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Dexterra Group Inc. — Management Reports 2025
Aug 5, 2025
45842_rns_2025-08-05_45fe2686-b695-4b72-84a8-acea07b7af30.pdf
Management Reports
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Management's Discussion and Analysis
Three and six months ended June 30, 2025 and 2024
dexterra
GROUP
The following Management's Discussion and Analysis ("MD&A"), prepared as at August 5, 2025 for Dexterra Group Inc. ("Dexterra" or the "Corporation"), provides information concerning Dexterra's financial condition and results of operations. This MD&A is based on unaudited condensed consolidated interim financial statements ("Financial Statements") for the three and six months ended June 30, 2025 ("Q2 2025") and June 30, 2024 ("Q2 2024"), respectively. Readers should also refer to Dexterra's most recent audited annual consolidated financial statements and MD&A for the years ended December 31, 2024 and 2023, and the Annual Information Form ("AIF") available on SEDAR at sedarplus.ca and Dexterra's website at dexterra.com. Some of the information contained in this MD&A contains forward-looking statements that involve risks and uncertainties. See "Forward-Looking Information" for a discussion of the uncertainties, risks and assumptions associated with these statements. Actual results may differ materially from those indicated or underlying forward-looking information as a result of various factors including those described elsewhere in this MD&A and AIF.
Business Overview
Dexterra is a corporation registered and domiciled in Canada and its common shares are listed on the Toronto Stock Exchange ("TSX") under the symbol DXT. Dexterra is a diversified services organization delivering quality solutions for the management and operation of infrastructure across North America.
The Corporation operates through two segments: Support Services and Asset Based Services ("ABS"). The Support Services business delivers a suite of operation, maintenance, and hospitality solutions for a diverse range of public and private sector clients, including remote operations, governments, aviation, education, industrial, transit, healthcare, and leisure. The ABS business provides workforce accommodation structures, access solutions, and space solutions to clients in the natural resources and infrastructure sectors among others. These businesses include the supply and installation of workforce accommodation facilities, access matting and soil stabilization that allow clients to access and move equipment in remote locations, and includes the rental of modular space units. These assets are owned by the Corporation and rented or sold to clients. The Corporation sold the Modular Solutions ("Modular") business in 2024. The 2024 operating results for Modular have been presented as discontinued operations in the condensed consolidated interim statement of comprehensive income and cash flows.
The accompanying Financial Statements of Dexterra are the responsibility of Dexterra's management and have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standard Board ("IFRS Accounting Standards") and all amounts presented are in thousands of Canadian dollars unless otherwise indicated.
Financial Summary
| Three months ended June 30, | Six months ended June 30, | |||
|---|---|---|---|---|
| (000's except per share amounts) | 2025 | 2024 | 2025 | 2024 |
| Revenue | $ 249,340 | $ 253,624 | $ 489,071 | $ 485,519 |
| Adjusted EBITDA(1) | 30,031 | 29,277 | 55,205 | 48,856 |
| Adjusted EBITDA as a % of revenue(1) | 12.0% | 11.5% | 11.3% | 10.1% |
| Net earnings from continuing operations(2) | 11,818 | 12,162 | 20,439 | 16,597 |
| Net earnings(2)(3) | 11,818 | 9,080 | 20,439 | 5,512 |
| Earnings per share: | ||||
| Net earnings from continuing operations per share, basic and diluted | 0.19 | 0.19 | 0.33 | 0.26 |
| Total net earnings per share, basic and diluted(3) | 0.19 | 0.14 | 0.33 | 0.08 |
| Total assets | 561,372 | 647,025 | 561,372 | 647,025 |
| Total loans and borrowings ("Net Debt") | 93,353 | 139,770 | 93,353 | 139,770 |
| Free Cash Flow(1) | (3,734) | (585) | (2,300) | 10,057 |
(1) Please refer to the "Non-GAAP measures" section for the definition of Adjusted EBITDA, Adjusted EBITDA as a % of revenue, and Free Cash Flow, and to the "Reconciliation of non-GAAP measures" section for the related calculations.
(2) Acquisition costs in pre-tax earnings for the six months ended June 30, 2024 were $0.4 million. Please refer to the "Non-GAAP measures" section for additional details.
(3) Net earnings for the three and six months ended June 30, 2024 included net loss from discontinued operations of $3.1 million and $11.1 million, respectively (2025 - $nil).
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Management's Discussion and Analysis
Three and six months ended June 30, 2025 and 2024
dexterra
GROUP
Non-GAAP measures
Certain measures and ratios in this MD&A do not have any standardized meaning as prescribed by GAAP and, therefore, are considered non-GAAP measures. Non-GAAP measures include “Adjusted EBITDA”, calculated as earnings from continuing operations before interest, taxes, depreciation, amortization, equity investment depreciation, share based compensation, gain/loss on disposal of property, plant and equipment, and non-recurring items; “Adjusted EBITDA as a % of revenue”, calculated as Adjusted EBITDA divided by revenue; “Free Cash Flow” (“FCF”), calculated as net cash flows from (used in) operating activities from continuing operations, less sustaining capital expenditures, lease payments and finance costs from continuing operations plus proceeds on the sale of property, plant and equipment and intangible assets from continuing operations; and “Return on Equity”, calculated as net earnings from continuing operations divided by average total shareholders’ equity. Sustaining capital expenditures included in the definition of FCF are replacement expenditures and/or leases necessary to maintain the existing business from continuing operations.
These measures and ratios provide investors with supplemental measures of Dexterra’s operating performance and highlight trends in its core businesses that may not otherwise be apparent when relying solely on GAAP financial measures. Dexterra also believes that securities analysts, investors and other interested parties frequently use non-GAAP measures in the evaluation of issuers. Dexterra’s management also uses non-GAAP measures in order to facilitate operating performance comparisons from period to period, to prepare annual operating budgets, and to determine components of management compensation.
These measures are regularly reviewed by the Chief Operating Decision Makers and provide investors with an alternative method for assessing the Corporation’s operating results in a manner that is focused on the performance of the Corporation’s ongoing operations and to provide a consistent basis for comparison between periods. These measures should not be construed as alternatives to net earnings and total comprehensive income or operating cash flows as determined in accordance with GAAP. The method of calculating these measures may differ from other entities and accordingly, may not be comparable to measures used by other entities. For a reconciliation of these non-GAAP measures to their nearest measure under GAAP please refer to the “Reconciliation of non-GAAP measures”.
Management's Discussion and Analysis
Second Quarter Overview
Highlights
- The Corporation delivered strong results for the three months ended June 30, 2025, generating consolidated revenue of $249.3 million, compared to $253.6 million for the same period in 2024, with Support Services revenue growth positively impacted by continued strong activity levels, offset, as anticipated, by a decrease in ABS revenue due to a shift in business mix following the successful construction and mobilization of major contracts in Q2 2024.
- Adjusted EBITDA for the three months ended June 30, 2025 was $30.0 million (2024 - $29.3 million), an increase of 2.6% over Q2 2024. The increase in Adjusted EBITDA was primarily as a result of strong camp occupancy and mix of business in ABS.
- FCF for the three months ended June 30, 2025 was a deficit of $3.7 million, compared to a deficit of $0.6 million for the same period in 2024 due to the seasonality of the business and higher working capital investment. Adjusted EBITDA conversion to FCF is expected to exceed 50% for the 2025 fiscal year.
- Net earnings for the three months ended June 30, 2025 were $11.8 million, compared to $9.1 million for the same period last year and year-to-date net earnings in 2025 were $20.4 million compared to $5.5 million in 2024. Our continuing operations delivered a return on equity of 15%. Earnings per share from continuing operations was $0.19 in Q2 2025, consistent with Q2 2024.
- On July 31, 2025, Dexterra acquired a 40% stake in privately owned, U.S.-based, facilities management provider Pleasant Valley Corporation (“PVC”) for US$58.3 million, including an option to acquire the remaining 60% as early as Q3 2027. PVC offers a range of facility services including Integrated Facilities Management (“IFM”) primarily to commercial and industrial clients across the United States. The PVC operating platform is a distributed model that incorporates proprietary facility management technology, a quality vendor network, as well as a strong commitment to service and partnership that supports long-standing relationships with clients including Fortune 500 companies. The investment in PVC builds on Dexterra’s facilities management offering and brings increased scale and capability to the Corporation’s U.S.-based facility management business platform. PVC generated in its most recent fiscal year approximately US$175 million in revenue with margins of approximately 8% with a solid new business pipeline of opportunities that will be a catalyst for future profitable growth in the U.S.
Page | 2
Management's Discussion and Analysis
Three and six months ended June 30, 2025 and 2024
dexterra
GROUP
- On August 5, 2025, Dexterra signed a purchase and sale agreement to acquire 100% of Right Choice Camps & Catering Ltd. ("Right Choice"), a workforce accommodation provider located in Western Canada for $67.5 million. Right Choice had approximately $75 million in annual revenues and approximately $15 million in Adjusted EBITDA in its most recent fiscal year and has a high-quality fleet of workforce accommodations and ancillary equipment that is currently underutilized. This transaction expands our business, adds capacity for long term growth, and will help Dexterra maintain its position as the leading workforce accommodations provider in Canada. The acquisition is consistent with our strategy to invest in opportunities that have high returns and will be immediately accretive to shareholders, and is expected to close, subject to normal closing conditions, on August 31, 2025.
- Both of these acquisitions will be financed using our recently amended banking facility which increased the available borrowing limit to $425 million with an improved pricing grid. Our debt leverage ratio is expected to be under 1.75x of proforma Adjusted EBITDA by December 31, 2025, demonstrating our commitment to maintaining a strong balance sheet.
- The Board of Directors also approved an annual dividend increase of 14% from $0.35 to $0.40 per share and declared a dividend for Q3 2025 of $0.10 per share for shareholders of record at September 30, 2025, payable on October 15, 2025. The dividend increase reflects consistent strong financial performance, robust cash flow generation, confidence in our strategy, and recent share price appreciation.
Operational Analysis
| Three months ended June 30, | Six months ended June 30, | |||
|---|---|---|---|---|
| (000's) | 2025 | 2024 | 2025 | 2024 |
| Revenue: | ||||
| Support Services | $ 205,353 | $ 200,286 | $ 404,128 | $ 385,826 |
| Asset Based Services | 43,987 | 53,338 | 84,943 | 99,693 |
| Total Revenue | $ 249,340 | $ 253,624 | $ 489,071 | $ 485,519 |
| Adjusted EBITDA: | ||||
| Support Services | $ 20,484 | $ 20,499 | $ 39,362 | $ 35,773 |
| Asset Based Services | 16,520 | 14,453 | 29,978 | 24,476 |
| Corporate expenses | (6,973) | (5,675) | (14,135) | (11,393) |
| Total Adjusted EBITDA | $ 30,031 | $ 29,277 | $ 55,205 | $ 48,856 |
| Adjusted EBITDA as a % of Revenue | ||||
| Support Services | 10.0% | 10.2% | 9.7% | 9.3% |
| Asset Based Services | 37.6% | 27.1% | 35.3% | 24.6% |
Support Services
Revenue for Q2 2025 was $205.3 million, an increase of 2.5% over Q2 2024, and 3.3% over Q1 2025, primarily driven by strong camp occupancy at camps mobilized in Q2 2024, partially offset by lower IFM project work as expected compared to same period last year.
Adjusted EBITDA for Q2 2025 was $20.5 million, consistent with Q2 2024 and compared to $18.9 million in Q1 2025. Adjusted EBITDA margin for Q2 2025 was 10.0%, compared to 10.2% in Q2 2024 and 9.5% in Q1 2025. The increase in Adjusted EBITDA and margin compared to Q1 2025 is due to the factors mentioned above, plus continued improvement of Facilities Management margins above 6% and the mix of business. Adjusted EBITDA margins are expected to continue to exceed 9% in the long term.
For the six months ended June 30, 2025, Support Services revenues were $404.1 million, an increase of 4.7% over the same period in 2024, primarily driven by high occupancy at new camps that came on-stream in the second half of 2024 and the acquisition of CMI which was acquired on February 29, 2024. Adjusted EBITDA for the six months ended June 30, 2025 was $39.4 million, an increase of 10.1% over the same period in 2024, generating Adjusted EBITDA margins of 9.7% and 9.3%, respectively. The increase in Adjusted EBITDA and margins is attributable to the same factors.
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Management's Discussion and Analysis
Three and six months ended June 30, 2025 and 2024
dexterra
GROUP
Direct Costs
Direct costs are comprised of labour, food costs, materials, supplies and transportation, which vary directly with revenues, and have a relatively low fixed component that includes leases and utilities. Direct costs for Q2 2025 were $175.7 million compared to $171.5 million for the same period in 2024. This increase in costs is primarily due to the increased volume of work, and the organic growth of the business. Direct costs as a percentage of revenue for three and six months ended June 30, 2025 were 85.6% and 86.1%, respectively, compared to 85.6% and 87.1%, respectively, for the same periods in 2024. The relative improvement over the prior year reflects management efforts to find operational efficiencies, optimize its supply chain and maximize vendor rebates, as well as experiencing higher camp occupancy that improves margins as fixed costs are spread over higher volumes.
Asset Based Services
Revenue for Q2 2025 was $44.0 million, a decrease of 17.5% over Q2 2024, primarily driven by lower volume of camp construction and installation associated with two large contracts that were mobilized in Q2 2024. Q2 2025 revenue increased 7.4% compared to Q1 2025, partially due to stronger access matting activity as utilization levels returned to over 90% by quarter end and workforce accommodations structures utilization was also over 90%.
Adjusted EBITDA for Q2 2025 was $16.5 million, an increase of 14.3% over Q2 2024 and 22.7% over Q1 2025. Adjusted EBITDA margin for Q2 2025 was 37.6% compared to 27.1% in Q2 2024 and 32.9% in Q1 2025. Adjusted EBITDA and margins were higher in Q2 2025 as a result of the change in business mix, specifically the margin differential between camp rental in Q2 2025 and camp mobilization related work in Q2 2024. Adjusted EBITDA margins in this business in the future are expected to remain between 30% to 40% depending on mix of business.
For the six months ended June 30, 2025, ABS revenues were $84.9 million, a decrease of 14.8% over the same period in 2024, primarily driven by lower camp construction and installation revenue, and lower demand in Q1 2025 for access matting sales and rentals. Adjusted EBITDA for the six months ended June 30, 2025 was $30.0 million, an increase of 22.4% over the same period in 2024, attributable to the change in business mix compared to the same period last year as described above. Adjusted EBITDA margin for the six months ended June 30, 2025 was 35.3% compared to 24.6% in the prior year.
Direct Costs
Direct costs are comprised of labour, materials, supplies and transportation, which vary with revenues, and have a relatively small fixed component, which includes land leases and camp utilities. Direct costs for Q2 2025 were $27.2 million compared to $37.5 million for the same period in 2024. This decrease in costs is primarily due to the factors mentioned above. Direct costs as a percentage of revenue for three and six months ended June 30, 2025, were 61.8% and 63.0%, respectively, compared to 70.3% and 73.3% for the same period in 2024 as a result of the change in product and business mix.
Other Items
Corporate expenses
Corporate expenses included in selling, general and administrative ("SG&A") expenses for Q2 2025 were $7.0 million and represented 2.8% of revenue compared to 2.2% in Q2 2024 and 3.0% of revenue in Q1 2025. The increased costs compared to 2024 represent the additional investments in growing the sales and operational support teams and expenditures on our enterprise information technology strategy. These investments are crucial in developing the scalability of our business and continuing to deliver sustainable, profitable growth. For the six months ended June 30, 2025, corporate costs were $14.1 million and represented 2.9% of revenue compared to 2.3% for the same period in 2024, with the increase driven by the aforementioned reasons.
Selling, general and administrative expenses
SG&A expenses are comprised of head and corporate office costs including the executive officers and directors of the Corporation, and shared services, including sales, information technology, corporate accounting staff and the associated costs of supporting a public company.
SG&A expenses for the three and six months ended June 30, 2025 were $16.9 million and $33.1 million, respectively, compared to $14.1 million and $27.5 million for the same period in 2024. The increase was mainly related to the items discussed under Corporate above, and increased activity levels in Support Services.
Page | 4
Management's Discussion and Analysis
Three and six months ended June 30, 2025 and 2024
dexterra
GROUP
Depreciation and amortization
| Three months ended June 30, | Six months ended June 30, | |||
|---|---|---|---|---|
| (000's) | 2025 | 2024 | 2025 | 2024 |
| Depreciation | $ 8,395 | $ 7,324 | $ 16,781 | $ 14,214 |
| Amortization of intangible assets | 1,297 | 1,277 | 2,489 | 2,489 |
| Total depreciation and amortization | $ 9,692 | $ 8,601 | $ 19,270 | $ 16,703 |
Depreciation and amortization for the three and six months ended June 30, 2025 was $9.7 million and $19.3 million, respectively, compared to $8.6 million and $16.7 million for same period in 2024. This increase is mainly attributable to asset additions associated with high return investment opportunities in ABS including camp equipment and access matting.
Share based compensation
Share based compensation expense for the three and six months ended June 30, 2025 was $2.2 million and $4.2 million, respectively, an increase of $1.4 million and $2.7 million from the comparable periods in 2024. Compensation expense increased given the Corporation's stronger share price which increased over 73% from Q2 2024 to June 30, 2025. The long-term incentive plan, including performance share units ("PSUs"), is directly linked to total shareholder returns, including the Corporation's share price. Cash payments for PSUs are only made if the share price and shareholder returns meet the performance criteria on the vesting date. The expired PSUs granted in 2022 did not meet the minimum vesting criteria. The Financial Statements include $7.3 million in trade and other payables and other long term liabilities for share based compensation.
Normal Course Issuer Bid
In connection with the ongoing Normal Course Issuer Bid ("NCIB"), Dexterra purchased and cancelled 427,500 common shares during Q2 2025 at a weighted average price of $8.40 per share for a total consideration of $3.6 million. On May 21, 2025, the TSX approved the Corporation's notice of intention to renew its NCIB allowing it to repurchase, subject to certain restrictions under securities laws, up to 3,115,173 of Dexterra's issued and outstanding common shares in the period from May 23, 2025 to May 22, 2026. Dexterra plans to remain opportunistic with share buybacks in 2025.
Finance costs
Finance costs include interest on loans and borrowings, interest on lease liabilities, and accretion of debt financing costs.
The effective interest rate on loans and borrowings for the six months ended June 30, 2025 was 6.3% compared to 8.3% for the same period in 2024, including amortization of financing costs. Amounts drawn on the credit facility incur interest at bank prime rate plus 0.50% to 1.50% or the Canadian Overnight Repo Rate Average ("CORRA") rate plus 1.50% to 2.5%. The all-in CORRA rate as at June 30, 2025 was 4.55% and our current leverage ratio equates to an interest rate at the bottom of the range. In connection with the recent amendment to the banking agreement, the Corporation incurred fees of $2.2 million which are amortized over the term of the facility. See Note 10 of the Financial Statements for more details.
Intangible assets
Intangible assets as at June 30, 2025 were $34.5 million, a decrease of $3.1 million compared to $37.6 million as at December 31, 2024. The decrease includes amortization in the normal course of business of $2.5 million and foreign currency translation adjustments related to CMI's intangible assets which have a U.S. functional currency.
Goodwill
Goodwill as at June 30, 2025 was $145.7 million which is consistent with the balance as at December 31, 2024. The change was due to the foreign currency translation of U.S. operations.
Dexterra assesses indicators of impairment at the end of each reporting period and performs a detailed impairment test at least annually. The Corporation concluded there were no indicators of impairment on its intangible assets and goodwill as at June 30, 2025. See Note 8 of the Financial Statements for more details.
Non-controlling interest
Dexterra owns 49% of Tangmaarvik Inland Camp Services Inc. ("Tangmaarvik") and controls its operations. As a result, the results of Tangmaarvik are consolidated with the results of Dexterra and a non-controlling interest is recognized. For the three and six months ended June 30, 2025, earnings of $0.1 million and $0.1 million, respectively, compared to $0.1 million and $0.2 million for the same period in 2024, were attributed to the non-controlling interest.
Page | 5
Management's Discussion and Analysis
Three and six months ended June 30, 2025 and 2024
dexterra
GROUP
Joint ventures
Dexterra holds a 49% ownership interest in Big Spring Lodging Limited Partnership ("BSL LP") and Cree Horizon Limited Partnership ("Cree Horizon LP"). These equity investments generate earnings from providing workforce accommodations, maintenance of relocatable structures, and catering and janitorial services. For the three and six months ended June 30, 2025, earnings from equity investments were $0.3 million and $0.5 million, respectively, compared to a loss from equity investments of $0.2 million and $nil for the same period in 2024.
Income taxes
For the three and six months ended June 30, 2025, the Corporation's effective income tax rate was 26.7% and 25.7%, respectively, compared to 24.4% and 25.2% in 2024. The effective tax rates for the three and six months ended June 30, 2025 and 2024 were generally consistent with the combined federal and provincial income tax rates. The Corporation is cash taxable in 2025, as the majority of its tax loss carryforwards were utilized in 2024. The Corporation is required to pay its 2025 taxes in Q1 2026. On an annualized basis, the effective income tax rate is expected to approximate 25% of earnings before income taxes.
Outlook
Strategic Outlook
Dexterra's strategic focus is to deliver reliable and predictable results, strong profitability and growth, and a return on equity to shareholders of 15%. The Corporation remains focused on organic growth and accretive acquisitions that will add critical IFM capability, technology, and scale. Our capital allocation priorities include: 1) supporting the dividend; 2) selective high-return capital investments or acquisitions in our existing business; 3) completing accretive acquisitions while maintaining a strong balance sheet; and 4) remaining opportunistic on share buybacks. Additionally, we expect to make strategic technology investments to drive innovation, operational efficiency and support organic IFM growth. Our primary goal as it relates to acquisitions in the near term will be to realize the benefits from the recent investments.
The recent investment in PVC builds on Dexterra's facilities management offering and substantially adds scale and capability to the Corporation's U.S.-based facility management business. PVC has a solid track record of growth and profitability and a solid pipeline of opportunities. The business will be accounted for as an equity investment. We expect PVC to be cash flow neutral to Dexterra initially as we invest in the business. Our medium term goal is revenue growth of approximately 10% per annum which is similar to the level experienced in other parts of our U.S. business.
The acquisition of Right Choice provides Dexterra with an immediate lift in Revenue and Adjusted EBITDA, and gives the Corporation an expanded workforce accommodation equipment fleet and capacity for future growth (approximately an additional 2,000 beds and ancillary equipment at 50% occupancy across seven open camps). Right Choice's seven open camps are in the Montney / Duvernay region providing an optimization opportunity with Dexterra's existing open camps in the area and for redeployment of available equipment across the Dexterra network. These additional assets will enable us to capitalize on future growth opportunities, including potential nation building and defence investment projects as Canada reacts to new global dynamics. This acquisition is consistent with Dexterra's strategy to invest in opportunities that have high return and will be immediately accretive to shareholders.
Operations Outlook
Overall
Key components of our business plan include driving strong execution and operational excellence to deliver predictability in our business results and win new sales opportunities that meet margin and profitability targets.
Revenue from wildfire support activities are expected to be at the higher end of average this year and contribute revenue of approximately $25 million for fiscal 2025.
Support Services
The focus of the Support Services business is continued profitable organic growth and disciplined margin management. This includes a strategic focus on growing IFM services profitably and expanding the U.S. platform in order to take advantage of the large North American outsourced services market. In this regard, we recently hired a new U.S.-based President to build and lead our U.S. activities.
Page | 6
Management's Discussion and Analysis
Three and six months ended June 30, 2025 and 2024
dexterra
GROUP
Asset Based Services
Current indications of market activity suggest the strong utilization of our existing fleet of camp equipment and access matting to continue through 2025. We will continue to explore opportunities that offer high returns on capital in the natural resources and infrastructure sectors.
Economy
Dexterra as a service provider is to a large degree naturally insulated from a direct impact of trade tariffs as our labour and large majority of our supply commodities are domestically sourced. For food, chemicals, and other commodities that have historically been sourced cross-border, significant progress has been made to mitigate these impacts primarily through strategic adjustments to our supply chain channels toward domestic suppliers.
The on-going trade actions by the U.S. government and retaliatory policies pose risks to the Canadian and U.S. economies which could impact the Corporation. These uncertainties could have broader economic implications such as impacting client demand and new sales opportunities, disrupting supply chains, or causing inflationary pressures. We are closely monitoring these developments and will adapt our strategies to mitigate any adverse effects on our business.
Liquidity and Capital Resources
The favourable terms of the amended credit facility reflect the Corporation's strong financial position, and provides additional capacity and flexibility for the Corporation to execute on its capital allocation priorities, growth strategy, and to deliver long-term shareholder value. The amended credit facility has an available limit of up to $425 million plus an uncommitted accordion of $150 million. See Note 10 of the Financial Statements for more details.
Net debt was $93.4 million at June 30, 2025 compared to $81.5 million at Q1 2025 and $67.9 million at December 31, 2024. The increase in debt from Q4 2024 was primarily due to the larger investment in working capital which encounters seasonal fluctuations. The Corporation remains focused on optimizing working capital through actively working with clients for prompt payment of receivables. Adjusted EBITDA conversion to FCF is expected to exceed 50% in fiscal 2025, with Q3 and Q4 experiencing the highest conversions to FCF as a result of the seasonality of the Support Services business.
Capital Spending
For the six months ended June 30, 2025, capital spending for property, plant and equipment was $5.9 million compared to $11.7 million for the same period of 2024. This includes investments in growth and sustaining capital, and intangible assets, partially offset by any proceeds from the sale of property, plant and equipment. Sustaining capital expenditures are replacement expenditures necessary to maintain the existing business and are expected to continue to be approximately 1% to 1.5% of revenue on an annualized basis. Actual amounts by quarter may vary depending on the timing of expenditures.
For the six months ended June 30, 2025, capital expenditures included a $3.3 million investment in growth capital associated with high return opportunities in workforce accommodation structures (2024 - $10.3 million). Growth capital expenditures are incurred when accretive and advantageous opportunities are identified.
Page | 7
Management's Discussion and Analysis
Three and six months ended June 30, 2025 and 2024
dexterra
GROUP
Quarterly Summary of Results
| Three months ended | ||||
|---|---|---|---|---|
| (000's except per share amounts) | 2025 June | 2025 March | 2024 December | 2024 September |
| Revenue | $ 249,340 | $ 239,731 | $ 247,758 | $ 269,749 |
| Adjusted EBITDA | 30,031 | 25,174 | 26,558 | 32,024 |
| Adjusted EBITDA as a % of revenue | 12.0% | 10.5% | 10.7% | 11.9% |
| Net earnings from continuing operations | 11,818 | 8,622 | 7,584 | 13,359 |
| Net earnings | 11,818 | 8,622 | 6,915 | 7,666 |
| Net earnings from continuing operations per share, basic and diluted | 0.19 | 0.14 | 0.11 | 0.21 |
| Total net earnings per share, basic and diluted | 0.19 | 0.14 | 0.11 | 0.12 |
| Three months ended | ||||
| (000's except per share amounts) | 2024 June | 2024 March | 2023 December | 2023 September |
| Revenue(1) | $ 253,624 | $ 231,896 | $ 231,196 | $ 265,842 |
| Adjusted EBITDA(1) | 29,277 | 19,579 | 23,567 | 38,204 |
| Adjusted EBITDA as a % of revenue(1) | 11.5% | 8.4% | 10.2% | 14.4% |
| Net earnings from continuing operations | 12,162 | 4,437 | 8,291 | 13,900 |
| Net earnings | 9,080 | (3,566) | (303) | 13,875 |
| Net earnings from continuing operations per share, basic and diluted | 0.19 | 0.07 | 0.13 | 0.21 |
| Total net earnings per share, basic and diluted | 0.14 | (0.06) | 0.00 | 0.21 |
(1) Revenue and Adjusted EBITDA for the 2023 comparatives as presented above have been restated to exclude discontinued operations.
Reconciliation of non-GAAP measures
The following provides a reconciliation of non-GAAP measures to the nearest measure under GAAP for items presented throughout the MD&A:
Adjusted EBITDA
| Three months ended June 30, | Six months ended June 30, | |||
|---|---|---|---|---|
| (000's) | 2025 | 2024 | 2025 | 2024 |
| Net earnings from continuing operations | $ 11,818 | $ 12,162 | $ 20,439 | $ 16,597 |
| Add: | ||||
| Depreciation and amortization | 9,692 | 8,601 | 19,270 | 16,703 |
| Share based compensation | 2,187 | 762 | 4,165 | 1,476 |
| (Gain) loss on disposal of property, plant and equipment | (97) | (17) | (68) | 3 |
| Finance costs | 1,973 | 3,528 | 4,032 | 7,358 |
| Income tax expense | 4,311 | 3,915 | 7,070 | 5,593 |
| Equity investment depreciation | 147 | 326 | 297 | 765 |
| Restructuring and other costs(1) | — | — | — | 361 |
| Adjusted EBITDA | $ 30,031 | $ 29,277 | $ 55,205 | $ 48,856 |
(1) Restructuring and other costs for the six months ended June 30, 2024 related to the CMI acquisition.
Free Cash Flow
| Three months ended June 30, | Six months ended June 30, | |||
|---|---|---|---|---|
| (000's) | 2025 | 2024 | 2025 | 2024 |
| Net cash flows from continuing operating activities | $ 3,257 | $ 5,695 | $ 9,124 | $ 22,465 |
| Sustaining capital expenditures, net of proceeds from the sale of property, plant and equipment and intangible assets | (894) | (1,367) | (1,335) | (2,031) |
| Finance costs paid | (3,681) | (3,278) | (5,584) | (7,210) |
| Lease payments | (2,416) | (1,635) | (4,505) | (3,167) |
| Free Cash Flow | $ (3,734) | $ (585) | $ (2,300) | $ 10,057 |
Management's Discussion and Analysis
Three and six months ended June 30, 2025 and 2024
dexterra
GROUP
Return on Equity
| Trailing twelve months ended June 30, | ||
|---|---|---|
| (000's) | 2025 | 2024 |
| Net earnings from continuing operations | $ 41,383 | $ 38,790 |
| Average total shareholders' equity(1) | 278,498 | 283,821 |
| Return on Equity | 15% | 14% |
(1) Average total shareholders' equity is calculated as the average of beginning total shareholders' equity and ending total shareholders' equity over the period from June 30, 2024 to June 30, 2025 for 2025 and from June 30, 2023 to June 30, 2024 for 2024.
Accounting Policies
Dexterra's IFRS Accounting Standards policies are provided in Note 3 to the audited annual consolidated financial statements for the year ended December 31, 2024.
Outstanding Shares
Dexterra had 62,182,051 voting common shares issued and outstanding as at July 31, 2025, of which 50.5% or 31,419,793 are owned by subsidiaries of Fairfax Financial Holdings Limited.
See Note 12 of the Financial Statements for details on the NCIB.
Off-Balance Sheet Financing
Dexterra has no off-balance sheet financing.
Management's Report on Disclosure Controls and Procedures and Internal Controls over Financial Reporting
Disclosure Controls and Procedures
The Chief Executive Officer ("CEO") and the Chief Financial Officer ("CFO") have designed, or caused to be designed under their supervision, disclosure controls and procedures ("DC&P") as defined in National Instrument 52-109 - Certification of Disclosure in Issuers' Annual and Interim Filings ("NI 52-109") of the Canadian Securities Administrators, to provide reasonable assurance that: (i) material information relating to the Corporation is made known to the CEO and the CFO by others, particularly during the period in which the interim filings are being prepared; and (ii) information required to be disclosed by the Corporation in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation.
Internal Controls over Financial Reporting
The CEO and the CFO have designed, or caused to be designed under their supervision, internal controls over financial reporting ("ICFR") as defined in NI 52-109 of the Canadian Securities Administrators, in order to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS Accounting Standards.
Based on the evaluation of the design and operating effectiveness of the Corporation's DC&P and ICFR, the CEO and the CFO concluded that the Corporation's DC&P and ICFR were effective as at June 30, 2025. There have been no changes in Dexterra's DC&P or ICFR that occurred during the three months ended June 30, 2025 that have materially affected, or are reasonably likely to materially affect, Dexterra's DC&P or ICFR.
Limitations on the Effectiveness of Disclosure Controls and Procedures and Internal Control over Financial Reporting
Because of their inherent limitations, DC&P and ICFR may not prevent or detect misstatements, errors or fraud. Control systems, no matter how well conceived or implemented, can provide only reasonable, not absolute, assurance that the objectives of the control systems are met.
Risks and Uncertainties
The financial risks, critical accounting estimates and judgements, and risk factors related to Dexterra and its business, which should be carefully considered, are disclosed in the AIF dated March 6, 2025 under "Risk Factors", and this MD&A should be read in conjunction with them. Such risks may not be the only risks facing Dexterra. Additional risks not currently known may also impair Dexterra's business operations and results of operations.
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Management's Discussion and Analysis
Three months ended June 30, 2025 and 2024
dexterra
GROUP
Critical Accounting Estimates and Judgements
This MD&A of Dexterra's financial condition and results of operations is based on its Financial Statements, which are prepared in accordance with IFRS Accounting Standards. The preparation of the Financial Statements requires management to make estimates and judgements about the future. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The resulting accounting estimates will, by definition, seldom equal the related actual results. The MD&A should be read in conjunction with the Financial Statements.
Financial Instruments and Risk Management
In the normal course of business, the Corporation is exposed to a number of financial risks that can affect its operating performance. These risks are: geopolitical risk, credit risk, liquidity risk, and interest rate risk. The Corporation's overall risk management program and prudent business practices seek to minimize any potential adverse effects on the Corporation's financial performance. The MD&A should be read in conjunction with the Financial Statements.
Forward-Looking Information
Certain statements contained in this MD&A may constitute forward-looking information under applicable securities law. Forward-looking information may relate to Dexterra's future outlook and anticipated events, business, operations, financial performance, financial condition or results and, in some cases, can be identified by terminology such as "continue"; "forecast"; "may"; "will"; "project"; "could"; "should"; "expect"; "plan"; "anticipate"; "believe"; "outlook"; "target"; "intend"; "estimate"; "predict"; "might"; "potential"; "continue"; "foresee"; "ensure" or other similar expressions concerning matters that are not historical facts. In particular, statements regarding Dexterra's future operating results and economic performance, including return on equity and Adjusted EBITDA margins; capital allocation priorities, acquisition strategy; its capital light model, market and inflationary environment expectations, asset utilization, camp occupancy levels, its leverage, FCF, wildfire activity expectations, timing for the closing of the Right Choice acquisition, expected benefits from the Right Choice and PVC acquisitions, investments in technology, U.S. tariff impacts, and its objectives and strategies are forward-looking statements. These statements are based on certain factors and assumptions, including expected growth, market recovery, results of operations, performance and business prospects and opportunities regarding Dexterra. While management considers these assumptions to be reasonable based on information currently available to Dexterra, they may prove to be incorrect. Forward-looking information is also subject to certain known and unknown risks, uncertainties and other factors that could cause Dexterra's actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking information, including, but not limited to: the ability to retain clients, renew existing contracts and obtain new business; an outbreak of contagious disease that could disrupt its business; the highly competitive nature of the industries in which Dexterra operates; outsourcing of services trends; reliance on suppliers and subcontractors; cost inflation; U.S. tariff impacts; volatility of industry conditions could impact demand for its services; a reduction in the availability of credit could reduce demand for Dexterra's products and services; Dexterra's significant shareholder may substantially influence its direction and operations and its interests may not align with other shareholders; its significant shareholder's approximate 51% ownership interest may impact the liquidity of the common shares; cash flow may not be sufficient to fund its ongoing activities at all times; loss of key personnel; the failure to receive or renew permits or security clearances; significant legal proceedings or regulatory proceedings/changes; environmental damage and liability is an operating risk in the industries in which Dexterra operates; climate changes could increase Dexterra's operating costs and reduce demand for its services; liabilities for failure to comply with public procurement laws and regulations; any deterioration in safety performance could result in a decline in the demand for its products and services; failure to realize anticipated benefits of acquisitions and dispositions; inability to develop and maintain relationships with Indigenous communities; the seasonality of Dexterra's business; inability to restore or replace critical capacity in a timely manner; reputational, competitive and financial risk related to cyber-attacks and breaches; failure to effectively identify and manage disruptive technology; economic downturns can reduce demand for Dexterra's services; its insurance program may not fully cover losses. Additional risks and uncertainties are described in Note 23 to the Financial Statements contained in its most recent Annual Report filed with securities regulatory authorities in Canada and available on SEDAR at sedarplus.ca. The reader should not place undue importance on forward-looking information and should not rely upon this information as of any other date. Dexterra is under no obligation and does not undertake to update or alter this information at any time, except as may be required by applicable securities law.
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