Cameron Doerksen

Cameron Doerksen followed up on the Q4 2025 acquisition of Hearn Industrial, asking for more details on the business given its strong margin profile. He also inquired about TFI's capital allocation priorities and target leverage at year-end 2026.

Answer

CEO Alain Bédard described Hearn Industrial as a great acquisition in the logistics sector, highlighting its lean operations, strong automotive business, and potential synergies with TFI's JHT division. Regarding capital allocation, Mr. Bédard outlined plans for $200-$300 million in tuck-in M&A for 2026, dividends, and using remaining free cash flow for debt reduction or share buybacks. He stated a preference to reduce leverage from 2.5x to closer to 2x. CFO David Saperstein clarified that the reported leverage ratio includes letters of credit and earnouts, making it appear higher than the company's 'real economic leverage'.

Cameron Doerksen asked for more details on the Q4 acquisition of Hearn Industrial, its business profile, and how it fits into TFI's logistics sector, noting its strong margin profile. He also inquired about TFI's year-end leverage target and overall capital allocation priorities for 2026.

Answer

Chairman, President, and CEO Alain Bédard described Hearn Industrial as a lean, successful operator with potential for synergies within the TFI family, particularly with the GHD division, enhancing the logistics sector. He outlined capital allocation priorities for 2026: $200-$300 million in tuck-in M&A, dividends, and using remaining free cash flow to reduce debt or for share buybacks, aiming to bring leverage closer to 2.0x. CFO David Saperstein clarified that the reported leverage ratio includes letters of credit and earnouts, making the 'real economic leverage' lower.

Cameron Doerksen from National Bank Financial asked for the expected effective tax rate following new U.S. legislation and for an updated average interest rate on debt after the recent private placement.

Answer

CFO David Saperstein clarified that the new legislation provides a cash tax benefit, estimated at $75 million over five years, but does not change the effective tax rate. He noted the new debt was issued at a weighted average rate of 4.8%, which was used to pay down debt costing 6.1%, and confirmed the company's overall average interest rate is under 5%.

Cameron Doerksen asked if the 2024 free cash flow range was a reasonable expectation for 2025 given lower CapEx, and inquired about working capital trends.

Answer

Executive Alain Bedard suggested 2025 free cash flow should be in the same "ZIP code" as 2024. Executive David Saperstein added that while Q1 FCF was very strong due to low CapEx and a significant cash release from working capital, the primary driver for the full year is earnings. He explained that working capital acts as a natural hedge, releasing cash when revenues decline and consuming it when they rise.

Cameron Doerksen asked about TFI's cross-border exposure and the potential risks from new U.S. tariffs on Canadian imports, particularly in the automotive sector.

Answer

Executive Alain Bedard stated that transborder revenue is only about 4% of TFI's global revenue. He acknowledged that tariffs on aluminum and steel could be an issue, but noted the company managed through them in 2018. The bigger concern is the potential domino effect of displaced commodity haulers competing for TFI's freight. However, he believes TFI's focus on specialty truckload provides some insulation. He concluded that while the situation is currently 'foggy,' it should become clearer by the summer.

Cameron Doerksen asked if there was any change to the full-year 2024 free cash flow outlook and inquired about the expected CapEx for 2025.

Answer

CEO Alain Bedard stated that the 2024 free cash flow outlook remains in the $750 million to $800 million range, similar to the prior year. For 2025, he anticipates net CapEx will decrease to approximately $250 million from $300 million, as the weaker market has allowed the company to extend the life of its truck fleet.

Cameron Doerksen questioned the market outlook for civil aviation, seeking indications of a potential pickup in training demand, and inquired about the timing of potential sales for the identified non-core businesses.

Answer

Matthew Bromberg (President and CEO, CAE) stated that the current softness in civil demand is the 'market' and CAE is resizing its network accordingly, reiterating the long-term 4-5% annual growth for the civil market. He indicated that portfolio transformations typically take 18-24 months, making it too early to discuss specific divestiture timing.

Cameron Doerksen questioned the civil market outlook, seeking indications of potential demand pickup, and asked about the expected timing for the divestiture of non-core businesses.

Answer

President and CEO Matthew Bromberg stated that the current market conditions, including softer demand, represent 'the market' and CAE is resizing its network accordingly. He reiterated the long-term civil market growth of 4-5% annually. Regarding divestitures, he indicated that portfolio transformations typically take 18-24 months, and CAE will not rush the process, providing announcements as individual business processes mature.

Cameron Doerksen asked about the expected timeline for margin and free cash flow improvement from the transformation initiatives, and CAE's ability to reprice or exit underperforming long-term contracts.

Answer

Matthew Bromberg, President and CEO of CAE, stated that some initiatives will yield immediate results, while others will take quarters or years. He committed to providing more guidance and visibility when 2027 guidance is presented. Regarding contracts, he confirmed that all options are on the table, including renegotiating or charting out contracts, with no single answer but a commitment to finding the right solution for each.

Cameron Doerksen from National Bank asked about the expected timeline for margin and free cash flow improvement, specifically whether benefits from the transformation initiatives are anticipated in fiscal 2027 or if it will take longer. He also inquired about the ability to reprice or exit long-term contracts that no longer fit the return profile.

Answer

Matthew Bromberg, President and CEO of CAE, stated that some initiatives will yield immediate results while others will take quarters or years to develop, and more guidance will be provided with the 2027 outlook. Regarding contracts, he confirmed that all options are on the table, including renegotiating or charting out contracts, and the team is challenged to find the right answer for each.

Cameron Doerksen from National Bank Financial asked for the specific indicators giving management confidence in a second-half rebound for the commercial airline pilot training business, given the near-term softness.

Answer

Chairman Calin Rovinescu noted that pilot hiring appears to have hit a trough and that recent activity is trending well for the second half. COO Nick Leontidis added that direct customer conversations confirm hiring will ramp up after the summer and that normalizing aircraft delivery rates from Boeing and Airbus will also drive increased demand for training.

Cameron Doerksen asked for details on CAE's fiscal 2026 capital expenditure plan, specifically seeking the breakdown between maintenance and growth CapEx and the key areas receiving investment.

Answer

Interim CFO Constantino Malatesta explained that total CapEx is expected to be modestly lower than in fiscal 2025, with a similar split of approximately 75% for growth and 25% for maintenance. President and CEO Marc Parent added that CAE is moving from a multi-year investment cycle into a phase of consolidating and operationalizing those assets. COO Nick Leontidis specified that growth CapEx is for expanding existing centers like Vienna and Orlando, not for building new facilities.

Cameron Doerksen of National Bank Financial asked about specific actions CAE is taking to improve working capital management. He also inquired about CAE's role and the potential financial contribution timeline for the Canadian Future Fighter Lead-in Training (FFLIT) program.

Answer

Interim CFO Constantino Malatesta attributed the strong free cash flow to improved execution on billing milestones, disciplined inventory management, and unlocking working capital, leading to an increased cash conversion target. CEO Marc Parent described the FFLIT program as a strategic partnership where CAE will help design and accelerate the procurement process. While financially significant, it is too early for a precise timeline, but work is beginning immediately.

Cameron Doerksen of National Bank Financial requested an update on the business aviation training market, asking about any notable changes in demand and the ramp-up progress of new training centers in Las Vegas and Savannah.

Answer

CEO Marc Parent reported that the business aviation segment is performing 'extremely well,' with new centers ramping up nicely and activity levels remaining higher than pre-pandemic. COO Nick Leontidis confirmed the segment had a strong quarter and was a disproportionate driver of the high Civil order intake, with many new long-term contracts signed.

Cameron Doerksen asked if a scenario where BRP and the industry end the snowmobile season with healthy dealer inventories and a decent snow season could represent potential upside to the CAD 400 million-CAD 500 million revenue tailwind from retail and wholesale alignment in Fiscal 2027. He also sought confirmation on the expected cash inflow from the Telwater sale and its timing.

Answer

CFO Sébastien Martel confirmed that a strong snowmobile season with good snowfall would lead to robust customer orders in the spring, providing a significant tailwind for the second half of Fiscal 2027, implying potential upside beyond the base revenue tailwind. He also confirmed that the expected cash inflow from the Yamaha offer for Telwater is approximately CAD 200 million and is anticipated to occur in Q4 or early Q4, pending regulatory approval.

Cameron Doerksen of National Bank Financial asked for more detail on the impact of expanded steel and aluminum tariffs, specifically which products are affected and if there's risk of further expansion. He also requested an update on the CEO search.

Answer

CFO Sébastien Martel explained the new 50% tariffs on steel and aluminum, effective August 18, mainly impact ATVs and some side-by-side models, but noted the impact is absorbable. He acknowledged rules could change but the company will adapt. CEO José Boisjoli provided an update on the CEO search, stating it is ongoing and the transition is still expected by the end of the year.

Cameron Doerksen inquired about the timeline for the CEO search process and whether the board was considering internal versus external candidates. He also asked for the rationale behind retaining the marine parts and accessories business.

Answer

CEO Jose Boisjoli explained that the board has initiated a global search considering both internal and external candidates, with an expected timeline of three to nine months. CFO Sebastien Martel added that the marine parts business was retained because the company could not secure an acceptable sale price. He described it as a profitable, low-maintenance business generating over $70 million in revenue with a ~25% EBITDA margin.

Cameron Doerksen asked about BRP's ability to mitigate the current $40 million tariff impact through supply chain adjustments and how dealer financing support costs are expected to trend.

Answer

CEO Jose Boisjoli stated that while BRP is adept at adapting to tariffs, the current lack of clear rules and lead time makes it difficult. CFO Sebastien Martel expects dealer floor plan financing costs to improve, trending back towards pre-COVID levels of around 1% of revenue, down from 1.6% in fiscal 2025, due to leaner dealer inventories.

Cameron Doerksen asked for an outlook on operating expense lines for the rest of the year and inquired about the cost-reduction levers BRP can pull to offset demand weakness next year.

Answer

CFO Sebastien Martel guided for H2 gross profit to be flat to slightly down versus H1, with OpEx remaining relatively flat year-over-year. For future cost savings, CEO Jose Boisjoli mentioned reprioritizing projects. Martel added that more conservative production planning will improve operational efficiency, and a renewed focus on reducing the bill of materials should yield benefits, particularly in fiscal 2026.

Cameron Doerksen of National Bank Financial inquired about the Marine business, asking what actions BRP can take to improve its profitability if market conditions remain weak, given its $1.50 drag on EPS. He also questioned the potential challenges in re-ramping production after significant workforce reductions.

Answer

CEO Jose Boisjoli explained that BRP has reduced marine production to a minimum for the remainder of the year to deplete dealer inventory, with a more normal restart planned for model year '26. He acknowledged the industry inventory correction might take 18 months. Regarding production, he stated that the company has been careful to retain the right level of skilled labor to ensure it can ramp up effectively when the market recovers.