TSX Symbol:  WJX Stronger Equipment Sales Contribute to Inventory Reduction as ERP System Implementation Reaches Major Milestone TORONTO, August 8, 2024 /CNW/ - Wajax Corporation ("Wajax" or the "Corporation") today announced its 2024 second quarter results. All monetary amounts are in Canadian dollars unless otherwise noted. Selected Highlights for the Second Quarter Second quarter revenue of $568.3 million and adjusted basic earnings per share of $1.06, down from $586.2 million and $1.26, respectively, in the same quarter of the prior year; Second quarter gross profit margin of 20.9%, up from 19.9% in 2023, due to higher margins on engineered repair services ("ERS") sales, and a higher proportion of, and higher margins on, product support sales; Cash flows generated from operating activities of $35.8 million in the second quarter of 2024 compared with cash flows used in operating activities of $6.0 million in the same quarter of the prior year; Second quarter adjusted EBITDA margin of 9.6%, compared to 9.8% in 2023; and The competitive new financing program introduced by Hitachi Construction Machinery Americas Inc. ("HCMA") effective March 1, 2024, as well as management's focus on reducing inventory levels, resulted in stronger equipment sales and lower inventory in the second quarter of 2024 as compared to the first quarter of 2024.(1) "Compared to the first quarter of 2024, equipment sales improved by 84% and adjusted basic earnings per share improved by 78%, resulting in improved cash flow and a reduction in inventory and debt levels. Further inventory reductions are expected through the remainder of 2024," said Iggy Domagalski, President and Chief Executive Officer. "The decrease in equipment sales versus the prior year period was primarily the result of the delivery of a large mining shovel in the second quarter of 2023 which did not recur this year. Lower revenue against a strong comparable quarter in 2023 was partially offset by growth in higher margin product support revenue, as well as a solid improvement in gross margin." He continued, "As an organization, we remain focused on driving further improvements to operating efficiency and, during the quarter, we rolled out the Corporation's new ERP system to a further 57 industrial parts and ERS branch locations, some of which are colocations. We now have a total of 99 branch locations operating on the new ERP system, representing approximately 90% of 2023 annual revenue." (dollars in millions, except per share data) Three Months EndedJune 30 Six Months EndedJune 30 2024 2023 % change 2024 2023 % change CONSOLIDATED RESULTS Revenue $568.3 $586.2 (3.1) % $1,050.6 $1,102.3 (4.7) % Equipment sales $180.4 $190.4 (5.2) % $278.5 $322.6 (13.7) % Product support $144.8 $140.6 3.0 % $279.2 $275.4 1.4 % Industrial parts $147.2 $154.9 (5.0) % $302.0 $308.2 (2.0) % Engineered repair services (ERS) $85.0 $89.0 (4.4) % $169.3 $174.0 (2.7) % Equipment rental $10.9 $11.4 (4.8) % $21.7 $22.2 (2.2) % Net earnings $20.6 $29.0 (28.9) % $35.4 $46.5 (24.0) % Basic earnings per share(2) $0.95 $1.35 (29.6) % $1.63 $2.16 (24.7) % Adjusted net earnings(1)(3) $22.9 $27.1 (15.4) % $35.8 $44.9 (20.4) % Adjusted basic earnings per share(1)(2)(3) $1.06 $1.26 (16.3) % $1.65 $2.09 (21.1) % Adjusted EBIT(1) $39.3 $42.7 (8.0) % $64.9 $71.8 (9.6) % Adjusted EBITDA(1) $54.7 $57.2 (4.3) % $95.4 $100.2 (4.8) % Adjusted EBIT margin(1) 6.9 % 7.3 % (5.1) % 6.2 % 6.5 % (5.1) % Adjusted EBITDA margin(1) 9.6 % 9.8 % (1.3) % 9.1 % 9.1 % (0.1) % Outlook Wajax continues to see solid fundamentals in certain of the markets it serves, particularly in mining and energy, but has observed reduced activity in industrial and forestry. Management is continuing to monitor end markets and customer purchasing patterns, while being prudent with costs, and maintaining focus on the execution of its 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 ERP system rollout and additional technology improvements. Management continues to evaluate options to repay or refinance the Corporation's $57.0 million in senior unsecured debentures maturing January 15, 2025. Dividend The Corporation has declared a dividend of $0.35 per share for the third quarter of 2024, payable on October 2, 2024, to shareholders of record on September 16, 2024. Second Quarter Highlights Revenue in the second quarter of 2024 decreased $17.9 million, or 3.1%, to $568.3 million, from $586.2 million in the second quarter of 2023. Regionally: Revenue in western Canada of $240.4 million decreased 10.8% from the same period in the prior year due primarily to lower construction and forestry equipment sales, and lower mining equipment sales driven largely by the delivery of a large mining shovel in the second quarter of the prior year with no such delivery in the current year. Revenue in central Canada of $96.6 million decreased 6.4% from the same period in the prior year due primarily to lower equipment sales in the construction and forestry category and lower industrial parts sales. Revenue in eastern Canada of $231.3 million increased 8.3% from the same period in the prior year due primarily to higher equipment sales in the construction and forestry category, and higher overall sales in the power systems category, partially offset by lower industrial parts sales. Gross profit margin of 20.9% in the second quarter of 2024 increased 100 basis points ("bps") compared with gross profit margin of 19.9% in the same period of 2023. The increase was driven primarily by higher margins on ERS sales, and a higher proportion of, and higher margins on, product support sales.(1) Selling and administrative expenses as a percentage of revenue increased to 14.4% in the second quarter of 2024 from 12.8% in the same period of 2023. Selling and administrative expenses in the second quarter of 2024 increased $6.8 million compared with the second quarter of 2023. This increase was due primarily to higher personnel costs.(1) EBIT decreased $4.7 million, or 11.3%, to $37.2 million in the second quarter of 2024 versus $41.9 million in the same period of 2023. The year-over-year decrease in EBIT resulted primarily from lower sales volumes and higher personnel expenses, offset partially by an improved gross profit margin. Adjusted EBIT decreased $3.4 million, or 8.0%, to $39.3 million in the second quarter of 2024 from $42.7 million in the second quarter of 2023, and adjusted EBIT margin decreased to 6.9% in the second quarter of 2024 from 7.3% in the same quarter of 2023.(1) The Corporation generated net earnings of $20.6 million, or $0.95 per share, in the second quarter of 2024 versus $29.0 million, or $1.35 per share, in the same period of 2023. The Corporation generated adjusted net earnings of $22.9 million, or $1.06 per share, in the second quarter of 2024 versus $27.1 million, or $1.26 per share, in the same period of 2023. Adjusted net earnings in the second quarter of 2024 excludes non-cash losses on mark to market of derivative instruments of $2.3 million after tax, or $0.11 per share (2023 – gains of $1.9 million after tax, or $0.09 per share).(1) Adjusted EBITDA margin decreased to 9.6% in the second quarter of 2024 from 9.8% in the second quarter of 2023.(1) Cash flows generated from operating activities amounted to $35.8 million in the second quarter of 2024, compared with cash flows used in operating activities of $6.0 million in the same quarter of the previous year. The increase in cash generated of $41.8 million was mainly attributable to a decrease in inventory of $22.5 million during the quarter compared to an increase of $40.7 million in the same quarter of the prior year, and a decrease in trade and other receivables of $9.0 million during the quarter compared to an increase of $7.9 million in the same quarter of the prior year. These increases in cash generated are offset partially by a decrease in accounts payable and accrued liabilities of $14.1 million during the quarter compared to an increase of $13.0 million in the same period of 2023. The Corporation's backlog at June 30, 2024 of $544.9 million decreased $42.2 million, or 7.2%, compared to March 31, 2024 backlog of $587.1 million due primarily to lower construction and forestry, material handling and ERS orders. The Corporation's backlog at June 30, 2024 decreased $6.4 million, or 1.2%, compared to June 30, 2023 backlog of $551.2 million due to lower construction and forestry, material handling, ERS, and industrial parts orders, offset partially by higher mining orders.(1) Working capital of $533.3 million at June 30, 2024 decreased $9.6 million from March 31, 2024 due primarily to lower inventory, offset partially by lower accounts payable and accrued liabilities. Working capital efficiency was 26.5%, an increase of 80 bps from March 31, 2024, due to the higher trailing four ...