TERRAVEST ANNOUNCES THIRD QUARTER RESULTS FOR FISCAL 2025 AND DIVIDEND DECLARATION Français
THIRD QUARTER AND NINE MONTHS REVIEW AND OUTLOOK
Management believes that there are certain non‐IFRS financial measures that can be used to assist shareholders in analyzing the performance of TerraVest. The table below highlights certain financial results and reconciles net income to Adjusted earnings before interests, income taxes, depreciation and amortization ("Adjusted EBITDA") for the third quarter and nine months ended June 30, 2025 and the comparative periods in fiscal 2024.
Sales for the third quarter and nine months ended June 30, 2025 were $405,707 and $951,742 versus $238,129 and $681,162 for the prior comparable periods. This represents increases of 70% and 40% respectively. However, TerraVest acquired all the issued and outstanding shares of Tankcon FRP Inc. ("Tankcon") in May 2025, of Simplex, Inc. ("Simplex") and L.B.T., Inc. ("LBT") in April 2025, of EnTrans Holding, Inc. ("Entrans") in March 2025 and of Advance Engineered Products Ltd. ("Advance") in April 2024. In addition, TerraVest acquired all the Canadian assets of Aureus Energy Services Inc. ("Aureus") in January 2025 and all the operating assets of the subsidiaries of Highland Tank Holdings LLC ("Highland") in November 2023, of which only Highland and Advance partially contributed to the prior comparable nine‑month period. Excluding Tankcon, Simplex, LBT and Entrans, sales for the third quarter ended June 30, 2025 were $233,016 versus $238,129 for the prior comparable period and excluding the same acquisitions plus Highland and Advance, sales for the nine months ended June 30, 2025 were $536,362 versus $544,352 for the prior comparable period. This represents decreases of 2% and 1% respectively for TerraVest's base portfolio (excluding Tankcon, Simplex, LBT, Entrans, Advance and Highland). Aureus results can't be excluded from TerraVest results as Aureus activities have been fully integrated into one of TerraVest's existing subsidiaries whose operations are similar in nature.
The decreases in sales for TerraVest base portfolio businesses versus prior comparable periods are primarily attributable to softer demand for storage tanks, for certain compressed gas transportation equipment product lines and for energy processing equipment, combined with a throughput issue in one of the subsidiaries in the Compressed Gas Equipment segment, partially offset by increased demand for domestic compressed gas tanks, and increased sales in the Service and the HVAC and Containment Equipment segments.
Net income for the third quarter and nine months ended June 30, 2025 were $13,306 and $77,086 versus $14,387 and $59,419 for the prior comparable periods. This represents a decrease of 8% and an increase of 30% respectively. The quarterly decrease in net income is primarily explained by additional depreciation and amortization expenses and financing costs as a result of business acquisitions and a loss on foreign exchange. The quarterly decrease was partially offset by the positive contributions of the business acquisitions and a favorable change in fair value of both investment in equity instruments and derivative financial instruments. The increase in net income for the nine months ended June 30, 2025 versus the prior comparable period is mainly attributable to the positive contributions of the business acquisitions, some of which only partially contributed to the prior comparable period, a favorable change in fair value of investment in equity instruments and a gain on bargain purchase. The increase for the nine-month period was partially offset by the same factors explained for the quarterly variance.
Adjusted EBITDA for the third quarter and nine months ended June 30, 2025 were $68,098 and $182,685 versus $49,062 and $142,052 for the prior comparable periods. This represents increases of 39% and 29% respectively, which is the result of the reasons explained above.
The table below reconciles cash flow from operating activities to Cash Available for Distribution for the third quarter and nine months ended June 30, 2025 and the comparative periods in fiscal 2024.
Cash flow from operating activities for the third quarter and nine months ended June 30, 2025 were $27,957 and $98,785 versus $45,303 and $127,022 for the prior comparable periods. This represents decreases of 38% and 22% respectively. The decreases are attributable to additional interest and income taxes paid and an unfavorable change in working capital items, primarily inventory levels and customer deposits, partially offset by increased net income.
Maintenance Capital Expenditures were $4,571 for the third quarter ended June 30, 2025 versus $5,953 for the prior comparable period representing a decrease of 23%, which is primarily explained by the timing of such capital expenditures and the nature of the capital projects in progress. During the third quarter ended June 30, 2025, TerraVest's total purchase of property, plant and equipment ("PP&E") paid was $12,317 of which $7,746 is considered growth capital. The growth capital incurred during the third quarter was mainly used to invest in new manufacturing product lines and increase its asset base in one of its service businesses.
Cash Available for Distribution for the third quarter and nine months ended June 30, 2025 increased by 8% and 16% respectively versus the prior comparable periods. These increases are a result of reasons explained above and elsewhere in this press release.
Outlook
In general, TerraVest's portfolio of businesses is performing well. Recent acquisitions have made a meaningful contribution and we expect this to continue throughout the fiscal year. Opportunities to enhance performance through synergies between recent acquisitions and the base portfolio of businesses continue to exist and are a focus for management.
Recent tariff announcements have created an environment of uncertainty in North America's manufacturing sector. This uncertainty has resulted in softer demand recently for a few of TerraVest's businesses. However, TerraVest's portfolio businesses are well-positioned manufacturing products predominantly for their domestic markets, which greatly limits the impacts of any potential tariffs.
The Company continues to make targeted investments to improve its manufacturing efficiency and expand its product lines, particularly in end-markets where it has a meaningful presence. With the new credit facility obtained in March 2025, TerraVest is very well-positioned to pursue its acquisition strategy.
Business Combinations
In May 2025, subsidiaries of TerraVest entered into an agreement to purchase all the issued and outstanding shares of Tankcon FRP Inc. as well as certain assets from affiliated entities, Tankcon Leasing Inc. and 9271-7743 Québec Inc. (altogether referred to as "Tankcon"). Headquartered in Blainville Québec, Tankcon is a premier North American manufacturer of fiber-reinforced polymer ("FRP") tank trailers and lessor of such trailers.
In April 2025, a subsidiary of TerraVest entered into an agreement to purchase all the issued and outstanding shares of Simplex, Inc. ("Simplex"). Headquartered in Springfield Illinois, Simplex is a leading technology company that designs and manufactures electrical test systems (load banks) and fuel supply systems for the standby power generation industry.
In April 2025, a subsidiary of TerraVest entered into an agreement to purchase all the issued and outstanding shares of L.B.T., Inc. ("LBT"). Headquartered in Omaha Nebraska, LBT is a premier North American manufacturer of tank trailers.
In March 2025, a subsidiary of TerraVest entered into an agreement to acquire all the issued and outstanding shares of EnTrans Holding, Inc. ("Entrans"). Headquartered in Athens Tennessee, Entrans is a premier North American manufacturer of tank trailers and transportation solutions.
In January 2025, TerraVest's partially owned subsidiary, Green Energy Services Inc. ("GES"), entered into an acquisition agreement to acquire all the Canadian assets of Aureus Energy Services Inc. ("Aureus"). Aureus provides water management heating activities and hot oiling services to the Western Canadian energy industry. The hot oiling services business was sold during the second quarter of fiscal 2025.
The following section provides the financial results of TerraVest's operations for the third quarter and nine months ended June 30, 2025 and the comparative periods in fiscal 2024.
Sales for the third quarter and nine months ended June 30, 2025 increased by 70% and 40% respectively versus the prior comparable periods. The reasons have been explained previously in this press release.
Gross profit for the third quarter and nine months ended June 30, 2025 increased by 52% and 35% respectively versus the prior comparable periods. This is primarily explained by the contribution of Tankcon, Simplex, LBT, Aureus and Entrans for the third quarter and nine months ended June 30, 2025 and of Advance and Highland for the nine months ended June 30, 2025. A less favorable product mix and reduced activity levels in some of TerraVest's base portfolio businesses partially offset the increases in gross profits versus prior comparable periods.
Administration expenses for the third quarter and nine months ended June 30, 2025 increased by 74% and 58% respectively compared to the prior comparable periods. The increases in administration expenses are mainly due to the addition of Entrans, LBT, Simplex, Advance and Highland (the latter two are only for the nine-month period) and to additional business acquisition-related costs versus the prior comparable periods. TerraVest also incurred additional amortization of intangible assets expense as a result of the numerous business acquisitions completed in the current and prior fiscal year.
Selling expenses for the third quarter and nine months ended June 30, 2025 increased by 42% and 33% respectively versus the prior comparable periods. The increases in selling expenses are explained by the addition of Entrans, Simplex, Advance and Highland (the latter two are only for the nine-month period) and by increased commission expenses as a result of increased sales in certain product lines.
Financing costs for the third quarter and nine months ended June 30, 2025 increased by 195% and 69% respectively versus the prior comparable periods. The increases are primarily explained by additional interest expense on long-term debt as a result of increased debt level following the acquisition of Entrans, LBT, Simplex and Tankcon and by additional interest on lease liabilities because of additional lease liabilities compared to the prior periods. The amortization of financing costs also increased versus the prior comparable periods following the amendment of the credit facilities in March 2025. The variation for the nine months ended June 30, 2025 is also explained by a fee incurred for the early repayment of an outstanding term loan refinanced as part of the amendment of the revolving operating credit facility.
Other (gains) losses variance for the third quarter and nine months ended June 30, 2025 reflect a favorable change in fair value of investment in equity instruments and a gain on bargain purchase on the acquisition of Aureus (only for the nine-month period), partially offset by a loss on foreign exchange resulting from a US dollar exposure on one of TerraVest's subsidiaries (gain for the nine-month period). The variation is also explained by a non‑recurring gain on disposal of a building in the second quarter of fiscal 2024.
Income tax expense variance for the third quarter and nine months ended June 30, 2025 is the result of the variation in taxable earnings and the timing of income tax expense adjustments.
As a result of the above, net income attributable to common shareholders for the third quarter and nine months ended June 30, 2025 decreased by 6% and increased by 32% respectively versus the prior comparable periods.
TerraVest is pleased to announce that the Board of Directors has declared a quarterly dividend of $0.175 per common share payable on October 10, 2025 to shareholders of record as at the close of business on September 30, 2025.
Additional information can be found in TerraVest's annual consolidated financial statements and MD&A which are available on SEDAR+ at www.sedarplus.ca.
Non‑IFRS Financial Measures
T his news release makes reference to certain non‑IFRS financial measures. These measures are not recognized measures under IFRS and do not have a standardized meaning prescribed by IFRS. TerraVest's definitions may differ from those of other issuers and therefore may not be comparable to similarly titled measures used by other issuers. The Company uses non‑IFRS financial measures including adjusted EBITDA, cash available for distribution, dividend payout ratio and maintenance capital expenditures.
Adjusted EBITDA: is defined as net income adjusted for income tax expense, financing costs, depreciation, amortization, change in fair value of derivative financial instruments, change in fair value of investment in equity instruments and investment in a limited partnership, gains or losses on foreign exchange, gains or losses on disposal of other property, plant and equipment and property, plant and equipment for rental, gains or losses on disposal of intangible assets, gains or losses on lease modification, gains or losses on remeasurement of equity interest, gain on bargain purchase, gains or losses on sale of business, non-recurring acquisition related costs, impairment charges and other non-recurring and/or non-operations related items that do not reflect the current ongoing operations of TerraVest. Management believes this is a useful metric in evaluating the ongoing operating performance of TerraVest. Readers are cautioned that Adjusted EBITDA should not be construed as an alternative to net income determined in accordance with IFRS as an indicator of TerraVest's performance.
Cash Available for Distribution: is defined as cash flow from operating activities adjusted for changes in non-cash operating working capital, maintenance capital expenditures and repayment of lease liabilities. Management believes that Cash Available for Distribution, as a liquidity measure, is a useful metric that provides an indication of the cash available from ongoing operations that can be distributed to shareholders as a dividend. Readers are cautioned that Cash Available for Distribution should not be construed as an alternative to cash flow from operating activities determined in accordance with IFRS as an indicator of TerraVest's liquidity and cash flows.
Dividend Payout Ratio: is defined as dividends paid in cash during the period divided by Cash Available for Distribution for the period. Management believes that Dividend Payout Ratio is a useful metric as it provides an indication of TerraVest's ability to sustain its current dividend policy. There is no directly comparable IFRS measure for Dividend Payout Ratio.
Maintenance Capital Expenditures: is defined as Capital Expenditures made to sustain the operations of TerraVest's operating businesses and to maintain the productive capacity of the businesses over an economic cycle, whether or not they yield significant cost or production efficiencies. Management believes that Maintenance Capital Expenditures should be funded by cash flow from existing operating activities and, therefore, deducted in determining Cash Available for Distribution. There is no directly comparable IFRS measure for Maintenance Capital Expenditures.
Working Capital: is calculated by subtracting current liabilities from current assets. Management uses Working Capital as a measure for assessing overall liquidity. There is no directly comparable IFRS measure for Working Capital.
Caution Regarding Forward-Looking Statements
This news release contains forward-looking statements. All statements other than statements of historical fact contained in this news release are forward-looking statements, including, without limitation, statements regarding our strategic direction and evaluation of the business segments and TerraVest as a whole, and other plans and objectives of or involving TerraVest. Readers can identify many of these statements by looking for words such as "expects" and "will" or similar terms or variations of these words. Although management believes that the expectations represented in such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct.
By their nature, forward-looking statements require us to make assumptions and, accordingly, forward looking statements are subject to inherent risks and uncertainties. There is significant risk that the forward-looking statements will not prove to be accurate. We caution readers of this news release not to place undue reliance on our forward-looking statements because a number of factors may cause actual future circumstances, results, conditions, actions or events to differ materially from the plans, expectations, estimates or intentions expressed in the forward-looking statements and the assumptions underlying the forward-looking statements.
Assumptions and analysis about the performance of TerraVest as a whole and its business segments, the markets in which the business segments compete and the prospects and values of the business segments are considered in setting the business plan for TerraVest, plans and/or ability to pay dividends, outlook for operations, financial position, results and cash flows, other plans and objectives and in making related forward-looking statements. Such assumptions include, without limitation, demand for products and services of the business segments in respect of the Canadian and other markets in which the businesses are active will be stable, and that input costs to business segments do not vary significantly from levels experienced historically. Should any of these factors or assumptions vary, actual results may differ materially from the forward-looking statements.
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