Release Date: August 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Aimia Inc (AIMFF, Financial) reported a significant increase in adjusted EBITDA, up 83.6% from Q1 to $12.3 million.
- The company received a $32.9 million earnout from the PLM transaction, enabling a share buyback program of up to 10% of its public float.
- Bozzetto's acquisition of StarChem contributed positively, with $8.4 million in revenue and $2 million in adjusted EBITDA, showing growth of 15% and 33% respectively from Q1.
- Cortland International grew its revenue by 3% to $35 million compared to Q1, benefiting from an improved product mix.
- Aimia Inc (AIMFF) ended Q2 with $112.8 million in consolidated cash, marking an increase of $14.6 million from Q1.
Negative Points
- Higher shipping costs, shipping delays, and increased raw material costs due to inflation negatively impacted Q2 results.
- The termination of the Paladin agreements and shareholder activism costs contributed to a modest increase in net loss compared to Q1.
- Bozzetto's results were affected by inflation, leading to softened customer demand and lower margins.
- Cortland's adjusted EBITDA declined by $400,000 relative to Q1 due to $1.2 million in advisory fees for a business transformation initiative.
- Clear Media faced soft demand for its advertising displays due to the slow recovery of the Chinese economy, impacting its sales.
Q & A Highlights
Q: Can you elaborate on what you meant by potential recapitalization? Does that involve bringing debt up to the holdco level and collapsing the ring-fenced subsidiaries?
A: It could mean that. We are exploring all options, including a holdco refinancing. Currently, Aimia has no regular debt at the holding company and no debt at Cortland, but there is debt at Bozzetto. A potential angle could be to do a holdco refi to gain greater access to Bozzetto's cash flows, considering the cost of debt and any tax implications.
Q: What's the status of exploring the repurchase of preferred shares?
A: Everything is on the table under the Strategic Review Committee. We are looking at the preferred shares, especially given the increased costs due to resets and associated Part VI tax. This is part of our broader recapitalization strategy at the holdco level.
Q: What will drive the expected benefits for Cortland in the upcoming periods?
A: Several market initiatives are underway. One is leveraging production facilities in India for high-performance rope, which requires customer confidence in product specifications. Another is expanding into the aquaculture market with fish cages, which have attractive margins. Additionally, advisory work is improving operational efficiency between Cortland and Tufropes.
Q: Are freight costs a major headwind, especially with the conflict in the Red Sea?
A: Freight costs are impacting both businesses. Bozzetto can mitigate some of these costs by using local suppliers and production facilities in Asia. However, Tufropes faces more challenges due to its significant export business, with container costs having increased significantly.
Q: Have we seen an inflection point in Clear Media's financials, or are they still down on a sequential basis?
A: Clear Media is still facing downward pressure due to reduced consumer spending in China. However, they are renegotiating leasing arrangements at lower costs, which should provide leverage when the advertising market rebounds.
Q: Can you provide an update on the status of relations with Mithaq?
A: Since the AGM, we have had a couple of cordial conversations with Mithaq representatives. There is nothing material to report, but we hope to work together with Mithaq and other large shareholders as we move forward with our strategic review.
Q: When can we expect updates on the strategic review process?
A: The work is underway, and we hope to announce our advisors in the coming weeks. We will communicate with shareholders at each milestone.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
