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TerraVest Industries Management Reports 2026
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MANAGEMENT'S DISCUSSION AND ANALYSIS
For the second quarter ended March 31, 2026
Dated: May 13, 2026
INTRODUCTION AND FORWARD-LOOKING STATEMENTS
This Management's Discussion and Analysis ("MD&A") presents management's view of the financial position and performance of TerraVest Industries Inc. ("TerraVest" or the "Company") for the second quarter ended March 31, 2026 and should be read in conjunction with TerraVest's interim condensed consolidated financial statements for the second quarter ended March 31, 2026. The financial information in this MD&A has been prepared in accordance with IFRS Accounting Standards ("IFRS"). All amounts are stated in thousands of Canadian dollars, except share and per share amounts or unless otherwise stated. This discussion is prepared as at May 13, 2026 and has been prepared with all available information up to and including the date of this report. This document should be read in full including the definitions of non-IFRS measures such as Adjusted earnings before interests, income taxes, depreciation and amortization ("Adjusted EBITDA"), Cash Available for Distribution, Dividend Payout Ratio, Maintenance Capital Expenditures and Working Capital which are found in the following section of this MD&A.
This MD&A sets out management's assessment of TerraVest's future plans and operations and contains forward-looking statements as defined under applicable Canadian securities legislation. These forward-looking statements often contain words such as "anticipates", "does not anticipate", "believes", "estimates", "forecasts", "intends", "expects", "does not expect", "could", "may", "will", "should", "plans" or similar terms or variations of these words and contain estimates or assumptions about the outcome of future events. These forward-looking statements are provided in the interest of providing readers with information regarding TerraVest. Readers are cautioned that management's expectations, estimates and assumptions, although considered reasonable, may prove to be incorrect and readers should not place undue reliance on forward-looking statements which are subject to risks, uncertainties, and other factors that could result in the outcome of these events being materially different from those anticipated in this MD&A. These factors and assumptions include, but are not limited to: levels of business activity in TerraVest's segments, political conditions and events, competitive pressures, changes in government policy or regulations, commodity pricing, and general economic conditions. TerraVest's actual results may differ materially from those expressed in, or implied by these forward-looking statements. The forward-looking information contained in the MD&A is expressly qualified by the cautionary statement. TerraVest does not undertake any obligation to update or release any revisions to these forward-looking statements to reflect events or circumstances, unanticipated events or circumstances, or should its estimates or assumptions change, after the date hereof, except as expressly required by law. Additional information relating to TerraVest and the risks to which its business is subject is contained in its Annual Information Form ("AIF"), which is available on SEDAR+ at www.sedarplus.ca.
NON-IFRS FINANCIAL MEASURES
The Company uses measures (and ratios) that are not in accordance with IFRS to provide investors with supplemental metrics to assess and measure its operating performance and financial position from one period to the next. These metrics are presented as a complement to enhance the understanding of TerraVest's operating results but not in substitution of IFRS results.
Adjusted EBITDA, Cash Available for Distribution, Dividend Payout Ratio, Maintenance Capital Expenditures and Working Capital are not recognized measures under IFRS and do not have standardized meanings prescribed by IFRS. TerraVest's definitions may differ from those of other issuers and therefore may not be comparable to similarly titled measures used by other issuers.
Adjusted EBITDA: is defined as net income adjusted for income tax expense, financing costs, depreciation, amortization, change in fair value of derivative financial instruments, change in fair value of investment in equity instruments and investment in a limited partnership, change in fair value of contingent considerations, gains or losses on foreign exchange, gains or losses on disposal of other property, plant and equipment and property, plant and equipment for rental, gains or losses on disposal of intangible assets, gains or losses on lease modification, gains or losses on remeasurement of equity interest, gain on bargain purchase, gains or losses on sale of business, non-recurring acquisition-related costs, impairment charges and other non-recurring and/or non-operations related items that do not reflect the current ongoing operations of TerraVest. Management believes this is a useful metric in evaluating the ongoing operating performance of TerraVest. Readers are cautioned that Adjusted EBITDA should not be construed as an alternative to net income determined in accordance with IFRS as an indicator of TerraVest's performance.
2026 Q2 - MD&A
TerraVest Industries Inc.
Cash Available for Distribution: is defined as cash flow from operating activities adjusted for changes in non-cash operating working capital, maintenance capital expenditures and repayment of lease liabilities. Management believes that cash available for distribution, as a liquidity measure, is a useful metric that provides an indication of the cash available from ongoing operations that can be distributed to shareholders as a dividend. Readers are cautioned that Cash Available for Distribution should not be construed as an alternative to cash flow from operating activities determined in accordance with IFRS as an indicator of TerraVest's liquidity and cash flows.
Dividend Payout Ratio: is defined as dividends paid in cash during the period divided by Cash Available for Distribution for the period. Management believes that Dividend Payout Ratio is a useful metric as it provides an indication of TerraVest's ability to sustain its current dividend policy. There is no directly comparable IFRS measure for Dividend Payout Ratio.
Maintenance Capital Expenditures: is defined as capital expenditures made to sustain the operations of TerraVest's operating businesses and to maintain the productive capacity of the businesses over an economic cycle, whether or not they yield significant cost or production efficiencies. Management believes that Maintenance Capital Expenditures should be funded by cash flow from existing operating activities and, therefore, deducted in determining Cash Available for Distribution. There is no directly comparable IFRS measure for Maintenance Capital Expenditures.
Working Capital: is calculated by subtracting current liabilities from current assets. Management uses Working Capital as a measure for assessing overall liquidity. There is no directly comparable IFRS measure for Working Capital.
BUSINESS OVERVIEW
TerraVest is a diversified industrial company that manufactures and sells goods and services to various end-markets including: agriculture, mining, energy production and distribution, chemical, utilities, transportation, data center infrastructure and construction, among others. TerraVest is focused on acquiring and operating market leading businesses that will benefit from TerraVest's financial and operational support. These opportunities generally center on manufactured products and services that complement TerraVest's existing operations and provide integration benefits.
TerraVest is comprised of four operating segments as follows: Home Heating and Cooling Products and Containment Equipment ("HVAC and Containment Equipment"), Compressed Gas Storage and Distribution Equipment ("Compressed Gas Equipment"), Energy Processing Equipment ("Processing Equipment") and Service.
HVAC and Containment Equipment
TerraVest's HVAC and Containment Equipment segment is a provider of products and services to a variety of industries across Canada and the United States. The HVAC and Containment Equipment segment manufactures and distributes products including commercial and residential refined fuel tanks, furnaces, boilers, air conditioning equipment and controls, fuel supply systems, load banks as well as chemical storage tanks, wastewater treatment systems, grease removal systems and other custom built steel storage products. This segment sells its products through various distribution networks and direct to end users. The end users of the products are fuel distributors, commercial, residential and industrial consumers, municipalities and government agencies.
Compressed Gas Equipment
TerraVest's Compressed Gas Equipment segment is a provider of products and services to a variety of industries across Canada and the United States. The Compressed Gas Equipment segment manufactures engineered products for the storage, distribution and dispensing of compressed gases, crude oil, refined fuel, dry bulk, chemicals and other products. Compressed gases include liquid propane gas ("LPG"), natural gas liquids ("NGL's"), liquified natural gas ("LNG"), anhydrous ammonia ("NH3"), carbon dioxide ("CO2") and various other gases. The products include bulk storage vessels, transport trailers, delivery units, dispensers, commercial and residential storage tanks and other custom vessels. This segment also services the various products it manufactures. This segment's products and services are primarily sold to petroleum and gas distributors, fertilizer distributors, farmers, midstream energy companies and transportation companies and are used by industrial, commercial and residential consumers.
Processing Equipment
TerraVest's Processing Equipment segment is a fabricator of equipment for various end-markets including upstream and midstream oil and gas production, water treatment and mining. The Processing Equipment segment manufactures and sells a wide array of equipment such as: wellhead processing equipment and tanks, desanding equipment, water treatment equipment and various other custom process equipment. This segment's products and services are primarily sold to oil and gas producers, midstream companies, utilities, municipalities and engineering companies.
2026 Q2 - MD&A
TerraVest Industries Inc.
Service
TerraVest's Service segment provides a wide range of services to the energy sector in Western Canada including water management, environmental solutions, heating, rentals and well servicing. TerraVest's Service segment is well recognized for its technological innovation and industry-leading service product offering. This segment services many of the largest energy producers in Canada.
SECOND QUARTER AND SIX MONTHS REVIEW AND OUTLOOK
Business Performance
Management believes that there are certain non-IFRS financial measures that can be used to assist shareholders in analyzing the performance of TerraVest. The table below highlights certain financial results and reconciles net income to Adjusted EBITDA for the second quarter and six months ended March 31, 2026 and the comparative periods in fiscal 2025.
| Second quarters ended | Six months ended | |||
|---|---|---|---|---|
| March 31, 2026 | March 31, 2025 | March 31, 2026 | March 31, 2025 | |
| $ | $ | $ | $ | |
| Sales | 442,565 | 311,450 | 850,915 | 546,035 |
| Net Income | 12,724 | 33,349 | 47,955 | 63,780 |
| Add (subtract): | ||||
| Income tax expense | 4,918 | 8,344 | 19,751 | 16,439 |
| Financing costs | 16,575 | 9,753 | 32,182 | 14,329 |
| Depreciation and amortization | 40,333 | 19,052 | 77,273 | 33,537 |
| Change in fair value of derivative financial instruments | (236) | 551 | (741) | 2,955 |
| Change in fair value of investment in equity instruments | 5,189 | (3,321) | 15,586 | (3,280) |
| Change in fair value of investment in a limited partnership | (124) | (299) | 57 | (76) |
| Change in fair value of contingent considerations | - | - | (48,307) | - |
| (Gain) loss on foreign exchange | (3,972) | 113 | (630) | (10,681) |
| (Gain) loss on disposal of other property, plant and equipment | (778) | 8 | (461) | (124) |
| (Gain) loss on disposal of property, plant and equipment for rental | (171) | - | (189) | (429) |
| (Gain) loss on sale of business | - | (136) | - | (136) |
| Gain on bargain purchase | - | (3,993) | (285) | (3,993) |
| Acquisition-related cost | 1,045 | 2,266 | 1,098 | 2,266 |
| Adjusted EBITDA | 75,503 | 65,687 | 143,289 | 114,587 |
Sales for the second quarter and six months ended March 31, 2026 were $442,565 and $850,915 versus $311,450 and $546,035 for the prior comparable periods. This represents increases of 42% and 56% respectively. The favorable net change in sales for the second quarter is generated by the 2026 and 2025 business combinations for $150,906, partially offset by a decrease in TerraVest base portfolio of $19,791. TerraVest acquired all the issued and outstanding shares of KBK Industries, LLC ("KBK") in January 2026, of Tankcon FRP Inc. ("Tankcon") in May 2025, of Simplex, Inc. ("Simplex") and L.B.T., Inc. ("LBT") in April 2025 and of EnTrans Holding, Inc. ("Entrans") in March 2025. In addition, TerraVest acquired all the Canadian assets of New Wave Energy Services Ltd. ("Wave") in September 2025 and of Aureus Energy Services Inc. ("Aureus") in January 2025. The reduction represents a decrease of 7% for TerraVest's base portfolio (excluding KBK, Tankcon, Simplex, LBT and Entrans). Wave and Aureus results can't be excluded from TerraVest results as their activities have been fully integrated into one of TerraVest's existing subsidiaries whose operations are similar in nature.
2026 Q2 - MD&A
TerraVest Industries Inc.
The decrease in sales for TerraVest base portfolio businesses versus the prior comparable period is a result of customer-induced delivery delays on product, pricing pressure on domestic tanks and storage tanks markets, along with the closure of Iowa Steel Fabricators, LLC and the timing of job completions in the second quarter of 2025 in the Processing Equipment segment. The foreign exchange impact had an unfavorable effect of $14,550 and $15,252 on sales for the second quarter and six months ended March 31, 2026, compared to the exchange rates of the prior comparable periods. Without this negative foreign exchange effect, the increases in sales would have been 47% and 59%, respectively.
Net income for the second quarter and six months ended March 31, 2026 were $12,724 and $47,955 versus $33,349 and $63,780 for the prior comparable periods. This represents decreases of 62% and 25% respectively. For the second quarter ended March 31, 2026 the decrease is mainly explained by additional depreciation and amortization expenses and financing costs as a result of business acquisitions, an unfavorable change in fair value of investment in equity instruments and a gain on bargain purchase recognized in the second quarter of 2025. These factors, combined with lower sales from TerraVest base portfolio businesses and an unfavorable product mix, explain these decreases.
For the six-month period ending March 31, 2026, the decrease is partially offset by a favorable change in fair value of contingent considerations due to Entrans acquisition. Other variances are also highlighted in the table above.
Adjusted EBITDA for the second quarter and six months ended March 31, 2026 were $75,503 and $143,289 versus $65,687 and $114,587 for the prior comparable periods. This represents increases of 15% and 25% respectively, which is the result of the reasons explained above. The foreign exchange impact had a negative effect on Adjusted EBITDA of $2,826 for the quarter ended March 31, 2026 and $4,410 for the six-month period ended March 31, 2026.
The table below reconciles cash flow from operating activities to Cash Available for Distribution for the second quarter and six months ended March 31, 2026 and the comparative periods in fiscal 2025.
| Second quarters ended | Six months ended | |||
|---|---|---|---|---|
| March 31, 2026 | March 31, 2025 | March 31, 2026 | March 31, 2025 | |
| $ | $ | $ | $ | |
| Cash Flow from Operating Activities | 58,540 | 34,225 | 155,088 | 70,828 |
| Add (subtract): | ||||
| Change in non-cash operating working capital items | (13,615) | 9,623 | (64,474) | 5,817 |
| Maintenance capital expenditures | (11,196) | (9,699) | (19,939) | (15,401) |
| Repayment of lease liabilities | (4,021) | (2,683) | (7,780) | (5,080) |
| Cash Available for Distribution | 29,708 | 31,466 | 62,895 | 56,164 |
| Dividends Paid | 4,337 | 3,413 | 8,132 | 6,338 |
| Dividend Payout Ratio | 15% | 11% | 13% | 11% |
Cash flow from operating activities for the second quarter and six months ended March 31, 2026 were $58,540 and $155,088 versus $34,225 and $70,828 for the prior comparable periods. This represents increases of 71% and 119% respectively. The increase is attributable to a favorable change in non-cash working capital items compared to the prior period, mainly explained by a decrease in accounts receivable and an increase in accounts payable and customer deposits, partially offset by an increase in inventories.
Maintenance Capital Expenditures were $11,196 for the second quarter ended March 31, 2026 versus $9,699 for the prior comparable period representing an increase of 15%, which is primarily explained by the timing of such expenditures as well as TerraVest's portfolio growth following the 2026 and 2025 business combinations. During the second quarter ended March 31, 2026, TerraVest's total purchase of property, plant and equipment ("PP&E") paid was $22,759 of which $11,563 is considered growth capital. The growth capital incurred during the second quarter was mainly used to invest in new manufacturing product lines.
Cash Available for Distribution for the second quarter and six months ended March 31, 2026 decreased by 6% and increased by 12% respectively versus the prior comparable periods. The trend is a result of reasons explained above and elsewhere in this MD&A.
2026 Q2 - MD&A
TerraVest Industries Inc.
Outlook
In general, TerraVest's portfolio of businesses is performing in line with management expectations, with two notable exceptions. Demand for tank trailers continues to be soft, while demand for industrial steel tanks continues to be stronger than expected. Recent acquisitions have made a meaningful contribution, and we expect this to continue throughout this fiscal year. Opportunities to enhance performance through synergies between recent acquisitions and the base portfolio of businesses continue to exist and are a focus for management.
Recent tariff announcements have created an environment of uncertainty in North America's manufacturing sector. TerraVest does benefit from a diverse manufacturing footprint in North America that allows us to mitigate against direct tariff-related impacts. TerraVest continues to address the topic by leveraging both its footprint but also supply chain to minimize the impact on the company. However, the current context has resulted in softer demand for certain of TerraVest's businesses.
The Company continues to make targeted investments to improve its manufacturing efficiency and expand its product lines, particularly in end-markets where it has a meaningful presence.
Business Combinations
In January 2026, a subsidiary of TerraVest entered into a share purchase agreement to purchase all the issued and outstanding shares of KBK. Headquartered in Woodlands, Texas, KBK is a manufacturer of aboveground and underground fiberglass tanks and steel storage tanks for the convenience store ("c-store"), agricultural, chemical, infrastructure and energy markets. This business is part of our HVAC and Containment Equipment operating segment.
A partially owned subsidiary of TerraVest also acquired control of another business, through the purchase of 60% of its issued and outstanding shares, which is individually not significant.
CONSOLIDATED RESULTS OF OPERATIONS
The following section provides the financial results of TerraVest's operations for the second quarter and six months ended March 31, 2026 and the comparative periods in fiscal 2025.
| Second quarters ended | Six months ended | |||
|---|---|---|---|---|
| March 31, 2026 | March 31, 2025 | March 31, 2026 | March 31, 2025 | |
| $ | $ | $ | $ | |
| Sales | 442,565 | 311,450 | 850,915 | 546,035 |
| Cost of sales | 333,123 | 220,665 | 638,788 | 384,625 |
| Gross profit | 109,442 | 90,785 | 212,127 | 161,410 |
| Administration expenses | 62,605 | 36,583 | 122,309 | 63,786 |
| Selling expenses | 12,649 | 9,833 | 24,837 | 18,852 |
| Financing costs | 16,575 | 9,753 | 32,182 | 14,329 |
| Other (gains) losses | (29) | (7,077) | (34,907) | (15,776) |
| 91,800 | 49,092 | 144,421 | 81,191 | |
| Earnings before income taxes | 17,642 | 41,693 | 67,706 | 80,219 |
| Income tax expense | 4,918 | 8,344 | 19,751 | 16,439 |
| Net Income | 12,724 | 33,349 | 47,955 | 63,780 |
| Allocated to non-controlling interests | 2,683 | 5,162 | 4,704 | 6,858 |
| Net income attributable to common shareholders | 10,041 | 28,187 | 43,251 | 56,922 |
| Weighted average shares outstanding – Basic | 21,685,695 | 19,501,433 | 21,685,695 | 19,501,433 |
| Weighted average shares outstanding – Diluted | 22,185,309 | 20,280,723 | 22,182,398 | 20,274,156 |
| Net income per share – Basic | $0.46 | $1.45 | $1.99 | $2.92 |
| Net income per share – Diluted | $0.45 | $1.39 | $1.95 | $2.81 |
2026 Q2 - MD&A
TerraVest Industries Inc.
Sales for the second quarter and six months ended March 31, 2026 increased by 42% and 56% respectively versus the prior comparable periods. The reasons have been explained previously in this MD&A.
Gross profit for the second quarter and six months ended March 31, 2026 increased by 21% and 31% respectively versus the prior comparable periods. This is primarily explained by the contribution of KBK, Tankcon, Simplex, LBT and Entrans, partially offset by an unfavorable product mix.
Administration expenses for the second quarter and six months ended March 31, 2026 increased by 71% and 92% respectively versus the prior comparable periods. The increase in administration expenses is mainly due to the addition of KBK, Tankcon, Simplex, LBT and Entrans.
Selling expenses for the second quarter and six months ended March 31, 2026 increased by 29% and 32% respectively versus the prior comparable periods. The increase in selling expenses is explained by the addition of KBK, Tankcon, Simplex, LBT and Entrans. Selling expenses also increased as a result of continued investment in marketing and promotional activities.
Financing costs for the second quarter and six months ended March 31, 2026 increased by 70% and 125% respectively versus the prior comparable periods. The increase is primarily explained by additional interest expense on long-term debt and on lease liabilities as a result of the acquisition of KBK, Tankcon, Simplex, LBT and Entrans.
Other (gains) losses variance for the six months ended March 31, 2026 was mainly driven by a favorable change in fair value of contingent considerations from the Entrans acquisition. In addition, this was partially offset by an unfavorable change in fair value of investment in equity instruments, and a gain on bargain purchase recognized in the prior comparable period, applicable to both the second quarter and six-month periods. TerraVest also realized a gain on foreign exchange versus a loss in the prior comparable quarter and a lesser gain on foreign exchange for the six-month period versus fiscal 2025.
Income tax expense variance for the second quarter and six months ended March 31, 2026 is the result of the variation in taxable earnings and the timing of income tax expense adjustments.
As a result of the above, net income attributable to common shareholders for the second quarter and six months ended March 31, 2026 decreased by 64% and 24% respectively versus the prior comparable periods.
Segmented Results
a) HVAC and Containment Equipment
| Second quarters ended | Six months ended | |||
|---|---|---|---|---|
| March 31, 2026 | March 31, 2025 | March 31, 2026 | March 31, 2025 | |
| $ | $ | $ | $ | |
| Sales | 159,242 | 101,208 | 280,552 | 198,998 |
| Net Income | 23,855 | 19,829 | 46,805 | 41,768 |
| Add (subtract): | ||||
| Financing costs | 1,734 | 713 | 2,777 | 1,410 |
| Depreciation and amortization | 11,490 | 4,136 | 18,379 | 9,336 |
| (Gain) loss on foreign exchange | (53) | 102 | 156 | (1,706) |
| (Gain) loss on disposal of other property, plant and equipment | (29) | (13) | (46) | (18) |
| Adjusted EBITDA | 36,997 | 24,767 | 68,071 | 50,790 |
2026 Q2 - MD&A
TerraVest Industries Inc.
Sales for the second quarter and six months ended March 31, 2026 were $159,242 and $280,552 versus $101,208 and $198,998 for the prior comparable periods. This represents increases of 57% and 41% respectively. Excluding KBK and Simplex, sales for the second quarter ended March 31, 2026 were $112,099 versus $101,208 for the prior comparable period. This represents an increase of 11% for the period for TerraVest base portfolio. The increase is primarily attributable to higher sales of residential petroleum tanks, standard efficiency boilers, and growing demand for commercial and industrial storage tanks.
Net income for the second quarter and six months ended March 31, 2026 were $23,855 and $46,805 versus $19,829 and $41,768 for the prior comparable periods. This represents increases of 20% and 12% respectively. The increases in net income are the result of the addition of KBK and Simplex, along with higher sales from TerraVest base portfolio, partially offset by an unfavorable product mix and by an increase in amortization of intangible assets following the acquisition of KBK.
Adjusted EBITDA for the second quarter and six months ended March 31, 2026 were $36,997 and $68,071 versus $24,767 and $50,790 for the prior comparable periods. This represents increases of 49% and 34% respectively, which is a result of the reasons explained above and highlighted in the table above.
b) Compressed Gas Equipment
| Second quarters ended | Six months ended | |||
|---|---|---|---|---|
| March 31, 2026 | March 31, 2025 | March 31, 2026 | March 31, 2025 | |
| $ | $ | $ | $ | |
| Sales | 200,968 | 104,897 | 407,747 | 180,506 |
| Net Income (Loss) | (1,334) | 7,707 | (5,837) | 13,747 |
| Add (subtract): | ||||
| Financing costs | 2,321 | 647 | 4,675 | 1,285 |
| Depreciation and amortization | 21,293 | 7,666 | 43,992 | 11,608 |
| Change in fair value of derivative financial instruments | (509) | - | (610) | - |
| (Gain) loss on foreign exchange | (620) | 69 | (333) | (32) |
| (Gain) loss on disposal of other property, plant and equipment | (1,014) | 17 | (809) | 7 |
| (Gain) loss on disposal of property, plant and equipment for rental | (171) | - | (189) | (429) |
| Adjusted EBITDA | 19,966 | 16,106 | 40,889 | 26,186 |
Sales for the second quarter and six-month ended March 31, 2026 were $200,968 and $407,747 versus $104,897 and $180,506 for the prior comparable periods. This represents increases of 92% and 126% respectively. Excluding Tankcon, LBT and Entrans, sales for the second quarter ended March 31, 2026 were $66,389 versus $74,081 for the prior comparable period. This represents a decrease of 10% for the Compressed Gas Equipment base portfolio. The decrease in the base portfolio is primarily attributable to general softer demand, customer-induced delivery delays and pricing pressure on domestic tanks and storage tanks markets. Iowa Steel Fabricators, LLC was fully closed in early February which represents a reduction of 1.39% of the sales. This business segment continued to be impacted by lower demand on tank trailers in the United States market.
Net income (loss) for the second quarter and six months ended March 31, 2026 were ($1,334) and ($5,837) versus $7,707 and $13,747 for the prior comparable periods. This represents decreases of 117% and 142% respectively. The decreases in net income are mainly explained by an increase in amortization of intangible assets following the various business acquisitions in this segment combined with softer demand for commercial trailers and an unfavorable product mix from various business acquisitions. The net income is also impacted by some non-recurring production start-up costs on new product lines and increased interest on lease liabilities. The unfavorable variance is partially offset by a one-time gain on asset disposal.
2026 Q2 - MD&A
TerraVest Industries Inc.
Adjusted EBITDA for the second quarter and six months ended March 31, 2026 were $19,966 and $40,889 versus $16,106 and $26,186 for the prior comparable periods. This represents increases of 24% and 56% respectively, which is a result of the reasons explained above and highlighted in the table above.
c) Processing Equipment
| Second quarters ended | Six months ended | |||
|---|---|---|---|---|
| March 31, 2026 | March 31, 2025 | March 31, 2026 | March 31, 2025 | |
| $ | $ | $ | $ | |
| Sales | 22,392 | 31,949 | 44,994 | 51,017 |
| Net Income | 854 | 4,920 | 2,534 | 6,208 |
| Add (subtract): | ||||
| Financing costs | 176 | 188 | 354 | 380 |
| Depreciation and amortization | 888 | 986 | 1,818 | 1,996 |
| (Gain) loss on foreign exchange | (43) | (41) | 4 | (332) |
| (Gain) loss on disposal of other property, plant and equipment | 7 | - | 7 | 3 |
| Adjusted EBITDA | 1,882 | 6,053 | 4,717 | 8,255 |
Sales for the second quarter and six months ended March 31, 2026 were $22,392 and $44,994 versus $31,949 and $51,017 for the prior comparable periods. This represents decreases of 30% and 12% respectively, which is attributable to customer-induced delivery delays.
Net income for the second quarter and six months ended March 31, 2026 were $854 and $2,534 versus $4,920 and $6,208 for the prior comparable periods. This represents decreases of 83% and 59% respectively, which is mainly the result of an unfavorable product mix and low margin on biogas operations jobs closed in fiscal 2026.
Adjusted EBITDA for the second quarter and six months ended March 31, 2026 were $1,882 and $4,717 versus $6,053 and $8,255 for the prior comparable periods. This represents decreases of 69% and 43% respectively, which is a result of the reasons explained above and highlighted in the table above.
d) Service
| Second quarters ended | Six months ended | |||
|---|---|---|---|---|
| March 31, 2026 | March 31, 2025 | March 31, 2026 | March 31, 2025 | |
| $ | $ | $ | $ | |
| Sales | 70,023 | 74,726 | 129,693 | 120,463 |
| Net Income | 11,849 | 14,181 | 20,651 | 21,893 |
| Add (subtract): | ||||
| Financing costs | 182 | 187 | 350 | 327 |
| Depreciation and amortization | 6,650 | 6,252 | 13,028 | 10,571 |
| (Gain) loss on foreign exchange | (8) | - | (7) | (14) |
| (Gain) loss on disposal of other property, plant and equipment | 259 | 3 | 387 | (116) |
| (Gain) loss on sale of business | - | (136) | - | (136) |
| Adjusted EBITDA | 18,932 | 20,487 | 34,409 | 32,525 |
2026 Q2 - MD&A
TerraVest Industries Inc.
Sales for the second quarter and six months ended March 31, 2026 were $70,023 and $129,693 versus $74,726 and $120,463 for the prior comparable periods. This represents a decrease of 6% and an increase of 8% respectively. The increase in sales in the Service segment is primarily driven by the water transfer and heating services offering, highlighting the successful integration of Wave and Aureus. This is offset in the second quarter by adverse weather conditions in Saskatchewan this year, which negatively impacted the industry activity, resulting in reduced operating hours and shifts in customer demand within service sectors.
Aureus' and Wave's activities and results were fully integrated into one of TerraVest's existing subsidiaries whose operations are similar in nature. As a result, it is impracticable to isolate their specific contribution to this segment's sales since their respective acquisition dates.
Net income for the second quarter and six months ended March 31, 2026 were $11,849 and $20,651 versus $14,181 and $21,893 for the prior comparable periods. This represents decreases of 16% and 6% respectively, which is primarily attributable to an unfavorable service mix versus the prior comparable periods.
Adjusted EBITDA for the second quarter and six months ended March 31, 2026 were $18,932 and $34,409 versus $20,487 and $32,525 for the prior comparable periods. This represents a decrease of 8% and an increase of 6% respectively and is the result of the reasons explained above.
Quarterly Results
| For the quarters ended | ||||||||
|---|---|---|---|---|---|---|---|---|
| 31-Mar-26 | 31-Dec-25 | 30-Sep-25 | 30-Jun-25 | 31-Mar-25 | 31-Dec-24 | 30-Sep-24 | 30-Jun-24 | |
| $ | $ | $ | $ | $ | $ | $ | $ | |
| Sales | 442,565 | 408,350 | 419,409 | 405,707 | 311,450 | 234,585 | 230,654 | 238,129 |
| Adjusted EBITDA | 75,503 | 67,786 | 81,902 | 68,098 | 65,687 | 48,900 | 47,547 | 49,062 |
| Net income attributable to common shareholders | 10,041 | 33,210 | 18,479 | 11,250 | 28,187 | 28,735 | 11,911 | 11,922 |
| Net income per share | ||||||||
| – Basic | 0.46 | 1.53 | 0.85 | 0.55 | 1.45 | 1.47 | 0.61 | 0.63 |
| – Diluted | 0.45 | 1.50 | 0.83 | 0.53 | 1.39 | 1.42 | 0.59 | 0.61 |
TerraVest's operating segments are seasonal in nature. The strongest quarters for TerraVest are its first and last quarters. The Processing Equipment and Service segments generally experience higher sales in the first and second quarters as majority of the drilling in Western Canada occurs during this period. The HVAC and Containment Equipment and Compressed Gas Equipment segments generally experience higher sales during the first and last quarters as demand for residential, commercial and industrial heating products increases heading into the winter months. The third quarter is typically the weakest across all segments. TerraVest takes advantage of this seasonality to build inventory levels during non-peak demand periods, thereby allowing TerraVest to more readily meet increased levels of demand during its regular peak demand periods. However, the current economic context might change that historical seasonal profile.
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TerraVest Industries Inc.
CASH FLOW
The following table provides summary information with respect to consolidated cash flows from operating, investing and financing activities:
| Six months ended | ||
|---|---|---|
| March 31, 2026 | March 31, 2025 | |
| $ | $ | |
| Cash flow from operating activities | 155,088 | 70,828 |
| Cash flow used in investing activities | (172,330) | (810,392) |
| Cash flow from financing activities | 30,482 | 726,075 |
| Net inflows (outflows) for the period | 13,240 | (13,489) |
| Cash, beginning of year | 13,946 | 28,375 |
| Impact of foreign exchange on cash | (146) | 2,288 |
| Cash, end of period | 27,040 | 17,174 |
Cash Flow from Operating Activities
TerraVest generated $155,088 of cash flow from operating activities during the six months ended March 31, 2026 compared to $70,828 for the prior comparable period. The increase is attributable to additional net income from operations (excluding items not affecting cash) and a favorable change in non-cash working capital items compared to the prior period, mainly explained by a decrease in accounts receivable and an increase in accounts payable and customer deposits, partially offset by an increase in inventories.
Cash Flow used in Investing Activities
Cash flow used in investing activities during the six months ended March 31, 2026 was $172,330 compared to $810,392 for the prior comparable period. This decrease in the level of cash usage is primarily attributable to lower cash paid for business acquisitions, partially offset by additional purchases of PP&E and investments in equity instruments.
Cash Flow from Financing Activities
Cash flow from financing activities during the six months ended March 31, 2026 was $30,482 versus $726,075 for the prior comparable period. The decreased cash flow from financing activities is mainly attributable to higher borrowings on the credit facility during the prior comparable period.
DIVIDENDS
During the second quarter ended March 31, 2026, TerraVest declared a dividend of $0.20 per common share payable on April 10, 2026 to shareholders of record on March 31, 2026.
Subsequent to the end of the second quarter, TerraVest declared a dividend of $0.20 per common share payable on July 10, 2026 to shareholders of record on June 30, 2026.
TerraVest expects to declare and pay a dividend on a quarterly basis. The dividend policy may be changed from time to time at the sole discretion of the Board of Directors. Accordingly, there can be no assurance as to the amount or timing of any dividend in the future. In assessing whether to pay a dividend and in determining the amount of the dividend, the Board of Directors will consider TerraVest’s financial condition and its then current business needs and other factors the Board of Directors may consider appropriate in the circumstances.
LIQUIDITY AND CAPITAL RESOURCES
TerraVest’s objective in managing its capital resources is to ensure that there are adequate capital resources to support the operations of its various business segments and permit opportunistic acquisitions in order to maximize the return to shareholders. Management continually assesses TerraVest’s capital needs to meet its objectives.
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TerraVest Industries Inc.
TerraVest's principal sources of liquidity are cash on hand, secured credit facilities and cash flow generated by its operations throughout the year. As at March 31, 2026, TerraVest's cash position was $27,040 compared to $13,946 as at September 30, 2025. As at March 31, 2026, TerraVest's consolidated working capital, excluding the short-term revolving credit facility, was $217,697 compared to $201,672 as at September 30, 2025. TerraVest expects to be able to fund all working capital requirements, contractual obligations, capital expenditures and dividends from a combination of cash on hand, operating cash flows and existing credit facilities.
Revolving Operating Loans
TerraVest and its subsidiaries have access to two revolving operating loans. One of the revolving operating loans is based on margin requirements. The revolving operating loans are subject to certain financial covenants which are based on the results of the individual subsidiaries in which the credit facilities are held. The availability of the revolving operating loans at any given time may have an impact on TerraVest's liquidity and available capital resources and its ability to fund its operating and future growth plans. As at March 31, 2026, the maximum amount available was $810,000, of which $643,245 was utilized: $639,077 drawn as borrowings and $4,168 as outstanding letters of credit. The letters of credit outstanding are considered a utilization of the facility but are not recorded in the consolidated statement of financial position. TerraVest was in compliance with all of its financial and non-financial covenants.
For further information on the financial and non-financial covenants, please refer to Note 9 of TerraVest's interim condensed consolidated financial statements for the second quarter ended March 31, 2026 and Note 15 of TerraVest's audited consolidated financial statements for the year ended September 30, 2025.
Revolving Term Loans
A subsidiary of TerraVest operating in the Service segment has access to revolving term loans totaling $22,000 that can be used to purchase PP&E. As at March 31, 2026, $12,533 was drawn. TerraVest was in compliance with all of its financial and non-financial covenants.
For further information on the financial and non-financial covenants, please refer to Note 9 of TerraVest's interim condensed consolidated financial statements for the second quarter ended March 31, 2026 and Note 15 of TerraVest's audited consolidated financial statements for the year ended September 30, 2025.
Term Loans
As part of their credit facility, TerraVest and certain of its subsidiaries have two term loans totaling $146,433, obtained to finance a portion of the acquisition of Entrans. In March 2026, TerraVest's $100,000 term loan matured and was fully repaid using the revolving operating loans. The remaining term loans are non-revolving and mature as follows: $100,000 in March 2027 and $46,433 in March 2028, with no repayment scheduled before maturity.
Share Capital
TerraVest's common shares are listed on the Toronto Stock Exchange under the symbol "TVK". Changes in the common shares issued and outstanding were as follows:
| As at March 31, 2026 | As at March 31, 2025 | |||
|---|---|---|---|---|
| Number | Amount | Number | Amount | |
| $ | $ | |||
| Balance, beginning of year and end of period | 21,685,695 | 563,988 | 19,501,433 | 250,644 |
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TerraVest Industries Inc.
Capital Structure
The capital structure of TerraVest consists of its revolving credit facilities, long-term debt and shareholders' equity attributable to common shareholders. The following table outlines TerraVest's capital structure:
| As at March 31, 2026 | As at Sept. 30, 2025 | |
|---|---|---|
| $ | $ | |
| Available on short-term revolving operating loan, net of amount drawn | 10,000 | 10,000 |
| Utilized on long-term revolving operating loans | 643,245 | 491,358 |
| Available on long-term revolving operating loans, net of amount utilized | 156,755 | 308,642 |
| Long-term debt (current and non-current) | 162,574 | 266,197 |
| Available on revolving term loans, net of amount drawn | 9,467 | 7,267 |
| Shareholders' equity attributable to common shareholders | 757,976 | 722,038 |
| 1,740,017 | 1,805,502 |
Other than the financial covenants and restrictive non-financial covenants contained in the loan agreements, TerraVest is not subject to any externally imposed capital restrictions.
The Board of Directors does not establish quantitative return on capital criteria for management. TerraVest intends to maintain a flexible capital structure that is consistent with its stated objectives and adjust it in the light of changes in economic conditions and the risk characteristics of the underlying instruments. In order to maintain or adjust its capital structure, TerraVest may, from time to time, acquire shares for cancellation in connection with a substantial issuer bid ("SIB") or a normal course issuer bid ("NCIB"), issue new shares, raise capital through various debt instruments or refinance current debt through instruments with different characteristics.
SHARE BASED PAYMENTS
TerraVest has a stock option plan for which options are granted to key management personnel to purchase common shares of TerraVest and a deferred share unit ("DSU") plan for non-employee directors. The stock option plan and the DSU plan are "rolling" plans whereby the amount of common shares that may be reserved for issuance shall be up to 10% of the issued common shares outstanding from time to time. An aggregate of 2,168,569 common shares can be issued under the stock option and DSU plans, of which 1,418,241 were available for grant as at March 31, 2026.
The stock options outstanding and the weighted average exercise prices as at March 31, 2026 were as follows:
| Grant Date | Expiry Date | Exercise price | Opening balance | Granted | Closing balance | Vested and exercisable | Unvested |
|---|---|---|---|---|---|---|---|
| Feb. 18, 2022 | Feb. 18, 2032 | $24.49 | 316,500 | - | 316,500 | 316,500 | - |
| Feb. 18, 2022 | Feb. 18, 2032 | $26.99 | 33,333 | - | 33,333 | 33,333 | - |
| Feb. 18, 2022 | Feb. 18, 2032 | $29.49 | 66,667 | - | 66,667 | 33,334 | 33,333 |
| Feb. 18, 2022 | Feb. 18, 2032 | $31.99 | 100,000 | - | 100,000 | 33,333 | 66,667 |
| Feb. 18, 2022 | Feb. 18, 2032 | $34.49 | 100,000 | - | 100,000 | - | 100,000 |
| Feb. 17, 2026 | Feb. 17, 2036 | $142.61 | - | 133,333 | 133,333 | - | 133,333 |
| 616,500 | 133,333 | 749,833 | 416,500 | 333,333 | |||
| Weighted average exercise price | $28.00 | $142.61 | $48.38 | $25.69 |
During the six months ended March 31, 2026, none were redeemed, and no stock options were exercised or forfeited. In February 2026, TerraVest granted 133,333 stock options to key management personnel.
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TerraVest Industries Inc.
FINANCIAL INSTRUMENTS RISK
TerraVest is exposed to various risks in relation to financial instruments. The main types of risks are market risk, credit risk and liquidity risk. An analysis of these risks as at March 31, 2026 is provided below.
Market Risk
TerraVest is exposed to market risk, through its use of financial instruments, specifically to foreign currency risk, interest rate risk and commodity price risk.
Foreign Currency Risk
Foreign currency risk arises from the fluctuation of foreign exchange rates and the degree of volatility of these rates relative to Canadian or U.S dollar. TerraVest is subject to foreign currency risk for:
- sales and operating expenses denominated in foreign currencies made by Canadian entities and certain U.S. entities; and
- financial instruments denominated in foreign currencies in Canadian entities and certain U.S. entities.
TerraVest does not have a policy to hedge its foreign currency risk and manages its exposure to foreign currency risk by periodically entering into forward exchange contracts. Based on the financial instruments net balance denominated in foreign currencies as at March 31, 2026, a one-cent increase per unit of foreign currency exchange rates would have resulted in a favorable impact of $202 on net income (favorable impact of $140 for the year ended September 30, 2025). A one cent decrease per unit of foreign currency exchange rates would have had an impact of a similar magnitude but in opposite directions on net income.
Interest Rate Risk
TerraVest does not have a policy to hedge its interest rate risk and is exposed to interest rate risk arising from fluctuations in interest rates on revolving credit facilities and long-term debt at variable interest rates. TerraVest has interest rate swap agreements to cover the impact of future fluctuations in interest rates under which TerraVest receives interest on the notional amount at the 1-month CORRA rate in exchange for payment at a fixed rate, plus 150 to 300 basis points based on a prescribed ratio.
For the six months ended March 31, 2026, a 1% increase in the interest rate would have had an unfavorable impact of $2,762 on net income ($3,152 for the year ended September 30, 2025), calculated using the average outstanding balances during the period on revolving credit facilities and long-term debt at variable interest rates. A 1% decrease in the interest rate would have had an impact of a similar magnitude but in opposite directions on net income.
Commodity Price Risk
TerraVest is exposed to commodity price risk arising from certain raw material price fluctuations. TerraVest does not have a policy to hedge its commodity price risk and manages its exposure to raw material price fluctuations by periodically entering into commodity swap contracts.
TerraVest's exposure to fluctuations in commodity prices is indirect, as price variations may influence activity levels among customers of its portfolio businesses, which in turn affects demand for goods and services. This indirect impact cannot be quantified.
Credit Risk
Credit risk is the risk that a counterparty will fail to perform its obligations to TerraVest. TerraVest's credit risk comes mainly from accounts receivable and is mitigated through credit policies that limit transactions according to counterparties' creditworthiness, which is assessed by considering counterparties' financial position, past experience and other factors. In addition, a large majority of TerraVest's clients are well-established companies with a history of prompt payment. Accounts receivable amounts are presented on the consolidated statements of financial position net of the allowance for expected credit losses. In measuring the expected credit losses, the trade receivables have been assessed on a collective basis as they possess shared credit risk characteristics. They have been grouped based on the days past due. The expected loss rates are based on the payment profile for sales based on historical credit losses. Trade receivables are written off when there is no reasonable expectation of recovery.
Failure to make payments within 180 days from the invoice date and failure to engage with TerraVest on alternative payment arrangement, amongst others, may be considered indicators of no reasonable expectation of recovery. The credit risk on cash is considered negligible since cash is held in reputable financial institutions with high quality external credit ratings.
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TerraVest Industries Inc.
TerraVest's maximum exposure to credit risk is $231,070 as at March 31, 2026 ($224,336 as at September 30, 2025).
As at March 31, 2026, 91% (93% as at September 30, 2025) of TerraVest's accounts receivable were less than 90 days past invoice date.
Liquidity Risk
TerraVest's objective is to maintain cash and cash availability to meet its liquidity requirements. TerraVest monitors its cash and trade receivable balances as well as cash flows generated from operations to meet its financial obligations. TerraVest also has access to various authorized revolving credit facilities to manage its liquidity needs. For a more detailed discussion on liquidity risk, refer to the section entitled "Liquidity and Capital Resources" in this MD&A.
SIGNIFICANT ACCOUNTING POLICIES
TerraVest prepares its financial statements in accordance with IFRS. TerraVest's accounting policies under IFRS are disclosed in Note 2 of TerraVest's audited consolidated financial statements for the year ended September 30, 2025.
CRITICAL ACCOUNTING ESTIMATES
The discussion and analysis of TerraVest's financial position and results of operations are based on its interim condensed consolidated financial statements, which have been prepared in accordance with IAS 34 Interim Financial Reporting. For information regarding the use of estimates and judgments, please refer to Note 3 of TerraVest's audited consolidated financial statements for the year ended September 30, 2025 and to Note 3 of TerraVest's interim condensed consolidated financial statements for the second quarter ended March 31, 2026.
CONTROLS AND PROCEDURES
As at March 31, 2026, TerraVest's Chief Executive Officer and Chief Financial Officer have certified that the design of the disclosure controls and procedures provides reasonable assurance that significant information relevant to TerraVest is reported to them during the preparation of disclosure documents, and that the design of the internal controls over financial reporting provides reasonable assurance regarding the reliability of the financial information and the preparation of the financial statements in accordance with IFRS. During the period covered by this report, TerraVest did not make any changes in internal controls over financial reporting that significantly affected or are reasonably likely to significantly affect TerraVest's internal controls over financial reporting.
Exception
TerraVest acquired KBK in January 2026. Management has not yet completed its assessment of the design or operating effectiveness of their disclosure controls and procedures and internal controls over financial reporting.
The following table provides significant financial information of KBK for the six months ended March 31, 2026:
| KBK | |
|---|---|
| $ | |
| Total assets | 166,633 |
| Total liabilities | 56,148 |
| Sales | 19,719 |
| Net income (loss) | (28) |
RELATED PARTY TRANSACTIONS
For detailed information on related party identity, relationship and transactions, please refer to Note 28 of TerraVest's audited consolidated financial statements for the year ended September 30, 2025.
RISK FACTORS
For a detailed discussion of the risk factors related to the businesses and to the structure of TerraVest, please refer to the AIF of TerraVest under the heading "Risk Factors", which is incorporated herein by reference.
ADDITIONAL INFORMATION
Additional information relating to TerraVest, including the AIF of TerraVest, is available on SEDAR+ at www.sedarplus.ca.
2026 Q2 - MD&A
TerraVest Industries Inc.