Release Date: August 09, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Exchange Income Corp (EIFZF, Financial) reported record revenue, adjusted EBITDA, and free cash flow for the second quarter of 2024.
- The Aerospace and Aviation segment saw a 15% increase in revenue and a 25% increase in adjusted EBITDA, driven by organic growth and new contracts.
- The company executed a strategic acquisition of Duhamel, enhancing its Environmental Access Solutions growth in Quebec and Eastern Canada.
- The Multi-Storey Windows Solution business secured over $100 million in future projects, indicating strong demand and positive momentum.
- The company anticipates its 2024 EBITDA to be at the mid to upper end of the previously provided range of $600 million to $635 million, showcasing confidence in future performance.
Negative Points
- The Manufacturing segment experienced an 8% decrease in revenue and a 29% decrease in adjusted EBITDA, impacted by seasonal anomalies and operational inefficiencies.
- Interest costs increased by approximately $4 million due to higher benchmark borrowing rates and increased debt outstanding.
- The payout ratio on free cash flow less maintenance expenditures increased to 61%, reflecting pressure despite three dividend increases in the last two years.
- The company faced challenges with delayed aircraft deliveries for the BC medevac contract, impacting the timing of capital expenditures.
- Working capital declined due to slower collections and government receivables, with a significant non-cash investment of $68 million.
Q & A Highlights
Q: Mike, the order flow you described is encouraging. How should we think about the timing of this ramp-up and what is driving this increase?
A: The order book has been high, and developers are shifting from condos to apartments due to interest rates. The recent decline in interest rates has boosted confidence. The new orders are geographically diverse, not just Toronto-centric. While this surge is promising, it may not be consistent. The backlog had declined but is now increasing, with some deliveries expected by mid-next year.
Q: How should we think about the trajectory of the matting business, especially with the new acquisition?
A: The matting business is entering a new cycle. The acquisition of Duhamel is strategic for Eastern Canada, particularly Quebec. We are optimistic about slow and steady growth, especially in Eastern Canada, and are building more mats to meet future demand.
Q: Can you discuss the Duhamel acquisition and its impact on serving the US market?
A: We are exploring opportunities in the US, focusing on T&D. Duhamel provides storage and production capacity, particularly for heavy crane mats. We are optimistic about expanding into the US, either organically or through acquisition.
Q: Can you provide an update on the BC and Manitoba Medevac contracts and any remaining CapEx?
A: The Manitoba contract is fully ramped up, with operations starting in September. The BC contract is delayed due to aircraft supply issues, but we are using older aircraft temporarily. The full impact will be seen as we redeploy existing aircraft to other contracts.
Q: With the upcoming convertible debentures, what are your plans for managing them?
A: The most likely scenario is conversion if the stock price reaches the mid-50s. If not, we may pay them off using our line of credit or consider a replacement issue. Our preference is for conversion, but we are exploring all options.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
