Exchange Income Corporation Posts Record Second Quarter Results as Previous Investments and Contract Wins Provide Tailwinds for the Remainder of 2024
The Corporation Posts Record Second Quarter Revenue of
Q2 Financial Highlights
-
Generated record second quarter Revenue of
$661 million , an increase of$33 million or 5%. -
Earned record second quarter Adjusted EBITDA1 of
$157 million , representing growth of$10 million over the prior period or 7%. -
Free Cash Flow1 second quarter record of
$101 million compared to the prior period of$98 million . -
Second quarter Net Earnings of
$33 million compared to the prior period of$37 million and Net Earnings per share of$0.69 compared to the prior period of$0.85 . -
Second quarter Adjusted Net Earnings1 of
$38 million compared to the prior year of$43 million and Adjusted Net Earnings per share of$0.80 compared to the prior period of$1.00 . - Trailing Twelve Month Free Cash Flow less Maintenance Capital Expenditures Payout Ratio 1 of 61% compared to the prior period of 57%.
-
Completed the previously announced strategic acquisition of
Armand Duhamel & Fils Inc. which will accelerate the Environmental Access Solutions strategic growth intoQuebec andEastern Canada .
CEO Commentary
“This quarter illustrates our diversified nature. Our Aerospace & Aviation segment continues to demonstrate strong performance, delivering on the large long-term contracts that we announced throughout 2023. The execution is driving the record financial results for the Aerospace & Aviation segment, and the segment continues to see significant growth opportunities to expand both in
“The acquisition of
Q2 Selected Highlights
(All amounts in thousands except % and share data)
|
Q2 2024 |
Q2 2023 |
% Change |
YTD 2024 |
YTD 2023 |
% Change |
||||||||||
Revenue |
$ |
660,575 |
|
$ |
627,222 |
|
5 |
% |
$ |
1,262,344 |
|
$ |
1,154,066 |
|
9 |
% |
Adjusted EBITDA |
$ |
157,045 |
|
$ |
147,036 |
|
7 |
% |
$ |
268,096 |
|
$ |
244,153 |
|
10 |
% |
Net Earnings |
$ |
32,648 |
|
$ |
36,896 |
|
(12 |
%) |
$ |
37,176 |
|
$ |
43,757 |
|
(15 |
%) |
per share (basic) |
$ |
0.69 |
|
$ |
0.85 |
|
(19 |
%) |
$ |
0.79 |
|
$ |
1.02 |
|
(23 |
%) |
Adjusted Net Earnings |
$ |
37,662 |
|
$ |
43,480 |
|
(13 |
%) |
$ |
47,236 |
|
$ |
55,020 |
|
(14 |
%) |
per share (basic) |
$ |
0.80 |
|
$ |
1.00 |
|
(20 |
%) |
$ |
1.00 |
|
$ |
1.28 |
|
(22 |
%) |
Trailing Twelve Month Adjusted Net Earnings Payout Ratio (basic) |
|
90 |
% |
|
75 |
% |
|
|
90 |
% |
|
75 |
% |
|
||
Free Cash Flow |
$ |
100,502 |
|
$ |
98,002 |
|
3 |
% |
$ |
162,433 |
|
$ |
157,710 |
|
3 |
% |
per share (basic) |
$ |
2.13 |
|
$ |
2.25 |
|
(5 |
%) |
$ |
3.44 |
|
$ |
3.66 |
|
(6 |
%) |
Free Cash Flow less Maintenance Capital Expenditures |
$ |
52,322 |
|
$ |
58,592 |
|
(11 |
%) |
$ |
74,915 |
|
$ |
77,515 |
|
(3 |
%) |
per share (basic) |
$ |
1.11 |
|
$ |
1.34 |
|
(18 |
%) |
$ |
1.58 |
|
$ |
1.80 |
|
(12 |
%) |
Trailing Twelve Month Free Cash Flow less Maintenance Capital Expenditures Payout Ratio (basic) |
|
61 |
% |
|
57 |
% |
|
|
61 |
% |
|
57 |
% |
|
||
Dividends declared |
$ |
31,275 |
|
$ |
27,809 |
|
12 |
% |
$ |
62,446 |
|
$ |
54,614 |
|
14 |
% |
Review of Q2 Financial Results
Consolidated revenue for the quarter was
Revenue generated by the Aerospace & Aviation segment increased by
Manufacturing segment revenue decreased by
EIC recorded Net Earnings of
Outlook
EIC’s complete interim financial statements and management’s discussion and analysis for the three and six months ending
Conference Call Notice
Management will hold a conference call to discuss its 2024 second quarter financial results on
A live audio webcast of the conference call will be available at www.ExchangeIncomeCorp.ca and www.newswire.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, availability of government funding for Indigenous health care, access to capital, market trends and innovation, risks associated with uninsured losses, climate risks, acts of terrorism, armed conflict, labour or social unrest, risks of a pandemic, the level and timing of defence spending, government-funded defence and security program risks 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 prices and purchase prices of aviation related assets, warranties and performance guarantees, global offset and intellectual property risks. Financial risks include, but are not limited to, availability of future financing, income tax matters, commodity risk, risks related to foreign exchange, interest rates, credit facility and the trust indentures, dividends, unpredictability and volatility of securities pricing, dilution and other credit risk. Human capital risks include, but are not limited to, reliance on key personnel, risks related to 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 ended
|
Three Months ended
|
Six Months ended
|
Six Months ended
|
||||||||||
Adjusted EBITDA |
$ |
157,045 |
$ |
147,036 |
$ |
268,096 |
$ |
244,153 |
|
|||||
Depreciation of capital assets |
|
61,785 |
|
50,032 |
|
117,099 |
|
97,540 |
|
|||||
Amortization of intangible assets |
|
5,593 |
|
5,432 |
|
11,171 |
|
10,229 |
|
|||||
Finance costs - interest |
|
31,703 |
|
28,158 |
|
61,518 |
|
53,877 |
|
|||||
Depreciation of right of use assets |
|
9,711 |
|
8,579 |
|
19,393 |
|
16,706 |
|
|||||
Interest expense on right of use liabilities |
|
2,048 |
|
1,738 |
|
4,032 |
|
3,329 |
|
|||||
Acquisition costs |
|
1,244 |
|
2,603 |
|
2,549 |
|
3,968 |
|
|||||
Other |
|
- |
|
- |
|
- |
|
(951 |
) |
|||||
Earnings before income taxes |
$ |
44,961 |
$ |
50,494 |
$ |
52,334 |
$ |
59,455 |
|
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.
Three Months Ended |
|
2024 |
|
2023 |
||
Net Earnings |
$ |
32,648 |
$ |
36,896 |
||
Acquisition costs (net of tax |
903 |
2,568 |
||||
Amortization of intangible assets (net of tax |
4,111 |
4,016 |
||||
Adjusted Net Earnings |
$ |
37,662 |
$ |
43,480 |
||
per share - Basic |
$ |
0.80 |
$ |
1.00 |
||
per share - Diluted |
$ |
0.77 |
$ |
0.93 |
Six Months Ended |
|
|
2024 |
|
|
2023 |
||||||
Net Earnings |
|
|
|
|
$ |
37,176 |
$ |
43,757 |
||||
Acquisition costs (net of tax |
|
|
|
|
|
|
1,849 |
3,745 |
||||
Amortization of intangible assets (net of tax |
|
|
|
|
|
|
8,211 |
7,518 |
||||
Adjusted Net Earnings |
|
|
|
|
|
|
$ |
47,236 |
$ |
55,020 |
||
per share - Basic |
|
|
|
|
|
|
$ |
1.00 |
$ |
1.28 |
||
per share - Diluted |
|
|
|
|
|
|
$ |
0.98 |
$ |
1.25 |
Free Cash Flow: 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.
|
Three Months Ended |
|
2024 |
|
|
2023 |
|
|||||
Cash flows from operations |
|
|
|
$ |
40,529 |
|
$ |
76,986 |
|
|||
Change in non-cash working capital |
|
|
|
|
|
68,491 |
|
27,559 |
|
|||
Acquisition costs (net of tax |
|
|
|
|
|
903 |
|
2,568 |
|
|||
Principal payments on right of use lease liabilities |
|
|
|
|
|
(9,421 |
) |
(9,111 |
) |
|||
|
|
|
|
|
|
|
$ |
100,502 |
|
$ |
98,002 |
|
|
per share - Basic |
|
|
|
|
|
$ |
2.13 |
|
$ |
2.25 |
|
|
per share - Diluted |
|
|
|
|
|
$ |
1.88 |
|
$ |
1.96 |
|
|
Six Months Ended |
|
2024 |
|
|
2023 |
|
|||||
Cash flows from operations |
|
|
|
$ |
91,506 |
|
$ |
66,212 |
|
|||
Change in non-cash working capital |
|
|
|
|
|
87,576 |
|
105,138 |
|
|||
Acquisition costs (net of tax |
|
|
|
|
|
1,849 |
|
3,745 |
|
|||
Principal payments on right of use lease liabilities |
|
|
|
|
|
(18,498 |
) |
(17,385 |
) |
|||
|
|
|
|
|
|
|
$ |
162,433 |
|
$ |
157,710 |
|
|
per share - Basic |
|
|
|
|
|
$ |
3.44 |
|
$ |
3.66 |
|
|
per share - Diluted |
|
|
|
|
|
$ |
3.07 |
|
$ |
3.23 |
|
Free Cash Flow less Maintenance Capital Expenditures: 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, 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.
|
|
Three Months Ended |
|||||||
CAPITAL EXPENDITURES |
Aerospace
|
Manufacturing |
Head
|
Total |
|||||
|
Maintenance Capital Expenditures |
$ |
40,805 |
$ |
7,276 |
$ |
99 |
$ |
48,180 |
|
Growth Capital Expenditures |
38,546 |
6,244 |
10 |
44,800 |
||||
Total Net Capital Additions and Intangible Asset purchases, per Statement of Cash Flows |
$ |
79,351 |
$ |
13,520 |
$ |
109 |
$ |
92,980 |
|
|
|
Three Months Ended |
|||||||
CAPITAL EXPENDITURES |
|
Aerospace
|
Manufacturing |
Head
|
Total |
||||
|
Maintenance Capital Expenditures |
$ |
33,081 |
$ |
6,034 |
$ |
295 |
$ |
39,410 |
|
Growth Capital Expenditures |
69,985 |
15,967 |
- |
85,952 |
||||
Total Net Capital Additions and Intangible Asset purchases, per Statement of Cash Flows |
$ |
103,066 |
$ |
22,001 |
$ |
295 |
$ |
125,362 |
|
Six Months Ended |
||||||||||
CAPITAL EXPENDITURES |
Aerospace
|
Manufacturing |
Head
|
Total |
|||||||
Maintenance Capital Expenditures |
$ |
75,398 |
$ |
11,840 |
$ |
281 |
$ |
87,519 |
|||
Growth Capital Expenditures |
83,690 |
425 |
10 |
84,125 |
|||||||
Total Net Capital Additions and Intangible Asset purchases, per Statement of Cash Flows |
$ |
159,088 |
$ |
12,265 |
$ |
291 |
$ |
171,644 |
|||
|
Six Months Ended |
||||||||||
CAPITAL EXPENDITURES |
|
Aerospace
|
Manufacturing |
Head
|
Total |
||||||
Maintenance Capital Expenditures |
$ |
68,625 |
$ |
11,208 |
$ |
362 |
$ |
80,195 |
|||
Growth Capital Expenditures |
106,592 |
13,771 |
- |
120,363 |
|||||||
Total Net Capital Additions and Intangible Asset purchases, per Statement of Cash Flows |
$ |
175,217 |
$ |
24,979 |
$ |
362 |
$ |
200,558 |
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 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 – Dividends and Payout Ratios and Section 12 – Non-IFRS Financial Measures and Glossary of the Corporation’s MD&A, which is available on SEDAR+ at www.sedarplus.ca.
View source version on businesswire.com: https://www.businesswire.com/news/home/20240808128547/en/
For further information, please contact:
Chief Executive Officer
(204) 982-1850
MPyle@eig.ca
Vice President,
(204) 953-1314
PPlaster@eig.ca
Source: