Wajax Corporation

Thank you for attending Wayzax Corporation's 2026 First Quarter Financial Results Webcast. On today's webcast will be Mr. George McLean, President and Chief Executive Officer, Ms. Tanya Casadinho, Chief Financial Officer. Please be advised that this webcast is being recorded. Please note that this webcast contains forward-looking statements. Actual future results may differ from expected results. I will now turn the call over to Tanya Casadeen-Hall.

Thank you, Operator. Good afternoon, and thank you for participating in our first quarter results call. This afternoon, we will be following a webcast, which includes a summary presentation of Wage Access Q1 2026 financial results. The presentation can be found on our website under Investor Relations, Events, and Presentations. Again, I would like to draw your attention to our cautionary statement regarding forward-looking information on slide 2 and the non-GAAP and other financial measures on slide 3. Please turn to slide 4, and at this point, I'll turn the call over to George.

To start out, we'll provide highlights on our first quarter before turning it back to Tanya for commentary on backlog, inventory, and the balance sheet. This slide provides an overview of WageX. The corporation has more than 167 years. of Canadian operating history and operates across 105 branches with a team of approximately 2,900 employees. During the quarter, our heavy equipment categories and revenue sources made up approximately 55% of our total revenue, while industrial parts and ERS generated approximately 45%. Moving to slide five. This slide provides an overview of our purpose and values. WageX's purpose statement is empowering people to build a better tomorrow, which we strive to achieve by living our values and delivering an exceptional experience for our shareholders, customers, suppliers, our people, and the communities we serve. Our purpose and values guide our decision-making and allow us to execute on our strategic priorities. Turning to slide six, this slide provides an overview of our strategic priorities, which were refined for 2026. During 2025, management focused on cost control, inventory optimization, and margin improvement to reduce leverage, enhance profitability, and increase cash flow from operations. These actions represented initial steps in an ongoing program of operational improvements. In 2026, management continues to emphasize disciplined operational execution across these focus areas, supported by balance sheet strength and prudent capital allocation, which will enable the corporation to deliver sustainable long-term value. Turning to slide 7, first quarter of 2026, WageX delivered improved margins, strong operating cash flow, and a further reduction in leverage despite lower year-over-year revenue. Revenue of $502.1 million decreased $52.9 million, or 9.5% in the quarter. The decrease resulted primarily from lower equipment volumes, including the delivery of one large mining shovel in the current quarter compared to two in the first quarter of the prior year. as well as continued customer uncertainty and increased caution across certain sectors. The gross profit margin of 20.6% increased 150 basis points compared to the same period of 2025, reflecting margin initiatives and sales mix. Increase was driven primarily by higher margins realized in industrial parts and ERS sales and a lower proportion of equipment sales from a sales mix perspective. These increases were partially offset by lower margins realized on product support revenue. We remain focused on these margin improvement initiatives to strengthen our margin profile, mitigate ongoing market pressures, and drive continued earnings performance. Selling and administrative expenses as a percentage of revenue increased to 14.8% in the first quarter of 2026 from 14.3% in the same period of 2025, driven by the year-over-year decline in revenue. Using the adjustments noted on the slide, adjusted selling and admins expenses decreased $1.5 million in the first quarter of 2026 compared with the same period in the prior year, primarily due to ongoing discipline in cost control and operational efficiency. Adjusted EBITDA margin of 8.1% in the first quarter of 2026 improved from 7.8% compared to the same period of 2025 and increased from 7.9% in the fourth quarter of 2025. Adjusted EBITDA of $40.5 million decreased $2.7 million, or 6.3%, from the first quarter of 2025, noting the adjustments recorded on this chart. Adjusted net earnings of $0.67 per share decreased 2.4%, or $0.02 per share, from the first quarter of 2025, noting the adjustments recorded on this chart. At the end of Q1, the TRIF rate was 2.02, an increase of 55% from the first quarter of 2025. Safety continues to be WageX's number one priority and management is committed to continuously improving our safety programs to improve on this result. We thank everyone on our team for their ongoing dedication to workplace safety. Turning to slide eight. Revenue decreases of 9.5% in the first quarter resulted from lower revenue in all regions. Western Canada sales of $227 million decreased 14% in the quarter to primarily to lower construction and forestry equipment volumes and lower mining volumes, reflecting the delivery of one large mining shovel in the first quarter of 2026 compared to two in the first quarter of the prior year. Central Canada sales of $90 million decreased 9.5% in the quarter due primarily to lower revenue in the material handling and industrial parts categories. Eastern Canada sales of $184 million decreased 3.3% in the quarter due primarily to lower equipment volumes in the construction and forestry segments and material handling categories and lower industrial parts sales. These decreases were partially offset by higher ERS revenue and higher equipment volumes in the power systems category.

Please turn to slide nine.

Update on equipment and product support sales and year-over-year variances are shown on this page. Equipment sales of $131 million decreased $39.8 million, or 23.3%, compared to last year, due primarily to lower construction and forestry sales in western and eastern Canada, lower material handling sales in all regions, and lower mining sales in western Canada, reflecting the delivery of one large mining shovel in the first quarter of 2026 compared to two in the first quarter of the prior year. Product support sales of $136 million decreased $10.3 million or 7% compared to last year due primarily to lower mining revenue in Western Canada. Please turn to slide 10. Update on industrial parts and ERS and year-over-year variances are shown on this page. Industrial parts sales of approximately $138 million decreased $7 million or 4.9% compared to last year due primarily to lower sales in Central and Eastern Canada driven by softer market conditions. ERS sales of approximately $87 million increased $5 million, or 6%, due primarily to higher sales in eastern Canada, driven by timing of projects. Moving to slide 11. Slide summarizes sales at a category level for our company's overall groupings of heavy equipment and industrial parts and ERS. First quarter, The heavy equipment categories decreased $50.9 million, or 15.5%, due to primarily lower construction and forestry equipment sales in all regions, and lower mining equipment and product support sales in Western Canada. In the first quarter, the industrial parts and ERS categories decreased $2 million, or 0.9%, driven by lower industrial sales part sales in Central and Eastern Canada offset partially by higher ERS sales in Eastern Canada will now turn the call back to Tanya for commentary on backlog inventory and the balance sheet thank you George please turn to slide 12 for my comments on backlog and inventory

Our Q1 backlog of $521.7 million increased $5.1 million compared to backlog of $516.6 million at Q4, and decreased $39.6 million on a year-over-year basis. The increase was due primarily to higher construction and forestry and material handling backlog, offset partially by lower mining backlog, driven largely by the delivery of a large mining shovel in the quarter, which was in backlog at December 31, 2025. Year-over-year decrease was due primarily to lower mining backlog, driven largely by the delivery of five large mining shovels since March 31st of 2025 and lower material handling backlog. These were partially offset by an increase in power systems backlog, driven by the subcontract with Irving Shipbuilding Inc. entered into during the fourth quarter of 2025 and higher ERS orders. Backlog at March 31, 2026 included one large mining shovel. Inventory increased 44 million compared to Q4 of 2025. The increase in the first quarter of 2026 resulted primarily from targeted equipment inventory purchasing in the construction and forestry category to support anticipated seasonal demand. Inventory decreased 64.5 million compared to Q1 of 2025. The year-over-year decrease resulted primarily from lower mining equipment and industrial parts and ERS inventory. Management believes that inventory levels are within a normal operating range at this point. Please turn to slide 13, where I will provide an update on cash flow, leverage, and working capital. Cash flow is generated from operating activities in the current quarter of $46.8 million, compared with cash generated of $25.7 million in the same quarter of the prior year. The increase in cash generated of $21.1 million was mainly attributable to an increase in accounts payable in accrued liabilities offset partially by a targeted increase in inventory during the quarter to support anticipated seasonal demand and an increase in trade and other resources. Our Q1 leverage ratio improved to 1.51 times from 1.62 times in Q4. primarily to lower debt level driven by cash generated from operating activities during the quarter. The corporation's leverage ratio is currently within our target range of 1.5 to 2 times at the end of Q1. Our available credit capacity at the end of Q1 was $302.2 million, which is sufficient to meet short-term normal course working capital and maintenance capital requirements and fund our planned strategic initiatives. continue to focus on working capital efficiency which is a key component in managing our overall leverage targets one working capital efficiency was 24.6 percent an improvement in efficiency of 50 basis points from 25.4 percent at december 31st 2025 due to the lower trailing four quarter average working capital inventory turns have remained the same from q4 of 2025 and improved to 2.5 times from 2.2 times in Q1 of 2025 and 2 times in Q4 of 2024, due primarily to lower average inventory levels offset partially by lower sales. The optimization of inventory improvement and working capital efficiency and meaningful reduction in leverage reflect management's disciplined execution and strong balance sheet as we look ahead to the balance of 2026. Finally, the Board has approved our second quarter 2026 dividend of $0.35 per share payable on July 3rd, 2026 to shareholders of record on June 15th, 2026. Slide 14, and at this point, I will now turn the call back to George.

Thanks, Tonya. Our outlook is summarized on slide 14. In the first quarter of 2026, Wage Act delivered revenue of $502.1 million, compared to $555 million in 2025. Gross profit margin of 20.6% compared to 19.1% in 2025. Adjusted basic earnings per share of 67 cents versus 69 cents in 2025. And cash flow from operating activities of $46.8 million compared to 25.7 million in 2025. Working capital efficiency improved to 24.6% from 25.1% at December 31, 2025, despite a targeted increase in inventory to support anticipated demand. Leverage improved to 1.51 times from 1.62 times at December 31, 2025, and remains within the corporation's target range of 1.5 to 2 times. By 2026, management continues to emphasize disciplined execution across these priorities, supported by prudent capital allocation. Ahead, Wajax continues to see solid customer demand in the mining and energy sectors. Mining demand is supported by a backlog that includes one large mining shovel scheduled for delivery within the next four quarters. Market conditions in other sectors remain mixed across regions, with ongoing macroeconomic softness and uncertainty related to Canada-U.S. tariff and trade dynamics. Ajax continues to maintain a strong balance sheet and a solid backlog. Inventory levels are within a normal operating range, while margin improvement and cost control remain key focus areas. Although demand visibility varies across end markets, the corporation's diversified exposure focused execution position to manage current market conditions effectively. Management believes the continued execution of its strategic priorities, supported by balance sheet strength and prudent capital allocation, will enable the corporation to deliver sustainable, long-term value. We will now turn it back to the operator and open the line for questions. Thank you very much for your continued interest in wage equity.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. To join the question queue, you may press star then 1 on your touchtone phone. You will hear a tone acknowledging your request. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press start and the number two. Our first question comes from the line of Devin Dodge from BMO Capital Markets. Your line is open.

Yeah, thanks. Good afternoon. George, I wanted to start with a question for you. You've officially been in the CEO seat for two months now. Just wondering if you could share some early perspectives on Wajax and where you see the biggest opportunities for the company.

Hello, Devin. Thanks for the question. Yes, I started on March 3rd and about nine weeks into my term here at Wajax, I'm spending 150 days crossing the country on a look, listen, learn tour. Been to about a third of the locations, all of our distribution centers and met with many of the team. And in terms of early observations, I see a lot of good, hardworking people across the country who are really focused on customers, needs of our customers, our product segments, and our industry. So really good people working hard, good focus on safety. Obviously, lots more that we can do, but I'm seeing good potential in the business across the country.

Okay, excellent. Okay. The other commentary suggested customer caution may have escalated a bit in early 2026. I'm assuming this may be coming from some end markets that had already been weak, but just wondering if you could provide a bit more color on which end markets that you're seeing this.

Yes, exactly. It's mainly around construction and forestry where we see the softness or the perhaps concern in the market, but overall I think pretty steady and stable with caution that we're seeing it. the same sectors and same customer segments over the last few quarters.

Okay, that makes sense.

And then one last one for me. MTU, it's one of the brands in your portfolio, but I believe the OEM often sells directly to larger customers, and that's, we'll say, limited Wajax's presence in the data center sector. Just wondering if there's an opportunity for Wajax to work with MTU on some of these potential data center projects even if it's only on a product support basis.

Yes, understood for sure. Rolls-Royce MTU is a great company with great products, and we're pleased to represent them. There is a lot of opportunity, as you said, all across the country in stationary applications and mobile applications, including power generation backups and really innovative products. And I think their direct sales are fairly limited, but certainly, as you said, in some of the bigger projects. But we're definitely the supplier of choice when it comes to parts down the road. So we look forward to participating in that as well and growing that relationship.

Okay, great. Thanks for that. I'll turn it over.

Our next question is from Patrick Sullivan from TD Cowen. Your line is open.

Okay, great.

Thank you for taking my question. I guess, was there anything unique about Q1 this year? Understanding that orders and deliveries can be a bit lumpy in any quarter, but Q1 can also be kind of at most risk for variability in terms of seasonality as well.

Was there anything kind of stuck out this quarter?

Hi, I'm sorry, we missed you. This is Pat, right?

Yes, it is.

So from a Q1 perspective, yeah, you're correct in terms of it can be a bit bumpy due to seasonality. We are coming up on a comparison to a pretty strong Q1 in 2025 where we did see a bit of what we believe was pull forward demand in equipment in the first quarter of last year, and we didn't necessarily see that pull forward this quarter. In addition to that last quarter or last year, same quarter, we had two mining shovels. This quarter, we only had one. So there's some lumpiness in there for sure.

Okay, understood. And then you noted the inventory build ahead of expected seasonal demands. I guess, can you talk about the areas where you're stocking up for and I guess your confidence in that demand coming to fruition?

Yes, so we did stock up specifically in the construction forestry areas because end of Q1 and Q2 typically are seasonally a bit higher for us. So we're stocking up in advance of that or that expected demand.

Okay, got it.

And maybe one last one before I turn it back over. The backlog was relatively stable quarter over quarter, but I'm wondering if you can talk about the quoting activity you're seeing on the market.

I guess, like, how is the quoting environment?

Yes, backlog is, this is George, this backlog is solid for us, which is great. In terms of quoting, we don't see any concerns or any major upsurge, and it lines up with what we see in the market generally around oil and gas mining. and then a little bit of uncertainty in construction, forestry, etc. But we do see some upturn, as Tanya said, in terms of the need for inventory, and we'll continue to quote on that basis.

Okay, great. Thank you.

Our next question is from Maxim Sychev from National Bank Capital Market. Your line is open.

Hi, good afternoon. Is it possible to get a bit more color around what exactly happened with product support in Q1? You know, how much of that is, you know, seasonality? How much of that is tougher comps? I guess, yeah, any grid of color. And more importantly, I guess, how we should be thinking about the rest of the year on sort of, you know, sequential basis, or should we expect a recovery in that category?

Thanks.

Max, from a product support perspective, I'll address your portion around the comps. We did have a strong comp as well in Q1 of last year. We had some larger sales in mining, which also impacted the comparison on the margin as well, and hence the call-out. In terms of what we expect, it comes back to the caution as well, so it really... Q2 tends to be seasonally better, but we are cautioned with that.

So just to drill down a little bit, I mean, like the installed base is already there. So in terms of like the delays or the caution around product support, what is it really being driven by? Is it services? Is it parts?

I mean, like what exactly is happening there?

Yeah, it's, George, I think there's nothing we can point to directly. It's more about just making sure we're performing in the field and that we meet the demand. There is definitely softness, but we think there's more we can do to meet that, to meet the market in that area. And nothing more really in detail we can point to at this stage until we see the trend play out.

Okay. And then I guess when we look forward, I mean, obviously where WTI, WCS is at the moment, I mean, what are your conversations with mining clients? And specifically, I understand that you have one trouble and backlog, but what about the visibility to potentially add more on a going forward basis? What is the pipeline looking from that perspective?

Sorry, we missed the first part, adding more what?

Troubles. Troubles? Troubles?

Yeah, I think that's – we don't have a good line of sight. I think we have good demand over time, but nothing unexpected or inordinate in that area. We continue to work that market, and we do believe we have an excellent product, but nothing more to disclose at this point. Okay, but I guess – Yeah, active quotes remain strong. Sorry, active quotes remain strong for us, and we're hopeful and optimistic that we'll continue.

Right. And I guess, I mean, the bot language from mining clients specifically, I mean, has it gotten better on the back of oil pricing spike or is it more sort of steady relative to, because I mean, people, I guess, it seems some sort of normalization from a pricing perspective. What are you feeling kind of on the ground?

I think it's a mix of steady and maybe some optimism about growth going forward, but it still hasn't played out yet. So

think solid with uh with hope for some upside going forward as uh as this trend in prices okay and then maybe a question for tiny event in terms of accounts payable obviously it you know helped q1 how should we think about that line item on a uh sort of the remainder of the year basis just just from a modeling perspective or if you want to maybe address working capital in general because i'm like i guess ap is only part of that but uh yeah anything to help us from a kind of a free cash flow perspective. Thank you.

So the way we look at working capital, it's a holistic view. So inventory is really the biggest driver and in accounts payable, it's the timing of the payables associated with inventory for the most part. So if we think about inventory, as we've been saying for a while, we are focused on optimizing our inventory, which means having the right inventory at the right time. So as we make our way through this build of the inventory, you'll see that go through AP eventually as well, but we are still very keenly focused on optimizing our working capital and by default our inventory.

Okay. Do you want me to be providing anything sort of numeric in terms of the optimization levels that you think are appropriate, I don't know, like as a percentage of revenue or anything tangible from that perspective?

Are your lines breaking up a little bit? What was the first part?

Sorry, I apologize. I'm just wondering, in terms of the working capital sort of efficiency, is it possible to maybe provide any sort of quantitative measure, like as a percentage of revenue or something like that, that we should be thinking of on a perspective basis in terms of kind of like we're starting from point A and point B is going to be, I don't know, like 10% improvement. Any color that would be super helpful. Thank you.

Yeah, a little bit difficult to give it to you on a working capital efficiency perspective, but like I said, inventory is the biggest driver. We're looking at it from a turns perspective, and we feel quite good with where the turns are at this moment. I think we're at 2.5 and have been there for two quarters now. So that will drive the level of inventory that we'll have on hand versus the expected sales.

Okay, thank you very much.

Our next question is from Jonathan Goldman from Scotiabank. Your line is open.

Hey, good afternoon, team, and thanks for taking my questions. I just want to circle back to the conversation on product support. I was wondering if we could just, there's one line in your disclosures that we can drill down on a bit more. I think in the revenue section, you talk about product support sales down 7% year on year. The explanation was lower mining revenue in Western Canada. So I was wondering if you can explain the dynamics there, because it seems like the outlook and the end markets are pretty good in mining.

So I just wanted to know if there's anything specific in the quarter in the region that's happening in Western Canada.

Yeah, it's a good question. We don't have a great line of sight in that area, but there is this ebb and flow between the work that is outsourced to the market or to us, and then self-performance of the product support work in-house by some of our customers, so there's always a dynamic there depending on their current situation, their needs, and their cash flows. So we don't, as I said, have a great line of sight in terms of all those details, but that is the balance. So it may be that there's some more self-performance of work in the market, but we know that our service offer is very good, and we expect it to continue to be solid through the rest of the year.

Okay, that's helpful. And I guess relatedly, a separate line in the disclosure is about some pressure on product support margins. Maybe you could just walk us through if there's been any change in the competitive dynamics in the marketplace, whether it's competing against customers themselves and self-perform other competitors, and if there's any dynamic with the oil price and kind of demand levels that would change sort of margin expectations going forward.

Yeah, nothing in the market or any concern. It's really just a strong comp that we're lapping now from the mining sector.

Okay, and maybe one for Tanya on housekeeping one. How should we think about the cadence or, I guess, level of SG&A dollars going through the year off of Q1?

Great question. Yes, our SG&A as a percentage of revenue this quarter is a little higher than we've been seeing it over the last several quarters now. That is still an area of focus for us. It continues to be. So our three key areas that we were talking about last year, margin, cost, and inventory, continue to be top of mind, and cost is no different. In terms of how we're thinking about it, we think about SG&A or the cost on a full-year basis, so we still feel good about the ranges that we've provided historically, but we're looking at it from a mid-term to long-term. We're not going to be managing it quarter over quarter, and we expect ebbs and flows depending on the volume, but it is still a key focus for us, if that helps.

No, that's helpful, and maybe just one more if I can squeeze it in. I realize, George, it's early days, but the balance sheet is probably in the best shape it's been in for a considerably long time. You're at the low end of your target range. How are you thinking about capital allocation going forward from where you sit today?

Hi, it's George. Thanks for the question. So I'm 90 days in and running this 150-day Look, Listen, Learn tour, and we're also engaging in a strategic planning process among the executive leaders. That's really to be determined. We think there's lots of potential and lots of possibilities, but that will be part of the discussion in terms of market needs, what we can provide, how much expenditure we'll need to support that and invest, and we'll be back with more details when we're ready, but that will take some time, at least six months to play out in terms of our planning.

Okay, looking forward to it. Thanks for taking my questions.

There are no questions at this time. Mr. McLean, please continue.

Thank you, operator. Much appreciated. Thank you, everyone, for joining, and thank you for your questions. We appreciate it, and thanks again for your support and interest, and hope everyone has a great day. Thanks. Bye.

This concludes today's conference call. Thank you for your participation. You may now disconnect.