Release Date: March 07, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Dexterra Group Inc (HZNOF, Financial) reported record revenue from continuing operations of $1 billion and adjusted EBITDA of $107 million for 2024.
- The company achieved a 40% increase in share price since mid-2023, reflecting strong market confidence.
- Dexterra Group Inc (HZNOF) successfully completed the acquisition of CMI Management, expanding its footprint into the US market.
- The company maintained a strong balance sheet with net debt at 0.6 times adjusted EBITDA, providing flexibility for future growth.
- Dexterra Group Inc (HZNOF) returned $30 million to shareholders through dividends and share buybacks, demonstrating a commitment to shareholder value.
Negative Points
- The Asset-Based Services segment experienced lower EBITDA due to a more normalized wildfire season in 2024 compared to 2023.
- Adjusted EBITDA margin for Asset-Based Services decreased to 29.3% in 2024 from 36.7% in 2023, influenced by the mix of business.
- The company faces potential risks from increased protectionist trade policies and tariffs, which could impact cross-border supply commodities.
- Dexterra Group Inc (HZNOF) anticipates fluctuations in adjusted EBITDA margins for Asset-Based Services between 30% to 40% depending on business mix.
- The company is exposed to seasonality, with Q4 traditionally being a slower period due to client shutdowns over the holiday season.
Q & A Highlights
Q: Can you provide expectations for organic growth in 2025 for the support services and asset-based services segments?
A: Mark Becker, CEO, stated that the company targets 5% to 7% organic growth for support services and 2% to 5% for asset-based services. The overall goal is to achieve around 5% organic growth across the entire business, considering market conditions and client plans.
Q: How should we think about the margin range for asset-based services, and what factors influence it?
A: Mark Becker explained that margins in asset-based services can range from 30% to 40%, influenced by the mix of business. High margins are seen during strong fire seasons or when new contracts are mobilized, while lower margins occur during demobilization activities. The company aims to provide transparency on business mix to help model expectations.
Q: What are the implications of Fairfax moving above 50% ownership of Dexterra?
A: Mark Becker noted that there are no significant changes related to Fairfax's increased ownership. Fairfax is not participating in share buybacks due to tax considerations, but they remain supportive, believing Dexterra's value exceeds its current market price.
Q: Can you elaborate on the cross-border supply commodities exposure and mitigation strategies?
A: Mark Becker highlighted that labor is the largest cost, sourced domestically, minimizing tariff impacts. Some food and paper products have cross-border exposure, but the company is actively managing supply chain alternatives and adjusting menus to mitigate risks. Contracts also include inflation factors to protect margins.
Q: Are there any changes to compensation metrics with the new business segmentation?
A: Mark Becker confirmed that while the design of incentive plans remains unchanged, they are realigned to the new business segments. This ensures alignment of executive compensation with the performance of specific business units.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
