Firan Technology Group Q2 Earnings Call Highlights

Key Points

• FTG posted a record quarter in Q2 2026, with bookings up 89% to CAD 86.7 million, revenue up 8.2% to CAD 52.7 million, and adjusted net earnings up 44% to CAD 5.1 million. Backlog also climbed to CAD 193.5 million, and free cash flow turned positive at CAD 2.7 million.
• Defense-related orders were a major growth driver, including two previously disclosed classified programs that helped lift bookings and backlog. Management said the programs are multi-year opportunities with large annual circuit board spend, though timing remains uncertain on one of them.
• Margins improved, but costs and tariffs remain a concern, especially in the circuits business where material inflation and tariff-related expenses are rising. FTG said it is working to pass those costs through to customers while also expanding capacity and managing staffing constraints at key sites.

Firan Technology Group TSE: FTG reported what President and CEO Brad Bourne called a “record quarter” across several operating and financial measures, as the aerospace and defense supplier posted higher revenue, earnings, bookings and backlog for its fiscal second quarter of 2026.

On the company’s analyst call, Bourne said FTG generated bookings of CAD 86.7 million, an 89% increase from the prior-year quarter and the company’s highest single-quarter bookings total. The result produced a book-to-bill ratio of 1.64 to 1. Quarter-end backlog reached CAD 193.5 million, up 30% from the previous year-end.

Revenue rose 8.2% year over year to CAD 52.7 million, also a quarterly record for the company. Adjusted EBITDA increased 20% to CAD 10.5 million, while adjusted net earnings rose 44% to CAD 5.1 million. Bourne said the results “once again demonstrate that top-line growth drives profitability at FTG.”

Margins Improve as Revenue Grows

Chief Financial Officer Drew Knight said FTG’s gross margin was CAD 19.2 million, or 36.5% of sales, compared with CAD 15.9 million, or 32.6% of sales, in the same quarter last year. Knight attributed the increase in gross margin dollars to top-line growth, while the margin rate benefited from operational improvements at multiple facilities despite unfavorable foreign exchange variances.

Adjusted EBITDA represented 19.9% of sales, compared with 17.9% a year earlier. Net earnings were CAD 5.0 million, or CAD 0.20 per diluted share, compared with CAD 3.5 million, or CAD 0.14 per diluted share, in Q2 2025.

SG&A expenses rose to CAD 8.4 million, or 15.9% of sales, from CAD 6.8 million, or 14.1% of sales, in the prior-year quarter. Knight said the increase was primarily due to performance compensation tied to profitability, amortization of deferred financing costs and corporate administration costs related to the new leadership team. R&D costs were CAD 2.8 million, or 5.3% of sales, compared with CAD 2.4 million, or 5.0% of revenue, a year earlier.

FTG ended the quarter with net debt of CAD 2.9 million, down from CAD 4.0 million at the end of Q1. Free cash flow was positive CAD 2.7 million, compared with negative CAD 5.5 million in Q2 2025. Knight said the company had CAD 85 million of primary liquidity sources at quarter-end, consisting of CAD 61.8 million in working capital and CAD 23.3 million of unused credit facilities.

Aerospace Sales Rise, Circuits Growth More Modest

In FTG’s aerospace business, sales increased 21% year over year to CAD 17.1 million. Bourne said sales were higher in Toronto, Tianjin and Calgary, while activity in Chatsworth was lower due to timing of some orders. FTG Aerospace Calgary benefited from hardware sales, including Satcom radios in Canada and the U.S., a second delivery of Edge+ WQARs in Asia, stronger data sales and licensing revenue tied to its Satcom radio product.

Bourne said deliveries to China’s C919 program continued, while deliveries to the new De Havilland Canada 515 aerial firefighting aircraft began to ramp up. He said more deliveries on both programs are expected in the second half of 2026.

In the circuits segment, sales were CAD 34.3 million, up 1.9% from the prior-year quarter. Bourne said the company’s two largest sites were down slightly, with Circuits Toronto affected by an operational disruption and Circuits Minnetonka impacted by a shift toward higher-technology products and labor constraints. He said Minnetonka had made “strong progress” on staffing by quarter-end.

Other circuits sites offset the weakness. Bourne said Circuits Fredericksburg nearly doubled revenue with work transferred from Minnetonka and no change in staffing levels, while Chatsworth increased 18% and Haverhill rose 15%.

Defense Programs Drive Backlog Increase

FTG said it received significant orders during the quarter related to two previously disclosed classified defense programs. Bourne emphasized that bookings were strong across the business and “not just on these two programs.” Only one of the programs contributed revenue in Q2, and Bourne said that contribution was not significant.

During the question-and-answer session, Bourne said the two classified programs are “gigantic,” with annual circuit board spending of CAD 50 million to CAD 100 million. He said FTG would not support the full spend and that customers would not place all work with one supplier. He described both as multi-year programs lasting more than five years, though he cautioned that timing remains uncertain as one program is still awaiting final customer design work.

Asked about the step-up in backlog, Bourne said approximately half of the roughly CAD 40 million backlog increase was related to the two programs. He said the orders indicate deliveries through the current year and into early next year, though he added that new programs often face delays as they move into production.

Tariffs, Costs and Capacity Remain Key Issues

Bourne said FTG continues to reduce exposure to U.S. tariff risk by growing non-U.S. revenue for non-U.S. sites and moving non-U.S. customer orders to non-U.S. facilities where possible. In Q2 2026, 70.3% of FTG sales were to U.S.-based customers, compared with 69.7% last year. Sales grew 10% in the U.S., 4% in Asia and 44% in Canada, while sales in Europe declined 8%.

He said tariffs are now affecting input costs in the circuits business because many materials originate outside North America. The impact is greatest at U.S. sites, though Toronto is also affected when materials ship through the U.S. to Canada. Bourne estimated the overall cost impact will be in the “CAD millions” in 2026 and said the company has started working with customers to pass on increased costs.

FTG also faces broader cost increases tied to circuit board demand related to AI data centers, Bourne said. He added that the company is working to pass those costs along, but said it is “tough to keep up with the rate of cost increases.”

On capacity, Bourne said most sites are focused on staffing, training and running equipment more hours per day. Toronto is the exception, where equipment-related bottlenecks remain. He said FTG has placed orders to expand plating capacity and add drills, with a goal of adding CAD 20 million of capacity by year-end, subject to equipment lead times.

Company Points to Aerospace and Defense Demand

Bourne said FTG’s end markets remain strong, citing planned production increases at Airbus and Boeing, growth in business jets and helicopters, and rising defense spending expectations across the U.S., NATO and Canada. He said FTG intends to pursue additional defense programs, including opportunities outside the U.S.

The company recently opened an aerospace facility in Hyderabad, India. Bourne said the location was selected because of India’s manufacturing cost profile, aerospace hub in Hyderabad, the country’s defense spending and the government’s “Make in India” policy. FTG expects total investment of approximately CAD 2 million to CAD 3 million. Bourne said the site will be staffed and trained through the balance of the year, but is not expected to provide a meaningful incremental benefit before 2027.

Looking ahead, Knight said FTG entered Q3 with record backlog of CAD 193.5 million, of which approximately 66% is expected to convert to revenue over the next 12 months. Bourne noted that the third quarter is seasonally softer due to vacations and lost production days, estimating about one week, or 8%, of lost production during the quarter.

About Firan Technology Group TSE: FTG

FTG is an aerospace and defence electronics product and subsystem supplier to customers around the globe. FTG has two operating units: FTG Circuits: A manufacturer of high technology, high reliability printed circuit boards. Our customers are leaders in the aviation, defence, and high technology industries. FTG Circuits has operations in Toronto, Ontario, Chatsworth, California, Fredericksburg, Virginia, Minnetonka, Minnesota, Haverhill, Massachusetts, and a joint venture in Tianjin, China. FTG Aerospace: Designs, certifies, manufactures, and provides in-service support for illuminated cockpit products and electronic assemblies for original equipment manufacturers and operators of aerospace and defence equipment.

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