Q4 2025 Exco Technologies Ltd Earnings Call

5 conference call webcast. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session to ask a question during the session. Please press star 1 and 1 on your telephone, you will then hear an automated message. Advising your hand is raised to withdraw your question. Please press star 1 and 1. Again, please note that today's conference is being recorded. I would now like for the conference over to your speaker, Mr. Darren Kirk president and CEO. Please go ahead, sir.

Thank you and good morning everyone. Welcome to Expo, Technologies, fiscal, 2025 fourth quarter conference call. I'll begin with some high-level comments on our performance in the invo operating environment for the quarter and full year. And then I'll turn the call over to our CFO Matthew pasno for a more detailed review of the financial results.

After our prepared remarks, we'll open the line for your questions.

Before we start, I'd remind listeners that are discussion today. Will include forward-looking statements. These statements are subject to various risks and uncertainties and actual results may be or may differ.

Please refer to the cautionary language in our Q4, press release and mdna, and annual report. All of which will be available on our website and on Cedar Plus

Fiscal 2025 was a year that tested the resilience of our business models and I'm pleased with how the organization responded.

For the full year, we generated approximately 615 million of Revenue, nearly 70 million of Eva dose and 63 cents of earnings per share.

Free cash flow remained, a clear highlight at roughly 41 million, which we used the fund growth in strengthen our balance sheet. We invested about 16 million in growth, Capital expenditures returned, approximately 20 million dollars to shareholders through dividends, and share, purchases, and reduce net debt to about 67 million.

These results capture the essence of our fiscal 2025 theme resilient by design, a reflection of how our Diversified product portfolio, Geographic footprint. And operating model allow us to navigate a difficult environment and still create value.

Let me briefly touch on our performance of the 2 segments.

In Auto Solutions 4 fourth quarter sales were down about 2% year-over-year, the decline in primarily reflects customer-driven, launch delays and then unfavorable vehicle mix including lower us Imports of certain foreign build Vehicles where we have meaningful accessory content.

Industry conditions, remain challenging, tariff uncertainty shifting regulations and consumer. Affordability. Pressures continued to weigh on overall sentiment, even as OEM supported Demand with higher incentives and dealer inventories normalized.

At the same time, we are encouraged by structural supports such as an aging vehicle, Fleet the potential for lower interest rates and that continued to adoption of advanced Safety and connectivity features. These factors should underpin relatively stable, North American and European production levels over the medium term.

I guess this backdrop our strategy in automotive Solutions is clear, increased content for vehicle through interior trim and accessory programs, that enhance vehicle, appeal and functionality.

Intensify our focus on higher margin, OEM accessory platforms and continue embedding Automation remanufacturing, and disciplined, cost management across our operations.

we've taken actions to streamline our operations including selective restructuring, and headcount reductions in this and prior periods, which have improved structural efficiency, and positions this segment to benefit as new programs ramp up and market conditions normalize,

As well, newer, programs are launching and healthier margins and are rope or porting pipeline for both interior and accessory products remains robust.

In the quarter and year pre-tax profit, and Automotive Solutions, was impacted by lower sales, volumes product, mix and higher labor costs. Particularly in Mexico, partially offset by ongoing efficiency initiatives in pricing actions. We have incurred, a modest amount of restructuring costs to support automation Lean Manufacturing in initiatives and we expect that we expect will drive better margins over time.

Turning to cast an extrusion fourth quarter sales were down about 5% versus last year. The picture within this segment is mixed but encouraging

Extrusion tooling continued to perform relatively well supported by a diverse set of end markets including building and construction Transportation, electrical, AI infrastructure and sustainable energy.

Efforts, the standardized processes, centralized, certain support functions and increase automation have improved leak times quality and capacity which we believe is translating into market share gains.

In diecast, tooling sales for new molds and related tooling remained comparably soft and the quarter as customers. Previously delayed or re prioritized programs in response to slower EV adoption regulatory, uncertainty and tariff related risks. However, we are now seeing a meaningful pickup in quoting activity and orders. Particularly as oem's pivot toward hybrid and smaller ice platforms. And move ahead with new powertrain programs after a period of reassessment.

We continue to believe that the slowdown in diecast, orders has been more about timing than structural change as evidenced by our current backlog, which is now above historical norms.

We're also seeing growing demand for 3D, printed tooling, particularly for larger and more complex applications, including Giga. Presses, our in-house additive manufacturing capabilities combined with deep diecast engineering experience. Allows us to deliver high performance, highly complex solutions. That will be difficult if not impossible to produce with conventional methods.

Our renewer casual facilities in Morocco and Mexico are progressing. Bringing us closer to key customers in Europe, Latin America and the US Sunbelt.

While these Greenfield sites are ramping up behind our prior, expectations and remain a drag on near-term profitability, we are seeing operational Improvement and expect them to become important contributors as volumes build over the year ahead.

We cast an extrusion pre-tax profit with lower, year-over-year reflecting reduced, diecast, volumes higher, labor, and overhead and under absorbed Fit cost related to newer facilities. At the same time. Continued progress in AI enabled, automation process standardization.

Evaluated, heat treatment services is enhancing productivity and improving the quality and cost effectiveness of our offerings.

Let me spend a moment on the broader environment and how it ties into our strategy.

Fiscal 2025 was characterized by significant industry. Headwinds you have tariff, actions and retaliatory measures from trading partners which disrupted trade flows and weighed on demand for certain foreign build vehicles in components.

Shifting emissions, regulations. And policy uncertainty, which slowed the pace of EV adoption extended. The life of ice platforms and increased interest in hybrids and software, macroeconomic conditions, particularly in Europe. Combined with weaker consumer confidence and ongoing affordability concerns.

These factors affected many of our Automotive related businesses, including interior and accessory products, diecast molds, and rebuilds consumable, tooling, and Extrusion, tooling for automotive applications by contrast. We saw a healthy demand in a range of non-automotive and markets such as building and construction, machinery, and equipment, electrical AI infrastructure, sustainable, energy, and nuclear energy.

Non-automotive Extrusion tooling represents about.

30% of X goes overall revenue, and this diversity helps stabilize our results. Underscoring, the advantages of our multi segment multi-market footprint.

Incurring. We are seeing constructive developments across several fronts and die casting. Oems are moving forward with powertrain programs after a period of reassessment, and we are participating in a robust recovery in both quoting and award activities. As I mentioned, our backlog level in this segment is now been rebuilt above the historical norms

There's also greater Clarity on tariffs, for several export markets into the US, which is supporting higher vehicle. Import volumes from models that feature our accessory content. Additionally,

some oems are now planning to shift production of foreign built, Vehicles into the US market.

As well. Reassuring and supply chain regionalization in North America are gaining momentum driving incremental demand for Extrusion and high-pressure die-cast tooling where we have exceptionally strong competitive positions.

Support EV hybrid and Ice platforms without relying on any single technology.

That flexibility allows us to capture value in today's mix of ice and hybrid programs, while positioning ourselves for the next wave of EV platforms and advanced Manufacturing Technologies such as Giga presses as they scale over time.

Beyond Automotive, we are increasing our involvement in nuclear energy and other critical infrastructure markets.

Um, that is important as a merging pillar.

Customers in these sectors are seeking domestic partners with high Precision Machining capabilities and long-term reliability. And are capabilities, are well aligned with those needs.

Our strategy is to build a company that is structurally resilient and positioned for long-term growth, regardless of short-term macro volatility,

On the operational side, we have expanded, our casting Extrusion footprint, through Acquisitions and Greenfield Investments, including newer, casual facilities in Morocco and Mexico and advanced in-house heat, treat capabilities, we've invested heavily in Automation and process standardization to drive product quality and scalability and continue to optimize our Automotive Solutions. Headcount aligning capacity with current and expected volumes while maintaining low-cost manufacturing base,

on the technology and Innovation side, we are a leader in 3D printing of tool steel, components enabling complex, geometries and optimized, cooling that improve tool, performance and reduce waste

we are increasing our use of AI and machine learning in CAD and Tam and operations to accelerate design reduce

Design reduce rework optimized tool paths and improved machine, utilization and yield and we're designing workflows and leveraging common systems to centralize select functions and lower cost jurisdictions improving consistency while in in reducing structural costs.

From a financial and strategic perspective. All reiterate a point that we made earlier this year. In light of the heightened uncertainty around global trade policy, particularly tariffs. We made the difficult decision in Q2 to withdraw. Our previously, announced fiscal 2026 revenue ibida and EPS targets.

Those targets originally set in 2021 and measured envisioned, reaching 7, 5, 0. 5 0 6.

While the current tariff environment makes it impractical to reaffirm that specific time frame, the underlying strategic drivers, remain intact. And in our view, achievable over a longer Horizon,

a key competitive Advantage for XO, is that nearly all of our products are sold in North America that are sold in North America. Comply with usmca rules of origin. We expect usmca compliant, products to remain, exempt, from tariffs, which positions us favorably versus many Global peers. Our substantial North American footprint, particularly in the US for Extrusion dies and large diecast. Molds means a significant portion of our business is inherently aligned with the ongoing trade and reassuring. Dynamics, it elevated. Tariffs on imports from non-compliant jurisdictions persist, we could see a further competitive Tailwind as customers. Look for Reliable local suppliers.

stepping back the long-term fundamentals of our markets, remain attractive, continued, lightweighting and increased use of aluminum and other Advanced Materials, gradual ramp up of EV, and hybrid platforms continued investment in AI infrastructure, sustainable energy and nuclear and Broad reshoring and supply chain localization Trends across North America,

We are realistic about the macro environment. We know, it will remain choppy in the near term but we are confident in exposed long-term trajectory our balance sheet is strong. Our operations are becoming more efficient and Technology enabled and our teams around the world are executing at a high level with that. I'll now turn the call to Matthew for a detailed review of the financial results. After his remarks, I'll return with some closing comments before we open the line for questions,

Thank you. Darren good morning, ladies and gentlemen.

Consolidated sales for the fourth quarter and it's September 30th 2025, we're 150.7 million compared to 155.4 million in the same quarter last year. A decrease of 4.8 million or 3% foreign exchange movements increased sales by 4.1 million dollars during the quarter?

Consolidated net income for the quarter was 8.2 million or 22 cents. Per share compared to 7.7 million or 20 cents per share last year.

First of the provisions and recognition of previously unrecorded tax assets. Adjusting, for these discrete items are normalized. Tax rate was approximately 24.2%

Quarterly Consolidated even though was million dollars, representing 11.9% of sales compared to 20.6 million or 13% in the prior year period.

Fourth quarter sales for the automotive solution. Segment were 77.9 million down 2% from the prior year quarter, the decline primarily reflects customer-driven launch delays.

And an unfavorable vehicle mix, particularly reduced us, Imports of foreign belt, Vehicles were Expo has meaningful content. Tara uncertainty of affordability. Pressures. And broader macroeconomic softness continues to weigh on industry volumes, despite these challenges quoting activity remains solid and management, expects to benefit from recent and upcoming program, launches that should increase content per vehicle and support recovery in both sales and margins.

Additionally, reductions in U of us, tariff rates.

For certain countries provide incremental relief and ongoing reassuring. Trends by Foreign oems are expected to benefit future activity.

Pre-tax profit for the automotive Solutions. Segment was 5.1 million down 2.7 million or 35% from last year. This decline is primarily driven by lower volumes product, mix shifts and higher labor costs particularly in Mexico. The segment incurred houses and restructuring charges supporting lean manufacturing and automation. Initiatives aiming at improving cost, competitiveness, at current production levels and positioning the segment for stronger results as new programs ramp up.

fourth quarter sales for the casting and Extrusion segment, where 72.7 million, a decrease of 3.5 million or 5% from last year, Extrusion tooling sales increased supported by strong Diversified in markets such as building and construction Transportation sustainable energy, AI infrastructure and electrical components

Process standardization and centralized support functions. Continue to enhance lead times quality and capacity contributing to market share gains.

Dicap tooling sales. However remains relatively soft uh to previously delayed EV related program launches and extended platform life cycles as oem's reassess product strategies amid Regulatory and tariff uncertainty.

Coding activity and Order intake for Diecast. Molds have improved meaningfully in recent months and demand for X goes added in a 3D printed tooling continues to grow particularly in large and more complex applications such as gigapress molds.

The segment reported pre-tax profit of 4.5 million down 1.8 million, or 29% from the prior year quarter. This was driven by lower volumes unfavorable, mix higher, direct, labor, and overhead. And under absorbed fixed costs,

Startup challenges at cast Hills, Mexico and Morocco facilities. Continue to weigh on profitability although Trends are improving management remains highly focused on pricing initiatives, operational efficiency process standardization and automation all of which are expected to drive approved. Results going forward.

Corporate expenses were, uh, $900,000 compared to $2 million last year. The reduction reflects foreign exchange gains and lower compensation and stock option expense

Operating cash flow before working capital changes, was 14.9 Million compared to 16.7 Million last year.

The variance, primarily reflects a difference in deferred income, tax interest and depreciation expense partially offset by higher net income.

Working capital changes contributed 6.7 million in cash.

This quarter compared to 12.2 million in the prior year quarter cash generated from working capital was driven by favorable movements and accounts, receivable accounts, payable provisions and approvals, partially offset by higher inventory, and reduced customer Advance payments.

Capital expenditures, total 11.1 million, including 4.5, million of growth Capital, XO ended the quarter with net debt of 67.1 million compared to 73.4 Million last year. We also had 61.6 million in available, uh, liquidity under our banking facilities.

Our financial position remains strong, providing the flexibility to continue funding strategic Investments, grow growth, initiatives dividends and other opportunities that may arise.

That concludes my comments. We can now transition back to Darren for his closing remarks.

Thanks, Matthew. Let me close with a few brief thoughts.

Fiscal, 2025 underscored, both the challenges and opportunities. In our markets we Face softer Automotive production delayed program launches trade, driven uncertainty and macro headwinds particularly in Europe yet in that context, Echo delivered, solid profitability, strong free cash flow lower, net debt.

With cautious optimism.

The Tariff environment remains complex but some of the extreme scenarios that we once contemplated have receded. And we are seeing evidence of Greater Clarity and stability in several key trade corridors

At the same time, secular Trends such as reassuring, lightweighting and increased investment in critical energy, and infrastructure are moving in our favor.

Most importantly Expo today is a stronger, more agile, and more Innovative company that it was just a few years. Years ago, we have expanded, our footprint, deepened our capabilities and embraced new technologies while remaining disciplined stewards of capital and committed Partners to our customers.

I want to close by thanking our employees around the world for their dedication and resilience that customers for their trust, and our shareholders for their ongoing support that concludes our prepared. Remarks operator, please open the line for questions.

Thank you as a reminder, to ask a question. Please press star, 1, 1 1 on your telephone and wait for your name, to be announced to withdraw your question. Please press star 1 and 1. Again once again, please press star 1, 1 1 for any questions and wait for your name. To be announced till we leave for your question. Please. Press star 1 1 1 again.

We are not going to proceed with our first question.

And the questions come from the line of Nico. Kuran from Acumen Capital, please ask your question.

Thanks, Jake my questions.

Hey, good morning. Nick. Hey Nick.

I'm just my first question is on CNA it appear to take a step down in the quarter. Um is this reflecting the the ongoing kind of restructuring that you've done?

Yeah. Um,

We saw a reduction in salaries and wages uh and some of those overhead functions. Uh, for sure.

Good. And then uh, maybe I'm the the demand side. What do you see not in the first quarter so far?

Uh, so I guess, um, let me just take it by, uh, the kind of 3 pillar segments. But, um, so on Extrusion, uh, tooling. Uh, I would say that, um, demand is consistent with, uh, the high level that we have been experienced over the last, uh, several quarters. Um, so no change there. Uh, that business, of course, is, is very diverse and, uh, it does seem that. AI infrastructure spending is, uh, is a bit of a Tailwind there. Lots of extrusions go into, uh, AI data center, uh, structures. And, uh, you know, right through the racking systems.

The cooling and and whatnot. So ultimately that drives um increased demand for Extrusion tooling. Um which um you know can offset other sectors that uh that may periodically be slower. Uh, diecast tooling remains, um, uh, in a strong demand environment, uh, as we've indicated, uh, you know, about 9 months ago. Uh, there was a, a fall-off in demand for new orders for Diecast pooling as oems reassessed their future vehicle platform plans. Uh, pivoting away from EVS towards hybrids and and and and that's obviously impacts that our sales uh through the last couple of quarters uh, for Diecast products. But, um, you know that the demand flow is is continuing and we should start to see the benefit of our sale that on our sales, uh, you know, toward the end of of q1. But certainly by Q2, uh, and then in automotive solution,

Solutions, I would say it's uh, it's picked up a bit. Um, uh, you know, in the first quarter relative to the fourth quarter, uh, 1 of the key, uh, factors for us there in our performance for Q4 and fiscal. 25 was the the tariffs that, uh, us imposed on foreign markets, particularly the, you know, Japanese and South Korean, Asian markets, and that resulted in a reduction in vehicle imports from those territories. And

Um, and and there seems to be some stabilization there.

Yeah, and maybe, uh, a question for Matthew. What should we expect in terms of capex for fiscal 26?

So our capex in 26 uh I'll say 27 28, million is kind of where we see things looking right now we are watching it closely. As you know, we've spent a lot in recent years and some real growth areas and uh, you know, it's not a maintenance capex but it's getting closer to that.

To you.

Well, you know, I think we mentioned before Darren and I

Are, uh, always looking at m&a Targets, or, or kind of looking at Sims and ideas, but, you know, we're, we want to be strategic. We want to find 1 that fit within our value stream and and what we produce and what we know, um, you know, Automotive side, we like the accessory market and, uh, you know, but, you know, we're not going to take anything that doesn't provide an accretive value right away or that we don't have the management of the support to, uh, be able to take it on properly. I think it's

Great. That's all from me. Thanks for check my questions and I'll pass along. Okay, thanks Nick. Thanks. Thanks.

Thank you, as I found a reminder to ask a question. Please press star, 1 1 1 on your telephone and wait for your name to be announced until we've got your question please. Press star 1, 1 1 again.

We have no further questions of this time. I'll hand back to you for any final remarks. Thank you.

Okay. Uh, thank you, Raz. And thank you everyone for joining us today. We look forward to speaking with you again, uh, in the, uh, New Year.

This concludes today's conference call. Thank you all for participating. You may now disconnect your lines. Thank you, and have a good rest of your day.