Mr. Martin Brassard reports

HEROUX-DEVTEK REPORTS THIRD QUARTER RESULTS

Heroux-Devtek Inc. has released its financial results for the third quarter ended Dec. 31, 2023. Unless otherwise indicated, all amounts are in Canadian dollars.

"We are proud to announce strong third quarter results reflecting progress in implementing our strategic initiatives. Our focus on stabilizing our production system is beginning to pay off and the effects of our pricing initiatives in response to inflationary pressures are accelerating. These factors drove solid recovery in both throughput and profitability this quarter, returning them to historical levels in a supply chain environment that remains challenging," said Martin Brassard, president and chief executive officer of Heroux-Devtek.

"Looking ahead, the bright outlook of the aerospace market, the business opportunities and the momentum of our strategic initiatives over the next few years allow us to foresee a continued upward trend in sales volume and profitability beyond the sales and margins we have generated in the past. As we navigate the path forward, we appreciate the continued support of our clients, employees and partners," added Mr. Brassard.

Third quarter results

Consolidated sales increased 16.1 per cent to $163.5-million, from $140.9-million in the same period last year, resulting from the actions taken to stabilize the corporation's production system to better deliver in the challenges of the current environment.

Civil sales were up 41.4 per cent to $63.8-million, mainly driven by increased deliveries for the Boeing 777 and Embraer Praetor programs. Defence sales were up 4.1 per cent to $99.7-million, mainly due to higher aftermarket business for legacy programs as well as higher deliveries for the Sikorsky CH-53K and Lockheed Martin F-35 programs, partly offset by delayed deliveries for the Boeing F-18 program.

Gross profit increased to $29.1-million from $19.9-million, or 17.8 per cent of sales from 14.1 per cent last year. This is mainly due to positive impact of higher volume and pricing initiatives partly offset by the effects of inflation on costs.

Operating income increased to $15.6-million or 9.5 per cent of sales from $5.1-million or 3.6 per cent of sales last year, mainly reflecting higher volume and margin combined with a 1-per-cent year-over-year positive foreign exchange impact. Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization), for the same reasons, rose 73.7 per cent to $24.5-million, or 15 per cent of sales, from $14.1-million, or 10 per cent of sales, last year.

Net income for the third quarter of fiscal 2024 increased to $9-million, or 27 cents per diluted share, compared with $1.8-million, or five cents per diluted share, in the corresponding quarter last year.

Nine-month results

Consolidated sales increased 15 per cent to $445.7-million, from $387.6-million in the corresponding period last year, reflecting growth in both civil and defence market segments as well as the 3.7-per-cent positive impact of foreign exchange.

Civil sales were up 37.6 per cent to $167.5-million, mainly driven by increased deliveries for the Boeing 777 and Embraer Praetor programs. Defence sales were up 4.6 per cent at $278.2-million, mainly due to higher aftermarket business for legacy programs as well as higher deliveries for the Sikorsky CH-53K and Lockheed Martin F-35 programs. These positive elements were partly offset by delayed deliveries for the Boeing F-18 program.

Gross profit increased to $71.7-million from $50.8-million last year, or to 16.1 per cent from 13.1 per cent as a percentage of sales. This is mainly due to positive impact of higher volume and pricing initiatives and was partly offset by the effects of inflation on costs.

Operating income increased to $32.2-million from $16.3-million last year, reflecting higher volume and margin partly offset by higher employee-related costs. Adjusted EBITDA, for the same reasons, rose 41.5 per cent to $59.1-million, or 13.3 per cent of sales, from $41.8-million, or 10.8 per cent, last year.

Net income for the nine-month period stood at $17.6-million, or 52 cents per diluted share, up from $7.5-million, or 22 cents per diluted share, or up from $6.3-million or 18 cents on an adjusted basis in the corresponding period last year.

Liquidity and financial position

Cash flows related to operating activities reached $11-million in the third quarter compared with $5.2-million during the corresponding period last year, representing an increase of $5.7-million that reflects the impact of higher throughput. For the nine-month period, cash flows related to operating activities represented a usage of $16.8-million, compared with $25.5-million generated during the corresponding period last year, mainly resulting from investments in inventory to stabilize the production system and sustain upcoming sales growth.

As at Dec. 31, 2023, net debt stood at $217.9-million, an increase as compared with $165-million as at March 31, 2023, mainly as a result of the cash flow usage described above. The improved profitability over the nine-month period partially offset the effects of increasing net debt on the net debt to adjusted EBITDA ratio, which increased to 2.8 times from 2.7 times at March 31, 2023.

Conference call

Heroux-Devtek will hold a conference call to discuss these results on Wednesday, Feb. 7, 2024, at 8:30 a.m. Eastern Time. Interested parties can join the call by dialling 1-888-390-0549 (North America) or 1-416-764-8682 (overseas). The conference call and accompanying presentation can also be accessed via live webcast at Heroux-Devtek's website.

If you are unable to call in at this time, you may access a tape recording of the meeting by calling toll-free 1-888-390-0541 and entering the passcode 917459 on your phone. Local dial-in number is 1-416-764-8677. This recording will be available from Wednesday, Feb. 7, 2024, as of 11:30 a.m., until 11:59 p.m. on Wednesday, Feb. 14, 2024.

About Heroux-Devtek Inc.

Heroux-Devtek is an international company specializing in the design, development, manufacture, repair and overhaul of aircraft landing gear, hydraulic and electromechanical actuators, custom ball screws, and fracture-critical components for the aerospace market. The corporation is the third-largest landing gear company worldwide, supplying both the defence and commercial sectors. Approximately 94 per cent of the corporation's sales are outside of Canada, including about 57 per cent in the United States. The corporation's head office is located in Longueuil, Que., with facilities in Canada, the United States, the United Kingdom and Spain.

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