Aimia Inc. (AIM) Earnings Call Transcript

At this time, all lines are in listen-only mode, and following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Friday, November 6th, 2026. I would now like to turn the call over to Mr. Joe Bracanelli, VP, Investor Relations. Please go ahead.

Thank you, operator, and good morning, everyone. Joining me on today's call are our Executive Chairman, Reece Somerton, and Aimia's President CFO, Stephen Leonard. Before we begin, I'd like to point out a couple items. We issued our financial results for the third quarter earlier today. All of our materials, including the news release, MD&A and financial statements, are available from our website as well as from SEDAR+. We will be using a presentation today, and for those listening in to our call by phone, a copy is available from the IR section of our website. Some of the statements that made on today's call may constitute forward-looking information and our 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 and MD&A. In addition, we will be making note of GAAP and non-GAAP financial measures Reconciliation of the non-GAAP financial measures is provided in the appendix of the presentation. Following today's discussion, please reach out to me if you have any outstanding questions or require any clarification on the matters that we discussed today. Thank you. And Reese, please go ahead.

Thanks Joe, good morning everybody, good afternoon. Thank you for joining us today. As you have come to hear over recent investor calls, Steve and I will review some of the key developments on the quarter. then we'll welcome any questions you might have. Just to run through our performance for the third quarter, I think what you will see is that The turnaround in Courtland that we flagged on the last set of results is starting to bear fruit. You can start to see it in the revenue growth that Courtland has delivered. Steve will give a few more details about that. We've also, importantly, been able to establish listings on the JSE in South Africa as well as the AIM market in the UK. And that's very important because we're establishing the platform to support future M&A activities. We've also been able to start deploying some of the capital. In the second quarter, we deployed about 13 million. In this quarter, the third quarter, we've deployed about 15.5 million. And obviously, it's a very short period, but we've shown... shown an investment gain of 1.9 million to fair value. So it's a good start, but clearly on a quarterly basis, things can swing dramatically. as I'm sure everybody saw last night. So with that, I will hand over to Steve to go through the financial highlights, and then I'll come back at the end to talk a bit more about the strategy, as well as take any questions you might have. Steve?.

Thank you, Rhys. Good day, everyone. Turning to our financial highlights. As you can see on slide seven, our results from continuing operations showed improvement across several financial metrics in Q3 when compared to the prior year period. In particular, revenue was up 21.3% to 45.6 million Gross profit increased 25.3% to 10.4 million, and gross profit margin improved to 22.8% from 22.1%. These improvements were offset, however, by a 2 million increase in SG&A expenses that included one-time costs related to strategic corporate initiatives and multi-listing activities, as well as higher freight costs at Cortland. The increase in SG&A was partly offset by ongoing efforts to reduce holdco costs for items such as insurance and professional services. We incurred a net loss in Q3 of 3.26 million, and I want to take this opportunity to put it into perspective. Our loss was largely attributable to two non-cash developments. First, we recorded an 8.3 million unrealized fair value loss on the company's investment in Clear Media due to a dispute the company is having with a bus shelter landlord in China that is affecting its liquidity and its ability to generate revenue. Second, net loss was impacted by net financial expenses of 6.9 million, which included 4.8 million of deferred financing costs associated with, that were written off with, associated with the redemption of the senior notes. Turning to Cortland. Cortland results for the third quarter are presented on slide 8. In Q3 26, Cortland generated 45.6 million of revenue, up 21% from last year. The year-over-year increase was due to a number of factors, including pricing surcharges implemented in response to rising raw material costs and freight costs, which have been impacted by increasing oil prices related to geopolitical events in the Middle East. Other contributing factors to the revenue growth included product mix that improved conditions in several of the sectors it serves, such as fishing and aquaculture, as well as aerospace and defense in the US. The increased revenue was partially offset by lower sales volume in other sectors. Portland's adjusted EBITDA in Q3 26 was 5.7 million, up from 5.5 million in the prior year period. The gross profit increase was partially offset by 1.8 million of higher SG&A expenses, primarily related to selling costs associated with freight and in addition higher compensation costs. Given the progress that Cortland has made on its turnaround and that customer demand in several of the sectors is improving, the new management team is committed to sustaining this momentum in the coming quarters. We ended the quarter with 152 million of cash on a consolidated basis, down from 294.5 million at the end of June 30. Slide 9 shows a waterfall of cash movements in the quarter. The key driver for the decrease in liquidity was 131.4 million payment in aggregate principal amount for the the redemption of the senior notes. This transaction, as we had disclosed previously, was triggered by the sale of Bezzetto. Other factors that contributed to the decline in our cash position included 15 and a half million of capital deployed for investments in marketable securities, 1.6 million of cashflow used in operating activities, 1.6 million of investments in property, plant and equipment, 0.7 million for the repurchase of common shares and 0.7 million for preferred share dividends. The outflow of cash was partially offset by 3.9 million of proceeds from an investment fund redemption, 2 million of interest received, 1.8 million in final adjustment proceeds from the Bozzetto transaction included in other movements, 9.9 million in proceeds from the sale of marketable securities. Given the closing of the major transactions in 26 were immediately subsequent to the quarter-end reporting periods, the cash position we reported throughout the year provided an incomplete picture of our available liquidity movements in cash. To better illustrate the major movements cash, including the amounts we have deployed towards our investment strategy. Slide 10 shows our consolidated cash position on a year-to-date basis. As you will note, our cash position has increased 43.3 million after taking into account the outflow of approximately 130 million to purchase the senior notes, which will save us 13 million in annual interest costs and And we invested 30 million in marketable securities. Other movements presented in the waterfall chart include 3.9 million towards the repurchase of AMIA's common shares, 7 million in interest payments related to the 2030 senior notes, and 2 million of dividend payments for our preferred shares. Looking at our liquidity more closely, slide 11 shows a breakdown of our cash position by our segments as of September 30th. Our consolidated liquidity includes 145.5 million of cash held at Holdings and 7 million held at Cortland. We continue to estimate our operating expenses at Holdco expected to be 7 million over the next 12 months. Of this total, approximately 3.3 million is related to compensation and the balance primarily relates to expenses of being a public company. Looking ahead, we plan to deploy the available capital consistent with our strategy to enhance shareholder value. This concludes my prepared comments. I would like to turn the call back to Rhys for his closing remarks.

Thanks Steve. So as you heard, the third quarter we continue to execute on our investment strategy. It's gaining some momentum. We deployed 15.5 million of capital in the quarter, making investments in public companies only. And those are companies that meet our investment criteria. We grew our portfolio of new investments to the 28th, nearly 29 million at the end. taking the second quarter investments plus the third quarter. We continue to target companies that trade at what we perceive as a significant discount to their intrinsic value, have strong management teams, and most importantly, generate consistent cash flows that we can rely on to really create a a permanent capital vehicle that is self-sustaining. A key consideration in our investment decisions is the potential for AMIA to get to a controlling position. That's not always the case, but in the majority of the cases, that's what we're looking to do. So it's still early in our advancement as an investment company, but we did generate $1.9 million in this quarter from these new investments. But like I said in the opening remarks, Quarterly performance is not something we wish to be measured on, but hopefully that bodes well for the future. Going on to slide 14, a couple of points here. What you'll notice on slide 14 is what we think is the net book value per share based on what the balance sheet is showing. Now, what's interesting about that number is it excludes the tax losses. The 1.1 billion of tax losses is not included in this number. So this is... the balance sheet number. And obviously we had the uptick from the end of December 31 with the Vizeto sale. So that continued to do well into the second quarter. This quarter, because of the clear media developments, it's come down slightly. But as we said, it's offset a little bit by the gains in the investment portfolio. And we hope that over the very long term, can compound at the very high rate, hopefully close to 20%. Certainly, if I look at the investment vehicle that AMIA is, it's very advantaged. It's got the tax losses. It's got cash. We have a listing in Canada. in the UK as well as South Africa as well as Canada, we should be able to really make the most of this opportunity. Turning to slide 15, a summary of the outlook. And We've rolled out the investment strategy. There's still a long way to go. We've only really just started on this for two quarters, but I think we started well. continue to look for opportunities to invest in undervalued companies. The criteria I've already been through a little bit earlier. We've got the two listings as I indicated. And I think for me, what was important in this quarter is that we started to see signs of the changes that we put through at Cortland earlier on this year are really starting to come through. So having a CEO and a new CFO in place at Cortland, I think you're starting to see the benefits of that with the revenue growth. I think what we want to see in future quarters – what will hopefully come through is sustained revenue growth with a real laser focus on costs, which will help the operating margins continue to improve. So GP margins is a function of your sales makeup, but what we wanna, It's kind of limited control over that. But what you can control is the SG&A line. And we've had a good start there as well in really examining the expenses very closely. And as a reminder, long term, our focus is on growing that net book value per share. And we've started to make, I think, a fairly good headway on that. So with that, I'm going to open up for any questions you might have. The questions will come to me and I'll either get Steve to answer or I'll answer and we welcome any questions.

Steve and Anureet, before we turn it over to inbound calls of people on the line, I did get a number of email questions, and I welcome other individuals listening via webcast to forward on some email questions as well. First relates to the NCIB. It wasn't as robust as in previous quarters, and the question is, you know, were we capped on the daily purchases on the NCIB? And if there's a bottleneck in place, would we consider an SIB.

Buybacks are always an interesting topic. And it's not only for AMIA, but I think in most of the companies I'm involved in. in a buyback feature, which is an important point to understand. And they're going to feature in AMIA as well. But AMIA is an investment vehicle. So, you know, what I would prioritize is acquisitions over... over share buybacks. Share buybacks have their place when the stock is undervalued. And we have been buying shares back when we can. We don't have any plans on an SIV. I think we can, buy shares in the markets at attractive prices, and we'll continue to whittle away at the number of shares and they continue to decline. So the number of shares in issue continues to decline which is exactly where we want to take it. But We must be clear, though, that finding great acquisitions does Trump share buybacks. And if we ended up buying back so many shares in AMIA, that it eventually becomes... it doesn't sustain itself as an investment vehicle because it'll be too small. So there is an element of scale that you have to think about. So buybacks definitely. I'm, I'm a big fan of buybacks. Every company I'm involved in, we do buybacks. AMIA is no exception. but preferences, acquisitions.

Can you provide any color on the investments made in the quarter, either by providing details of the companies, their geography, and as well how those investments interact with the company's tax losses.

So I think there's companies that we've made acquisitions of by buying some of the securities in the public market. The two that we've disclosed, one is, Foxtons, which is a London-based real estate agent. And the other is NWF, which is kind of a mini conglomerate of three companies. We've made the public disclosures, so we're not going to say too much more about that, but you can see the geography is fairly straightforward. It's in the UK. And the reason for that is that the UK is offering, I still think, the best risk reward. for the investment destination of our dollars in AMIA. But the weakness of that is it doesn't utilise the tax losses right now. That's fine. We will get to utilizing those tax losses. And we've already utilized them partially with the sale of Bezzetto. But on a more sustainable basis, what we need to do is make acquisitions eventually in the US and Canada, and we will get there. But right now, the focus is on getting AMIA to scale, getting dependable businesses where we can create value first and foremost. And once that's better done, we can then move to the next step of looking at the US and other places that we can utilize the tax losses. So the underlying message is we will definitely utilize them, and they do have a very long period before they start to expire. So we completely believe that the investment case of AMIA, to really unlock the value, we will have to get to utilizing those losses, and we will do.

I have more questions from email, but why don't we turn it over to operator, to anybody who's in queue on our call for questions.

Thank you. And ladies and gentlemen, this will be a question and answer session. Should you have a question, please press the star followed by the one on your touchtone phone. You will hear a prompt that your hand has been raised. If you wish to decline from the polling process, please press the star followed by the two. And if you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. And your first question comes from Rob Byde from Zeus Capital, please go ahead.

Good morning, good afternoon. Hi, guys. Just on your investment strategy,.

You've made two, I think, great investments in Foxton's and NWF. Is quoted equity the best way to go? Would you look at private companies or perhaps even corporate credits? Then in terms of how active you might be, you have significant shareholdings in both Foxtons and NWF now. I mean, would you, for example, be seeking board seats or are you happy as a more passive investor in these cases? Thanks.

Yes, that's a really good question. No, we're definitely not passive. We will be very active and we are active. But the way we think about it is... If the companies are doing what we think they should be doing as far as allocating capital and making sure their cost base is appropriate, and they're able to generate that capital and upstream it to shareholders, we're completely fine with letting the companies go on their own and continue to operate autonomously. the problem comes in is if companies aren't doing that. So if they have a division that's losing money and another division is making money, you know, we can't really tolerate that. So, you know, we will work along with the company to make sure that that doesn't persist. and that they make changes in the short term. I think in the two examples you've given of Foxtons and NWF, they're obviously interesting businesses, but... There's a lot of work to do, I think, on both of them. And there's no guarantee that they're going to work out. I would just say that if we are able to unlock value in both, and I think the rewards will be considerable, but There's no guarantees on doing that. So how aggressive are we going to be or how active are we going to be? We're very active in building building our stakes in them. I think Foxton's, we've kind of built most of that the third quarter so that's been a very quick gain in our ownership of that and there's different ownership thresholds that we need to be cognizant of and we are, and that also features in how quickly we move on it. But those are just two of the companies. I think we've also done a lot of work on companies that we haven't yet made investments in. And it could be that in the future quarters, we start to make progress on the companies that we haven't yet made investments in before we return to the ones that we have.

By way of color, sorry, by way of color, I mean, the reason that those two companies have been cited is largely because of some filings that we have done in the UK on the FCA. And you may not see reference to them in our financial materials, but we have put some filings on some of our positions. And that's how the last caller.

pose the question about our two investments. Thank you. And just on the point, do you prefer quoted companies? I guess because of the transparency and so on and are you interested in private companies or even in you know non-equity investments in credit credits for example.

Yes, sorry, I missed that part out. You see, the beauty of public companies, particularly UK public companies, is they have these shareholders that have monthly redemptions, which mean that they essentially forced sellers for the last, I don't know, 44 months, right? And so, you know, we are there to be able to buy, you know, or trade. take ownership of these companies or percentages of them at an attractive price. If we have to knock on the door and ask the... the CEO or the chairman, if we can buy the company, we're immediately having to pay 30% or 40% premiums. So our model, I think, is vastly superior because we can build stakes in companies at market prices. And I think the example of Foxtons is an interesting one because we're able to build a stake purely in the market. from I think the one fund that we bought from was winding down. and another one had kind of given up. So, you know, that's what we like. We hope we have more of them. look to wind down and sell us some interesting companies at like probably way below what a private buyer would pay for it and way below what you could buy them in the future. in the private market. So unless we can find things in the private market that are like outstanding investments at really attractive prices that can compete with what the public market can offer you, We'll probably avoid private for now and stick to our strategy. But credit, definitely not. We're not interested in taking that part of the market. And we're not interested in distressed companies either. cash flow generative companies with good management teams that are going to stick with us and want to be part of the future vehicle that we're building, which is AMIA. Thanks Rhys, that's very clear. Thank you.

Thank you. And your next question comes from Ben Elliott from RBC Dominion Securities. Please go ahead.