Have a $64.50 target. GLTA
EXCHANGE INCOME CORPORATION
Q2 First Pass: In Line Earnings
Key Takeaway: Neutral impact. EIF reported Q2 results that were in line with
our expectations and a touch above consensus. The company reaffirmed its
2023 guidance. EIF is hosting a conference call tomorrow at 8:30 a.m. ET.
Q2 Recap: Revenue came in at $627MM, up from $529MM in Q2/22 and
versus our estimate of $610MM (cons. $608MM). Adj. EBITDA came in at
$147MM, up from $115MM in Q2/22 and versus our estimate of $146MM
(cons. $143MM). Adj. EPS came in at $1.00, up from $0.97 in Q2/22,
compared to our estimate of $1.18 (cons. $0.96). FCF (CFO less net capex
and cash lease payments) was -$57MM, up from -$369MM in Q2/22,
compared to our estimate of $75MM. The main variance versus our estimate
was larger capex spend and a greater drag on working capital. Gross capex
in the quarter was $125MM, of which $39MM was deemed maintenance
capex.
Divisional Results: Below is a summary of EIF’s divisional results.
Aerospace & Aviation: Q2 revenue came in at $372MM, up from $352MM in
Q2/22 and versus our estimate of $366MM (cons. $376MM). EBITDA was
$108MM, up from $86MM in Q2/22 and versus our estimate of $104MM
(cons. $102MM). The Y/Y increase in aerospace revenue and EBITDA was
driven by additional ISR contracts that have been awarded.
Manufacturing: Q2 revenue came in at $252MM, up from $177MM in Q2/22
and versus our estimate of $243MM (cons. $219MM). EBITDA was $49MM,
up from $39MM in Q2/22, compared to our estimate of $54MM (cons.
$50MM).
2023 Guidance Reaffirmed: EIF reaffirmed its 2023 guidance. The
company is guiding to 2023 EBITDA of $540MM - $570MM. We are
modelling $564MM and consensus is at $559MM.
Liquidity Update: The company has liquidity of $1.1B through cash on
hand, its credit facility and the credit facility accordion feature. EIF ended the
quarter with a leverage rate of 2.39x and is well within its key financial
covenant of 4.0x