Call is being recorded on Tuesday, May 13, 2025. I would now like to turn the conference over to Joe Racanelli, please go ahead.
Thank you, Operator, and good morning, everyone. Joining me on today's call are Aimia's Executive Chairman, Rhys Summerton, and Aimia's President and CFO, Steven Leonard. Before we begin, I'd like to point out a couple of items. We issued our financial results for the first quarter earlier this morning, and all of our materials, including the news release, MD&A, financial statements, are available from our website and SEDAR Plus. We will be using a presentation today, and for those listening to our discussion by phone, a copy of it is available, a copy of the presentation is available from the IR section of our website. Now, some of the statements made on today's call may constitute forward-looking information, and our future results may differ materially from what we discuss. Please refer to the risks and uncertainties section of our financial statements, our MD&A, as well as the annual information form.
In addition, we will be making note of GAAP and non-GAAP financial measures. Reconciliation of these is provided in the appendix of our presentation. Following today's presentation, after our Q&A session, if you do have any other points to discuss with us, please reach out to me, and we'll make arrangements to do so. With that, I'd like to turn the call now to Rhys. Please go ahead, Rhys.
Thanks, Joe. Good morning, and thank you for joining us today. I think, on balance, there's much to be pleased about with these results. On a consolidated basis, we increased adjusted EBITDA, lowered whole co-costs to below CAD 3 million, and on a non-operational basis, we generated a gain of almost CAD 54 million from the completion of our substantial issuer bid. We also benefited from the positive impact on foreign currency fluctuations. Efforts to rein in SG&A expenses, both at the whole co level and at our core holdings, were also contributing factors to our improved financial performance. Our core holdings did not have any significant impact from tariffs in Q1. We continue to monitor the impact of tariffs on these businesses and remain cautiously optimistic about the outlook for both Bozzetto and Courtland for the remainder of the year. As a result, we are reiterating our guidance for the year.
At the end of March, we optimized the size of our board, which we've alluded to before, and adjusted director compensation, generating savings of CAD 1.3 million. That leaves us at this current juncture. Much work is, in fact, still needed to address the discount our shares are trading at relative to our estimate of net asset value and the balance sheet value, and to utilize efficiently the CAD 1 billion of tax loss carry forwards not being utilized currently. In my closing remarks, I will expand on our strategy going forward and outline some of the steps we plan to take. First, Steve will provide a summary of our financial results and operational highlights for the first quarter.
Thank you, Rhys. Good morning, everyone. I'd like to begin my remarks with a review of our consolidated results. As you'll note from slide seven, Q1 was marked by improvements to a number of our key financial metrics when comparing our performance to last year. Consolidated revenue grew by 6% to CAD 129.8 million, or 2% on a constant currency basis. Gross profit was up almost 4% to CAD 35.6 million. Adjusted EBITDA increased to CAD 19.7 million, up from CAD 6.7 million. Net earnings were CAD 400,000, up from a loss of CAD 4.5 million. These improvements were driven by a combination of factors, including the solid performance from our core holdings and the CAD 10.1 million decline in whole co-costs. To put the decline in whole co-costs in perspective, Q1 2024 included CAD 6.9 million of shareholder activism costs and CAD 1.6 million of expenses related to termination benefits for former executives.
What's important to take away from our consolidated results for Q1 is that our strategy to improve the operational performance at our core holdings and reduce whole co-costs is working. We reported earnings per share of CAD 0.55 in Q1. This was due primarily to a CAD 53.8 million net gain from the substantial issuer bid completed in February 2025. A breakdown of the net gain under IFRS is presented on slide eight. As you'll note, the gain is essentially determined from the difference between the carrying value of the preferred shares exchanged and the conversion value of the shares, which is net of the notes issued, the value of the notes issued in the exchange less transaction costs. In simple terms, the gain was triggered because the preferred shares were acquired at a discount to their fair value, face value.
The gain effectively boosted our EPS for Q1, recognizing the value transferred to our common shareholders. Turning to performance of our core holdings, starting with Bozzetto on slide nine, the result of our specialty chemical business was again solid in Q1 when compared to the performance in the preceding quarters. In Q1 2025, Bozzetto generated revenue of CAD 89.1 million, up from CAD 88.1 million for the same period last year. On a constant currency basis, Bozzetto's revenue was down 2%, or CAD 1.8 million, due to lower volume sold by the textile solution sector. This revenue decline was partially offset by improved pricing and product mix at Bozzetto's dispersion solution sector. In Q1 2025, Bozzetto generated adjusted EBITDA of CAD 17 million, which represents a margin of 19.1%.
These results were achieved through strategic procurement and improving product mix, as well as reducing SG&A expenses by CAD 1.4 million, excluding the transaction-related items in both quarters. In the same period last year, Bozzetto generated adjusted EBITDA of CAD 15.5 million and a margin of 17.6%. Results of Courtland International for the first quarter are presented on slide ten. Courtland grew in Q1 2025 by almost 20% from last year to CAD 40.7 million. On a constant currency basis, Courtland grew its revenue by CAD 4.3 million, or 13%. The growth was driven by increased market demand, particularly among customers within the fishing and aquaculture and marine and shipping industries. Additional factors driving Courtland's growth included improved product mix. Courtland's adjusted EBITDA grew by 35% to CAD 5.4 million, while the adjusted EBITDA margin improved to 13.3% in Q1 2025.
The improvements were largely driven by higher gross profit and by the positive impact of the business transformation and operational improvement initiatives we started in prior periods aimed at building Courtland's market share and strengthening its sales force and launching new products. We ended the first quarter with CAD 94.7 million of cash, down slightly from CAD 95.4 million at the end of 2024. Slide 11 shows a waterfall of the cash movements in Q1 2025. We generated CAD 12.2 million in cash flow from operations, reduced by CAD 5.9 million of part 6.1 tax related to dividends paid in 2024. Part 6.1 tax will be significantly reduced going forward due to the decrease in preferred shares following the completion of the SIB in February.
Other cash movements this quarter included CAD 3.8 million of CapEx, CAD 3.8 million of transaction costs related to the SIB, CAD 1.9 million of Bozzetto debt repayments, and CAD 1.6 million related to the share buyback under the NCIB. As measured by the CAD 22.4 million of adjusted EBITDA for Bozzetto and Courtland on a combined basis and the CAD 2.7 million of whole co-costs, our results for Q1 put us on track to achieve our guidance for the year. We're often asked about the impacts of tariffs on our core holdings. To date, Bozzetto and Courtland have seen modest impacts by the introduction of new tariffs to the global economy. Each core holding benefits from its diversity of its geographical markets and product mix, providing mitigation and sales opportunities. It's for this reason that we've maintained our guidance for the year.
As illustrated on slide 12, we continue to forecast adjusted EBITDA in 2025 in the range of CAD 88 million-CAD 95 million for our core holdings on a combined basis and expect whole co-costs to be below CAD 11 million. Needless to say, we closely monitor the macroeconomic developments and the impacts on tariffs on the performance of our core holdings closely, and we will adjust our outlook if necessary. We continue to receive positive feedback from investors on the valuation metrics we shared previously and thought it would be helpful to update them again relative to our position at March 31. As a reminder, the metrics presented on slide 13 are taken from our financial disclosure materials available on SEDAR Plus and our website. This information is presented here in a simplified manner to help investors with their modeling.
I should point out, with the completion of the substantial issuer bid in February, we have added CAD 142.6 million of debt related to the 2030 notes, and we've also provided Bozzetto's long-term debt to the slide. This concludes my summary of financial results, and I'd like to turn the call back to Rhys for his closing remarks. Rhys.
Thanks, Steve. Since becoming Executive Chairman at the end of March, I've shared my vision on how Aimia can unlock its value with a number of investors. I thought it would be helpful to share this vision more broadly today. As illustrated on slide 15, our path to enhancing shareholder value really centers on three key steps. Firstly, reduce whole co-costs, and we have a plan in place there. Two, reduce the discount Aimia shares are trading relative to the intrinsic value of the assets. Three, allocate capital effectively with the goal of utilizing tax losses. The first two steps of our strategy will be our priorities over the next 12 months. Success at each stage will earn us the right to proceed with allocating capital effectively through new investments, with the ultimate goal being of realizing tax loss carry forwards.
Our investments may take the form of equity investments in undervalued companies, whereby Aimia gains a controlling stake. That is in the future, and only if we can qualify on reducing whole co-costs and reducing the discount that Aimia shares are trading relative to intrinsic value. Following this blueprint, this will put us on the road to becoming a permanent capital company. We have already made headway on our first priority, reducing whole co-costs. Earlier this spring, Steve and I launched a line-by-line review of all Aimia whole co-costs, looking for potential savings. In 2025, we plan whole co-costs to be below CAD 11 million, down from CAD 12 million in 2024. We have already started by reducing the size of our board, which was an important first step. This measure alone will generate annual savings of CAD 1.3 million, including cash costs of CAD 350,000.
Other opportunities, as presented on slide 16 for cost saving, include reducing office rent, audit fees, and software licenses. We've already started to implement these cost-saving measures, and you'll see the benefit of this both in the second half of 2025 and into 2026. We should have firmer plans, which we will release in our second quarter results in August. On the longer-term ambition, annual whole co-costs should be below 1.5% of our net asset value, which is far better than the benchmark of several of our peers, especially some recently announced permanent capital vehicles. Closing the discount that our shares are trading is a second priority. We will be able to achieve this in a number of ways, including being more aggressive with our share buyback program. In Q1, we acquired almost 700,000 shares.
To date, we have purchased 4.2 million shares, or 60% of the 7 million shares available in our current program, as you can see on slide 17. Given our increased focus on reducing the discount of share price relative to NAV, we plan to renew the NCIB in June when the current program expires. We will share more details of the renewal once the parameters are finalized with the TSX. Another way for us to reduce the share price discount will be to extract value from our core and non-core holdings. We are advanced with plans to obtain reliable valuations of our assets, ensuring that we receive a fair return on our investment. In the coming months, we will share more details as we make progress with these plans. As you have heard, Q1 was marked by progress on multiple fronts.
Most significantly, our core holdings combined to generate CAD 22.4 million of adjusted EBITDA, and we reduced our whole co-costs to CAD 2.7 million. These results put us on track to reach our guidance for the year. In the coming months, we expect to build on this momentum and plan to take concrete steps to transition Aimia into a permanent capital vehicle. The goal, as you have heard, is to reduce whole co-costs, close the discount that our share price trades at relative to NAV, and then, if we qualify, effectively allocate capital for new investments. We look forward to providing updates on the progress. Before we open the call to questions, and just a reminder that everybody can ask questions on this call, I would like to remind everyone that we'll be holding our AGM in Toronto on May 21.
I hope to meet as many of you as possible who can make it in person. Thank you for your time today. We'll hand back to Joe.
Operator, if you would not mind providing instructions on how to pose questions, please. Operator.
Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press the star followed by the number one on your touchstone phone, and you will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star followed by the number two. If you use a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. Your first question comes from Surinder Thint with Jefferies. Please go ahead.
Thank you. Rhys, are you able to provide maybe any more color in terms of a strategic update or your thoughts on a go-forward basis when we think about what you want the whole co to look like and if there's the potential to maybe look at a sale of one or both core assets and then just kind of reboot the whole co?
Yeah, thanks, Surinder. It's a good question. I think the first answer to that is we want the whole co to have lower expenses. Before we do anything else, we need to implement our strategy of reducing whole co costs materially. We've given some guidance on that, but I think there's going to be more to do, and you'll probably see much more evidence of it in 2026 than 2025 as some of the expenses have a run-off. Once we've done that and work on, remember, that second step that we've brought up, which is kind of closing the discount to NAV, now to do that, we need to know what a market value is for these assets. We will, and we are, advancing that as quickly as possible.
I think we'll break from the history of Aimia, and we will report things when we are ready to announce anything material, obviously. We are moving very, very rapidly in that direction. Once we've done that, if those two steps are closed, so let's say we've reduced whole co costs and we've closed the discount materially, at that point, we can look at it and decide how we allocate the capital. That capital allocation decision is really what excites me in the longer term. We only get there, though, if we can fulfill the first two steps.
That's helpful. When we think about just your willingness to buy back shares or the aggressiveness, how do you think about that in the current environment relative to maybe making investments to, let's say, get growth rebooted at Bozzetto or something like that? Where is that trade-off? Because obviously, the discount reflects the challenges at the underlying assets.
Yeah, I think the discount reflects a few things. There's a fairly high correlation with permanent capital vehicles and higher whole co-costs and big discounts. By closing that, by reducing whole co-costs, we think you end up reducing the discount that these companies should trade at. Secondly, if you look at our two core investments, they're both very cash flow generative. It's not as though we're stifling them in any way by conducting a share buyback and preventing reinvestment of their cash flows. What we're allocating to buybacks is really what we have at the whole co level already. Some of that cash is upstream to the whole co from the core holdings. If there's investments to be made there, we'll definitely look at it. We look at it through the lens of what is the most efficient form of capital allocation.
When you think about buybacks, every share we buy back, we add significant value relative to the price we're paying. It is a very simple and easy decision. We know what the quality of the underlying assets are like. We have that knowledge, and we have confidence that buying shares back makes a lot of sense at this level.
That's helpful and understood on the early part of the strategic strategy here. In terms of just when we think about tariffs and your commentary around kind of the limited impacts, if I was to rewind, part of the strategy with some of the core holdings was greater penetration into the US. How does the tariffs or the potential volatility around that impact that strategy at this point?
Hi, Surinder. It's Steve. I mean, we're still in the early innings. As we said, our Q1, I mean, there was some wind that we faced in our sights on the tariff on Bozzetto. You probably saw it by my comments. The textile side of the business was a little softer. That was basically because some of the clients in the Bozzetto side of the business downstream were ultimately going to be selling into the U.S., and were delaying production or purchases pending what was going to happen with the tariffs. Conversely, Bozzetto was able to take advantage outside of the U.S. in other markets, particularly in the dispersion side of it, with different initiatives relative to different verticals that they're approaching. There was some mitigation there, and it gives us some comfort in terms of what we're thinking about for the full year.
It's still a strategy for Bozzetto to gain more access to the US market. That was primarily through the Honduras acquisition. Again, it's early days because we have to monitor more closely what's going on between that country and the US in terms of what's going to happen on tariffs. On the Courtland side, as you know, we have a big operation in India, and we're producing in India, but we also have a footprint in the U.S. That gives us an advantage not only because we have domestic production in the U.S., but it also gives us an advantage in terms of how different products will be measured in terms of what's going to be sold to the end customer, how much is going to be produced in India versus in the U.S., etc.
Again, as many companies, we're still in the evaluation stage, but we're not seeing, at least in the first three or four months to date, significant impact on our business.
That's helpful. Thank you.
Thank you. The next question comes from Brian Morrison with Titi Cohen. Please go ahead.
Yeah, good morning. Rhys, step one, the holdco process seems well underway. Step two also sounds like reducing share price discount, whether it be potential monetization of your core assets or your buyback, sounds like it's progressing as well. I want to focus on step three here because it's a little bit of a change of course. The old management team stated a similar strategy and then went off kilter or off strategy investments. Help me get comfort in the process in terms of the team that determines the idea generation, the governance on these investments, and your clear criteria for capital allocation. I assume other than utilizing the NOLs would be top of mind. I want to know what goes into your capital allocation strategy.
Yeah, that's what excites me the most about this.
Cutting whole co costs and reducing discounts is kind of the easy part. I would say that you are right about being well down the line on reducing the whole co costs. I think on step two, there is a lot of work that we have done and a lot more work still to do there. With all these things, it does take time. We will continue to push that very, very hard. I will go back to the point that we can only get to stage three once we have really executed well on stages one and two or steps one and two. What we do then, I think, will be interesting from a capital allocation point of view.
When we look at companies, at least in my history of investing, we've kind of allocated capital successfully to companies that are out of favor, are on the smaller end of the market cap spectrum. Equally, what we like is companies that have very strong balance sheets, so net cash balance sheets, who have very high or very strong free cash flow generative underlying businesses. That is where, if we get to that stage, what we'll really look forward to sharing ideas about. We think that there is a very wide pool of public assets listed in various markets which have exposure to the U.S. and Canada, where they are perhaps forgotten about by the current markets, which has continued to ignore high free cash flow generators on the value side of the market.
What we'll do is speak to all investors in Aimia about that when the time is right. We have targets already in mind, probably seven or eight companies that we think would fulfill our criteria. It would be a case of executing on it. We'd only execute if the valuation made enormous sense. If we could do it once we have a very efficient Aimia to manage those assets with, we wouldn't even think about doing anything before steps one and two are done.
Right. I get that, Rhys. What I'm trying to understand is maybe share with us what your track with Milkwood is over a one, five, ten-year timeframe. I'm trying to digest why investors, other than NOL access, would allocate capital to Aimia rather than to invest to do so themselves.
How will investments by Aimia differ from those of your own investments at Milkwood?
Yeah. I think there would be some overlap with those investments, potentially. If you just think about the nature of permanent capital vehicles, the attraction is not to own shares in public markets, but really to own 100% of companies. I think that's really where there's an opportunity here, is to build up stakes in public companies and eventually turn them into wholly owned holdings of Aimia. That's really the attraction of a permanent capital vehicle into the long term. As regards Milkwood, I don't want to sort of obfuscate what we're doing right now, and that's talking about Aimia. You're welcome to go into the Milkwood website, and we'd be very happy to provide any investors in Aimia with access to our letters.
You'll be able to see exactly how we've done and the investments that we've made. This is our focus, if you like, is definitely on Aimia. When the time is right for us to allocate capital, we will share all the details with you. It'll be along very similar lines to what we've done in the past.
Just last, we're going to do two questions. You say that some of these investments could overlap with, would these be investments that you currently hold, or would they be new investments? I know that you and Mithick, specifically Children's Place, have a relationship there. I just want to understand. I'm not sure that we want to see, or maybe that's not fair. I'm wondering if there's any potential related party investments that could get fended into Aimia over time.
Yeah.
No, I can categorically say we don't own any Children's Place shares. The only relationship we have is we share some interests in looking at companies in a very similar way, as well as having some board representation on similar companies. The idea is not to invest in any of Milkwood's current investments. In fact, I don't even think I know what all Milkwood's investments are. That's not the idea at all. We come up with our own ideas. I think if you had to go and look at our letters, you would see what kind of investments we make. Now, to answer your first part of your question, I think you said, is anything in the existing portfolio of Milkwood going to end up in Aimia? We would evaluate it each time, but I would suspect that that won't be the case in the short term.
It might be the case in the long term.
Okay. I appreciate it. I'm sorry to ask those questions, but I appreciate the clarification.
I think they're very valid. Thank you. Yeah.
Okay. Steve, the state of your tax deposit, can you just fill me in on that, and then I'll pass the line?
Yeah. Brian was hoping to have more firm news this quarter, but I would say we're in the ninth inning. I think we'll have news between now and our Q2 results. Yeah, we're very close to concluding something.
All right. Thank you very much.
Thanks, Brian. Rhys and Steve, we got a couple of questions in via text, and if you wouldn't mind. First is, what type of companies would you invest in? Yeah.
I think what we've said is when we get to that point, we want to be able to utilize the tax losses. That is most likely that we'll invest in companies eventually that are in the U.S. and Canada to draw down on that. Operationally, I think what we want to do is find companies that have sustainable, strong free cash flow generative ability, that are good companies, and have very, very solid balance sheets with a net cash position. We'll share more details when and if the time comes to do that.
Next question. Can you expand on what you mean by determining the value of holdings? Does that entail the potential sale of these assets?
Yeah. Remember what I said earlier was that we will break from the past, and we don't want to promise something and then take a long time to deliver it.
What we would much rather do is come back to shareholders of Aimia once we have something to say. Rest assured, we are working very, very hard at having something to say.
A question for Steve. What are your plans for interest payments related to the 23 notes? Will you pick them or pay out the interest?
No. We are going to pay them. We disclose in our MD&A our next 12 months' use of cash, and it is in there. We will have a June payment coming up. Right now, the current plan is to pay the notes, the interest on the notes.
You talked about planning to renew the NCIB. Is that going to happen in June, or when is the timing on that?
Yes. That comes up for renewal in June, and our process is underway.
We expect to renew it in early June.
Thank you for joining us. That is the extent of our questions for today. As Rhys mentioned, we are hosting our annual general meeting next week in Toronto. We are hopeful that many of you will be able to attend in person. We will have and provide links for a webcast of our AGM, and we will also provide through that link opportunity for anyone to post questions. Thank you. If you do have any follow-up, please reach out to us. Have a good day, everyone.
There are no further questions at this time. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.