in attendance today. We look forward to connecting with everyone again next year. Thank you.