WAJAX ANNOUNCES 2023 FOURTH QUARTER AND ANNUAL RESULTS, INCREASES QUARTERLY DIVIDEND BY 6%

TSX Symbol:  WJX

Expanded Relationship with Hitachi and Growth in Industrial Parts and Engineered Repair Services Continue to Drive Record Results

TORONTO, March 4, 2024 /CNW/ – Wajax Corporation (“Wajax” or the “Corporation”) today announced its 2023 fourth quarter and annual results. All monetary amounts are in Canadian dollars unless otherwise noted.

Selected Highlights for the Fourth Quarter and Full Year

Fourth quarter revenue of $542.6 million and record full year revenue of $2,154.7 million, up 0.2% and 9.8%, respectively, over 2022;
Fourth quarter adjusted EBITDA of $47.2 million and record full year adjusted EBITDA of $197.4 million, up 11.5% and 19.0%, respectively, over 2022;
Fourth quarter adjusted basic EPS of $0.83 and full year adjusted basic EPS of $3.88, down 0.4% and up 19.1%, respectively, over 2022; and
Ended 2023 with backlog of $554.0 million, an increase of $85.2 million over 2022.(1)

“In 2023, Wajax celebrated its 165th anniversary and delivered a third straight year of record revenue, up 9.8% over 2022. When combined with our continuing focus on improved operating leverage, this resulted in a 19.1% year-over-year increase in adjusted basic earnings per share,” said Iggy Domagalski, President and Chief Executive Officer. “Our team delivered significant value to shareholders including a 32% increase in the quarterly dividend. We are pleased with these results, and proud of our team’s exceptional efforts throughout the year.”(1)

He continued, “Looking ahead into 2024, fundamentals remain solid across many of our key markets, which continues to be reflected in our strong backlog – and these fundamentals should be supportive as we look to build on the near-record number of Hitachi excavators we shipped in 2023, as well as the exceptionally strong performance of our industrial parts and engineered repair services businesses. Our strong financial results and solid balance sheet, coupled with the recently completed $100.0 million increase in credit limit under our senior secured credit facility, give us the flexibility to continue to invest in future organic growth and acquisitions. The 6% dividend increase announced today reflects the board’s and management’s collective belief in our strategic vision.”(1)

Outlook
Moving into 2024, Wajax continues to see solid fundamentals in many of the markets it serves – particularly mining, energy and construction – supported by relatively elevated key commodity prices and sustained customer budgeting for capital projects. Wajax began 2024 with strong backlog of $554.0 million, up 18.2% from the end of 2022, which supports management’s confidence in the near-term future.(1) In addition to expected growth in its heavy equipment business over the long-term, Wajax continues to anticipate further demand in its less cyclical industrial parts and engineered repair services (“ERS”) businesses, which saw top-line growth of 12.9% and 28.6%, respectively, in 2023. Challenges associated with higher interest rates, wage and price inflation, and a tight labour market, are expected to persist, and management continues to monitor market dynamics and customer sentiment for signs of possible weakness.

Management will be focused on six strategic priorities for 2024: continuing to build a “people first” company; growing Wajax’s existing business with a focus on parts, service and margin improvement; unlocking the potential of Wajax’s enhanced direct relationship with Hitachi; acquiring industrial parts and ERS businesses; improving cost structure and processes; and continuing Wajax’s enterprise resource planning system rollout and additional technology improvements. For more information regarding these priorities, please see the Wajax’s Management’s Discussion and Analysis for the year-ended December 31, 2023, and annual report for the year ended December 31, 2023.

Dividend Increase
Wajax also announced today that its Board of Directors has approved a 6% increase in the Corporation’s quarterly dividend. The Corporation has declared a dividend of $0.35 per share for the first quarter of 2024, payable on April 2, 2024, to shareholders of record on March 15, 2024.

Fourth Quarter Highlights

Revenue in the fourth quarter of 2023 increased $1.3 million, to $542.6 million, from $541.3 million in the fourth quarter of 2022. From a regional perspective:

Revenue in western Canada of $235.6 million decreased 15.5% from the prior year due primarily to the timing of mining equipment sales, as well as lower equipment sales in the construction and forestry category, offset partially by strong ERS sales.
Revenue in central Canada of $105.4 million increased 21.3% from the prior year mainly due to strong ERS sales, higher equipment sales in the construction and forestry category, and higher product support revenue across all categories.
Revenue in eastern Canada of $201.7 million increased 14.8% from the prior year due primarily to higher equipment and product support sales in the construction and forestry category, and strong industrial parts and ERS sales.

Gross profit margin of 21.2% in the fourth quarter of 2023 increased 310 basis points (“bps”) compared to the same period of 2022. The increase in margin was driven primarily by higher margins across all revenue types, and a higher proportion of ERS and product support sales as compared to equipment sales.(1)
Selling and administrative expenses as a percentage of revenue increased to 17.1% in the fourth quarter of 2023 from 13.2% in the fourth quarter of 2022. Selling and administrative expenses in the fourth quarter of 2023 increased $21.2 million, or 29.6%, compared to the fourth quarter of 2022 due primarily to: higher personnel costs as the volume of ERS and product support business increased over the prior year; an unrealized loss on interest rate swaps of $5.5 million in the quarter, compared to a loss of less than $0.1 million in the same quarter of the prior year; and facility closure, restructuring, and other related costs of $1.9 million in the quarter without a comparable cost in the same quarter of the prior year. Excluding the $5.5 million loss on interest rate swaps, and the $1.9 million facility closure, restructuring, and other related costs, selling and administrative expenses as a percentage of revenue was 15.7% in the fourth quarter of 2023. The unrealized loss/gain on interest rate swaps and the facility closure, restructuring, and other related costs have been excluded in calculating the following metrics: adjusted net earnings, adjusted EBIT, adjusted EBIT margin, adjusted EBITDA, adjusted EBITDA margin, adjusted basic earnings per share, and adjusted diluted earnings per share.(1)
EBIT decreased $4.1 million, or 15.5%, to $22.6 million in the fourth quarter of 2023 versus $26.7 million in 2022. The year-over-year decrease in EBIT resulted from higher selling and administrative expenses, offset partially by higher margins, and a higher proportion of ERS and product support sales. Adjusted EBIT increased $3.4 million, or 12.1%, to $31.7 million in the fourth quarter of 2023 from $28.2 million in the fourth quarter of 2022, and adjusted EBIT margin increased to 5.8% in the fourth quarter of 2023 from 5.2% in the same quarter of 2022.(1)
The Corporation generated net earnings of $11.1 million, or $0.52 per share, in the fourth quarter of 2023 versus $16.6 million, or $0.78 per share, in 2022. The Corporation generated adjusted net earnings of $17.8 million, or $0.83 per share, in both the fourth quarter of 2023 and the fourth quarter of 2022. Adjusted net earnings for the quarter excludes facility closure, restructuring, and other related costs of $1.4 million after tax, or $0.07 per share (2022 – nil), non-cash losses on mark to market of derivative instruments of $5.0 million after tax, or $0.23 per share (2022 – losses of $1.1 million after tax, or $0.05 per share), and losses on the change in fair value of contingent consideration of $0.2 million after tax, or $0.01 per share (2022 – nil).(1)
Adjusted EBITDA margin increased to 8.7% in the fourth quarter of 2023 from 7.8% in 2022.(1)
Cash flows generated from operating activities amounted to $48.5 million in the fourth quarter of 2023, compared to $19.1 million in the same quarter of the previous year. The increase of $29.4 million was mainly attributable to a decrease in accounts receivable of $3.9 million in the fourth quarter of 2023 compared to an increase of $33.0 million in the same quarter of the previous year, and a decrease in inventory of $28.1 million compared to an increase of $15.5 million in the same quarter of the prior year. This increase in cash generated was offset partially by a decrease in accounts payable and accrued liabilities of $20.3 million compared to an increase of $38.1 million in the same quarter of …

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