Aimia Inc. (AIM) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to the Aimia Inc. Second Quarter 2026 Results Conference Call. [Operator Instructions] This call is being recorded on Tuesday, August 11, 2026. And now I would like to turn the conference over to Joe Racanelli. Please go ahead.

Thank you, operator, and good morning, everyone. Joining me on today's call are Rhys Summerton, Aimia's Executive Chairman, and Steven Leonard, the company's President and Chief Financial Officer. Before we begin with our prepared remarks, I do want to point out that we issued our financial results for the second quarter earlier this morning. All of our materials, including the news release, MD&A, and financial statements are available from our website as well as from our profile page on SEDAR+. We will be using a presentation today, and for those listening to our discussion by phone, a copy is available on the IR section of our website. Most importantly, some of the statements made on today's call may contain forward-looking information and future results may differ materially from what we discussed. Please refer to the risks and uncertainties that may affect our future performance referenced in our presentation as well as in the MD&A. In addition, we will be making note of GAAP and non-GAAP financial measures. Reconciliation of these items is provided in the appendix of our presentation. And following today's presentation, please reach out to me if you have any outstanding questions or require any clarification of the items that we discussed today. Please go ahead, Rhys.

Thanks, Joe. Good morning, everybody. Thank you for joining us. Before we head over to questions on this call, Steve and I will briefly discuss some of the salient highlights of the second quarter. Just to kick off with, we were especially active this quarter. We're kind of getting used to being especially active. We've completed several objectives that we set out for in the year. In particular, we closed the sale of Bozzetto, which generated net proceeds of $270 million. We grew our net book value by 22% to reach $3.74 per share. We completed a tender offer to purchase senior notes due in January 2030, reducing our interest costs materially. We took action to improve Cortland's ability to capitalize on the opportunities. And we're quite excited about this, which we'll elaborate on more in the presentation, also to grow market share in Cortland. And importantly, we started to deploy capital in some investment opportunities consistent with our strategy. And we renewed our buyback program to buy up to 5 million common shares, which will take us through to June 2027. So our performance and milestones completed in the quarter provide clear evidence that we are making progress against our strategy. We have a lot more that we would like to report in the future, and we look forward to doing that. And I'll expand on the outlook and priorities as we go through the presentation. But first, I will ask Steve to review our financial results. Before Steve gets going, though, we want to congratulate him for becoming a granddad in the early hours of this morning and still being dedicated to make the call a few hours later. So Steve, over to you and congratulations.

Thank you, Rhys. Good morning and afternoon, everyone. Before we look at our financial performance in more detail, I wanted to begin my discussion today by reviewing the key highlights of the Bozzetto transaction and its impact on our Q2 results as outlined on slide 7. First, it's important to understand that Bozzetto was classified as discontinued operations. As a result, Bozzetto's contributions were excluded from the Aimia's Q2 results from continuing operations, with the exception of cash flow from operations and net earnings, which are presented on a consolidated basis and include Bozzetto's results. Second, the transaction generated net proceeds of $270 million, including $1.8 million received in July relating to our finalization of the working capital and the debt closing accounts. Third, the transaction resulted in a net gain of $21.7 million, a total that favorably impacted our EPS and our net book value per share at quarter end. Finally, I should point out that we did not incur any income tax on this transaction as we offset approximately $45 million of the taxable capital gain by utilizing our capital loss carryforwards. Turning to our financial highlights, as you see from slide 8, our results from continuing operations, that is Cortland and the Holdco segment, in Q2 were largely in line with the prior year period. Revenue was $36.4 million compared to $37.8 million last year. Gross profit was $8.7 million compared to $8.8 million in Q2 2025. Adjusted EBITDA was $2.3 million compared to $2.8 million last year. The modest declines do reflect the impact of geopolitical and macroeconomic developments on our rope and netting solutions business. We expect those conditions to improve in the second half of the year. One positive item to note relates to the continued reduction in SG&A expenses at the holding level. The decrease reflects the benefits of ongoing efforts to reduce Holdco costs for items such as insurance, rent, and professional services. I should point out that our Holdco expenses in particular would have been lower by $600,000 if not for costs incurred relating to one-time strategic initiatives, particularly related to dual listing activities in the U.K. Cortland results for the second quarter are presented on slide 9. In Q2, Cortland generated $36.4 million in revenue, down $3.7 million from last year. The year-over-year decline was due to lower sales volume, particularly in projects for the offshore energy sector and lower demand across the broader market due to higher selling prices. Cortland revenue decline was partially offset by pricing surcharges implemented in response to the rising raw material and freight costs, which were impacted by the rising oil prices related to the geopolitical events in the Middle East. Cortland's adjusted EBITDA in Q2 '26 was $4.4 million, down from $4.9 million last year. The decline was mainly due to lower sales volume. To capitalize on emerging opportunities, we implemented a number of changes at Cortland aimed at improving sales, strengthening relationships with customers, improving operations, and consolidating leadership. In part of these efforts, Thomas Cherian, a finance leader with more than 30 years of experience, will join Cortland CEO Wolfgang Wandel as CFO in our Houston office. Given the increased focus on growing sales and building customer relationships, we are optimistic that Cortland is primed for a stronger second half of the year pending the easing of tensions in the Middle East. We ended the quarter with $294.5 million of cash on a consolidated basis, up from a $100.3 million at the end of March. Slide 9 shows a waterfall of cash movements in the quarter. The key driver in the increase in liquidity was $268.2 million of cash proceeds from the Bozzetto transaction. And as I mentioned earlier, we received another $1.8 million in July related to the closing of the working capital and the debt balances. Other increases in Q2 include $2.7 million of cash flow from operations. The increase in liquidity was offset by an outflow that included $22.6 million of principal repayments on the Bozzetto credit facilities prior to closing, $25 million of Bozzetto's cash at closing, $7.5 million of interest payments, $4.3 million of investments in property, plant, and equipment, $1.8 million towards the buyback of shares, and $11.8 million in net marketable security investments. Looking at our liquidity more closely on slide 11, you see a breakdown of our cash position by segment at the end of June. Our consolidated liquidity includes $268.8 million of cash held at the Holding segment and $7.7 million at Cortland. Looking ahead, we plan to deploy the capital towards investment opportunities consistent with the strategy outlined previously. Over the next 12 months, we anticipate that Holdco expenses will approximate $7 million. Earlier we mentioned that a key development in Q2 was the completion of the offer to purchase our senior notes that mature in January 2030. The purchase offer was triggered by the sale of Bozzetto. The offer expired on June 26, and we made a payment of $131.4 million for validly tendered notes and interest on July 3rd after our reporting period. In the interest of transparency, slide 12 illustrates the impact of the tender offer on our liquidity on a pro forma basis. When taking into account the senior notes repayment, our pro forma liquidity was $173.2 million, which consisted of $163.1 million of cash, $12 million of marketable securities, less $2 million of other current borrowings. Post-paydown of the notes tendered, we have a balance of $11.2 million in principal notes outstanding through the maturity in January 2030. That concludes my prepared remarks. I'd like to turn the call back to Rhys for his closing remarks. Rhys?

Yes, thank you, Steve. Well done. So going to slide 14. Previously, I mentioned that one of our strategic objectives was to grow intrinsic value, and it's up to each investor and those that are interested to kind of calculate the intrinsic value of Aimia. But the net book or net asset value per share does indicate the trajectory of it. And if you measure net asset value per share, you'll notice that we increased this by 22% to $3.74 after the sale of Bozzetto. We don't expect similar gains to come through regularly or on a quarterly basis. Obviously, this was episodic. There will be some lumpiness in the periods ahead. But as I wrote in the chairman's letter, what you should expect over time is that this net book value per share should appreciate if we do -- if we make the right decisions, and we would hope that would outperform any of the benchmarks that are out there, like the S&P 500. That's what we regard as what would be par. So we want to do a bit better than that over the long term, and that will benefit all shareholders. Going on to slide 15, as you have heard on this call, the second quarter was particularly active. And as I said, I think that's something that we're getting used to. We will be active going forward. Our focus on the coming months will be to continue this momentum. In particular, our priorities in the near term will center on continuing and following through on the improvements that we are seeing at Cortland from both a sales point of view and operations. That's starting to already bear fruit. We continue to identify and work very hard at identifying target investment opportunities. We're deploying the capital in a very disciplined way with the ultimate goal, as always, to enhance shareholder value. And finally, we'll complete the listing in the U.K., which will be a secondary listing on AIM. But over the longer term, which is really the important part, our focus will be, as I said, to grow the net book value or net asset value per share, which will benefit all of us. So with that, thank you for your time thus far. We'll open to questions. Joe?

[Operator Instructions] And your first question comes from the line of Surinder Thind of Jefferies.

A few different questions in a few different areas. I'd like to start with Cortland. Given the changes that you guys are making at this point, from your perspective, what would constitute success over maybe the next 12 to 24 months? Is the idea to focus on the top line, the margin component or anything else? And then maybe just what is the time frame that we should be thinking about that you're trying to benchmark yourself over so that the changes that you're making are kind of visible to the front?

Yes, I'll take that and Steve might want to add on afterwards, but let me just give you some context around Cortland, which might be useful. You know, when I got involved in Aimia just over a year ago, I reviewed the portfolio of investments, and since I've been involved, there have been multiple opportunities where we could have taken the opportunity to exit Cortland and turn that into cash and raised a lot of money from it. It's been my decision to turn that down. And the reason is that I see a lot of opportunity to make Cortland into a long-term kind of, serial acquirer or growth platform, if you like. And the building blocks that we've put in place thus far are just the start. So, and I appreciate, you know, you kind of want a time horizon about when you will start to see the turnaround and how to quantify it, and I'll get there. But what I would say is that there's such low-hanging fruit to improve Cortland that the changes that we've made, even just in this very early stage, are easy things to do, and you'll start to see the improvement, we believe, in the second half of this year already. So we don't ask you to look, you know, even 24 months down the road for that improvement. We think you will start to see them already. And we've seen that coming through in the forward load and in the numbers on a weekly basis. Now we want to make sure that that's sustainable, and that's the important part. So we will -- I think it's very likely, barring some geopolitical issue, that you will see the improvement coming through. Now, over the longer term, what's the opportunity for Cortland? And this gets really exciting, is that if you take all the opportunities around where Cortland perhaps doesn't have a presence or could be enhanced with local on-the-ground participation, you'll start to see that there's opportunities for Cortland to grow. So we have world-class manufacturing out of India. We can improve distribution. We're improving sales already. And we can improve the product delivery around all of that. And if you put all those points together, I think that you will see both in the short term and the longer term, a vastly improved Cortland as a group. Will it require us to make some bolt-on acquisitions along the way? Definitely. And I think what those acquisitions do is they're small, but they improve our geographic coverage and they also make the overall business less reliant on a few key markets. So we want to be a global player in this, and I think there's a real opportunity for Cortland to get there. So to answer your question, short term, we think you'll see an improvement. Longer term, I think you'll see that Cortland becomes a very important part of Aimia going forward.

That's helpful. And then maybe could you expand upon the near-term outlook in the sense of as you expect things to get better, is that primarily a reflection of the macro getting better or maybe what are the conditions you're assuming that are leading to things getting better in the near term in the back half of '26?

I think Surinder, that. Sorry. Okay, go ahead, Rhys.

No. You go, Steve. You go.

No, I think what we're seeing is, you know, what happened as we came into '26, what happened coming like mid-Q1 to end of Q1 with what happened in the Middle East and impact on oil, that rippled through the cost structure. We made some changes, as you've seen in our prepared remarks on adjusting our selling prices. And this wasn't just Aimia -- sorry, Cortland, this was other competitors as well doing that, and some of the downstream users of these products were making decisions on drawing down inventories and delaying purchasing decisions with an expectation that things would improve. And we've seen some of that happen, you know, as it depends on the week or the day, what's going on with the geopolitical events, but we are seeing, as Rhys said, stronger orders in the second half. So we're seeing some of that, you know, ultimately these downstream users of these products still need them. So, you know, the delays that they made in the second quarter are starting to get pulled through in the second half. So that's one thing we're seeing. And then, obviously, you know, another area that we expect to be improving is on the margin side, both on gross margin and EBITDA. You know, so you should see an improvement of that in the second half.

That's helpful. And I'll just end there. Yep.

So if I just add, the way to look at Cortland. You know, Cortland in the past, and we see this a lot with different businesses, you know, you get businesses that are simply accident-prone. So what do I mean by that? You know, I mean that whatever event happens in the world, it seems to have a negative impact on them. And what that really means is that a business isn't resilient. There's no backup. It doesn't have this built-in resiliency that we want. So the changes that we've made in Cortland is to make it a lot more resilient and defensive against kind of macro events that happen. So we don't want to be necessarily, you know, exposed each and every time there's some kind of issue in the world. Cortland needs to stand on its own and to be able to deliver good results almost in spite of the environment around it. And the way we're going to get there is by diversifying where we get the revenues from a lot more and relying on the management team, which are now in place and operating very well to deliver.

And then maybe I'll sneak in one more. When we look back at maybe the Bozzetto acquisition and maybe talk about the lessons learned there or maybe how this is going to influence kind of the future acquisition framework, any color there would be helpful. And then maybe any areas that maybe are off limits from an industry perspective and areas that you're definitely interested in.

Yes, that's a good question. So obviously, you know, Bozzetto was kind of before my time. And, you know, when I reviewed what was in Aimia, you know, obviously we knew what was in Aimia before we even got involved, right? And what we realized about Bozzetto is that it was an asset that had really good management. It was operating as well as it possibly could be operating. But it lacked one crucial thing for Aimia as a permanent capital vehicle. There would be a struggle, and it would be the wrong thing to take cash away from Bozzetto and to use that cash to pay down debt all the time. So I would say the mistake that was made, at least from an outsider's point of view, is that the gearing was too high on Bozzetto at an Aimia level. And it meant that we were then having this 9.75% debt at the Holdco level, which needed to be serviced. And so you were kind of starving Bozzetto of cash that it could use to make acquisitions and grow simply because you were trying to fuel Holdco in Aimia. So the key lesson, I think, is, and obviously we all know this, is when we look for acquisitions, we are looking for things that are not going to take up large amounts of funding. Everything that we've looked at thus far has got net cash on the balance sheet. And we now have cash at the center, and we will deploy it into opportunities where we will enhance our cash balance rather than reduce our cash balance. And we really don't want to get into the game of taking on big debt at the Aimia Holdco level. So if I had to say what was the key takeaway, that would be the primary one. The secondary one is that anything we buy, we have to make sure that the management teams that we acquire understand that we will make the capital allocation decisions. We will allocate the capital that they generate. It's not up to them to allocate the capital. So those are really good points that I guess Aimia has learned. I would also probably say that the motivation to do some of those acquisitions in the past is not the same motivation as today. Today I'm a significant shareholder directly and indirectly. The board of Aimia has close to 45% of the shares, and every acquisition we do is reviewed by the board. Even before we buy 1% of it, it gets reviewed by the board. So, there's a lot of alignment. We're not trying to rush to do any acquisitions, but we're very excited about, you know, all the acquisition potential that's out there because there's just so many. And so, you know, we'd be very excited about the opportunity set.

That's really helpful. I appreciate that. Thank you.

Thank you. Before we go on to other callers with questions, I have received a couple of emails since the start of our presentation. One question to you in particular. You mentioned that you're excited about Cortland's opportunities for growth. How much of Aimia's cash are you willing to deploy towards funding its growth instead of investing in new companies?

That's also a good question. I would say that bear in mind that Cortland is cash flow generative already. So, you know, we think that the bulk of acquisitions that we would look at in Cortland would be self-funded by the business. Also, Cortland has some cash and has no debt. So there's a potential to take on some gearing in Cortland if the acquisition opportunity presented itself. But the opportunities that we've looked at so far wouldn't require cash from, or significant cash from Aimia, from the Holdco at all. We would try and self-fund it from the Cortland level.

Should we be using net book value as the main metric to measure Aimia's progress?

I think that net book value per share, it's important to stress the per share part because we do have a share buyback program which executes virtually daily. So, net book value per share would indicate the direction of travel of the intrinsic value. There are some swings and roundabouts, some positives and some negatives to what I would perhaps estimate intrinsic value is, but that's not something we will share. For investors, it might be a good heuristic to use net book value per share. And certainly the change in net book value per share, I think, would be a very useful metric to measure Aimia's success on. In fact, I would think it would be unlikely that net book value per share would grow and intrinsic value per share would not grow along the same kind of path as the book value per share. So it's a useful metric. It's one of the useful metrics, but obviously every investor must decide for themselves what metric they use.

And your next question comes from the line of Robin Byde of Zeus Capital. Please go ahead.