WINNIPEG - Exchange Income Corporation (TSX: EIF) ('EIC' or the 'Corporation') a diversified, acquisition-oriented company focused on opportunities in the aviation & aerospace and manufacturing segments, reported its financial results for the three and nine-months ending September 30, 2023.
All amounts are in Canadian currency.
Q3 Financial Highlights
Record quarterly Revenue of $688 million, an increase of $101 million or 17%.
Earned Adjusted EBITDA1 of $168 million, representing growth of $17 million over the prior period or 12% and setting a new benchmark for the Corporation.
Free Cash Flow1 third quarter record of $117 million compared to the prior period of $113 million.
Record Free Cash Flow less Maintenance Capital Expenditures1 of $74 million, an increase of $5 million or 8%.
Record third quarter record Net Earnings and Adjusted Net Earnings1 of $50 million and $55 million. Each increased by approximately $1 million despite an increase in interest expense of $8 million. On a per share basis (basic), Net Earnings decreased from $1.20 to $1.06 and Adjusted Net Earnings1 decreased from $1.34 to $1.19 primarily due the bought deal capital raised in the second quarter which will be deployed on future long-term contracts.
Trailing Twelve Month Free Cash Flow less Maintenance Capital Expenditures Payout Ratio of 58% and Adjusted Net Earnings Payout Ratio of 78% compared to prior period amounts of 52% and 72%, respectively.
Announced the acquisition of DryAir Manufacturing Corporation on October 5, 2023.
Announced an increase in the dividend of $0.12 per annum to $2.64 per share, or an increase of 5%.
CEO Commentary 'Our third quarter was characterized by strong underlying fundamentals. We set several records for the quarter including Revenue, Adjusted EBITDA, Free Cash Flow, Free Cash Flow less Maintenance Capital Expenditures, Net Earnings and Adjusted Net Earnings on an absolute basis.' commented Mike Pyle, CEO. 'Certain per share metrics temporarily declined when compared to the prior year primarily because of the bought deal offering in the second quarter and capital on hand that is yet to be deployed. The acquisitions of BVGlazing and Hansen have met or exceeded our initial expectations and have been accretive to our shareholders. Our bought deal offering will be used to finance future Growth Capital Expenditures, primarily the new medevac contracts in British Columbia and Manitoba and the aircraft required to support the Air Canada routes on the East Coast, which will reap the rewards in the future. We have always had a long-term disciplined approach to capital allocation and our investment decisions made earlier this year are no exception. Those seeds sown and investments made will yield meaningful long-term growth for the Company in the future. This confidence in the future and our collective sustained performance on an absolute basis has allowed us to increase our dividend by $0.12 per annum to a new level of $2.64 per share.
'This quarter also demonstrates the importance of our diversification. We previously communicated to the market that the prior year was a unique alignment of price, supply, demand and weather in our Environmental Access Solutions business. When we purchased the business, our investment decision was based on the long term fundamentals of the business. Fiscal 2022 significantly exceeded those metrics based on the unique combination of factors described above and, as we have noted previously, the results were not sustainable under normal economic and industry conditions. The business has moderated, as expected, and is still exceeding our internal expectations of the deal metrics. When you look at the combined performance of our segments you will note that our overall performance of the entire business continues to set record results even with an increase in interest expense of $8 million. This illustrates the effectiveness of our diversified business model and disciplined acquisition and organic growth strategy. Further, this record performance was achieved whilst the broader economy was experiencing difficulties associated with persistent inflation, tightening monetary policy and corresponding highs in benchmark interest rates. Our strong balance sheet management has been a cornerstone of our success and, with a slowing economy, ensures that we will be able to take advantage of any opportunities. The Growth Capital Expenditures1 that we executed throughout 2023 will further lead to improved metrics in the latter part of 2024 and 2025 as the assets come online and contribute to our financial performance in a meaningful way.
'Subsequent to quarter end, we announced the acquisition of DryAir Manufacturing Corp. DryAir exhibited all of the hallmarks of an acquisition target. They are an innovative and recognized leader in the hydronic heating industry in North America primarily serving the rental market. The former owners will continue in their existing roles and it was clear at the outset of our initial meetings that EIC's business model and management's values were a match. The acquisition is accretive to our shareholders on a per share basis and exceeded our investment thresholds on a historical basis and on forward looking metrics,' stated Adam Terwin, EIC's Chief Corporate Development Officer. 'We continue to be active in reviewing potential acquisition opportunities. Our acquisition strategy and requirements are very disciplined, and we continue to apply those criteria for any potential acquisitions. As evidenced by the DryAir acquisition, the EIC story resonates with prospective vendors. We continue to champion the value that EIC can unlock by continuing to support their management's success and entrepreneurial spirit while providing capital for organic growth.
Tel: (204) 982-1850