Adf Group Inc

TSX:DRX

Earnings Call Transcript 2020-Q1

[Operator]

Good morning, ladies and gentlemen, and welcome to the ADF Group results for the period ending April 30, 2019. [Operator Instructions] Please note that this call is being recorded on June 12, 2019.I would now like to turn the conference over to Jean Paschini, Co-Chairman of the Board of Directors and Chief Executive Officer. Please go ahead.

[Jean Paschini, Co]

Thank you. Good morning, ladies and gentlemen. Welcome to ADF's conference call covering the first quarter ended April 30, 2019. Sitting with me this morning is Jean-François Boursier, our CFO. We are currently at the Imperia Hotel in Terrebonne. We will hold our Annual Shareholder Meeting right after this call.I will now ask Jean-François to update you on the quarterly results, which were disclosed earlier this morning by press release. I will then update you on our operations, and we will also discuss new orders we also announced this morning -- earlier this morning.

[Jean-François Boursier]

Thank you, Jean. Good day, everyone. Please note that some of the issues discussed today may include forward-looking statements. These are documented in ADF Group's management report for the first quarter ended April 30, 2019, which were filed with SEDAR this morning.Revenues for the first quarter stood at $37.1 million compared with $28.5 million last year. You will recall that the uncertainty created by the import tariffs introduced early last year had a negative impact on our fiscal 2019 results, including our results for the quarter ended April 30, 2018. As you may also recall, we have recuperated from the slow start and were successful in signing new contracts worth a total of almost $300 million from the beginning of last year to April 30, 2019, excluding the new commercial agreements announced earlier this morning. The $37.1 million in revenues are now showing some of these new contracts hitting our fabrication shop floors.Gross margin at 15.5% benefited from better absorption of fixed cost in line with the higher volumes and the finalization of contractual changes, which improved margins. At the close of the 3 months ended April 30, 2019, EBITDA stood at $3 million compared to a negative EBITDA of $1.2 million a year ago.Selling and administrative expenses were higher than last year, mostly from timing differences and should come back in line with last year's level over the next quarters.Year-to-date, net earnings stood at $1.6 million or $0.05 per share, basic and diluted, compared with a net loss of $0.9 million a year ago or $0.03 per share, basic and diluted.Besides the elements mentioned before, the net earnings for the quarter ended last April was positively impacted by the recognition of deferred tax assets totaling $1 million, which were previously written off, which reduced the tax expense by the same amount.With the increase in volume and revenues, our balance sheet remained somewhat under pressure. In spite of this, working capital as at April 30, 2019, at $32.7 million was strong and even somewhat higher than our January 31, 2019, working capital, which stood at $31.8 million.Cash flow from operations required $2.8 million, which were mainly financed by drawing an additional $2.8 million from our credit facility since January 31, 2019.Our order backlog stood at $255.4 million as at April 30, 2019, excluding the new commercial agreements announced this morning. In light of this backlog and these new commercial agreements, we do expect to see our revenues to maintain an upward trend, more so in the second half of this fiscal year and following quarters.Ladies and gentlemen, thank you for your attention. I will now turn the call to Jean.

[Jean Paschini, Co]

Thank you, Jean-François. As previously mentioned, we announced this morning a series of new commercial agreements in the U.S., worth a total of $165 million, which will bring our backlog of current order just over $400 million mark, which is among the highest recorded during a single year.I would also like to point out that although these new projects will only start contributing more significantly to the top and bottom line next year, it most certainly puts us on the right track to reach our objective to grow our backlog. What's more, we have worked with one of our clients on several other projects in the past and so the long-term relationship we've built over the year resulted in repeat business.The work we did so far to improve some of our process and methods has definitely contributed to our overall operational performance. Although our results did improve during the first quarter, we are continuing to strive to improve them -- to improve on them.We are looking at every business opportunity there is, and we are making every effort to ensure we grow the level of order backlog in a profitable way and continue to closely monitor our operation risks.Ladies and gentlemen, thank you for your interest and confidence in ADF Group. Jean-François and I will answer your questions.

[Operator]

[Operator Instructions] We don't have any questions at this time. Please proceed.

[Jean Paschini, Co]

Again, I wish to thank you for your interest in ADF Group. We will remain available to answer your questions. Have a good day.

[Operator]

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.