Magellan Aerospace Corporation Announces Financial Results

TORONTO–(BUSINESS WIRE)–Magellan Aerospace Corporation (“Magellan” or the “Corporation”) released its financial results for the third quarter of 2025. All amounts are expressed in Canadian dollars unless otherwise indicated. The results are summarized as follows:

1. Overview

A summary of Magellan’s business and significant updates

Magellan is a diversified supplier of components to the aerospace industry. Through its wholly owned subsidiaries, controlled entity and joint venture, Magellan designs, engineers and manufactures aeroengine and aerostructure components for aerospace markets, including advanced products for defence and space markets, and complementary specialty products. The Corporation also supports the aftermarket through supply of spare parts as well as performing repair and overhaul services.

Magellan operates substantially all of its activities in one reportable segment, Aerospace, which is viewed as one segment by the chief operating decision-makers for the purpose of resource allocations, assessing performance and strategic planning. The Aerospace segment includes the design, development, manufacture, repair and overhaul, and sale of systems and components for defence and civil aviation.

In the first nine months of 2025, 63.8% of revenues were derived from commercial markets while 36.2% of revenues related to defence markets.

For additional information, please refer to the “Management’s Discussion and Analysis” section of the Corporation’s 2024 Annual Report available on www.sedarplus.ca.

2. Results of Operations

A discussion of Magellan’s operating results for the third quarter ended September 30, 2025

The Corporation reported revenue in the third quarter of 2025 of $255.7 million, a $32.2 million increase from third quarter of 2024 revenue of $223.5 million. Gross profit and net income for the third quarter of 2025 were $32.6 million and $12.7 million, respectively, in comparison to gross profit of $25.0 million and net income of $5.8 million for the third quarter of 2024.

Consolidated Revenue

Revenue in Canada increased 14.9% in the third quarter of 2025 compared to the corresponding period in 2024, primarily due to higher wide body aircraft part revenues and higher maintenance, repair and overhaul (“MRO”) revenues.

Revenue in the United States increased by 15.6% in the third quarter of 2025 compared to the third quarter of 2024, largely due to higher casting product revenues, increased aircraft engine shaft revenues and favourable foreign exchange impacts due to the strengthening of the United States dollar relative to the Canadian dollar. On a currency neutral basis, revenues in the United States increased 14.4% in the third quarter of 2025 over the same period in 2024.

European revenue in the third quarter of 2025 increased 12.9% compared to the corresponding period in 2024 primarily driven by higher wide body aircraft part revenues, higher MRO revenues and net favourable transactional and translational foreign exchange impacts. On a currency neutral basis, European revenues in the third quarter of 2025 increased by 8.9% when compared to the same period in 2024.

Gross Profit

Gross profit of $32.6 million for the third quarter of 2025 was $7.6 million higher than the $25.0 million gross profit for the third quarter of 2024, and gross profit as a percentage of revenues of 12.8% for the third quarter of 2025 increased from 11.2% recorded in the same period in 2024. The gross profit in the current quarter increased from the same quarter in the prior year as a result of volume increases and contract rehabilitations on certain programs in addition to favourable product mix, offset in part by price increases on purchased materials and supplies.

Administrative and General Expenses

Administrative and general expenses as a percentage of revenues was 6.4% for the third quarter of 2025, higher than the same period of 2024 percentage of revenues of 6.1%. Administrative and general expenses increased $2.8 million or 20.3% to $16.4 million in the third quarter of 2025 compared to $13.6 million in the third quarter of 2024 driven by higher salary and benefit costs and higher information technology spending.

Other

Total Other for the third quarter of 2025 included a $1.5 million foreign exchange gain compared to a $1.1 million foreign exchange loss in the third quarter of the prior year. The movements in balances denominated in foreign currencies and the fluctuations of the foreign exchange rates impact the net foreign exchange gain or loss recorded in a quarter.

Interest Expense

Total interest expense of $0.3 million in the third quarter of 2025 decreased by $0.7 million compared to the third quarter of 2024, mainly due to lower interest (earned) paid on cash, bank indebtedness and long-term debt as a result of higher interest earned on cash due to higher cash balances in the current quarter as compared to the prior year.

Provision for Income Taxes

Income tax expense for the three months ended September 30, 2025 was $4.7 million, representing an effective income tax rate of 27.2% compared to 36.8% for the same period of 2024. The change in the effective tax rate and current and deferred income tax expense year over year was primarily due to the change in mix of income and losses across the different jurisdictions in which the Corporation operates and the reversal of temporary differences.

3. Selected Quarterly Financial Information

A summary view of Magellan’s quarterly financial performance

Revenues and net income in the quarter were impacted by the movements of the Canadian dollar relative to the United States dollar and British pound, when the Corporation translates its foreign operations to Canadian dollars. Further, the movements in the United States dollar relative to the British pound impact the Corporation’s United States dollar exposures in its European operations. During the periods reported, the average quarterly exchange rate of the United States dollar relative to the Canadian dollar fluctuated between a high of 1.4350 in the first quarter of 2025 and a low of 1.3488 in the first quarter of 2024. The average quarterly exchange rate of the British pound relative to the Canadian dollar reached a high of 1.8573 in the third quarter of 2025 and hit a low of 1.6912 in the fourth quarter of 2023. The average quarterly exchange rate of the British pound relative to the United States dollar reached a high of 1.3483 in the third quarter of 2025 and hit a low of 1.2419 in the fourth quarter of 2023.

Revenue for the third quarter of 2025 of $255.7 million was higher than that in the third quarter of 2024. The average quarterly exchange rate of the United States dollar relative to the Canadian dollar in the third quarter of 2025 was 1.3775 versus 1.3637 in the same period of 2024. The average quarterly exchange rate of the British pound relative to the Canadian dollar moved from 1.7741 in the third quarter of 2024 to 1.8573 during the current quarter. The average quarterly exchange rate of the British pound relative to the United States dollar increased from 1.3011 in the third quarter of 2024 to 1.3483 in the current quarter. Had the foreign exchange rates remained at levels experienced in the third quarter of 2024, reported revenues in the third quarter of 2025 would have been lower by $1.8 million.

The Corporation’s results in fiscal 2023 were negatively impacted by the continued effects of the COVID-19 pandemic via reduced volumes, supply chain disruptions and the effect of inflation on materials, supplies, utilities and labour. These impacts, which continued into 2024 have stabilized and are having a less disruptive impact. Since the end of 2023, the Company has seen a general, but uneven, growth trend in quarterly revenues and net income.

4. Reconciliation of Net Income to EBITDA

A description and reconciliation of certain non-IFRS measures used by management

In addition to the primary measures of earnings and earnings per share (basic and diluted) in accordance with IFRS, the Corporation includes EBITDA (net income before interest, income taxes and depreciation and amortization) in this MD&A. The Corporation has provided this measure because it believes this information is used by certain investors to assess financial performance and that EBITDA is a useful supplemental measure as it provides an indication of the results generated by the Corporation’s principal business activities prior to consideration of how these activities are financed and how the results are taxed in the various jurisdictions. Each component of this measure is calculated in accordance with IFRS, but EBITDA is not a recognized measure under IFRS, and the Corporation’s method of calculation may not be comparable with that of other companies. Accordingly, EBITDA should not be used as an alternative to net income as determined in accordance with IFRS or as an alternative to cash provided by or used in operations.

EBITDA in the third quarter of 2025 increased $8.3 million to $29.8 million in comparison to $21.5 million in the same quarter of 2024 mainly as a result of gross margin improvements and foreign exchange gains offset in part by higher administrative and general expenses.

5. Liquidity and Capital Resources

A discussion of Magellan’s cash flow, liquidity, credit facilities and other disclosures

The Corporation’s liquidity needs can be met through a variety of sources including cash on hand, cash provided by operations, short-term borrowings from its credit facility and accounts receivable securitization program, and long-term debt and equity capacity. Principal uses of cash are for operational requirements, capital expenditures, common share repurchases and dividend payments. Based on current funds available and expected cash flow from operating activities, management believes that the Corporation has sufficient funds available to meet its liquidity requirements at any point in time. However, if cash from operating activities is lower than expected or capital projects exceed current estimates, or if the Corporation incurs major unanticipated expenses, it may be required to seek additional capital in the form of debt or equity or a combination of both.

Cash Flow from Operations

For the three months ended September 30, 2025, the Corporation provided $4.8 million of cash from operating activities, compared to $18.6 million provided in the third quarter of 2024. Changes in non-cash working capital items used cash of $20.9 million, $22.7 million more when compared to $1.8 million cash provided in the prior year. The quarter over quarter working capital changes were largely attributable to increases in accounts receivables from timing of customer payments, increases in contract assets and increases in prepaid expenses and other from timing of various deposit payments offset in part by increases in accounts payable, accrued liabilities and provisions primarily driven by timing of supplier payments.

Investing Activities

Investing activities used $11.1 million of cash for the third quarter of 2025 compared to $7.2 million cash used in the same quarter of the prior year, an increase of $3.9 million. The increase in cash usage was primarily due to higher investment in property, plant and equipment and higher spending on intangible and other assets.

In July 2025, the Corporation entered into an agreement with the Manitoba government for a grant of $8,000 supporting various investment projects for its operating facilities in Winnipeg, Manitoba, Canada. The government grant is repayable if certain covenants are not met. In the third quarter of 2025, the full amount was received and was recorded as a reduction to property, plant and equipment purchases.

Financing Activities

Financing activities used $3.4 million of cash for the third quarter of 2025 compared to $13.0 million of cash used in the same quarter of the prior year. The decrease in cash usage was primarily driven by increases in cash provided from bank indebtedness offset in part by increases in common share repurchases and common share dividends.

On June 24, 2025, the Corporation extended its Bank Credit Facility Agreement (“Facility Agreement”) with a syndicate of lenders for an additional two-year period expiring on June 30, 2027. The Facility Agreement provides for a multi-currency global operating credit facility to be available to Magellan in a maximum aggregate amount of $75 million. Interest applicable to the facility is at adjusted term Canadian Overnight Repo Rate Average (“CORRA”) rates or adjusted term Secured Overnight Financing (“SOFR”) rates plus a spread of 1.00%. The Facility Agreement also includes a $75 million uncommitted accordion provision, which provides Magellan with the option to increase the size of the operating credit facility to $150 million. Extensions of the Facility Agreement are subject to mutual consent of the syndicate of lenders and the Corporation. A fixed and floating charge on accounts receivable, inventories and property, plant and equipment is pledged as collateral for the operating credit facility.

As at September 30, 2025, the Corporation had contractual commitments to purchase $21.4 million of capital assets.

Dividends

During the first, second and third quarters of 2025, the Corporation declared quarterly cash dividends of $0.025, $0.05 and $0.05 per common share, respectively, and paid aggregate dividends of $7.1 million.

Subsequent to September 30, 2025, the Corporation declared dividends to holders of common shares in the amount of $0.05 per common share payable on December 31, 2025, to shareholders of record at the close of business on December 17, 2025. The Board of Directors of the Corporation continues to review its dividends on a quarterly basis to ensure that the dividend declared balances the return of capital to shareholders while maintaining adequate financial flexibility for investment and growth initiatives.

Normal Course Issuer Bid

On June 11, 2025, the Corporation’s application to extend its normal course issuer bid (“June 2025 NCIB”) was approved. The June 2025 NCIB allows the Corporation to purchase up to 2,856,929 common shares, over a 12-month period, commencing June 13, 2025, and ending June 12, 2026.

During the nine month period ended September 30, 2025, the Corporation purchased a total of 59,126 common shares for cancellation at a cost of $0.9 million. During the same period in the prior year, the Corporation purchased 87,942 common shares for cancellation at a cost of $0.7 million.

Outstanding Share Information

The authorized capital of the Corporation consists of an unlimited number of preference shares, issuable in series, and an unlimited number of common shares. As at November 7, 2025, 57,079,054 common shares were outstanding and no preference shares were outstanding.

6. Financial Instruments

A summary of Magellan’s financial instruments

Derivative Contracts

The Corporation operates internationally, which gives rise to a risk that its income, cash flows and shareholders’ equity may be adversely impacted by fluctuations in foreign exchange rates. Currency risk arises because the amount of the local currency receivable or payable for transactions denominated in foreign currencies may vary due to changes in exchange rates and because the non-Canadian dollar denominated financial statements of the Corporation’s subsidiaries may vary on consolidation into the reporting currency of Canadian dollars. The Corporation from time to time may use derivative financial instruments to help manage foreign exchange risk with the objective of reducing transaction exposures and the resulting volatility of the Corporation’s earnings. The Corporation does not trade in derivatives for speculative purposes. Under these foreign exchange contracts (forwards and / or collars), the Corporation is obligated to purchase specified amounts of currency – generally either the United States dollar (“USD”) or British Pound (“GBP”) – at predetermined dates and exchange rates if certain conditions are met. The counterparties to the foreign currency contracts are all major financial institutions with high credit ratings. A number of these contracts are designated as cash flow hedges.

As at September 30, 2025, the Corporation no longer has any foreign exchange collar or USD foreign exchange forward contracts remaining and it holds foreign exchange forward contracts of GBP 23.5 million with a derivative asset carrying value of less than $0.1 million included in Prepaid expenses and other on the interim condensed consolidated statement of financial position.

For the nine months ended September 30, 2025, a gain of $1.6 million net of taxes of $0.6 million, was recorded in other comprehensive income as mark-to-market adjustments for the foreign exchange collar and forward contracts discussed above.

Contacts

For additional information contact:

Phillip C. Underwood

President & Chief Executive Officer

T: (905) 677-1889

E: [email protected]

Elena M. Milantoni

Chief Financial Officer

T: (905) 677-1889

E: [email protected]

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