Wajax Q3 Earnings Call Highlights

Key Points

• Third-quarter results weakened: Revenue fell 1.1% to C$477.8 million, adjusted EBITDA declined 13.2% to C$38.9 million, and adjusted earnings per share dropped 19% to C$0.60, reflecting lower mining equipment sales and softer industrial demand.
• Backlog neared a record: It rose 18.2% year over year to C$598.6 million, supported by construction and forestry, industrial products and ERS, and a multiyear shipbuilding contract.
• Cash flow and leverage came under pressure: Wajax used C$23.1 million in operating cash and its leverage ratio increased to 1.82 times. The company maintained its C$0.35 quarterly dividend and expects mixed market conditions, while planning selective investments for long-term growth.

Wajax TSE: WJX reported lower third-quarter revenue and earnings as mixed market conditions, lower mining equipment sales and weaker industrial products demand weighed on results, while backlog rose to a near-record level and product support and Engineered Repair Services revenue increased.

Revenue for the third quarter of 2026 was C$477.8 million, down C$5.3 million, or 1.1%, from a year earlier. President and Chief Executive Officer George McClean said the decline was largely attributable to the prior-year delivery of one large mining shovel, with no comparable delivery in the latest quarter.

Adjusted EBITDA fell 13.2% year over year to C$38.9 million, and the adjusted EBITDA margin declined to 8.1% from 9.3% in the prior-year period. Adjusted net earnings were C$0.60 per share, down 19%, or C$0.15 per share, from the third quarter of 2025.

Margins and regional performance

Gross profit margin was 20.1%, down 70 basis points from the prior-year quarter. The company attributed the decline primarily to lower margins in product support, industrial products and ERS, partly offset by stronger equipment-sales margins. Selling and administrative expenses rose to 15.0% of revenue from 14.7%, reflecting lower revenue and higher personnel, travel and entertainment, supplies, and marketing costs.

Chief Financial Officer Tania Casadinho said quarterly revenue mix affected year-over-year margin comparisons. She noted that year-to-date gross margin was 20.5%, representing a 90-basis-point improvement from the comparable period in 2025.

• Western Canada revenue declined 2.1% to C$206 million, primarily because of lower mining equipment sales, partly offset by mining product support and construction and forestry equipment sales.
• Central Canada revenue declined 12% to C$80 million, with lower sales across categories, particularly material handling, industrial products and ERS.
• Eastern Canada revenue increased 5.5% to C$191 million, supported by construction and forestry equipment and power systems sales.

Equipment sales decreased 4% to C$126 million, while product support revenue rose 6.3% to C$131 million, driven mainly by mining activity in Western Canada. Industrial products revenue fell 6.7% to approximately C$127 million amid competitive conditions and tariff and macroeconomic uncertainty affecting customers. ERS revenue increased 5.3% to approximately C$85 million, aided by the timing of large projects in Western and Eastern Canada.

Backlog approaches record level

Wajax ended the quarter with backlog of C$598.6 million, up 18.2% from a year earlier and 9.5% sequentially. Casadinho said the level was just below the company’s record backlog set in 2023.

The sequential increase was driven primarily by construction and forestry as well as industrial products and ERS. Year-over-year growth reflected power systems backlog associated with the River Class Destroyer subcontract with Irving Shipbuilding Inc., along with higher construction and forestry and ERS backlog. Those gains were partly offset by lower mining backlog following delivery of three large mining shovels since September 2025.

Backlog at Sept. 30 included two large mining shovels scheduled for delivery in the fourth quarter. Casadinho said the Irving contract is expected to extend over multiple years, with a portion included in 2027 backlog and the majority expected to be realized by 2028, depending on milestones.

Cash flow, leverage and dividend

Cash used in operating activities was C$23.1 million during the quarter, compared with C$18.5 million of cash generated in the prior-year period. The change reflected increased inventory and receivables, as well as lower accounts payable and accrued liabilities.

Inventory rose C$18.4 million from the second quarter, mainly due to higher mining equipment inventory. However, management said inventory was C$143.1 million below its March 2024 peak and remained within a normal operating range.

The company’s leverage ratio rose to 1.82 times from 1.38 times in the second quarter, due to working-capital timing and lower trailing 12-month adjusted EBITDA. Available credit capacity was C$276.4 million at quarter-end. On Oct. 22, Wajax extended the maturity of its C$500 million bank credit facility from October 2029 to October 2031.

The board approved a quarterly dividend of C$0.35 per share, payable Jan. 5, 2027, to shareholders of record on Dec. 15, 2026.

Strategy and outlook

Management highlighted its newly announced 2027 Strategy Roadmap, which is intended to support a long-term goal of becoming Canada’s fastest-growing provider of industrial products, equipment and services by 2031. The plan centers on building the workforce, strengthening customer and supplier relationships, supporting communities, and delivering on operating and capital-allocation commitments.

McClean said Wajax plans targeted investments in technician recruitment and retention, sales-force effectiveness, digital tools, supply chain, facilities and leadership development. The company also plans organizational changes, including presidents for Equipment, Parts and Service and for Industrial Products and ERS, along with a Chief Value Officer.

During the question-and-answer session, McClean said Wajax sees strength in mining, utilities, energy and infrastructure, while customer capital spending remains selective. He described construction demand as mixed and forestry conditions as showing “green shoots.” He also said the company is seeing active quoting activity across mining, oil and gas, resources and infrastructure-related markets.

Looking ahead, management expects market conditions to remain mixed across regions and end markets, with macroeconomic uncertainty continuing to affect customer confidence and project timing. McClean said the company intends to maintain discipline on margins, costs and working capital while investing selectively to support profitable long-term growth.

About Wajax (TSE:WJX)

Wajax Corp is a Canadian distributor of industrial components. The company's core business is the sale of parts and service support of equipment, power systems, and industrial components through a network of branches in Canada. Most of its revenue is generated from the sale of equipment which includes machinery and components used for construction purposes and its industrial components find utility in businesses like mining, forestry, and material handling for other industrial purposes. It sells to leading manufacturer brands such as Hitachi, JCB, Bell, Hyster, Palfinger and other similar industries.

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