Operational Excellence and Acquisitions Result in Record Annual Results for Exchange Income Corporation
Company Posts Annual Records for each of Revenue of
2023 Financial Highlights
-
Generated record Revenue of
$2.5 billion , an increase of$439 million or 21%. -
Earned consolidated Adjusted EBITDA1 of
$556 million , a new record, that represents growth of$99 million or 22%. -
Record Net Earnings of
$122 million compared to$110 million in the prior year. -
Produced record Adjusted Net Earnings1 of
$144 million , or$3.20 per share compared to$133 million or$3.29 per share. - Trailing Twelve Month Adjusted Net Earnings Payout Ratio1 of 80% compared to 73% in the prior year.
-
Free Cash Flow1 record of
$377 million compared to$332 million , an increase of$45 million or 14%. -
Free Cash Flow less Maintenance Capital Expenditures1 was a record of
$202 million or$4.49 per share compared to$176 million or$4.36 per share. - Trailing Twelve Month Free Cash Flow less Maintenance Capital Expenditures Payout Ratio1 was 57% compared to the prior year of 55%.
-
Increase in the annualized dividend rate by 5% or
$0.12 per annum to$2.64 per share.
Q4 Financial Highlights
-
Generated record high Revenue of
$657 million , an increase of$113 million or 21%. -
Earned record consolidated Adjusted EBITDA of
$144 million , representing growth of$20 million or 16%. -
Free Cash Flow less Maintenance Capital Expenditures was a record
$50 million , an increase of$10 million or 24%. -
Record Net Earnings of
$29 million , an improvement of$2 million or 8%. -
Produced record Adjusted Net Earnings of
$34 million , an improvement of$2 million or 5%.
CEO Commentary
To put these annual results into proper context, these were achieved despite supply chain challenges, inflationary pressures and high interest rates. With the contract wins and acquisitions announced, we are excited about our prospects as we move into 2024 and subsequent years.
We will be celebrating our 20-year anniversary since our first acquisition of
We achieved record results in 2023 and invested in the future whilst retaining our commitment to a strong balance sheet,” continued
___________________________________
1 Adjusted EBITDA, Adjusted Net Earnings, Free Cash Flow, Free Cash Flow less Maintenance Capital Expenditures, Maintenance and Growth Capital Expenditures, and the corresponding per share amounts and payout ratios are Non-IFRS measures. See Appendix A for more information.
Selected Financial Highlights
(All amounts in thousands except % and share data)
|
FY 2023 |
FY 2022 |
% Change |
Q4 2023 |
Q4 2022 |
% Change |
Revenue |
|
|
21% |
|
|
21% |
Adjusted EBITDA |
|
|
22% |
|
|
16% |
Net Earnings |
|
|
12% |
|
|
8% |
per share (basic) |
|
|
- |
|
|
(3%) |
Adjusted Net Earnings |
|
|
8% |
|
|
5% |
per share (basic) |
|
|
(3%) |
|
|
(5%) |
Trailing Twelve Month Adjusted Net Earnings Payout Ratio (basic) |
80% |
73% |
|
|
|
|
Free Cash Flow |
|
|
14% |
|
|
24% |
per share (basic) |
|
|
2% |
|
|
11% |
Free Cash Flow less Maintenance Capital Expenditures |
|
|
15% |
|
|
24% |
per share (basic) |
|
|
3% |
|
|
12% |
Trailing Twelve Month Free Cash Flow less Maintenance Capital Expenditures Payout Ratio (basic) |
57% |
55% |
|
|
|
|
Dividends declared |
|
|
18% |
|
|
14% |
Review of 2023 Financial Results
Consolidated revenue for the year was
Revenue in the Aerospace & Aviation segment grew by
Revenue in the Manufacturing segment increased by
EIC recorded Net Earnings of
The Corporation generated Free Cash Flow of
“2023 was a year that I would characterize as a continued normalization of the business from the pandemic. We are seeing the power of our diversification, and our strong results allowed us to increase our dividend for the 17th time in our history. Our payout ratio on a Free Cash Flow less
Maintenance Capital Expenditures basis remained consistent with the prior period in spite of an increase in interest expense of approximately
Financial Officer. “During 2023, we also fortified our balance sheet for future growth through amending, extending, and increasing the size of our credit facility to approximately
Review of Q4 Financial Results
Revenue generated by the Corporation during the fourth quarter was
Adjusted EBITDA generated by the Corporation during the fourth quarter was
Outlook
EIC’s complete annual financial statements and management’s discussion and analysis for the three and twelve month period ended
Conference Call Notice
Management will hold a conference call to discuss its 2023 fourth quarter financial results on
A live audio webcast of the conference call will be available at www.ExchangeIncomeCorp.ca. Please connect at least 15 minutes prior to the conference call to ensure adequate time for any software download that may be required to join the webcast. An archived replay of the webcast will be available for 90 days.
About
Caution concerning forward-looking statements
The statements contained in this news release that are forward-looking are based on current expectations and are subject to a number of uncertainties and risks, and actual results may differ materially. These uncertainties and risks include, but are not limited to, external risks, operational risks, financial risks and human capital risks. External risks include, but are not limited to, risks associated with economic and geopolitical conditions, competition, government funding for Indigenous health care, access to capital, market trends and innovation, risks associated with general uninsured losses, climate, acts of terrorism, armed conflict, labour or social unrest, pandemic, level and timing of defence spending and government-funded defence and security programs and risks associated with environmental, social and governance. Operational risks include, but are not limited to, significant contracts and customers, operational performance and growth, laws, regulations and standards, acquisitions, concentration and diversification, access to parts and relationships with key suppliers, casualty losses, environmental liability, dependence on information systems and technology, international operations, fluctuations in sales and purchase prices of aviation related assets, warranties, performance guarantees, global offset and intellectual property risks. Financial risks include, but are not limited to, availability of future financing, income tax matters, commodity, foreign exchange, interest rates, credit facility and trust indentures, dividends, unpredictability and volatility of securities pricing, dilution and credit risk. Human capital risks include, but are not limited to, reliance on key personnel, employees and labour relations and conflicts of interest.
Except as required by Canadian Securities Law,
Appendix A
Adjusted EBITDA, Adjusted Net Earnings, Free Cash Flow, and Maintenance and Growth Capital Expenditures are not recognized measures under IFRS and are, therefore, defined below.
Adjusted EBITDA: is defined as earnings before interest, income taxes, depreciation, amortization, other non-cash items such as gains or losses recognized on the fair value of contingent consideration items, asset impairment, and restructuring costs, and any unusual non-operating one-time items such as acquisition costs. It is used by management to assess its consolidated results and the results of its operating segments. Adjusted EBITDA is a performance measure utilized by many investors to analyze the cash available for distribution from operations before allowance for debt service, capital expenditures, and income taxes. The most comparable IFRS measure, presented in the Corporation’s Statements of Income as an additional IFRS measure, is Operating profit before Depreciation, Amortization, Finance Costs, and Other.
|
Three Months |
Three Months, |
Twelve Months, |
Twelve Months, |
|
|||||
|
Adjusted EBITDA |
$ |
143,621 |
$ |
124,052 |
$ |
555,525 |
$ |
456,442 |
|
|
Depreciation of capital assets |
|
56,846 |
|
47,103 |
|
208,492 |
|
168,156 |
|
|
Amortization of intangible assets |
|
4,377 |
|
6,116 |
|
20,244 |
|
20,897 |
|
|
Finance costs - interest |
|
29,177 |
|
22,533 |
|
112,316 |
|
73,665 |
|
|
Depreciation of right of use assets |
|
9,824 |
|
8,684 |
|
37,091 |
|
30,655 |
|
|
Interest expense on right of use liabilities |
|
2,065 |
|
1,647 |
|
7,471 |
|
4,753 |
|
|
Acquisition costs |
|
2,170 |
|
630 |
|
7,769 |
|
6,847 |
|
|
Other |
|
- |
|
- |
|
(951) |
|
- |
|
|
Earnings before taxes |
$ |
39,162 |
$ |
37,339 |
$ |
163,093 |
$ |
151,469 |
|
Adjusted Net Earnings: is defined as Net Earnings adjusted for acquisition costs, amortization of intangible assets, interest accretion on acquisition contingent consideration, accelerated interest accretion on convertible debentures, and non-recurring items. Adjusted Net Earnings is a performance measure, along with Free Cash Flow less Maintenance Capital Expenditures, which the Corporation uses to assess cash flow available for distribution to shareholders. The most comparable IFRS measure is Net Earnings. Interest accretion on contingent consideration is recorded in the period subsequent to an acquisition after the expected payment to the vendors is discounted. The value recorded on acquisition is accreted to the expected payment over the earn out period. Accelerated interest accretion on convertible debentures reflects the additional interest accretion recorded in a period that,
but for the action to early redeem the debenture series, would have been recorded over the remaining term to maturity. This interest reflects the difference in the book value of the convertible debentures and the par value outstanding.
The Corporation presents Adjusted Net Earnings per share, which is calculated by dividing Adjusted Net Earnings, as defined above, by the weighted average number of shares outstanding during the period, as presented in the Corporation’s Financial Statements and Notes.
The Corporation presents an Adjusted Net Earnings payout ratio, which is calculated by dividing dividends declared during a period, as presented in the Corporation’s Financial Statements and Notes, by Adjusted Net Earnings, as defined above. The Corporation uses this metric to assess cash flow available for distribution to shareholders.
|
Year Ended |
|
2023 |
|
|
2022 |
|
|
|
Net Earnings |
$ |
122,307 |
|
$ |
109,669 |
|
|
|
Acquisition costs (net of tax of |
|
6,865 |
|
|
6,138 |
|
|
|
Amortization of intangible assets (net of tax of |
|
14,879 |
|
|
15,255 |
|
|
|
Interest accretion on acquisition contingent consideration (net of tax of nil and nil) |
|
- |
|
235 |
|||
Accelerated interest accretion on redeemed debentures (net of tax of nil and |
|
- |
|
|
1,618 |
|||
|
Adjusted Net Earnings |
$ |
144,051 |
$ |
132,915 |
|||
|
per share - Basic |
|
$ |
3.20 |
|
$ |
3.29 |
|
|
per share - Diluted |
|
$ |
3.07 |
|
$ |
3.13 |
|
|
Three Months Ended |
|
2023 |
|
|
2022 |
|
|
Net Earnings |
$ |
29,027 |
|
$ |
26,990 |
|
|
Acquisition costs (net of tax |
|
1,524 |
|
|
359 |
|
|
Amortization of intangible assets (net of tax |
|
3,217 |
|
|
4,465 |
|
|
Interest accretion on acquisition contingent consideration (net of tax of nil and nil) |
- |
235 |
||||
|
Adjusted Net Earnings |
$ |
33,768 |
|
$ |
32,049 |
|
|
per share - Basic |
$ |
0.72 |
|
$ |
0.74 |
|
|
per share - Diluted |
$ |
0.70 |
|
$ |
0.73 |
|
Free Cash Flow: for the year is equal to cash flow from operating activities as defined by IFRS, adjusted for changes in non-cash working capital, acquisition costs, principal payments on right of use lease liabilities, and any unusual non-operating one-time items. Free Cash Flow is a performance measure used by management and investors to analyze the cash generated from operations before the seasonal impact of changes in working capital items or other unusual items. The most comparable IFRS measure is Cash Flow from Operating Activities. Adjustments made to Cash Flow from Operating Activities in the calculation of Free Cash Flow include other IFRS measures, including adjusting the impact of changes in working capital and deducting principal payments on right of use lease liabilities.
The Corporation presents Free Cash Flow per share, which is calculated by dividing Free Cash Flow, as defined above, by the weighted average number of shares outstanding during the period, as presented in the Corporation’s Financial Statements and Notes.
|
FREE CASH FLOW
Year Ended |
|
|
2023 |
|
|
2022 |
|
|
Cash flows from operations |
|
$ |
353,226 |
$ |
335,119 |
|
|
|
Change in non-cash working capital |
|
|
52,555 |
|
21,217 |
|
|
|
Acquisition costs (net of tax of |
|
|
6,865 |
|
6,138 |
|
|
|
Principal payments on right of use lease liabilities |
|
|
(35,528) |
|
(30,449) |
|
|
|
|
|
$ |
377,118 |
$ |
332,025 |
|
|
|
per share - Basic |
|
$ |
8.39 |
$ |
8.23 |
|
|
|
per share - Diluted |
|
$ |
7.38 |
$ |
7.16 |
|
|
FREE CASH FLOW |
|
|
|
|
|
|
|
Three Months Ended |
|
2023 |
|
|
2022 |
|
|
Cash flows from operations |
$ |
169,757 |
$ |
169,792 |
|
|
|
Change in non-cash working capital items |
|
(59,945) |
|
(79,192) |
|
|
|
Acquisition costs (net of tax of |
|
1,524 |
|
359 |
|
|
|
Principal payments on right of use lease liabilities |
|
(9,071) |
|
(8,426) |
|
|
|
|
$ |
102,265 |
$ |
82,533 |
|
|
|
per share - Basic |
$ |
2.17 |
$ |
1.95 |
|
|
|
per share - Fully Diluted |
$ |
1.92 |
$ |
1.71 |
|
Free Cash Flow less Maintenance Capital Expenditures: for the year is equal to Free Cash Flow, as defined above, less Maintenance Capital Expenditures, as defined below.
The Corporation presents Free Cash Flow less Maintenance Capital Expenditures per share, which is calculated by dividing Free Cash Flow less Maintenance Capital Expenditures, as defined above, by the weighted average number of shares outstanding during the period, as presented in the Corporation’s Financial Statements and Notes.
The Corporation presents a Free Cash Flow less Maintenance Capital Expenditures payout ratio, which is calculated by dividing dividends declared during a period, as presented in the Corporation’s Financial Statements and Notes, by Free Cash Flow less Maintenance Capital Expenditures, as defined above. The Corporation uses this metric to assess cash flow available for distribution to shareholders.
Maintenance and Growth Capital Expenditures: Maintenance Capital Expenditures is defined as the capital expenditures made by the Corporation to maintain the operations of the Corporation at its current level, depreciation on the Corporation’s mat and bridge rental portfolio assets, and, prior to the onset of COVID-19, depreciation recorded on assets in the Corporation’s aircraft and engine leasing pool. Other capital expenditures are classified as Growth Capital Expenditures as they will generate new cash flows and are not considered by management in determining the cash flows required to sustain the current operations of the Corporation. While there is no comparable IFRS measure for Maintenance Capital Expenditures or Growth Capital Expenditures, the total of Maintenance Capital Expenditures and Growth Capital Expenditures is equivalent to the total of capital asset and intangible asset purchases, net of disposals, on the Statement of Cash Flows.
|
Year Ended |
||||||||
CAPITAL EXPENDITURES |
|
Aerospace & Aviation |
Manufacturing |
|
Head Office |
|
Total |
|
|
Maintenance Capital Expenditures |
$ |
148,705 |
$ |
26,063 |
$ |
523 |
$ |
175,291 |
|
Growth Capital Expenditures |
|
279,388 |
|
23,656 |
|
- |
|
303,044 |
|
Total Net Capital Asset and Intangible Purchases, per Statement of Cash Flows |
$ |
428,093 |
$ |
49,719 |
$ |
523 |
$ |
478,335 |
|
|
Year Ended |
|
|||||||
CAPITAL EXPENDITURES |
|
Aerospace & Aviation |
Manufacturing |
|
Head Office |
|
Total |
|
|
Maintenance Capital Expenditures |
$ |
132,931 |
$ |
22,679 |
$ |
311 |
$ |
155,921 |
|
Growth Capital Expenditures |
|
108,885 |
|
15,613 |
|
918 |
|
125,416 |
|
Total Net Capital Asset and Intangible Purchases, per Statement of Cash Flows |
$ |
241,816 |
$ |
38,292 |
$ |
1,229 |
$ |
281,337 |
|
Investors are cautioned that Adjusted EBITDA, Adjusted Net Earnings, Free Cash Flow, and Maintenance Capital Expenditures and Growth Capital Expenditures should not be viewed as an alternative to measures that are recognized under IFRS such as Net Earnings or Cash Flow from Operating Activities. The Corporation’s method of calculating Adjusted EBITDA, Adjusted Net Earnings, Free Cash Flow, and Maintenance Capital Expenditures and Growth Capital Expenditures may differ from that of other entities and therefore may not be comparable to measures utilized by them. For additional information on the Corporation’s non-IFRS measures, refer to Section 5 – Dividends and Payout Ratios and Section 13 – Non-IFRS Measures and Glossary of the Corporation’s MD&A, which is available on SEDAR at www.sedar.com.
View source version on businesswire.com: https://www.businesswire.com/news/home/20240222318362/en/
Chief Executive Officer
(204) 982-1850
MPyle@eig.ca
Vice President,
(204) 953-1314
PPlaster@eig.ca
Source: