Q3 2026 Exco Technologies Ltd Earnings Call

July 30, 2026

Speaker #1: For the specific presentation, there'll be a question-and-answer session. To ask a question during the session, you will need to press star 11 on your telephone.

Speaker #1: You will then hear an automated message advising your head is raised. Please note, today's conference is being recorded. I would like to hand the conference over to your speaker.

Speaker #1: So, Darren Kirk, president and CEO, please go ahead, sir.

Speaker #2: Thank you, Livia, and good morning, everyone. Welcome to Exco Technology's third-quarter conference call for fiscal 2026. I'm joined this morning, as usual, by Matthew Posno, our chief financial officer.

Darren Kirk: Thank you, Olivia. Good morning, everyone. Welcome to Exco Technologies' Q3 conference call for fiscal 2026. I'm joined this morning, as usual, by Matthew Posno, our Chief Financial Officer. Before we begin, I'll remind everyone that today's call may contain forward-looking statements and references to non-IFRS measures. Please refer to the cautionary language and reconciliations in yesterday's news release and our MD&A available on SEDAR+ and our website. I'll begin today with an overview of our operations and strategic progress during the quarter, including an update on the official launch of Exco Energy, which I believe represents one of the most exciting developments at our company in many years. Matthew will then walk through the financial details. Following that, we will open the line for questions. Exco delivered solid progress in Q3.

Speaker #2: Before we begin, I'll remind everyone that today's call may contain forward-looking statements and references to non-IFRS measures. Please refer to the cautionary language in reconciliations in yesterday's news release and our MD&A available on Cedar Plus and our website.

Speaker #2: I'll begin today with an overview of our operations and strategic progress during the quarter, including an update on the official launch of Exco Energy, which I believe represents one of the most exciting developments at our company in many years.

Speaker #2: Matthew will then walk through the financial details and, following that, we will open the line for questions. Exco delivered solid Consolidated sales increased 7% year over year to $165 million, a third-quarter record for the company.

Darren Kirk: Consolidated sales increased 7% year-over-year to CAD 165 million, a Q3 record for the company, while EBITDA increased 26% to CAD 18.5 million. Our consolidated EBITDA margin expanded by roughly 170 basis points to 11.2%, driven by a meaningful improvement in our casting and extrusion segment. Net income was CAD 5.8 million or CAD 0.15 per share, which included CAD 0.02 of restructuring charges. Excluding those charges, the underlying earnings power of the business continued to build in the quarter. More important than any single quarter's results is the direction of travel. Over the past several years, we have invested significantly in our business. New greenfield facilities, expanded machining and heat treatment capacity, automation, and industry-leading additive manufacturing capabilities. Those investments are now essentially complete. Our capital spending has moderated accordingly.

Speaker #2: While EBITDA increased 26% to $18.5 million. Our consolidated EBITDA margin expanded by roughly $170 basis points to $11.2%, driven by a meaningful improvement in our casting and extrusion segment.

Speaker #2: Net income was $5.8 million, or $0.15 per share, which included $0.02 of restructuring charges. Excluding those charges, the underlying earnings power of the business continued to build in the quarter.

Speaker #2: More important than any single quarter's results is the direction of travel. Over the past several years, we have invested significantly in our business: new greenfield facilities, expanded machining and heat treatment capacity, automation, and industry-leading additive manufacturing capabilities.

Speaker #2: Those investments are now essentially complete, and our capital spending has moderated accordingly. Our priority and the lens through which we are managing the company is translating that expanded asset base into higher utilization, improved margins, stronger cash generation, and better returns on capital.

Darren Kirk: Our priority, and the lens through which we are managing the company, is translating that expanded asset base into higher utilization, improved margins, stronger cash generation, and better returns on capital. Q3 demonstrated clear progress against these objectives. We believe there is much more to come. Let me turn to the development that I am most excited about. During the quarter, we officially launched Exco Energy, a new initiative to pursue opportunities in the Canadian nuclear energy sector and, over time, in other advanced and technologically demanding end markets. The logic behind Exco Energy is straightforward. Through our large mold group, Exco has spent decades machining some of the largest, most complex, and most demanding precision components in North America.

Speaker #2: The third-quarter demonstrated clear progress against these objectives, and we believe there is much more to come. Let me turn to the development that I am most excited about.

Speaker #2: During the quarter, we officially launched Exco Energy. A new initiative to pursue opportunities in the Canadian nuclear energy sector and, over time, in other advanced and technologically demanding end markets.

Speaker #2: The logic behind Exco Energy is straightforward. Through our large mold group, Exco has spent decades machining some of the largest, most complex, and most demanding precision components in North America.

Speaker #2: We operate among the most advanced large-scale machining engineering and quality systems on the continent, supported by rigorous process controls and a workforce whose craftsmanship is very difficult to replicate.

Darren Kirk: We operate among the most advanced large-scale machining, engineering, and quality systems on the continent, supported by rigorous process controls and a workforce whose craftsmanship is very difficult to replicate. Those are precisely the capabilities the nuclear industry requires. Capabilities that are in short supply as Canada embarks on what we believe will be a multi-decade expansion of its nuclear energy infrastructure. The demand backdrop is compelling. Electricity consumption is rising structurally, driven by electrification, reshoring of industrial activity, and the enormous power requirements of AI in data center infrastructure. Nuclear energy is increasingly recognized as essential to meeting that demand with reliable, secure, emissions-free baseload power. In Canada, that translates into major refurbishment and life extension programs at existing reactor fleets, new large-scale builds, and an emerging pipeline of small modular reactors, all of which require a deep domestic supply chain of qualified precision manufacturing partners.

Speaker #2: Those are precisely the capabilities the nuclear industry requires—capabilities that are in short supply as Canada embarks on what we believe will be a multi-decade expansion of its nuclear energy infrastructure.

Speaker #2: The demand backdrop is compelling. Electricity consumption is rising structurally, driven by electrification, reshoring of industrial activity, and the enormous power requirements of AI in data center infrastructure.

Speaker #2: Nuclear energy is increasingly recognized as essential to meeting that demand with reliable, secure, emissions-free baseload power. In Canada, that translates into major refurbishment and life extension programs at existing reactor fleets, new large-scale builds, and an emerging pipeline of small modular reactors, all of which require a deep domestic supply chain of qualified, precision manufacturing partners.

Speaker #2: We intend for Exco to be an important part of that supply chain. We were honored that the Government of Canada chose to host its nuclear energy strategy announcement at our Nuclear Newmarket facility on June 22nd.

Darren Kirk: We intend for Exco to be an important part of that supply chain. We were honored that the government of Canada chose to host its nuclear energy strategy announcement at our Newmarket facility on 22 June. We view that event as a strong validation of the relevance of our capabilities to Canada's nuclear ambitions, and it has meaningfully raised our profile with utilities, government stakeholders, and industry partners. Our engagement across the sector has deepened considerably, and quoting activity has already been very encouraging. I want to be clear about how we are approaching this opportunity. Exco Energy will leverage our existing precision machining assets, engineering talent, and quality systems, which means incremental revenue in this area carry attractive economics and improve utilization and returns on capital across our existing footprint.

Speaker #2: We view that event as a strong validation of the relevance of our capabilities to Canada's nuclear ambitions and that it has meaningfully raised our profile with utilities, government stakeholders, and industry partners.

Speaker #2: Our engagement across the sector has deepened considerably, and quoting activity has already been very encouraging. I want to be clear about how we are approaching this opportunity.

Speaker #2: Exco Energy will leverage our existing precision machining assets engineering talent and quality systems, which means incremental revenue in this area carry attractive economics and improve utilization and returns on capital across our existing footprint.

Speaker #2: At the same time, the nuclear industry rightly demands rigorous qualification processes and revenues will build over a period of years, rather than quarters. We are investing the time now to establish the certifications relationships and track record that will position Exco as a partner of choice as this market develops.

Darren Kirk: At the same time, the nuclear industry rightly demands rigorous qualification processes. Revenues will build over a period of years rather than quarters. We are investing the time now to establish the certifications, relationships, and track record that will position Exco as a partner of choice as this market develops. We believe the long-term prize is substantial. A large, growing, non-automotive end market with high barriers to entry that play directly to our strengths. Exco Energy is also broader than nuclear alone. A core element of the strategy is applying our additive manufacturing expertise across a wider range of end markets. Exco has quietly built one of the leading additive manufacturing operations for tooling applications in North America.

Speaker #2: We believe the long-term prize is substantial: a large, growing, non-automotive end market with high barriers to entry that plays directly to our strengths. Exco Energy is also broader than nuclear alone.

Speaker #2: A core element of the strategy is applying our additive manufacturing expertise across a wider range of end markets. Exco has quietly built one of the leading additive manufacturing operations for tooling applications in North America. The addition of our seventh industrial 3D printer in late fiscal 2025 further strengthened this capability, and demand for our 3D-printed tooling solutions remains strong.

Darren Kirk: The addition of our seventh industrial 3D printer in late fiscal 2025 further strengthened this capability, and demand for our 3D-printed tooling solutions remains strong as customers pursue greater efficiency and increasingly large and complex tooling, including tooling for Giga Press applications. Additive manufacturing is transforming what is possible in our industry, enabling conformal cooling, faster cycle times, longer tool life, and design geometries that simply cannot be produced conventionally. The same attributes that make our additive solutions valuable in die cast tooling are relevant to a broad set of technically demanding industrial applications. We are actively pursuing opportunities to apply this expertise together with our engineering capabilities and installed asset base across other end markets, reducing our reliance on any single industry and improving the quality and durability of our earnings over time.

Speaker #2: As customers pursue greater efficiency and increasingly large and complex tooling, including tooling for gigapress applications. Additive manufacturing is transforming what is possible in our industry.

Speaker #2: Enabling conformal cooling, faster cycle times, longer tool life, and design geometries that simply cannot be produced conventionally. The same attributes that make our additive solutions valuable in die cast tooling are relevant to a broad set of technically demanding industrial applications.

Speaker #2: We are pursuing we are actively pursuing opportunities to apply this expertise together with our engineering capabilities and installed asset base across other end markets, reducing our reliance on any single industry and improving the quality and durability of our earnings over time.

Speaker #2: Diversification of our end market exposure initially on a capitalite basis and from a position of technological strength is a central pillar of our long-term strategy.

Darren Kirk: Diversification of our end market exposure, initially on a capital-light basis and from a position of technological strength, is a central pillar of our long-term strategy. Turning to our segments. The Casting and Extrusion segment reported Q3 sales of CAD 77 million, up 4% from the prior year, while segment EBITDA margin improved to 16.2% from 12.7%, a testament to the pricing discipline, operational efficiency initiatives, and cost actions we have pursued across the segment. Extrusion tooling sales remained solid, supported by diversified demand across building and construction, transportation, renewable energy, electrical applications, and AI infrastructure-related projects. The structural demand drivers here are powerful. Construction remains the largest end market for extrusions and continues to grow. Aluminum content per vehicle keeps rising as automakers pursue lightweighting, particularly in electrified platforms. The build-out of data centers and electrical infrastructure is emerging as a significant new source of demand.

Speaker #2: Turning to our segments. The casting and extrusion segment reported third-quarter sales of 77 million, up 4% from the prior year, while segment EBITDA margin improved to 16.2% from 12.7%, a testament to the pricing discipline operational efficiency initiatives and cost actions we have pursued across the segment.

Speaker #2: Extrusion tooling sales remain solid, supported by diversified demand across building and construction, transportation, renewable energy, electrical applications, and AI infrastructure, related projects. The structural demand drivers here are powerful.

Speaker #2: Construction remains the largest end market for extruders and extrusions, and it continues to grow. Aluminum content for vehicles keeps rising as automakers pursue lightweighting, particularly in electrified platforms.

Speaker #2: And the build-out of data centers and electrical infrastructure is emerging as a significant new source of demand. Industry forecasts suggest data center infrastructure alone could add more than a million tons of aluminum demand through 2030, spanning heat sinks, cooling systems, and structural framing—all of which are extrusion-intensive applications.

Darren Kirk: Industry forecasts suggest data center infrastructure alone could add more than 1 million tons of aluminum demand through 2030 spanning heat sinks, cooling systems, and structural framing, all of which are extrusion-intensive applications, with the Americas expected to be the fastest-growing region. Layer on tariff dynamics and reshoring, which are pushing production toward domestic and nearshore supply. The backdrop for North American extrusion tooling is as constructive as we have seen it in some time. Importantly, we are also seeing increasing activity for our capital equipment products, containers, die ovens, and related tooling systems, particularly in North America, as extruders invest in new press capacity and upgrade existing lines to meet this growing demand. These products deepen our position across the customer's press, carry attractive consumable and replacement dynamics over time, and are a natural complement to our die business.

Speaker #2: With the Americas expected to be the fastest growing region. Layer-on tariff dynamics and reshoring which are pushing production toward domestic and nearshore supply in the backdrop for North American extrusion tooling is as constructive as we have seen it in some time.

Speaker #2: Importantly, we are also seeing increasing activity for our capital equipment products, containers, die ovens, and related tooling systems, particularly in North America, as extruders invest in new press capacity and upgrade existing lines to meet this growing demand.

Speaker #2: These products deepen our position across the customers' press, carry attractive consumable and replacement dynamics over time, and are a natural complement to our die business.

Speaker #2: To further capture this opportunity, we have been reinforcing our sales efforts, strengthening our commercial teams, increasing the intensity and discipline of our customer coverage, and sharpening our quoting processes.

Darren Kirk: To further capture this opportunity, we have been reinforcing our sales efforts, strengthening our commercial teams, increasing the intensity and discipline of our customer coverage, and sharpening our quoting processes. The work is showing up in higher quoting activity and improving order flow. European conditions overall were more mixed, though we continue to pursue market share gains in the region and to further integrate and strengthen our operations there. Turning to die cast tooling, revenues were relatively stable in the quarter as shipments increased against the segment's elevated backlog. I would be candid, however, that our die cast results, and indeed our overall results, were held back this quarter relative to our expectations and the underlying potential of the business. Three factors were at play. First, certain customer-driven timing delays continued to defer shipments and the associated revenue recognition.

Speaker #2: The work is showing up in higher quoting activity and improving order flow. European conditions overall were more mixed, though we continue to pursue market share gains in the region and to further integrate and strengthen our operations there.

Speaker #2: Turning to die cast tooling, revenues were relatively stable in the quarter as shipments increased against the segment's elevated backlog. I would be candid, however, that our die cast results, and indeed our overall results, were held back this quarter relative to our expectations.

Speaker #2: And the underlying potential of the business. Three factors were at play. First, certain customer-driven timing delays continued to defer shipments and the associated revenue recognition.

Speaker #2: Second, we incurred the closure of our large mold facility in Mexico. And third, margins on a couple of large jobs delivered in the quarter came in lower than anticipated.

Darren Kirk: Second, we incurred additional incremental costs to complete the closure of our large mold facility in Mexico. Third, margins on a couple of large jobs delivered in the quarter came in lower than anticipated. These tools were admittedly priced during last year's order drought at pricing that reflected the competitive conditions of that period. None of these factors change our view on the underlying trajectory. The Mexico wind-down is now complete, consolidating production across fewer locations. The delayed shipments remain in our backlog rather than lost, and pricing on our more recent order intake is meaningfully healthier. With a strong shipping schedule in place, we expect Q4 to be materially better for our die-cast tooling. Stepping back, the demand picture for die cast tooling in North America is increasingly encouraging.

Speaker #2: These tools were admittedly priced during last year's order drought at pricing that reflected the competitive conditions of that period. None of these factors changes are change our view on the underlying trajectory.

Speaker #2: The Mexico wind-down is now complete, consolidating production across fewer locations, the delayed shipments remain in our backlog rather than lost, and pricing on our more recent order intake is meaningfully healthier.

Speaker #2: With a strong shipping schedule in place, we expect the fourth quarter to be materially better for our die cast tooling. Stepping back, the demand picture for die cast tooling in North America is increasingly encouraging.

Speaker #2: Our die cast backlog remains above historical levels, and demand continues to diversify beyond passenger vehicles into energy, heavy trucks, and other industrial applications. There is also continued momentum in gigapress applications, where Exco has significant and differentiated capabilities.

Darren Kirk: Our die cast backlog remains above historical levels, demand continues to diversify beyond passenger vehicles into energy, heavy trucks, and other industrial applications. There's also continued momentum in Giga Press applications, where Exco has significant and differentiated capabilities. What began with a handful of EV pioneers is broadening across the industry. Multiple OEMs and tier one suppliers are now installing or evaluating very large casting machines in North America. Industry forecasts call for double-digit annual growth in giga castings through the end of the decade, some analysts expect a substantial majority of large structural automotive castings to migrate to giga casting formats by 2030. Critically for Exco, these molds are among the largest and most complex tools in the industry, our combination of large envelope precision machining, high tonnage crane capacity, and additive manufacturing puts us in a strong position to serve this market as it scales.

Speaker #2: What began with a handful of EV pioneers is broadening across the industry. Multiple OEMs and tier-one suppliers are now installing and or evaluating very large casting machines in North America.

Speaker #2: Industry forecasts call for double-digit annual growth in gigacastings through the end of the decade, and some analysts expect a substantial majority of large structural automotive castings to migrate to gigacasting formats by 2030.

Speaker #2: Critically for Exco, these molds are among the largest and most complex tools in the industry and are combination of large envelope precision machining, high tonnage crane capacity, and additive manufacturing puts us in a strong position to serve this market as it scales.

Speaker #2: The automotive solutions segment reported third-quarter sales of 88 million and increase of 9% over the prior year, or roughly 8% excluding foreign exchange. Which meaningfully outpaced underlying industry vehicle production.

Darren Kirk: The Automotive Solutions segment reported Q3 sales of CAD 88 million, an increase of 9% over the prior year, or roughly 8% excluding foreign exchange, which meaningfully outpaced underlying industry vehicle production. Performance benefited from resilient North American automotive demand, recent and ongoing program launches, a favorable vehicle mix, and continued growth in accessory products with both new and existing customers. US SAAR averaged approximately 16.2 million units during the quarter, including 16.5 million units in June. Segment profitability was affected primarily by product mix, higher labor costs, and increased energy and supply chain cost pressures. We are responding on multiple fronts: advancing lean manufacturing and automation initiatives, taking pricing action where possible, and maintaining pricing discipline on new program awards. In Europe, conditions remain challenging amid OEM restructuring and competitive pressures. Supplier consolidation and our manufacturing capabilities in Morocco are creating additional opportunities for us.

Speaker #2: Performance benefited from resilient North American automotive demand, recent and ongoing program launches, a favorable vehicle mix, and continued growth in accessory products, with both new and existing customers.

Speaker #2: US SAR averaged approximately 16.2 million units during the quarter, including 16.5 million units in June. Segment profitability was affected primarily by product mix, higher labor costs, and increased energy and supply chain cost pressures.

Speaker #2: And we are responding on multiple fronts. Advancing lean manufacturing and automation initiatives, taking pricing action where possible, and maintaining pricing discipline on new program awards.

Speaker #2: In Europe, conditions remain challenging amid OEM restructuring and competitive pressures. Those supplier consolidation and our manufacturing capabilities in Morocco are creating additional opportunities for us.

Speaker #2: Quoting activity across the segment increased during the quarter, supporting the potential for future program awards. And we remain confident that recent and upcoming launches and continued supplier consolidation will support growth and Exco's content for vehicle over time.

Darren Kirk: Quoting activity across the segment increased during the quarter, supporting the potential for future program awards. We remain confident that recent and upcoming launches and continued supplier consolidation will support growth in Exco's content per vehicle over time. Looking ahead, our Q4 will reflect normal seasonality associated with OEM summer shutdowns and European vacation schedules. The broader environment remains characterized by uncertainty surrounding global trade policy, tariffs, and geopolitical developments, which may create volatility in customer demand and does limit near-term visibility somewhat. That said, we believe Exco is well-positioned to navigate these dynamics. Nearly all of our products sold within North America compliant with USMCA requirements, we maintain a substantial US manufacturing footprint for extrusion dies and large mold products, providing additional flexibility should tariff policies evolve.

Speaker #2: Looking ahead, our fourth quarter will reflect normal seasonality associated with OEM summer shutdowns and European vacation schedules. The broader environment remains characterized by uncertainty surrounding global trade policy, tariffs, and geopolitical developments, which may create volatility in customer demand and does limit near-term visibility somewhat.

Speaker #2: That said, we believe Exco is well-positioned to navigate these dynamics. Nearly all of our products sold within North America comply with US MCA requirements and we maintain a substantial US manufacturing footprint for extrusion dies and large mold products, providing additional flexibility should tariff policies evolve.

Speaker #2: Indeed, if elevated tariffs on imports from non-compliant jurisdictions persist, we may well benefit from improved competitive positioning relative to certain global peers. More broadly, we are encouraged by increasing initiatives to reshore industrial manufacturing in North America which support demand for both extrusion and high-pressure die cast tooling.

Darren Kirk: Indeed, if elevated tariffs on imports from non-compliant jurisdictions persist, we may well benefit from improved competitive positioning relative to certain global peers. More broadly, we are encouraged by increasing initiatives to reshore industrial manufacturing in North America, which support demand for both extrusion and high-pressure die cast tooling, areas where we maintain considerable strength. With our die cast backlog above historical levels, favorable North American extrusion market dynamics, increased quoting activity across the business, moderating capital expenditures, and the launch of Exco Energy, we believe the foundation is in place for higher utilization, stronger earnings, improved cash generation, and better returns on capital in the periods ahead. Before I hand the call over to Matthew, I would like to sincerely thank our roughly 4,500 employees around the world for their dedication and continued focus on safety, quality, and customer service. Their efforts are what makes Exco's progress possible.

Speaker #2: Areas where we maintain considerable strength. So with our die cast backlog above historical levels, favorable North American extrusion market dynamics, increased quoting activity across the business, moderating capital expenditures, and the launch of Exco Energy, we believe the foundation is in place for higher utilization, stronger earnings, improved cast generation, and better returns on capital in the periods ahead.

Speaker #2: Before I hand the call over to Matthew, I would like to sincerely thank our roughly 4,500 employees around the world for their dedication and continued focus on safety, quality, and customer service.

Speaker #2: Their efforts are what make Exco's progress possible. With that, I'll now pass the call to Matthew to review the financial results in more detail.

Darren Kirk: With that, I'll now pass the call to Matthew to review the financial results in more detail.

Speaker #1: Thank you, Darren. Good morning, ladies and gentlemen. Consolidated sales for the third quarter into June 30th, 2026 were $165.4 million, compared to $154.9 million in the same quarter last year.

Matthew Posno: Thank you, Darren. Good morning, ladies and gentlemen. Consolidated sales for Q3 ended 30 June 2026 were CAD 165.4 million, compared to CAD 154.9 million in the same quarter last year, an increase of CAD 10.6 million or 7%. Foreign exchange movements increased sales by approximately CAD 1.9 million in the quarter. Excluding this impact, sales increased approximately 6%. Consolidated net income for the quarter was CAD 5.8 million, or CAD 0.15 a share, compared with CAD 5.4 million or CAD 0.14 per share in the prior year quarter. Results in the current period included CAD 600,000, or CAD 0.02 of after-tax restructuring charges. The effective income tax rate in the quarter was 30%, compared to 13% recovery last year. The prior year quarter benefited from CAD 1.6 million of research and development tax credits.

Speaker #1: An increase of 10.6 million or 7%. Foreign exchange movements increased sales by approximately $1.9 million in the quarter, excluding this impact, sales increased approximately 6%.

Speaker #1: Consolidated net income for the quarter was $5.8 million, or $0.15 per share, compared with $5.4 million, or $0.14 per share, in the prior quarter.

Speaker #1: Results in the current period included $600,000, or $0.02 per share, of after-tax restructuring charges. The effective income tax rate in the quarter was 30%, compared to a 13% tax recovery last year.

Speaker #1: The prior quarter benefited from 1.6 million dollars of research and development tax credits quarterly consolidated EBITDA was 18.5 million, representing 11.2% of sales compared to 14.7 million, or 9.5 in the prior year period.

Matthew Posno: Quarterly consolidated EBITDA was CAD 18.5 million, representing 11.2% of sales, compared to CAD 14.7 million or 9.5% in the prior year period, an increase of 26%. Q3 sales for the Automotive Solutions segment were CAD 88.3 million, up CAD 7.5 million or 9% from the prior year quarter. The segment benefited from resilient North American automotive demand, recent and ongoing program launches, a favorable vehicle mix, and continued growth in accessory products. European conditions remain challenging, although supplier consolidation and Exco's capabilities in Morocco are creating additional opportunities. Pre-tax profit for the segment was CAD 6.5 million, a decrease of CAD 800,000 from the prior year quarter. The decline primarily reflects product mix, higher labor costs, and increased energy and supply chain cost pressures. Management continues to focus on lean manufacturing, automation, and pricing discipline, particularly on new program awards.

Speaker #1: An increase of 26%. Third quarter sales for the automotive solutions segment were 88.3 million dollars, up 7.5 million dollars or 9% from the prior year quarter.

Speaker #1: The segment benefited from resilient North American automotive demand, recent and ongoing program launches, a favorable vehicle mix, and continued growth in accessory products. European conditions remain challenging, although supplier consolidation and Exco's capabilities in Morocco are creating additional opportunities.

Speaker #1: Pre-tax profit for the segment was 6.5 million dollars, a decrease of 800,000 dollars from the prior year quarter. The decline primarily reflects product mix, higher labor costs, and increased energy and supply chain cost pressures.

Speaker #1: Management continues to focus on lean manufacturing, automation, and pricing discipline, particularly on new program awards. Quoting activity increased during the quarter, and recent and upcoming launches are expected to support growth in content per vehicle, although fourth quarter results will reflect normal seasonality from OEM summer shutdowns.

Matthew Posno: Quoting activity increased during the quarter, recent and upcoming launches were expected to support growth in content per vehicle. Q4 results will reflect normal seasonality from OEM summer shutdowns. Q3 sales for the Casting and Extrusion segment were CAD 77.1 million, up CAD 3.1 million, or approximately 4% from the prior year quarter. Extrusion tooling sales remained solid, supported by diversified demand across construction, transportation, renewable energy, electrical applications, and AI infrastructure-related projects. North American conditions remained favorable, while European demand was more mixed. Die-cast tooling revenues were relatively stable as shipments increased against the segment's elevated backlog, partly offset by customer timing delays and the closure of the large mold Mexico facility. During the quarter, Exco launched Exco Energy to leverage the large mold group's precision machining, engineering quality, and additive manufacturing capabilities in the Canadian nuclear energy market and other technically demanding end markets.

Speaker #1: Third quarter sales for the casting and extrusion segment were 77.1 million dollars, up 3.1 million or approximately 4% from the prior year quarter. Extrusion tooling sales remained solid, supported by diversified demand across construction, transportation, renewable energy, electrical applications, and AI infrastructure related projects.

Speaker #1: North American conditions remain favorable, while European demand was more mixed. Die cast tooling revenues were relatively stable as shipments increased against the segment's elevated backlog, partly offset by customer timing delays and the closure of the large mold Mexico facility.

Speaker #1: During the quarter, Exco launched Exco Energy to leverage the large mold group's precision meeting engineering quality and additive manufacturing capabilities in the Canadian nuclear energy market and other technically demanding end markets.

Speaker #1: The segment reported pre-tax profit of $5.1 million, an increase of $2.5 million, or 97%, from last year. Results included $900,000 of incremental restructuring charges.

Matthew Posno: The segment reported pre-tax profit of CAD 5.1 million, an increase of CAD 2.5 million, or 97% from last year. Results included CAD 900,000 of incremental restructuring charges. The improvement reflected higher extrusion tooling sales and foreign exchange gains, partially offset by lower die-cast results, product mix, higher overhead costs, fixed costs under absorption, and increased depreciation. Management remains focused on converting the elevated die-cast backlog into shipments, increasing utilization at newer operations, and improving return on capital through pricing, lean manufacturing, automation, process standardization, and the centralization of key support functions. Corporate expenses for the quarter were CAD 2.4 million compared to CAD 4 million in the prior quarter. The decrease primarily reflects foreign exchange swings compared to the prior year quarter. Cash provided by operating activities was CAD 13.4 million, compared to CAD 25.2 million in the prior year quarter. The decrease primarily reflects a greater use of non-cash working capital in the current quarter.

Speaker #1: The improvement reflected higher extrusion tooling sales and foreign exchange gains, partially offset by lower die cast results product mix, higher overhead costs, fixed costs under absorption, and increased depreciation.

Speaker #1: Management remains focused on converting the elevated die cast backlog into shipments, increasing utilization at newer operations, and improving return on capital through pricing, lean manufacturing, automation, process standardization, and a centralization of key support functions.

Speaker #1: Corporate expenses for the quarter were 2.4 million dollars compared to 4 million dollars in the prior quarter. The decrease primarily reflects foreign exchange swings compared to the prior year quarter.

Speaker #1: Cash provided by operating activities was 13.4 million dollars compared to 25.2 million in the prior year quarter. The decrease primarily reflects a greater use of non-cash working capital in the current quarter.

Speaker #1: Free cash flow for the quarter was 9.7 million dollars compared to 20.1 million last year. Cash used in financing activities included 900,000 dollars to repurchase shares under the company's normal course issuer bid, and a reduction in bank indebtedness.

Matthew Posno: Free cash flow for the quarter was CAD 9.7 million, compared to CAD 20.1 million last year. Cash use and financing activities included CAD 3.9 million in dividend payments, CAD 900,000 to repurchase shares under the company's Normal Course Issuer Bid, and a reduction in bank indebtedness. Cash use and investment activities totaled CAD 2.7 million, with virtually all fixed asset additions related to maintenance. Following several years of elevated growth-related investment, management now expects the fiscal 2026 capital expenditures of approximately CAD 20 million, focused primarily on maintenance, productivity improvements, and select growth initiatives. Exco ended the quarter with CAD 26.1 million in cash, net debt of CAD 63.9 million, and approximately CAD 61.6 million of availability under its committed credit facility. The company remains in compliance with its financial covenants.

Speaker #1: Cash used in investment activities totaled 2.7 million dollars, with virtually all fixed asset additions related to maintenance. Following several years of elevated growth related to investment, management now expects the fiscal 2026 capital expenditures of approximately 20 million dollars, focused primarily on maintenance, productivity improvements, and select growth initiatives.

Speaker #1: Exco ended the quarter with 26.1 million dollars in cash, net debt of 63.9 million, and approximately 61.6 million of availability under its committed credit facility.

Speaker #1: The company remains in compliance with its financial covenants. Our balance sheet remains strong and provides flexibility to support dividends, share buybacks, debt reduction, and strategic investments, while management continues to prioritize improved asset utilization and returns on capital.

Matthew Posno: Our balance sheet remains strong and provides flexibility to support dividends, share buybacks, debt reduction, and strategic investments while management continues to prioritize improved asset utilization and returns on capital. That concludes my comments. I will now turn the call back to Darren for his closing remarks.

Speaker #1: That concludes my comments. I will now turn the call back to Darren for his closing remarks.

Speaker #2: Thanks, Matthew. To summarize our third quarter showed clear progress on the priorities we have laid out. Sales growth, meaningful margin expansion, disciplined capital spending, and stronger returns on capital while the launch of Exco Energy marks an important step in diversifying our business into large growing and technically demanding end markets that play directly to our strengths.

Darren Kirk: Thanks, Matthew. To summarize, our Q3 showed clear progress on the priorities we have laid out. Sales growth, meaningful margin expansion, disciplined capital spending, and stronger returns on capital. The launch of Exco Energy marks an important step in diversifying our business into large, growing, and technically demanding end markets that play directly to our strengths. We are excited about the road ahead. Operator, we would now be pleased to take questions.

Speaker #2: We are excited about the road ahead. Operator, we would now be pleased to take questions.

Operator: Thank you. Ladies and gentlemen, as a reminder, to ask a question at this time, you will need to press star one one on your telephone and wait for your name to be announced. Again, star one one to ask a question. Stand by while we compile a candidate roster. We have a question coming from the line of Nick Corcoran with Acumen Capital. Your line is now open.

Speaker #3: Thank you. Ladies and gentlemen, as a reminder, to ask a question at this time, you will need to press star 11 on your telephone and wait for your name to be announced.

Speaker #3: Okay, press star 11 to ask a question. Please stand by while we compile the candidate roster. And we have a question coming from the lineup.

Speaker #3: Nick Corcoran with Acumen Capital, you may now begin.

Reece McCauley: Hi, it's Reece McCauley on the line for Nick Corcoran. Thanks for taking my questions. Quick two questions here. In terms of the launch of Exco Energy, how is this initiative progressing and how big is that total market looking?

Speaker #4: Hi, it's Reese McCauley on the line for Nick Corcoran. Thanks for taking my questions. I have two quick ones. First, in terms of the launch of Exco Energy, how is this initiative progressing? And how big is the total market looking?

Speaker #2: All right. Good morning, Nick. It's Darren here. So I guess with respect to Exco Energy, we've officially launched it this quarter this quarter, but I want to say it's not from a cold start.

Darren Kirk: Good morning, Nick. It's Darren here. I guess with respect to Exco Energy, we've officially launched it this quarter, but I want to say it's not from a cold start. This is really the formalization of a couple of years of groundwork. We've been engaging with partners and customers across the industry over the last couple of years and working towards some preliminary accreditations. We're actually already quoting and delivering some products under Exco Energy. I'm not going to size the opportunity at this stage other than to say that it's obviously going to be a very large and growing market with significant money being spent for nuclear energy plants and refurbishment over the next several years. Perhaps in future quarters we can dimension what the size of that opportunity is, but at this stage, we're not prepared to disclose that.

Speaker #2: We've this is really the formalization of a couple of years of groundwork. We've been engaging with partners and customers across the industry over the last couple of years and working towards some preliminary accreditations and so it's we're actually already quoting and delivering some products under Exco Energy.

Speaker #2: We're not I'm not going to I'm not going to size the opportunity at this stage. Other than to say that it's obviously going to be a very large and growing market with significant money being spent for nuclear energy plants and refurbishment over the next several years, but perhaps in future quarters we can dimension what the size of that opportunity is, but at this stage we're not prepared to disclose that.

Speaker #4: That's great. Thank you. And then just another one. Is there any update on the M&A pipeline and management's thoughts on any potential acquisitions?

Reece McCauley: That's great. Thank you. Just another one. Is there any update on the M&A pipeline and management's thoughts on any potential acquisitions?

Speaker #2: So I'm going to say no. There's nothing on the front burner here. As we've kind of been articulating, the clearest path for us to improve our returns on assets and cash flow is by harvesting the assets that we've already deployed and using them more efficiently.

Darren Kirk: I'm going to say no. There's nothing on the front burner here. As we've kind of been articulating, the clearest path for us to improve our returns on assets and cash flow is by harvesting the assets that we've already deployed and using them more efficiently. That remains our primary objective at this point. That being said, we obviously have financial capacity to pursue acquisitions. We remain on the lookout. I think, to the extent that there was interest, it would be more focused on the casting and extrusion segment, where we do see demand drivers lining up for a multi-year period here and where we're well-positioned.

Speaker #2: And so that remains our primary objective at this point. That being said, we obviously have financial capacity. To pursue acquisitions, we remain on the lookout.

Speaker #2: I think to the extent that there was interest, it would be more focused on the casting and extrusion segment, where we do see demand drivers lining up for a multi-year period here and where we're well positioned.

Speaker #4: That's great. Thank you.

Reece McCauley: That's great. Thank you.

Speaker #3: Thank you. And I'm showing a couple of questions in the chat this time. I will not turn the call back over to Mr. Darren Kirk for any closing comments.

Operator: Thank you. I'm showing no further questions in the queue at this time. I will now turn the call back over to Mr. Darren Kirk for any closing comments.

Speaker #2: Okay. Well, thank you, operator, and thank you, everyone, for joining us today. We will look forward to speaking again once we release our annual numbers later this year.

Darren Kirk: Well, thank you, operator, thank you everyone for joining us today. We will look forward to speaking again once we release our annual numbers later this year. Take care.

Speaker #2: Take care.

Operator: This concludes today's conference call. Thank you for your participation, and you may now disconnect.

Q3 2026 Exco Technologies Ltd Earnings Call

Request DemoDemo

Exco

Earnings