TSX Symbol: WJX
--Expanded Relationship with Hitachi, and Growth in Industrial Parts and Engineered Repair Services, Drove Record Revenue in 2022--
Selected Highlights for the Fourth Quarter and Full Year
- Fourth quarter revenue of
$541.3 million and full year revenue of$1.963 billion up 34.4% and 19.9%, respectively, over 2021; - Fourth quarter adjusted EBITDA of
$42.3 million and full year adjusted EBITDA of$165.9 million up 48.6% and 13.9%, respectively, over 2021(1); - Fourth quarter adjusted net earnings of
$17.8 million and full year adjusted net earnings of$69.8 million up 154.2% and 35.7%, respectively, over 2021(1); and - Exited 2022 with backlog of
$468.8 million .(1)
"In 2022 we delivered record revenue of nearly
"During the first half of the year, improved cash flow from operations allowed us to make early repayment of our acquisition credit facility and fund two tuck-in acquisitions, further expanding our ERS footprint and service offerings. In 2022, we generated
(Dollars in millions, except per share data) | Three Months Ended | Year Ended | ||||
2022 | 2021 | % change | 2022 | 2021 | % change | |
CONSOLIDATED RESULTS | ||||||
Revenue | 34.4 % | 19.9 % | ||||
Equipment sales | 68.8 % | 29.8 % | ||||
Product support | 15.1 % | 10.6 % | ||||
Industrial parts | 26.9 % | 22.3 % | ||||
Engineered repair services (ERS) | 17.2 % | 14.0 % | ||||
Equipment rental | 7.1 % | 10.0 % | ||||
Net earnings | 108.9 % | 36.0 % | ||||
Basic earnings per share(2) | 108.5 % | 35.4 % | ||||
Adjusted net earnings(1)(3) | 154.2 % | 35.7 % | ||||
Adjusted basic earnings per share(1)(2)(3) | 153.7 % | 35.1 % | ||||
Adjusted EBITDA(1) | 48.6 % | 13.9 % |
Outlook
Moving into 2023,
The Corporation's core strategic priorities remain unchanged and
Dividend Increase
"The increase in our quarterly dividend, representing an additional annual outlay of approximately
Fourth Quarter Highlights
- Revenue in the fourth quarter of 2022 increased
$138.5 million , or 34.4%, to$541.3 million , from$402.8 million in the fourth quarter of 2021. Regionally:
- Revenue in western
Canada of$278.8 million increased 64.3% from the prior year due primarily to robust growth in equipment and product support sales in the mining, and construction and forestry categories, and strength in the engineered repair services ("ERS") and industrial parts categories. - Revenue in central
Canada of$86.9 million increased 14.4% from the prior year mainly due to organic growth in industrial parts sales. - Revenue in eastern
Canada of$175.6 million increased 11.8% from the prior year due primarily to organic industrial parts growth driven by higher bearings sales, and higher equipment sales in the construction and forestry, and material handling categories.
- Gross profit margin of 18.1% in the fourth quarter of 2022 decreased 220 basis points ("bps") compared to the same period of 2021. The decrease in margin was driven primarily by lower product support margins and a higher proportion of equipment sales, largely due to the sale of several large mining shovels in the fourth quarter of 2022 without any similar sales in the same period of the prior year. These factors contributing to the decrease in margin were partially offset by higher equipment margins.(1)
- Selling and administrative expenses as a percentage of revenue decreased to 13.2% in the fourth quarter of 2022 from 16.5% in the fourth quarter of 2021, driven by the 34.4% increase in revenue over the prior year. Selling and administrative expenses in the fourth quarter of 2022 increased
$4.9 million , or 7.4%, compared to the fourth quarter of 2021, due primarily to higher personnel costs as the volume of business increased over the prior year.(1)
- EBIT increased
$11.4 million , or 74.4%, to$26.7 million in the fourth quarter of 2022 versus$15.3 million in 2021. The year-over-year increase in EBIT resulted primarily from higher sales volumes and equipment margins, offset partially by lower product support margins, a higher proportion of equipment sales, and increased selling and administrative expenses.
- The Corporation generated net earnings of
$16.6 million , or$0.78 per share, in the fourth quarter of 2022 versus$8.0 million , or$0.37 per share, in 2021. The Corporation generated adjusted net earnings of$17.8 million , or$0.83 per share, in the fourth quarter of 2022 versus$7.0 million , or$0.33 per share, in 2021. Adjusted net earnings for the quarter excludes non-cash losses on mark to market of derivative instruments of$1.1 million after-tax, or$0.05 per share (2021 – losses of$0.2 million after-tax, or$0.01 per share). Adjusted net earnings in the same period of 2021 also excluded a gain recorded on the sale of properties of$1.2 million after-tax, or$0.06 per share.(1)
- Adjusted EBITDA margin increased to 7.8% in the fourth quarter of 2022 from 7.1% in 2021.(1)
- Cash flows generated from operating activities amounted to
$19.1 million in the fourth quarter of 2022, compared to$36.0 million in the same quarter of the previous year. The decrease of$16.9 million was mainly attributable to a decrease in cash generated from changes in non-cash operating working capital of$30.3 million , which was driven largely by an increase in accounts receivable of$33.0 million in the fourth quarter of 2022 as compared to an increase in accounts receivable of$1.9 million in the same quarter of the previous year. This decrease in cash generated was partially offset by an increase in net earnings excluding items not affecting cash flow of$14.5 million .
- The Corporation's backlog at
December 31, 2022 of$468.8 million decreased$90.0 million , or 16.1%, compared toSeptember 30, 2022 due primarily to deliveries of multiple mining shovels that were in the prior quarter's backlog, along with most other categories completing more deliveries in the quarter versus new orders added to backlog, most notably in the construction and forestry category. These decreases were partially offset by higher ERS orders.(1)
- Working capital of
$346.0 million atDecember 31, 2022 increased$3.4 million fromSeptember 30, 2022 , due primarily to higher trade and other receivables and inventory, partially offset by higher accounts payable and accrued liabilities and income taxes payable. Working capital efficiency was 16.8%, a decrease of 80 bps fromSeptember 30, 2022 , due to the higher trailing 12-month revenue.(1)
- The Corporation's leverage ratio decreased to 1.13 times at
December 31, 2022 , compared to 1.28 times atSeptember 30, 2022 . The decrease in the leverage ratio was due to the combination of the lower debt level in the current period driven by cash generated from operating activities, and the higher trailing 12-month pro-forma adjusted EBITDA. The Corporation's senior secured leverage ratio was 0.71 times atDecember 31, 2022 , compared to 0.81 times atSeptember 30, 2022 .(1)
- Effective
October 6, 2022 , the Corporation amended its$400.0 million bank credit facility to extend the maturity date fromOctober 1, 2026 toOctober 1, 2027 . AtDecember 31, 2022 ,Wajax had borrowed$85.0 million and issued$6.2 million of letters of credit for a total utilization of$91.1 million of its$400.0 million bank credit facility.
- Subsequent to quarter-end and effective
January 23, 2023 ,Mark Edgar was appointed to the role ofChief People Officer . Prior to joiningWajax ,Mr. Edgar's career has included extensive human resources experience gained as Senior Vice President, Human Resources for Royal Sun Alliance Canada, Head of Human Resources - Corporate, for Centrica plc, the parent company ofBritish Gas , and Head of Human Resources -Customer Group , forBritish Sky Broadcasting plc (nowSky plc ).
Conference Call Details
About
Founded in 1858,
The Corporation's goal is to be
Notes:
(1) | "Adjusted net earnings", "Adjusted basic and diluted earnings per share", "Adjusted EBITDA", "Adjusted EBITDA margin", "Backlog", "Leverage ratio", "Senior secured leverage ratio", "Working capital", "Gross profit margin", "Selling and administrative expenses as a percentage of revenue" and "Pro-forma adjusted EBITDA" do not have standardized meanings prescribed by generally accepted accounting principles ("GAAP"). See the Non-GAAP and Other Financial Measures section later in this press release. | |
(2) | Weighted average shares, net of shares held in trust, outstanding for calculation of basic and diluted earnings per share for the three months ended | |
Weighted average shares, net of shares held in trust, outstanding for calculation of basic and diluted earnings per share for the year ended | ||
(3) | Net earnings excluding the following: | |
a. | after-tax non-cash losses on mark to market of derivative instruments of | |
b. | after-tax non-cash gains on mark to market of derivative instruments of | |
c. | after-tax gain recorded on the sale of properties of nil (2021 – | |
d. | after-tax gain recorded on the sale of properties of nil (2021 – | |
e. | after-tax | |
Non-GAAP and Other Financial Measures
The press release contains certain non-GAAP and other financial measures that do not have a standardized meaning prescribed by GAAP. Therefore, these financial measures may not be comparable to similar measures presented by other issuers. Investors are cautioned that these measures should not be construed as an alternative to net earnings or to cash flow from operating, investing, and financing activities determined in accordance with GAAP as indicators of the Corporation's performance. The Corporation's management believes that:
(i) | these measures are commonly reported and widely used by investors and management; |
(ii) | the non-GAAP measures are commonly used as an indicator of a company's cash operating performance, profitability and ability to raise and service debt; |
(iii) | "Adjusted net earnings" and "Adjusted basic and diluted earnings per share" provide indications of the results by the Corporation's principal business activities prior to recognizing non-recurring costs (recoveries) and non-cash losses (gains) on mark to market of derivative instruments. These adjustments to net earnings and basic and diluted earnings per share allow the Corporation's management to consistently compare periods by removing infrequent charges incurred outside of the Corporation's principal business activities and the impact of unrealized losses (gains) resulting from fluctuations in interest rates and the Corporation's share price; |
(iv) | "Adjusted EBITDA" provides an indication of the results by the Corporation's principal business activities prior to recognizing non-recurring costs (recoveries) and non-cash losses (gains) on mark to market of derivative instruments. These adjustments to net earnings allow the Corporation's management to consistently compare periods by removing infrequent charges incurred outside of the Corporation's principal business activities, the impact of unrealized losses (gains) resulting from fluctuations in interest rates and the Corporation's share price, the impact of fluctuations in finance costs related to the Corporation's capital structure, the impact of tax rates, and the impact of depreciation and amortization of long-term assets; and |
(v) | "Pro-forma adjusted EBITDA" provides the same utility as Adjusted EBITDA described above, however pursuant to the terms of the bank credit facility, is adjusted for the EBITDA of business acquisitions made during the period as if they were made at the beginning of the trailing 12-month period, and for the deduction of payments of lease liabilities. Pro-forma adjusted EBITDA is used in calculating the Leverage ratio and Senior secured leverage ratio. |
Non-GAAP financial measures are identified and defined below:
Funded net debt | Funded net debt includes bank indebtedness, debentures and total long-term debt, net of cash. Funded net debt is relevant in calculating the Corporation's funded net debt to total capital, which is a non-GAAP ratio commonly used as an indicator of a company's ability to raise and service debt. |
Debt | Debt is funded net debt plus letters of credit. Debt is relevant in calculating the Corporation's leverage ratio, which is a non-GAAP ratio commonly used as an indicator of a company's ability to raise and service debt. |
Total capital | Total capital is shareholders' equity plus funded net debt. |
EBITDA | Net earnings (loss) before finance costs, income tax expense, depreciation and amortization. |
Adjusted net earnings (loss) | Net earnings (loss) before (gain) loss recorded on the sale of properties, non-cash losses (gains) on mark to market of derivative instruments and Tundra transaction costs. |
Adjusted basic and diluted earnings (loss) per share | Basic and diluted earnings (loss) per share before (gain) loss recorded on the sale of properties, non-cash losses (gains) on mark to market of derivative instruments and Tundra transaction costs. |
Adjusted EBITDA | EBITDA before (gain) loss recorded on the sale of properties, non-cash losses (gains) on mark to market of derivative instruments and Tundra transaction costs. |
Pro-forma adjusted EBITDA | Defined as adjusted EBITDA adjusted for the EBITDA of business acquisitions made during the period as if they were made at the beginning of the trailing 12-month period pursuant to the terms of the bank credit facility and the deduction of payments of lease liabilities. |
Working capital | Defined as current assets less current liabilities, as presented in the consolidated statements of financial position. |
Other working capital amounts | Defined as working capital less trade and other receivables and inventory plus accounts payable and accrued liabilities, as presented in the consolidated statements of financial position. |
Non-GAAP ratios are identified and defined below:
EBITDA margin | Defined as EBITDA (defined above) divided by revenue, as presented in the consolidated statements of earnings. |
Adjusted EBITDA margin | Defined as adjusted EBITDA (defined above) divided by revenue, as presented in the consolidated statements of earnings. |
Leverage ratio | The leverage ratio is defined as debt (defined above) at the end of a particular quarter divided by trailing 12-month pro-forma adjusted EBITDA (defined above). The Corporation's objective is to maintain this ratio between 1.5 times and 2.0 times. |
Senior secured leverage ratio | The senior secured leverage ratio is defined as debt (defined above) excluding debentures at the end of a particular quarter divided by trailing 12-month pro-forma adjusted EBITDA (defined above). |
Funded net debt to total capital | Defined as funded net debt (defined above) divided by total capital (defined above). |
Working capital efficiency | Trailing four-quarter average working capital (defined above) as a percentage of the trailing 12-month revenue. |
Supplementary financial measures are identified and defined below:
EBIT margin | Defined as EBIT divided by revenue, as presented in the consolidated statements of earnings. |
Backlog | Backlog is a management measure which includes the total sales value of customer purchase commitments for future delivery or commissioning of equipment, parts and related services, including ERS projects. This differs from the remaining performance obligations as defined by IFRS 15 Revenue from Contracts with Customers. There is no directly comparable GAAP financial measure for Backlog. |
Gross profit margin | Defined as gross profit divided by revenue, as presented in the consolidated statements of earnings. |
Selling and administrative expenses as a percentage of revenue | Defined as selling and administrative expenses divided by revenue, as presented in the consolidated statements of earnings. |
Reconciliation of the Corporation's net earnings to adjusted net earnings and adjusted basic and diluted earnings per share is as follows:
Three months ended | Year ended | |||
2022 | 2021 | 2022 | 2021 | |
Net earnings | $ 16.6 | $ 8.0 | $ 72.4 | $ 53.2 |
Gain recorded on the sale of properties, after-tax | — | (1.2) | — | (2.1) |
Non-cash losses (gains) on mark to market of derivative instruments, after-tax | 1.1 | 0.2 | (2.6) | — |
Tundra transaction costs, after-tax | — | — | — | 0.3 |
Adjusted net earnings | $ 17.8 | $ 7.0 | $ 69.8 | $ 51.5 |
Adjusted basic earnings per share(1) | $ 0.83 | $ 0.33 | $ 3.26 | $ 2.41 |
Adjusted diluted earnings per share(1) | $ 0.80 | $ 0.32 | $ 3.15 | $ 2.34 |
(1) | For the three months ended |
Reconciliation of the Corporation's EBIT to EBITDA, Adjusted EBITDA and Pro-forma adjusted EBITDA is as follows:
Three months ended | Year ended | |||
|
|
|
| |
EBIT | $ 26.7 | $ 15.3 | $ 113.9 | $ 92.3 |
Depreciation and amortization | 14.1 | 14.3 | 55.5 | 55.4 |
EBITDA | $ 40.8 | $ 29.7 | $ 169.3 | $ 147.7 |
Gain recorded on the sale of properties | — | (1.5) | — | (2.5) |
Non-cash losses (gains) on mark to market of derivative instruments(1) | 1.5 | 0.3 | (3.5) | — |
Tundra transaction costs(2) | — | — | — | 0.4 |
Adjusted EBITDA | $ 42.3 | $ 28.5 | $ 165.9 | $ 145.6 |
Payment of lease liabilities(3) | (8.3) | (7.8) | (32.0) | (28.9) |
Pro-forma adjusted EBITDA | $ 34.0 | $ 20.6 | $ 133.9 | $ 116.7 |
(1) | Non-cash losses (gains) on mark to market of non-hedged derivative instruments. |
(2) | In 2021, the Corporation incurred transaction costs relating to the Tundra acquisition. These costs were primarily for advisory services. |
(3) | Effective with the reporting period beginning on |
Calculation of the Corporation's funded net debt, debt, leverage ratio and senior secured leverage ratio is as follows:
|
| |
Bank indebtedness (cash) | $ 5.2 | $ (10.0) |
Debentures | 55.8 | 55.2 |
Long-term debt | 83.6 | 98.2 |
Funded net debt | $ 144.6 | $ 143.5 |
Letters of credit | 6.2 | 7.3 |
Debt | $ 150.8 | $ 150.7 |
Pro-forma adjusted EBITDA(1) | $ 133.9 | $ 116.7 |
Leverage ratio(2) | 1.13 | 1.29 |
Senior secured leverage ratio(3) | 0.71 | 0.82 |
(1) | For the year ended |
(2) | Calculation uses debt divided by the trailing four-quarter Pro-forma adjusted EBITDA. This leverage ratio is calculated for purposes of monitoring the Corporation's objective target leverage ratio of between 1.5 times and 2.0 times, and is different from the leverage ratio calculated under the Corporation's bank credit facility agreement. |
(3) | Calculation uses debt excluding debentures divided by the trailing four-quarter Pro-forma adjusted EBITDA. While the calculation contains some differences from the leverage ratio calculated under the Corporation's bank credit facility agreement, the resulting leverage ratio under the bank credit facility agreement is not significantly different. |
Calculation of total capital and funded net debt to total capital is as follows:
|
| |
Shareholders' equity | $ 449.8 | $ 389.9 |
Funded net debt | 144.6 | 143.5 |
Total capital | $ 594.4 | $ 533.4 |
Funded net debt to total capital | 24.3 % | 26.9 % |
Calculation of the Corporation's working capital and other working capital amounts is as follows:
|
| |
Total current assets | $ 860.1 | $ 681.4 |
Total current liabilities | 514.1 | 367.9 |
Working capital | $ 346.0 | $ 313.5 |
Trade and other receivables | (307.1) | (223.5) |
Inventory | (462.2) | (388.7) |
Accounts payable and accrued liabilities | 423.8 | 305.8 |
Other working capital amounts | $ 0.7 | $ 7.1 |
Cautionary Statement Regarding Forward-Looking Information
This news release contains certain forward-looking statements and forward-looking information, as defined in applicable securities laws (collectively, "forward-looking statements"). These forward-looking statements relate to future events or the Corporation's future performance. All statements other than statements of historical fact are forward-looking statements. Often, but not always, forward looking statements can be identified by the use of words such as "plans", "anticipates", "intends", "predicts", "expects", "is expected", "scheduled", "believes", "estimates", "projects" or "forecasts", or variations of, or the negatives of, such words and phrases or state that certain actions, events or results "may", "could", "would", "should", "might" or "will" be taken, occur or be achieved. Forward-looking statements involve known and unknown risks, uncertainties and other factors beyond the Corporation's ability to predict or control which may cause actual results, performance and achievements to differ materially from those anticipated or implied in such forward-looking statements. To the extent any forward-looking information in this news release constitutes future-oriented financial information or financial outlook within the meaning of applicable securities law, such information is being provided to demonstrate the potential of the Corporation and readers are cautioned that this information may not be appropriate for any other purpose. There can be no assurance that any forward-looking statement will materialize. Accordingly, readers should not place undue reliance on forward looking statements. The forward-looking statements in this news release are made as of the date of this news release, reflect management's current beliefs and are based on information currently available to management. Although management believes that the expectations represented in such forward-looking statements are reasonable, there is no assurance that such expectations will prove to be correct. Specifically, this news release includes forward looking statements regarding, among other things: our belief that the Corporation's strong balance sheet gives us the flexibility to invest in our expanded Hitachi relationship, additional organic initiatives and acquisition opportunities to help drive future growth; our outlook for 2023, including the view that solid fundamentals persist in many of the markets
Readers are cautioned that the risks described in our annual MD&A, are not the only risks that could impact the Corporation. Risks and uncertainties not currently known to the Corporation, or currently deemed to be immaterial, may have a material effect on the Corporation's business, financial condition or results of operations.
Additional information, including
SOURCE
© Canada Newswire, source