TSX Symbol:  WJX Revenue Decreases 6.5% While Increased Backlog and New Hitachi Construction Machinery Americas Financing Program Supports Continued Momentum in Near Term TORONTO, May 1, 2024 /CNW/ - Wajax Corporation ("Wajax" or the "Corporation") today announced its 2024 first quarter results. All monetary amounts are in Canadian dollars unless otherwise noted. Selected Highlights for the First Quarter First quarter revenue of $482.3 million and adjusted basic earnings per share of $0.59; First quarter gross profit margin of 22.0%, up from 20.4% in 2023, due to a higher proportion of, and higher margins on, product support, industrial parts and engineered repair services ("ERS") sales; First quarter adjusted EBITDA margin of 8.4%, up from 8.3% in 2023;  Backlog at March 31, 2024 of $587.1 million increased $33.1 million, or 6.0%, compared to December 31, 2023 backlog of $554.0 million, due primarily to higher construction and forestry orders; and Effective March 1, 2024, Hitachi Construction Machinery Americas Inc. ("HCMA") introduced a new financing program with competitive rates that will benefit Wajax customers and is expected to result in stronger equipment sales in the near term.(1) "In the first quarter of 2024, Wajax delivered revenue of $482.3 million, down $33.7 million, or 6.5%, from the first quarter of 2023. This year over year decrease was primarily due to a decline in construction and forestry equipment sales in western and eastern Canada," said Iggy Domagalski, President and Chief Executive Officer. "Given our increased backlog of $587.1 million as at March 31, 2024, and the new HCMA financing program available March 1, 2024, stronger equipment sales are expected in the near term, and inventory is expected to decline over the next two quarters."(1) He continued, "The recently completed $100.0 million increase in credit limit under our senior secured credit facility provides us with additional flexibility as we continue to invest in future organic growth and our robust pipeline of potential acquisitions. We continue to monitor end markets and customer purchasing patterns, while being prudent with costs and maintaining focus on the execution of our strategic priorities." (Dollars in millions, except per share data) Three Months EndedMarch 31 2024 2023 % change CONSOLIDATED RESULTS Revenue $482.3 $516.1 (6.5) % Equipment sales $98.1 $132.3 (25.8) % Product support $134.3 $134.8 (0.4) % Industrial parts $154.9 $153.3 1.0 % Engineered repair services (ERS) $84.2 $85.0 (0.9) % Equipment rental $10.8 $10.7 0.5 % Net earnings $14.7 $17.5 (15.8) % Basic earnings per share(2) $0.68 $0.81 (16.5) % Adjusted net earnings(1)(3) $12.8 $17.8 (27.8) % Adjusted basic earnings per share(1)(2)(3)         $0.59 $0.83 (28.5) % Adjusted EBIT(1) $25.6 $29.0 (11.8) % Adjusted EBITDA(1) $40.7 $43.0 (5.3) % Adjusted EBIT margin(1) 5.3 % 5.6 % (5.7) % Adjusted EBITDA margin(1) 8.4 % 8.3 % 1.3 % Outlook Wajax continues to see solid fundamentals in many of the markets it serves – particularly in mining and energy, supported by relatively elevated commodity prices and sustained customer budgeting for capital projects. Effective March 1, 2024, HCMA introduced a new financing program with competitive rates that will benefit Wajax's customers and is expected to result in stronger equipment sales in the near term. The majority of recent increases in short-term equipment rental arrangements are also expected to convert to equipment sales within six to twelve months, and as at March 31, 2024, Wajax had $54.2 million of equipment inventory related to such arrangements. As at March 31, 2024, the Corporation's inventory of $747.4 million increased by $116.4 million sequentially from December 31, 2023. This was primarily due to lower equipment sales in the first quarter of 2024, as well as management's determination to accept early delivery of certain equipment inventory in exchange for more favourable payment terms. Given the Corporation's increased backlog and the new HCMA financing program, inventory is expected to decline over the next two quarters. On January 11, 2024, the Corporation amended its senior secured credit facility to increase the facility limit from $400.0 million to $500.0 million. The increase provides the Corporation with additional flexibility as management continues to invest in future organic growth and the Corporation's robust pipeline of potential acquisitions. The Corporation's $57.0 million in senior unsecured debentures mature on January 15, 2025, and management is evaluating options to repay or refinance such debentures. Management continues to monitor end markets and customer purchasing patterns, while being prudent with costs, and continuing to 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 enterprise resource planning ("ERP") system rollout and additional technology improvements. For more information regarding these priorities, please see Wajax's Management's Discussion and Analysis for the quarter ended March 31, 2024, and annual report for the year ended December 31, 2023. Dividend The Corporation has declared a dividend of $0.35 per share for the second quarter of 2024, payable on July 3, 2024, to shareholders of record on June 14, 2024. First Quarter Highlights Revenue in the first quarter of 2024 decreased $33.7 million, or 6.5%, to $482.3 million, from $516.1 million in the first quarter of 2023. Regionally: Revenue in western Canada of $219.7 million decreased 7.7% from the same period in the prior year due primarily to lower equipment sales in the construction and forestry category. This increase was offset partially by higher industrial parts sales. Revenue in central Canada of $90.5 million increased 3.7% from the same period in the prior year due primarily to higher ERS sales. Revenue in eastern Canada of $172.2 million decreased 9.8% from the same period in the prior year due primarily to lower equipment sales in the construction and forestry, and material handling categories. Gross profit margin of 22.0% in the first quarter of 2024 increased 150 basis points ("bps") compared with gross profit margin of 20.4% in the same period of 2023. The increase was driven primarily by a higher proportion of, and higher margins on, product support, industrial parts and ERS sales.(1) Selling and administrative expenses as a percentage of revenue increased to 16.4% in the first quarter of 2024 from 14.7% in the same period of 2023. Selling and administrative expenses in the first quarter of 2024 increased $3.3 million compared with the first quarter of 2023. This increase was due primarily to higher personnel costs.(1) EBIT decreased $2.8 million, or 9.5%, to $26.7 million in the first quarter of 2024 versus $29.5 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 11.8%, to $25.6 million in the first quarter of 2024 from $29.0 million in the first quarter of 2023, and adjusted EBIT margin decreased to 5.3% in the first quarter of 2024 from 5.6% in the same quarter of 2023.(1) The Corporation generated net earnings of $14.7 million, or $0.68 per share, in the first quarter of 2024 versus $17.5 million, or $0.81 per share, in the same period of 2023. The Corporation generated adjusted net earnings of $12.8 million, or $0.59 per share, in the first quarter of 2024 versus $17.8 million, or $0.83 per share, in the same period of 2023. Adjusted net earnings in the first quarter of 2024 excludes non-cash gains on mark to market of derivative instruments of $1.9 million after tax, or $0.09 per share (2023 – losses of $0.3 million, or $0.01 per share).(1) Adjusted EBITDA margin increased to 8.4% in the first quarter of 2024 from 8.3% in the first quarter of 2023.(1) Cash flows used in operating activities amounted to $7.3 million in the first quarter of 2024, compared with cash flows used in operating activities of $69.6 million in the same quarter of the previous year. The increase in cash generated of $62.2 million was mainly attributable to a decrease in contract assets of $16.3 million during the quarter compared to an increase of $7.0 million in the prior year, a decrease in trade and other receivables of $18.5 million during the quarter compared to a decrease of $5.0 million in the prior year, and income taxes paid of $10.0 million during the quarter compared to $27.0 million in the prior year. The Corporation's backlog at March 31, 2024 of $587.1 million increased $33.1 million, or 6.0%, compared to December 31, 2023 backlog of $554.0 million due primarily to higher construction and forestry orders. The Corporation's backlog at March 31, 2024 increased $56.4 million, or 10.6%, compared to March 31, 2023 backlog of $530.8 million due to higher mining and material handling orders, offset partially by lower construction and forestry, and industrial parts orders.(1) Working capital of $542.9 million at March 31, 2024 decreased $17.4 million from December 31, 2023 due primarily to higher accounts payable and accrued liabilities, lower trade and other receivables, lower contract assets, and the Corporation's unsecured subordinated debentures being classified within current liabilities in the current quarter versus non-current liabilities in the prior quarter. These decreases were offset partially by higher inventory. Working capital efficiency was 25.6%, an increase of 180 bps from December 31, 2023, due to the higher trailing four quarter average working capital and the lower trailing 12-month revenue. Excluding the debentures, working capital of $599.3 million at March 31, 2024 increased $39.1 million from December 31, 2023, and working capital efficiency was 26.3%, an increase of 240 bps from December 31, 2023.(1) The Corporation's leverage ratio increased to 2.20 times at March 31, 2024, compared to 1.98 times at December 31, 2023. The increase in leverage ratio was due to the higher debt level in the current period, driven largely by the Corporation's investment in inventory, and lower trailing 12-month pro-forma adjusted EBITDA. The Corporation's senior secured leverage ratio was 1.85 times at March 31, 2024, compared to 1.64 times at December 31, 2023.(1) Effective January 2, 2024, Wajax completed adjustments to its senior ...