Wajax (WJX) Q2 2024 earnings summary

Executive summary

• Q2 2024 revenue was $568.3 million, down 3.1% year-over-year, mainly due to lower mining equipment sales and the absence of a large mining shovel delivery seen in Q2 2023, partially offset by higher sales in eastern Canada.

• Gross profit margin improved to 20.9%, up 100 basis points from the prior year, driven by higher ERS and product support margins.

• Adjusted EBITDA was $54.7 million, down 4.3% year-over-year, reflecting lower sales volumes and higher personnel expenses.

• Adjusted net earnings per share were $1.06, down from $1.26 in Q2 2023, excluding non-cash losses on derivatives.

• ERP system rollout now covers 99 branches, representing about 90% of 2023 revenue.

Financial highlights

• Selling and administrative expenses rose 9.1% year-over-year, mainly due to higher personnel costs, and represented 14.4% of revenue.

• Cash flow from operating activities was $35.8 million, up from a $6 million outflow in Q2 2023, mainly due to lower inventory and receivables.

• Leverage ratio decreased to 2.17x from 2.2x in Q1 2024, reflecting lower debt levels.

• Working capital efficiency increased to 26.5%, up 80 basis points from March 31, 2024.

• Backlog at quarter-end was $544.9 million, down 7.2% sequentially and 1.2% year-over-year.

Outlook and guidance

• Management expects stable gross margins and further inventory reductions through the remainder of 2024.

• Solid fundamentals remain in mining and energy, but industrial and forestry markets show reduced activity.

• Eight large mining shovels are in the backlog, with three expected to deliver in Q4 2024 and four throughout 2025.

• Management is evaluating options to repay or refinance $57 million in debentures maturing January 2025.