Operator
Good day, and thank you for standing by. Welcome to Exco Technologies Third Quarter Results 26 conference call.
At this time, it is on a listen only mode. To ask a question during the session, you will need to press 11 on your telephone.
You will then hear an automated message advising your hand is raised. Please note today's conference is being recorded.
I would like to hand the conference over to your speaker, Mr. Darren Kirk, President and CEO.
Please go ahead, sir.
Darren Michael Kirk
Thank you, Olivia, and good morning, everyone. Welcome to Exco Technologies third quarter conference call for fiscal 26.
I am joined this morning, as usual, by Matthew James Posno, our Chief Financial Officer. Before we begin, I will remind everyone that today's call may contain forward looking statements and references to non-IFRS measures.
Please refer to the cautionary language and reconciliations in yesterday's news release and our MD and A available on SEDAR plus and our website. I will begin today with an overview of our operations and strategic progress during the quarter, including an update on the official launch of Exco Energy, which I believe represents 1 of the most exciting developments at our company in many years.
Matthew will then walk through the financial details and following that, we will open the line for questions. Exco delivered solid progress in the third quarter.
Consolidated sales increased 7% year over year to $105 million, a third quarter record for the company. While EBITDA increased 26% to 18.5 million.
Our consolidated EBITDA margin expanded by roughly 170 basis points to 11.2%, driven by a meaningful improvement in our Casting and Extrusion segment. Net income was $5.8 million or $0.15 per share, which included $0.02 of restructuring charges.
Excluding those charges, the underlying earnings power of the business continued to build in the quarter. More important than any single quarter's results is the direction of travel.
Over the past several years, we have invested significantly in our business. New greenfield facilities, expanded machining and heat treatment capacity, automation, and industry leading additive manufacturing capabilities.
Those investments are now essentially complete, our capital spending has moderated accordingly. Our priority and the lens through which we are managing the company is translating that expanded asset base into higher utilization improved margins, stronger cash generation and better returns on capital.
The third quarter demonstrated clear progress against these objectives. And we believe there is much more to come.
Let me turn to the development that I am most excited about. During the quarter, we officially launched Exco Energy.
A new initiative to pursue opportunities in the Canadian nuclear energy sector and over time, in other advanced and technologically demanding end markets. The logic behind Exco Energy is straightforward.
Through our large mold group, Exco has spent decades machining some of the largest, most complex, and most demanding precision components in North America. We operate among the most advanced large scale machining, engineering, and quality systems on the continent.
Supported by rigorous process controls and a workforce whose craftsmanship is very difficult to replicate. Those are precisely the capabilities the nuclear industry requires.
Capabilities that are in short supply as Canada embarks on what we believe will be a multi decade expansion of its nuclear energy infrastructure. The demand backdrop is compelling.
Electricity consumption is rising structurally driven by electrification, reshoring of industrial activity, and the enormous power requirements of AI in data center infrastructure. Nuclear energy is increasingly recognized as essential to meeting that demand with reliable, secure, emissions free baseload power.
In Canada, that translates into major refurbishment and life extension programs at existing reactor fleets, new large scale builds, and an emerging pipeline of small modular reactors, all of which require a deep domestic supply chain of qualified precision manufacturing partners. We intend for Exco to be an important part of that supply chain.
We were honored that the government of Canada chose to host its nuclear energy strategy announcement at our-- at our Newmarket facility on June 22nd. We view that event as a strong validation of the relevance of our capabilities to Canada's nuclear ambitions, and it has meaningfully raised our profile with utilities, government stakeholders, and industry partners.
Our engagement across the sector has deepened considerably, and quoting activity has already been very encouraging. I want to be clear about how we are approaching this opportunity.
Exco Energy will leverage our existing precision machining assets engineering talent and quality systems, which means incremental revenue in this area carry attractive economics and improved utilization and returns on capital across our existing footprint. At the same time, the nuclear industry rightly demands rigorous qualification processes and revenues will build over a period of years rather than quarters.
We are investing the time now to establish the certifications relationships, and track record that will position Exco as a partner of choice as this market develops. We believe the long term prize is substantial, A large growing nonautomotive end market with high barriers to entry that play directly to our strengths.
Exco energy is also broader than nuclear alone. A core element of the strategy is a applying our additive manufacturing expertise across a wider range of end markets.
Exco has quietly built 1 of the leading additive manufacturing operations for tooling applications in North America. The addition of our seventh industrial 3D printer in late fiscal 25 further strengthened this capability and demand for our 3D printed tooling solutions remain strong.
As customers pursue greater efficiency and increasingly large and complex tooling. Including tooling for Giga Press applications.
Additive manufacturing is transforming what is possible in our industry, enabling conformal cooling, faster cycle times, longer tool life, and design geometries that simply cannot be produced conventionally. The same attributes that make our additive solutions valuable in die cast tooling are relevant to a broad set of technically demanding industrial applications.
We are actively pursuing opportunities to apply this expertise together with our engineering capabilities and installed asset base across other end markets, reducing our reliance on any single industry and improving the quality and durability of our earnings over time. Diversification of our end market exposure initially on a capital light basis and from a position of technological strength is a central pillar of our long term strategy.
Turning to our segments. The Casting and Extrusion segment reported third quarter sales of $77 million up 4% from the prior year, while segment EBITDA margin improved to 16.2% from 12.7%, a testament to the pricing discipline, operational efficiency initiatives and cost actions we have pursued across the segment.
Extrusion tooling sales remained solid, supported by diversified demand across building and construction, transportation, renewable energy, electrical applications, and AI infrastructure related projects. The structural demand drivers here are powerful.
Construction remains the largest end market for extrusions and continues to grow. Aluminum content per vehicle keeps rising as automakers pursue lightweighting, particularly in electrified platforms.
And the build out of data centers and electrical infrastructure is emerging as a significant new source of demand, Industry forecasts suggest data center infrastructure alone could add more than 1 million tons of aluminum demand through 2030, spanning heat sinks, cooling systems, and structural framing, all of which are extrusion intensive applications. With The Americas expected to be the fastest growing region.
Layer on tariff dynamics in reshoring, which are pushing production toward domestic and nearshore supply in the backdrop for North American extrusion tooling is as constructive as we have seen it in some time. Importantly, we are also seeing increasing activity for our capital equipment products.
Containers, die ovens and related tooling systems particularly in North America as extruders invest in new press capacity and upgrade existing lines to meet this growing demand. These products deepen our position across the customers' press, carry attractive and thank you for standing by.
Operator
Welcome to Exco Technologies Third Quarter Results 26 conference call. At this time, it is on a listen-only mode.
To ask a question during the session, you will need to press *11 on your telephone. You will then hear an automated message advising your hand is raised.
Please note today's conference is being recorded. I would like to hand the conference over to your speaker, Mr.
Darren Kirk, President and CEO. Please go ahead, sir.
Darren Michael Kirk
Thank you, Olivia, and good morning, everyone. Welcome to Exco Technologies third quarter conference call for fiscal 26.
I am joined this morning, as usual, by Matthew James Posno, our Chief Financial Officer. Before we begin, I will remind everyone that today's call may contain forward looking statements and references to non-IFRS measures.
Please refer to the cautionary language and reconciliations in yesterday's news release and our MD and A available on SEDAR plus and our website. I will begin today with an overview of our operations and strategic progress during the quarter, including an update on the official launch of Exco Energy, which I believe represents 1 of the most exciting developments at our company in many years.
Matthew will then walk through the financial details and following that, we will open the line for questions. Exco delivered solid progress in the third quarter.
Consolidated sales increased 7% year over year to $165 million, a third quarter record for the company. While EBITDA increased 26% to 18.5 million.
Our consolidated EBITDA margin expanded by roughly 170 basis points to 11.2%, driven by a meaningful improvement in our Casting and Extrusion segment. Net income was $5.8 million or $0.15 per share, which included $0.02 of restructuring charges.
Excluding those charges, the underlying earnings power of the business continued to build in the quarter. More important than any single quarter's results is the direction of travel.
Over the past several years, we have invested significantly in our business. New greenfield facilities, expanded machining and heat treatment capacity, automation, and industry leading additive manufacturing capabilities.
Those investments are now essentially complete, and our capital spending has moderated accordingly. Our priority and the lens through which we are managing the company is translating that expanded asset base into higher utilization improved margins, stronger cash generation and better returns on capital.
The third quarter demonstrated clear progress against these objectives. And we believe there is much more to come.
Let me turn to the development that I am most excited about. During the quarter, we officially launched Exco Energy.
A new initiative to pursue opportunities in the Canadian nuclear energy sector and over time, in other advanced and technologically demanding end markets. The logic behind Exco Energy is straightforward.
Through our large mold group, Exco has spent decades machining some of the largest, most complex, and most demanding precision components in North America. We operate among the most advanced large scale machining, engineering, and quality systems on the continent, supported by rigorous process controls and a workforce whose craftsmanship is very difficult to replicate.
Those are precisely the capabilities the nuclear industry requires. Capabilities that are in short supply as Canada embarks on what we believe will be a multi decade expansion of its nuclear energy infrastructure.
The demand backdrop is compelling. Electricity consumption is rising structurally driven by electrification, reshoring of industrial activity, and the enormous power requirements of AI in data center infrastructure.
Nuclear energy is increasingly recognized as essential to meeting that demand with reliable, secure, emissions free baseload power. In Canada, that translates into major refurbishment and life extension programs at existing reactor fleets, new large scale builds, and an emerging pipeline of small modular reactors.
All of which require a deep domestic supply chain of qualified precision manufacturing partners. We intend for Exco to be an important part of that supply chain.
We were honored that the government of Canada chose to host its nuclear energy strategy announcement at our-- at our Newmarket facility on June 22nd. We view that event as a strong validation of the relevance of our capabilities to Canada's nuclear ambitions, and it has meaningfully raised our profile with utilities, government stakeholders, and industry partners.
Our engagement across the sector has deepened considerably, and quoting activity has already been very encouraging. I want to be clear about how we are approaching this opportunity.
Exco Energy will leverage our existing precision machining assets, engineering talent, and quality systems, which means incremental revenue in this area carry attractive economics and improve utilization and returns on capital across our existing footprint. At the same time, the nuclear industry rightly demands rigorous qualification processes and revenues will build over a period of years rather than quarters.
We are investing the time now to establish the certifications relationships, and track record that will position Exco as a partner of choice as this market develops. We believe the long term prize is substantial, a large growing non-automotive end market with high barriers to entry that play directly to our strengths.
Exco energy is also broader than nuclear alone. A core element of the strategy is applying our additive manufacturing expertise across a wider range of end markets.
Exco has quietly built 1 of the leading additive manufacturing operations for tooling applications in North America. The addition of our seventh industrial 3D printer in late fiscal 25 further strengthened this capability and demand for our 3D printed tooling solutions remain strong.
As customers pursue greater efficiency and increasingly large and complex tooling. Including tooling for Giga Press applications.
Additive manufacturing is transforming what is possible in our industry, enabling conformal cooling, faster cycle times, longer tool life, and design geometries that simply cannot be produced conventionally. The same attributes that make our additive solutions valuable in die cast tooling are relevant to a broad set of technically demanding industrial applications.
We are actively pursuing opportunities to apply this expertise together with our engineering capabilities and installed asset base across other end markets, reducing our reliance on any single industry and improving the quality and durability of our earnings over time. Diversification of our end market exposure initially on a capital light basis and from a position of technological strength is a central pillar of our long term strategy.
Turning to our segments. The Casting and Extrusion segment reported third quarter sales of $77 million up 4% from the prior year while segment EBITDA margin improved to 16.2% from 12.7%, a testament to the pricing discipline, operational efficiency initiatives and cost actions we have pursued across the segment.
Extrusion tooling sales remained solid, supported by diversified demand across building and construction, transportation, renewable energy, electrical applications, and AI infrastructure related projects. The structural demand drivers here are powerful.
Construction remains the largest end market for extrusions and continues to grow. Aluminum content per vehicle keeps rising as automakers pursue lightweighting, particularly in electrified platforms.
And the build out of data centers and electrical infrastructure is emerging as a significant new source of demand. Industry forecasts suggest data center infrastructure alone could add more than 1 million tons of aluminum demand through 2030, spanning heat sinks, cooling systems, and structural framing, all of which are extrusion intensive applications.
With The Americas expected to be the fastest growing region. Layer on tariff dynamics in reshoring, which are pushing production toward domestic and nearshore supply in the backdrop for North American extrusion tooling is as constructive as we have seen it in some time.
Importantly, we are also seeing increasing activity for our capital equipment products, containers, die ovens and related tooling systems particularly in North America as extruders invest in new press capacity and upgrade existing lines to meet this growing demand. These products deepen our position across the customers' press, carry attractive consumable and replacement dynamics over time, and are a natural complement to our dye business.
To further capture this opportunity, we have been reinforcing our sales efforts. Strengthening our commercial teams, increasing the intensity and discipline of our customer coverage and sharpening our quoting processes.
The work is showing up in higher quoting activity and improving order flow. European conditions overall were more mixed, though we continue to pursue market share gains in the region and to further integrate and strengthen our operations there.
Turning to die cast tooling, Revenues were relatively stable in the quarter as shipments increased against the segment's elevated backlog. I would be candid, however, that our die cast results and indeed our overall results were held back this quarter relative to our expectations.
And the underlying potential of the business. 3 factors were at play.
First, certain customer driven timing delays continued to defer shipments and the associated revenue recognition. Second, we incurred additional incremental costs to complete the closure of our large mold facility in Mexico.
And third, margins on a couple of large jobs delivered in the quarter came in lower than anticipated. These tools were admittedly priced during last year's order drought, at pricing that reflected the competitive conditions of that period.
None of these factors change our view on the underlying trajectory. The Mexico wind down is now complete.
Consolidating production across fewer locations. The delayed shipments remain in our backlog rather than lost and pricing on our more recent order intake is meaningfully healthier.
With a strong shipping schedule in place, we expect the fourth quarter to be materially better for our die cast tooling. Stepping back, the demand picture for die cast tooling in North America is increasingly encouraging.
Our die cast backlog remains above historical levels and demand continues to diversify beyond passenger vehicles into energy, heavy trucks and other industrial applications. There is also continued momentum in Giga Press applications, where Exco has significant and differentiated capabilities.
What began with a handful of EV pioneers is broadening across the industry. Multiple OEMs and Tier 1 suppliers are now installing and or evaluating very large casting machines in North America.
Industry forecasts call for double digit annual growth in Gigacasting through the end of the decade and some analysts expect a substantial majority of large structural automotive castings to migrate to Gigacasting formats by 2030. Critically for Exco, these molds are among the largest and most complex tools in the industry and our combination of large envelope precision machining high tonnage crane capacity, and additive manufacturing puts us in a strong position to serve this market as it scales.
The automotive solutions segment reported third quarter sales of $88 million, an increase of 9% over the prior year. Or roughly 8% excluding foreign exchange.
Which meaningfully outpaced underlying industry vehicle production. Performance benefited from resilient North American automotive demand, recent and ongoing program launches, a favorable vehicle mix and continued growth in accessory products.
With both new and existing customers. U.S.
SAAR averaged approximately 16.2 million units during the quarter including 16.5 million units in June. Segment profitability was affected primarily by product mix, higher labor costs and increased energy and supply chain cost pressures.
And we are responding on multiple fronts. Advancing lean manufacturing and automation initiatives taking pricing action where possible, and maintaining pricing discipline on new program awards.
In Europe, conditions remain challenging amid OEM restructuring and competitive pressures, though supplier consolidation and our manufacturing capabilities in Morocco are creating additional opportunities for us Quoting activity across the segment increased during the quarter supporting the potential for future program awards, and we remain confident that recent and upcoming launches and continued supplier consolidation will support growth in export content per vehicle Over time. Looking ahead, our fourth quarter will reflect normal seasonality associated with OEM summer shutdowns and European vacation schedules.
The broader environment remains characterized by uncertainty surrounding global trade policy, tariffs, and geopolitical developments, which may create volatility in customer demand and does limit near term visibility somewhat. That said, we believe EXPO is well positioned to navigate these dynamics.
Nearly all of our products sold within North America are compliant with US requirements, and we maintain a US manufacturing footprint for extrusion dyes and large mold products. Providing additional flexibility should tariff policies evolve.
Indeed, if elevated tariffs on imports from noncompliant jurisdictions persist, we may well benefit from improved competitive positioning relative to certain global peers. More broadly, we are encouraged by increasing initiatives to reshore industrial manufacturing in North America, which support demand for both extrusion and high pressure die cast tooling.
Areas where we maintain considerable strength. So with our die cast backlog above historical levels, favorable North American extrusion market dynamics increased quoting activity across the business, moderating capital expenditures and the launch of Exco Energy, we believe the foundation is in place for higher utilization, stronger earnings, improved cash generation and better returns on capital, in the periods ahead.
Before I hand the call over to Matthew, I would like to sincerely thank our roughly 4.5 thousand employees around the world for their dedication, and continued focus on safety, quality, and customer service. Their efforts are what makes Exco's progress possible.
With that, I will now pass the call to Matthew to review the financial results in more detail.
Matthew James Posno
Thank you, Darren. Good morning, ladies and gentlemen.
Consolidated sales for the third quarter ended June 30, 2026 were $165.4 million compared to $104.9 million in the same quarter last year. An increase of $10.6 million or 7% Foreign exchange movements increased sales by approximately $1.9 million in the quarter, Excluding this impact, sales increased approximately 6%.
Consolidated net income for the quarter was $5.8 million or $0.15 a share, compared with $5.4 million or $0.14 per share in the prior year quarter. Results in the current period included $600 thousand or $0.02 of after tax restructuring charges.
The effective income tax rate in the quarter was 30% compared to a 13% recovery last year. The prior year quarter benefited from $1.6 million of research and development tax credits Quarterly consolidated EBITDA was $18.5 million, representing 11.2% of sales compared to $14.7 million or 9.5% in the prior year period, an increase of 26%.
Third quarter sales for the automotive solutions segment were $88.3 million, up $7.5 million or 9% from the prior year quarter. The segment benefited from resilient North American automotive demand, recent and ongoing program, favorable vehicle mix and continued growth in accessory products.
European conditions remain challenging, although supplier consolidation and Exco's capabilities in Morocco are creating additional opportunities. Pretax profit for the segment was $6.5 million, a decrease of $800 thousand from the prior year quarter.
The decline primarily reflects product mix, higher labor costs and increased energy and supply chain cost pressures. Management continues to focus on lean manufacturing, and pricing discipline, particularly on new program awards.
Quoting activity increased during the quarter, and recent and upcoming launches were expected to support growth in content per vehicle, although fourth quarter results will reflect normal seasonality from OEM summer shutdowns. Third quarter sales for the Casting and Extrusion segment were $77.1 million, up $3.1 million or approximately 4% from the prior year quarter.
Extrusion tooling sales remained solid, supported by diversified demand across construction, transportation, renewable energy, electrical applications, and AI infrastructure related projects. North American conditions remained favorable, while European demand was more mixed.
Diecast tooling revenues were relatively stable as shipments increased against the segment's elevated backlog, partly offset by customer timing delays and the closure of the large Mold Mexico facility. During the quarter, Exco launched Exco Energy to leverage the large mold group's precision machining, engineering, quality, and additive manufacturing capabilities in the Canadian nuclear energy market and other technically demanding end markets.
The segment reported pretax profit of $5.1 million, an increase of $2.5 million or 97% from last year. Results included $900 thousand of incremental restructuring charges.
The improvement reflected higher extrusion tooling sales and foreign exchange gains partially offset by lower die cast results, product mix, higher overhead costs, fixed costs under absorption, and increased depreciation. Management remains focused on converting the elevated die cast backlog into shipments increasing utilization at newer operations and improving return on capital through pricing lean manufacturing, automation, process standardization, and the centralization of key support functions.
Corporate expenses for the quarter were $2.4 million compared to $4 million in the prior year quarter. The decrease primarily reflects foreign exchange swings compared to the prior year quarter.
Cash provided by operating activities was $13.4 million compared to $25.2 million in the prior year quarter. The decrease primarily reflects a greater use of non cash working capital in the current quarter.
Free cash flow for the quarter was $9.7 million compared to $20.1 million last year. Cash used in financing activities included $3.9 million in dividend payments, $900 thousand to repurchase shares under the company's normal course issuer bid and a reduction in bank indebtedness.
Cash used in investment activities totaled $2.7 million, with virtually all fixed asset additions related to maintenance, Following several years of elevated growth related investment, management now expects fiscal 26 capital expenditures of approximately $20 million focused primarily on maintenance, productivity improvements, and select growth initiatives. Exco ended the quarter with $26.1 million in cash, net debt of $63.9 million and approximately $61.6 million of availability under its committed credit facility.
The company remains in compliance with its financial covenants. Our balance sheet remains strong and provides flexibility to support dividends, share buybacks, debt reduction, and strategic investments while management continues to prioritize improved asset utilization and returns on capital.
That concludes my comments. I will now turn the call back to Darren for his closing remarks.
Darren Michael Kirk
Thanks, Matthew. To summarize, our third quarter showed clear progress on the priorities we have laid out, sales growth, meaningful margin expansion, disciplined capital spending and stronger returns on capital.
While the launch of Exco Energy marks an important step in diversifying our business into large, growing, technically demanding end markets that play directly to our strengths. We are excited about the road ahead.
Operator, we would now be pleased to take questions.
Operator
At this time, you will need to press *11 on your telephone and wait for your name to be announced, then press *11 to ask a question. Please standby while we complete the candidate roster.
And we have a question coming from the line Nick Corcoran with Acumen Capital. Your line is now open.
Nick Corcoran
Hi. it is Richon calling on the line for Nick Corcoran.
Thanks for taking my questions. So quick 2 questions here.
So in terms of the launch of Exco Energy, how is this initiative progressing? And how big is that total market looking?
Darren Michael Kirk
Hey, good morning, Nick. Darren here.
So I guess with respect to Exco Energy, we have officially launched it this quarter, but I want to say it is not from a cold start. We have-- this is really the formalization of a couple of years of groundwork We have been engaging with partners and customers across the industry over the last couple of years and working towards some preliminary accreditations.
And so it is-- we are actually already quoting and delivering some products under Exco Energy. We are not-- I am not going to size the opportunity at this stage other than to say that it is obviously going to be a very large and growing market with significant money being spent for nuclear energy plants and refurbishment over the next several years.
But perhaps in future quarters, we can dimension what the size of that opportunity is. But at this stage, we are not prepared to disclose that.
Nick Corcoran
that is great. Thank you.
And then just another 1. Is there any on the M&A pipeline and management's thoughts on any potential acquisitions?
Darren Michael Kirk
So I am going to say no. there is nothing on the front burner here.
As we have kind of been articulating, the clearest path for us to improve our returns on assets and cash flow is by harvesting the assets that we have already deployed and using them more efficiently. And so that remains our primary objective at this point.
You know, that being said, we obviously have financial capacity to pursue acquisitions. We remain on the lookout.
I think to the extent that there was interest, it would be more focused on the casting and extrusion segment where we do see demand drivers lining up for a multiyear period here and where we are well positioned. that is great.
Thank you.
Operator
Thank you. And I am showing no further questions in the queue at this time.
I will now turn the call back over to Mr. Darren Michael Kirk for any closing comments.
Darren Michael Kirk
Okay. Well, thank you, operator, and thank you everyone for joining us today.
We will look forward to speaking again once we release our annual numbers later this year. Take care.
Operator
This concludes today's conference call. Thank you for your participation, and you may now disconnect.