Mr. Mike Pyle reports

EXCHANGE INCOME CORPORATION GENERATES RECORD FIRST QUARTER RESULTS AND CELEBRATES 20 YEARS OF CONTINUED SUCCESS

Exchange Income Corp. has released its financial results for the three months ending March 31, 2024. All amounts are in Canadian currency.

Q1 financial highlights

• Generated record first quarter revenue of $602-million, an increase of $75-million or 14 per cent.
• Earned adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $111-million, representing growth of $14-million over the prior period or 14 per cent and setting another first quarter benchmark for the corporation.
• Free cash flow first quarter record of $62-million compared with the prior period of $60-million.
• Net earnings of $5-million compared with the prior period of $7-million and net earnings per share of 10 cents compared with the prior period of 16 cents.
• Adjusted net earnings of $10-million compared with the prior period of $12-million and adjusted net earnings per share of 20 cents compared with the prior year of 27 cents.
• Increase in free cash flow less maintenance capital expenditures of $4-million to $23-million, another first quarter record.
• Trailing-12-month free cash flow less maintenance capital expenditures payout ratio remained consistent with the comparative period at 58 per cent.
• Completed an extension and upsize to the corporation's credit facility, including the addition of a new social loan tranche, containing consistent pricing and terms with the company's prior credit facility.

CEO commentary

"Fiscal 2024 is the 20-year anniversary of both our initial public offering and our first acquisition being Perimeter Aviation Ltd. on May 6, 2004. It represented the start of our purpose-built strategy. Our purpose was to provide our shareholders with stable and growing cash distributions, maximize the share value associated with our portfolio of subsidiaries and employ a disciplined acquisition strategy. The success of EIC over the past 20 years is due in large part to identifying the correct acquisition targets, empowering the management teams at each subsidiary, and providing growth capital expenditures to fuel expansion. In retrospect, we built a diversified business through both acquisition and organic investment in our family of businesses. As we look forward, we continue to see growth and success for our shareholders, employees and communities we serve. Our annual report theme for 2023 was 'built to last' and I am confident in our business and management teams continuing to execute upon our original purpose. Our businesses excelled over the past 20 years and our diversity continues to weather the current environment of geopolitical and economic uncertainty. We remain poised to execute on our strategic vision and generate record-breaking results into the future," said Mike Pyle, chief executive officer of Exchange Income.

"We are very proud to report first quarter records in a number of our key metrics including revenue, adjusted EBITDA, free cash flow and free cash flow less maintenance capital expenditures. Our management teams are executing on the many contractual wins announced throughout fiscal 2023. Our strong performance was achieved whilst the broader economy was experiencing headwinds from persistent inflation in the United States, a weakening Canadian economy and geopolitical uncertainty around the globe. The financial results continue to show the diversification of our business lines and the critical services that our businesses provide. We remain poised to grow organically and our management teams have been pro-actively identifying opportunities for growth, while Adam and his team have been evaluating a number of potential acquisitions."

"Our pipeline of opportunities continues to be strong however we remain disciplined in ensuring that we acquire companies with strong management teams, coupled with sustainable cash flows, while ensuring that acquisition metrics are accretive to our shareholders. We are currently assessing a number of high-quality opportunities and we continue to work on projects in both the aerospace and aviation and manufacturing segments, and in discussion with prospective vendors the EIC story and our 20-year history continues to resonate," stated Adam Terwin, Exchange Income's chief corporate development officer.

Review of Q1 financial results

Consolidated revenue for the quarter was $602-million, which was an increase of $75-million or 14 per cent over the prior period. Revenue in the aerospace and aviation and manufacturing segments grew over the prior year, by $43-million and $32-million, respectively. Adjusted EBITDA for the quarter was $111-million, which was an increase of $14-million or 14 per cent compared with the first quarter of last year. The record financial metrics were achieved by continued growth in the operations in the aerospace and aviation segment offset by a decline in the manufacturing segment profitability primarily due to the expected reduction in the company's environmental access solutions business line results. The prior year comparative for the environmental access solutions was characterized by the continuation of the perfect alignment of price, demand, supply and weather coupled with a seasonal anomaly of having a number of rental mats deployed on a long, linear project in Western Canada throughout the first quarter and into the second quarter of 2023.

Revenue generated by the aerospace and aviation segment increased by $43-million or 13 per cent to $369-million and adjusted EBITDA increased by $20-million or 27 per cent to $94-million over the comparative period. The significant drivers of the increased revenue and profitability relate to higher passenger load factors and expanded routes, within the essential air serviced business line, driven by organic growth and investments in growth capital expenditures during the past number of years. Furthermore, leasing activity with the aircraft sales and leasing business line has continued to experience step-based improvements and is anticipated to reach prepandemic run rates by the end of 2024. Lastly, the aerospace business line continued to expand with additional ISR operations utilizing owned aircraft resulting in an improved margin profile and sales mix for the business line.

Manufacturing segment revenue increased by $32-million to $233-million for the quarter and adjusted EBITDA decreased by $5-million to $27-million. The increases in revenues were primarily driven by the acquisitions made in 2023 while the decline in segment profitability was expected and primarily due to the environmental access solutions business line. The prior year comparative for the environmental access solutions was characterized by the continuation of the perfect alignment of price, demand, supply and weather coupled with the seasonal anomaly of having a number of rental mats deployed on a long, linear project in Western Canada throughout the first quarter and into the second quarter of 2023. The manufacturing segment continues to see a number of inquiries and interest from existing and new customers; however such inquiries are not being converted into orders as quickly as in the past due to the macroeconomic and geopolitical uncertainty that exists. The subsidiaries are confident that once the uncertainties subside there are significant future opportunities for growth and expansion based on the level of interest across the family of subsidiaries.

Exchange Income recorded adjusted net earnings of $10-million, or 20 cents per share, compared with $12-million, or 27 cents per share, in the prior year's first quarter. The record adjusted EBITDA was offset by increased interest costs due to increased benchmark borrowing rates coupled with higher amounts of debt outstanding due to the growth capital expenditures in the latter part of 2023 and into 2024. Additionally, the corporation experienced higher depreciation and amortization due to acquisitions and organic growth. Lastly, the prior year's comparative also included a gain on contingent consideration of approximately $1-million.

Carmele Peter, president of Exchange Income, said: "The nature and diversity of the businesses we own enables us to produce resilient financial results in the face of uncertainty in the broader economy and geopolitical uncertainty around the world. So, while our manufacturing segment was impacted by these uncertainties in the quarter our aerospace and aviation segment achieved record results. The essential nature of our aviation companies continues to shine through with higher load factors, new routes and execution on the new medevac contracts won last year. Our aerospace business has the foundational support of long-term government contracts and the geopolitical tensions have led to opportunities like the U.K. Home Office surveillance work and increased flying under other surveillance contracts. We are able to weather all storms and not only survive but succeed. We are truly built to last."

Richard Wowryk, Exchange Income's chief financial officer, also noted: "We have increased our credit facility to approximately $2.2-billion and extended its maturity to May, 2028, subsequent to the end of the quarter. We were excited to announce that as part of this increase and extension, our credit facility includes a social loan of $200-million related to the financing of the new King Air aircraft being purchased for the British Columbia fixed wing medevac contract. Such aircraft have enhanced performance, improved fuel efficiency, state-of-the-art medical cabins and provide an essential service across British Columbia including for remote, rural and indigenous communities. The upsize and extension was executed with terms and conditions consistent with our previous facility, including leaving pricing the same. The extension and upsizing of our credit facility provides us with significant capacity to further invest in our existing businesses through growth capital expenditures and accretive acquisitions. We continue to have a strong, liquid balance sheet."

Outlook

Mr. Pyle concluded by saying: "Our performance in the first quarter met our expectations and was a perfect illustration of the EIC business model. We have a diversified business model and through our empowerment of subsidiary leadership teams along with investments in growth capital expenditures, we are primed for growth not just in 2024 but well into the future. Success begets success and our 20-year track record provides insight into how we will continue to grow and evolve into the future. Our consistent execution of the strategy, including making investment decisions for the long term, continues to show in our results."

Exchange Income's complete interim financial statements and management's discussion and analysis for the three months ending March 31, 2024, can be found at the Exchange Income website or at SEDAR+.

Conference call notice

Management will hold a conference call to discuss its 2024 first quarter financial results on Wednesday, May 8, 2024, at 8:30 a.m. ET. All interested parties can join the conference call by dialling 1-888-886-7786 or 1-416-764-8658 (international). Please dial in 15 minutes prior to the call to secure a line. The conference call will be archived for replay until May 15, 2024, at midnight. To access the archived conference call, please dial 1-877-674-7070 or 1-416-764-8692 (international) and enter the encore code 365708 followed by the pound key.

A live audio webcast of the conference call will be available at Exchange Income's website. Please connect at least 15 minutes prior to the conference call to ensure adequate time for any software download that may be required to join the webcast. An archived replay of the webcast will be available for 90 days.

About Exchange Income Corp.

Exchange Income is a diversified, acquisition-oriented company, focused on two sectors: (i) aerospace and aviation services and equipment; and (ii) manufacturing. The corporation uses a disciplined acquisition strategy to identify already-profitable, well-established companies that have strong management teams, generate steady cash flow, operate in niche markets and have opportunities for organic growth.

We seek Safe Harbor.