Exchange Income (TSE:EIF) reported what management described as a record-setting year in its conference call discussing results for the three and 12 months ended Dec. 31, 2025. CEO Mike Pyle said the company set historical highs for revenue, adjusted EBITDA, free cash flow, free cash flow less maintenance capital expenditures, net earnings, and adjusted net earnings, “both on an absolute basis and more importantly, on a per-share basis.”
Management also highlighted a simplified capital structure and a stronger balance sheet. Pyle said the company redeemed all outstanding convertible debentures during 2025, with the “vast majority” converted into equity, contributing to the company’s lowest leverage levels in about 15 years. CFO Richard Wowryk added that more than 90% of the convertibles converted into equity and that, going forward, the only dilutive instruments on the balance sheet relate to deferred shares.
Fourth-quarter highlights and segment drivers
Wowryk said free cash flow per share increased 30% to CAD 3.00 and free cash flow less maintenance capex per share increased 38% to CAD 1.24. He emphasized that the per-share gains came despite a 14% increase in weighted average shares outstanding during the quarter, primarily due to the conversion of convertibles and shares issued for acquisitions.
Both operating segments contributed to the quarter’s performance, with management citing year-over-year adjusted EBITDA increases of 27% in Aerospace & Aviation and 38% in Manufacturing for the period.
- Aerospace & Aviation: Management attributed the segment’s strength to profitability across business lines, including the July 1 acquisition of Canadian North, strong load factors at air operators, robust demand for aircraft and engine leases and parts sales at Regional One, and the start of operations of a second aircraft for the U.K. Home Office, alongside higher flying tempo under contracts.
- Manufacturing: Results were driven by strong rental and mat sales in Canadian environmental access solutions operations and “continued robust demand” for composite matting in U.S. operations. Precision manufacturing and engineering also had a strong quarter, supported by telecommunications, data center, and hydronic heating solution sales.
Capital allocation, working capital, and leverage
Maintenance capital expenditures in Q4 were CAD 97 million, higher than comparative periods due to the Canadian North acquisition and the timing of maintenance events in Aerospace & Aviation. Growth capex was CAD 134 million, which Wowryk said was primarily driven by acquisitions of engines and aircraft to expand Regional One’s leasing portfolio and King Air deliveries for the British Columbia medevac contract.
Wowryk said the company ended 2025 with a strong working capital performance. He noted that certain government receivables that had been behind historical collection patterns were resolved during 2025. He also said lower output at the multi-story window solutions business allowed the company to return significant working capital during the year.
On leverage, Wowryk said Exchange Income exited fiscal 2025 with an overall leverage ratio of 2.73, the lowest level in about 15 years. He also pointed to a time lag between deploying growth capital and seeing the full adjusted EBITDA benefit, noting that the company had deployed more than CAD 300 million of capital by year-end and expected meaningful returns in coming years, which he said were incorporated into 2026 guidance.
Investment-grade rating and bond market flexibility
Management highlighted an investment-grade credit rating announced after year-end. Pyle said the BBB (low) rating with a stable outlook from Morningstar DBRS confirms the stability and diversity of the business and creates the capability to issue long-term, fixed-rate bonds. He stressed that this does not change the company’s conservative approach to leverage, but provides another tool for financing acquisitions or growth capex.
In response to analyst questions, management said bonds could become a more meaningful part of the company’s long-term capital structure, adding fixed-rate exposure previously provided by convertible debentures. Pyle also said he prefers staggering maturities to reduce refinancing risk. Wowryk said interest savings depend on the comparison point, but noted the bond market could be materially cheaper than the company’s historic convertible debenture financing, and also attractive versus extending interest rate swaps, two of which mature in April 2026.
2026 outlook: guidance, aviation growth, and manufacturing mix
Pyle said the company did not change the 2026 adjusted EBITDA guidance range first issued at the end of Q3, but updated its stance following two developments: an expanded Air Canada commercial agreement and the acquisition of Mach II. He said both are accretive and that management now has “a bias from the mid to the upper end” of the CAD 825 million to CAD 875 million adjusted EBITDA guidance range.
On Aerospace & Aviation, management said 2026 growth is expected to be supported by:
- A full year of Canadian North results
- Expansion and extension of the Air Canada commercial agreement, with aircraft expected to start flying mid-2026
- Continued medevac growth, including the anticipated mid-2026 start of the Newfoundland and Labrador medevac contract
- Year-over-year contribution from the second U.K. Home Office aircraft that began operations in Q4 2025
Management also cautioned that labor shortages and supply chain challenges persist, particularly around parts, consumables, and broader inflationary cost pressures. They added that maintenance capex is expected to increase over 2025 due to the full year inclusion of Canadian North and increased flying from recent aircraft investments, with additional deferred maintenance investments at Canadian North continuing in the early part of 2026.
For Manufacturing, Travis Muhr said the segment is expected to be “materially consistent” overall with 2025, with strength in environmental access solutions and improving revenue in precision manufacturing and engineering, offset by continued challenges in the multi-story window solutions business due to project gaps and reduced margins stemming from earlier-year booking conditions. He also said the recent Supreme Court of Canada case on tariffs does not impact that window business, because the primary tariffs affecting it are Section 232 tariffs on aluminum and steel, which remain in place.
Management reiterated plans for a new composite matting facility in the Southeast U.S. and said it will be built in Saltillo, Mississippi. Construction has begun, with production expected to start in mid to late 2027. Wowryk said the estimated cost is up to $60 million and that expected returns are “significantly above” the company’s required return threshold.
Defense and security opportunities and M&A pipeline
Management repeatedly pointed to increased defense and security focus as a potential tailwind across the portfolio. The company discussed its “Made in Canada” Arctic security and sovereignty proposal, noting alignment with Canada’s Defence Industrial Strategy and existing Indigenous partnerships. Pyle also said the company extended its Australia ISR bid again to early April and is awaiting the government’s conclusion.
In Q&A, management described a broad increase in global demand for countries to enhance self-reliance in security, and said it is in discussions in multiple regions, while acknowledging that procurement timelines can be long and outcomes uncertain.
On M&A, Wowryk said the company’s pipeline remains strong and highlighted the Mach II investment completed in the first quarter of 2026. Management framed Mach II as part of a longer-term strategy to expand Regional One’s capabilities into narrow-body and wide-body aircraft aftermarket parts and leasing, while emphasizing it expects a measured approach (“walk before we run”) rather than a rapid shift.
About Exchange Income (TSE:EIF)
Exchange Income Corp is a diversified acquisition-oriented corporation focused on opportunities in two sectors, aerospace, aviation services and equipment, and manufacturing. The business plan of the corporation is to invest in profitable, well-established companies with strong cash flows operating in niche markets. Its Aerospace and Aviation segment is a key revenue driver, recognizes revenue from the provision of flight, flight ancillary services, and the sale or lease of aircraft and aftermarket parts.
