Wajax Q2 Earnings Call Highlights

Key Points

• Revenue fell 5.7% year over year to C$515.7 million, mainly because of lower equipment sales and the absence of a large mining shovel delivery from the prior-year quarter. However, higher-margin product support and engineered repair services helped lift gross margin to 20.9% and adjusted EBITDA 2.6% to C$45.9 million.
• Product support revenue rose 6.9% to C$143 million and engineered repair services increased 2.9%, offsetting a 22.3% decline in equipment sales. Management said mining demand remains strong in several commodities, while customers continue prioritizing equipment reliability and life-cycle extensions.
• Backlog increased to C$546.6 million and leverage improved to 1.3 times, supported by mining, construction and forestry, engineered repair services, and power-systems work. Wajax maintained its C$0.35-per-share quarterly dividend and is developing longer-term growth priorities through a new senior-leadership strategy group.

Wajax TSE: WJX reported lower second-quarter revenue as equipment sales declined, but the company said margin initiatives, product support growth and lower leverage supported improved profitability.

Revenue for the second quarter of 2026 was C$515.7 million, down C$31.5 million, or 5.7%, from a year earlier. President and Chief Executive Officer George McClean said the decrease was driven primarily by lower equipment volumes, including the absence of a large mining shovel delivery that had occurred in the second quarter of 2025.

Despite the revenue decline, gross profit margin increased 180 basis points year over year to 20.9%. McClean attributed the improvement to margin initiatives and sales mix, including higher margins on industrial parts and engineered repair services, or ERS, and a lower proportion of equipment sales.

Adjusted EBITDA rose 2.6% to C$45.9 million, with the adjusted EBITDA margin improving to 8.9% from 8.2% a year earlier and 8.1% in the first quarter. Adjusted net earnings increased 9.7% to C$0.84 per share.

Equipment Sales Decline Offset by Product Support Growth

Equipment sales fell C$39.4 million, or 22.3%, to C$137 million. The decline reflected lower mining equipment sales in Western Canada, lower material-handling equipment sales in Western and Eastern Canada, and lower construction and forestry equipment sales in Central Canada.

Product support sales, however, increased C$9.2 million, or 6.9%, to C$143 million, led by mining-related revenue in Western Canada. ERS sales rose 2.9% to approximately C$86 million, while industrial parts sales decreased 1.9% to approximately C$138 million.

Western Canada revenue declined 10.7% to C$223 million, primarily because of lower mining equipment sales. Central Canada sales fell 12.9% to C$83 million, reflecting lower construction and forestry equipment revenue and lower ERS revenue. Eastern Canada revenue increased 3.7% to C$210 million, helped by construction and forestry equipment, power systems equipment and product support sales.

McClean said mining demand remains strong despite the timing-related revenue decline. He cited activity in oil sands and base metals including gold, copper and nickel, while noting softness in coal and iron ore due to commodity-market conditions and rising operating costs. “The sales cycle in mining is typically very long, so making period-to-period comparisons is difficult,” he said.

The company said it expects momentum in ERS and product support to continue, supported by turnaround activity, power generation, hydro, mining and oil-and-gas maintenance spending. McClean said customers are emphasizing asset reliability and life-cycle extension, while Wajax is placing additional focus on technician recruitment, retention and training.

Backlog Rises and Leverage Falls

Second-quarter backlog was C$546.6 million, up C$24.9 million from the first quarter and C$22.4 million from a year earlier. Chief Financial Officer Tania Casadinho said the sequential increase was primarily due to mining backlog, including the addition of a large mining shovel, as well as higher construction and forestry and ERS backlog.

At June 30, backlog included two large mining shovels scheduled for delivery over the next two quarters. The year-over-year backlog increase also reflected power systems work tied to a River-class destroyer subcontract with Irving Shipbuilding Inc. entered into in the fourth quarter of 2025.

Inventory decreased C$3.7 million from the first quarter and C$12.3 million from a year earlier. Casadinho said management believes inventory is within a normal operating range. Inventory turns improved to 2.4 times, compared with 2.2 times in the second quarter of 2025.

Cash flow from operating activities totaled C$36.2 million, compared with C$68.3 million a year earlier. The company said the decline largely reflected a smaller inventory reduction in the current quarter relative to the prior-year period. Wajax’s leverage ratio improved to 1.3 times from 1.51 times in the first quarter, while available credit capacity stood at C$297.8 million.

The board approved a third-quarter dividend of C$0.35 per share, payable Oct. 2 to shareholders of record Sept. 15.

Strategic Planning and Market Outlook

McClean, who joined Wajax as CEO in March, said the company is moving from a period focused on listening and operational improvement toward planning for growth. Wajax has formed a Strategy Working Group of 18 senior leaders to assess opportunities across its businesses, regions and functions and help shape 2027 priorities and investment decisions.

The company is adding capabilities in sales, marketing, strategic projects, talent and communications. McClean said Wajax has hired Josie Patella as vice president of sales enablement and is working to improve sales-force effectiveness, role clarity, technician capabilities and go-to-market execution.

Management also highlighted its enterprise resource planning platform as an enabler for more detailed profitability and cost analysis by segment, region and supplier. McClean said the system could also provide a foundation for e-commerce initiatives in industrial products, parts and product support.

Looking ahead, Wajax described market conditions as mixed, with customers remaining cautious and approval processes taking time. Still, management said it is seeing improved customer sentiment in certain end markets. Mining remains supported by commodity prices, critical-minerals investment and project pipelines, while oil-and-gas and oil-sands momentum is building and government and utilities demand remains steady due to infrastructure and grid investment.

McClean said the company intends to remain disciplined on cost control, margin management, working capital and capital allocation as it develops its longer-term growth plans.

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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