Exco Technologies Limited

Good day, everyone, and thank you for standing by. Welcome to the EXCO Technologies Limited Third Quarter Results 2025. At this time, all participants are in a listen-only mode. After the presentation, there will be a question-and-answer session. To participate, you will need to press star 1-1 on your telephone. You will then hear a message advising your hand is raised. To withdraw your question, simply press star 1-1 again. Please note, this event is being recorded. Now, it's my pleasure to turn the call to the President and CEO, Mr. Darren Kirk. The floor is yours.

Thank you, Carmen, and good morning, everyone. Welcome to Exco Technology's fiscal 2025 third quarter conference call. I will start with an overview of our operations for the quarter, and then our CFO, Matthew Posno, will review the financial details. After our prepared remarks, we'll open the call for questions. Before we begin, let me remind everyone of the cautionary notes regarding forward-looking statements in our press release and on page two of our quarterly presentation. Those notes apply to our discussion today. Overall, this was clearly a challenging quarter for Exco as we faced multiple headwinds in our end markets. Automotive production volumes declined in both North America and Europe during the quarter, driven in part by tariff-led trade disruptions and macroeconomic uncertainty. In North America, industry analysts are forecasting roughly a 5% drop in vehicle output for calendar 2025, with European production expected to be down about 3%. Against this backdrop, EXCO sales softened modestly in the quarter with a mid-single-digit percentage decline in revenue. Our profitability was further pressured by a fall-off in die-cast sales, unfavorable product and vehicle mix in our auto solutions segment, adverse foreign exchange impacts, and costs associated with restructuring activities. Despite these headwinds, we continued to execute on our strategy and maintained very favorable performance in several areas of our businesses. In our automotive solutions segment, sales were lower than a year ago, reflecting difficult market conditions. A key factor was reduced vehicle import volumes from Asia due to tariffs, which impacted programs where we supply accessory content. The imposition of steep US tariffs on certain foreign-built vehicles earlier this year led to a pullback in imports of some Japanese and Korean models that include our interior trim and storage accessories, dampening our sales in this segment. Aside from the tariff effects, we also experienced unfavorable vehicle and product mix and continued launch delays on certain new programs, as well as cautious production schedules from our OEM customers. On the positive side, US consumer demand has been relatively resilient, dealer inventories have improved, and OEM incentives have increased to support sales despite interest rates being where they are. Earlier in the year, we saw customers restock accessory inventories that had been drawn down, although tariff related uncertainties have again made some OEMs more conservative. We responded by tightening our cost controls within automotive solutions, and despite the volume headwinds, segment EBITDA margins held relatively firm. This was achieved through a combination of efficiency gains, pricing actions, and proactive cost management. Notably, we implemented headcount reductions and other restructuring measures in this segment to help offset rising labor costs and protect profitability. These were difficult decisions, but they were necessary to improve our cost structure. The severance and restructuring costs incurred this quarter are expected to be paid back within a year or so through lower ongoing expenses. Excluding these charges, our automotive solutions performance was relatively stable and positioned to rebound when volumes normalize. Turning to our casting and extrusion segment, results here were mixed with areas of weakness in die-cast tooling offset by resilience in extrusion tooling. Demand for new high-pressure die-cast mold and related consumable tooling was relatively soft this quarter. Automakers have been pumping the brakes on certain new vehicle programs, which we attribute to several factors. A noticeable slowdown in EV adoption and a pivot toward hybrid vehicles, changes in the regulatory landscape, particularly around emissions and fuel economy, continued tariff-induced uncertainty, and a tendency of OEMs to extend the life of existing powertrain platforms before committing to next-generation hybrids or EVs. Essentially, many of our customers are deferring new tooling orders as they reassess product plans in light of political and market risks. We've seen a decline in order flow for new die-cast molds as a result, with some programs on hold until there is more clarity. That said, our die-cast business remains fundamentally strong. Quoting activity for new programs continues, we're engaged on multiple fronts, and we're totally confident this is more of a timing issue than a structural change in the business. It's worth emphasizing that while the EV rollout has slowed, EXCO's business is largely agnostic to powertrain type. Whether the industry accelerates electrification or shifts toward hybrid, the common trend is a greater use of lightweight aluminum components, which sustains demand for our die-cast and extrusion tooling over the longer term. We have already seen gigapress capacity expansion plans delayed somewhat along the slower EV ramp, but we fully expect those large casting programs to proceed in time, and EXCO is well positioned for when they do. Meanwhile, our extrusion tooling operations delivered relatively stable results this quarter. Sales of extrusion dyes and associated tooling were roughly flat year over year, demonstrating the resilience imparted by the diverse end markets we serve. The extrusion group supports not only automotive, but also building and construction, green energy, aerospace, transportation, and other industrial sectors. So weakness in one area is often offset by strength in others. In Europe especially, we performed well. Our Halex operations outperformed local market conditions and improved profitability thanks to higher volumes, efficiency gains, and better integration with EXCO's global operations. we continue to realize benefits from our recent capital investments. For example, despite temporary installation-related disruptions during the quarter, our new heat treat equipment in Michigan is now fully operational and enhancing productivity and lowering costs. As well, our Castrol Mexico plant is ramping up nicely now, contributing positive EBITDA. Across the segment, we have focused on standardizing processes and increasing automation, which has reduced lead times and improved product quality. These operational improvements combined with our strategic footprint and unmatched capabilities give us confidence that our segment will deliver much stronger results when the die-cast industry demand recovers. Matthew will now provide details on the financial aspects of the quarter, and then I'll come back and provide some commentary on our outlook.

Thanks, Darren. In terms of consolidated results, consolidated sales for the third quarter ended June 30, 2025, were $154.9 million compared to $161.8 million in the same quarter last year, a decrease of $6.9 million or 4%. Foreign exchange rate changes increased sales by $3.1 million during the quarter. Consolidated net income for the third quarter was $5.4 million or 14 cents per share, compared to $8.2 million, or $0.21 per share, last year, a decrease of $2.8 million, or 34%. Net income included $600,000, or $0.02 earnings per share, and after-tax restructuring charges. The effective tax rate was negative 13%. It was a tax credit compared to a 27.5% debit last year, benefiting from $1.6 million in prior research and development tax credits recognized this year. In terms of segment results, the automotive solutions segment, sales for the quarter were 80.8 million, down 2.1 million from last year. Foreign exchange fluctuations added 1.5 million to sales. The decline reflects customer-driven delays in program launches, an unfavorable vehicle mix, and slightly lower production volumes in North America and Europe. Broader industry challenges such as tariff uncertainty, recessionary risk, evolving environmental regulations, and consumer confidence continue to weigh on the automotive solutions segment, We expect recent and upcoming program launches to drive growth in content per vehicle. Quoting activity remains solid. In terms of pre-tax profit, it was down $7.4 million or $800,000 compared to the prior year third quarter, mainly due to lower volumes, product mix changes, and rising labor costs, particularly in Mexico, where the wage inflation has been significant in 2025. We incurred approximately half a million dollars in restructuring costs, as part of the lean manufacturing automation initiatives to better align with current production levels. Pricing discipline remains a priority, with new programs being priced to reflect anticipated future cost increases. The catch and extrusion segment sales were $74 million, down $4.9 million or 6% compared to last year. Foreign exchange added $1.6 million to sales. Extrusion tooling sales increased driven by diversified end markets such as construction, automotive, sustainable energy, transportation, recreational vehicles, electronic components. However, die-cast tooling demand weakened as OEMs delayed EV launches, shifted production to hybrids and smaller internal combustion engines, and extended the life of existing platforms amid tariff and EV market uncertainties. Over time, we expect to benefit as foreign non-USMCA die-cast tooling suppliers face growing disadvantages from potential tariff increases. Potting activity remains healthy and demand for our 3D printed tooling continues to grow within GigaPresses and other applications. Pre-tax profit was $2.6 million, down 4.5 million or 63% due to lower die-cast tooling demand and several additional costs. $1 million in incremental outsourcing costs for heat treatment, half a million dollars in restructuring costs, and $1.6 million in foreign exchange losses. CASTO's heat treatment operation continues to expand, improving cost savings and production quality, while HALIC's efficiency initiatives are delivering positive results. Startup loss at Castile's new facilities are narrowing, especially in Mexico. Management remains focused on process standardization, engineering capabilities, and centralized support functions to improve lead times, quality, and production capacity. In terms of cash flow and financial position, operating cash flow was $25.2 million and free cash flow was $20.1 million after $3.9 million in maintenance fixed asset expenditures. Free cash flow combined with existing cash balances funded $4.5 million in growth capital, $4 million in dividends, and $1.1 million in share repurchases under a normal course issuer bid. We ended the quarter with $23.5 million in cash, $95 million in debt, and $57 million available under our credit facility. Our financial position remains strong, supporting strategic initiatives and enabling us to pursue high-value growth opportunities, dividends, and other potential investments. That concludes my comments. We can now transition back to Darren to discuss the company's outlook.