Adf Group Inc

TSX:DRX

Earnings Call Transcript 2023-Q1

[Operator]

Good morning, ladies and gentlemen, and welcome to ADF Group First Quarter Results for the period ending April 20, 2022 (sic) [ April 30, 2022 ] [Operator Instructions] Note that this call is being recorded on Wednesday, June 8, 2022. And I would like to turn the conference over to Jean-François Boursier, Chief Financial Officer. Please go ahead.

[Jean-François Boursier, executive]

Thank you. Good morning, ladies and gentlemen. Welcome to ADF's conference call covering the first quarter ended April 30, 2022. I'm currently at our Terrebonne office, where we will hold our Annual Shareholders Meeting after this call at 11 a.m. by way of live webcast.

I will first update you on our quarterly results, which were disclosed earlier this morning by press release and then update you on our operations, including yesterday's new contracts announcement. But first, a word of caution. 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, 2022, which were filed with SEDAR this morning.

We started the first quarter of our new fiscal year with revenues of $68 million, which is $17.6 million or 35% more than the first quarter ended a year ago. Gross margin as a percentage of revenues at 12.1% is down from the 15.4% margin for the quarter ended April 30, 2021, while adjusted EBITDA at $5.6 million was $0.5 million lower than the first quarter ended last year.

This said, it is important to note that the first quarter ended a year ago on April 30, 2021, benefited from a COVID-related subsidy, which improved gross margin by $1.6 million and adjusted EBITDA by $1.9 million. So excluding the subsidy, the margin for the quarter ended a year ago would have been 12.2%, the same level as our quarter ended last April 30, while adjusted EBITDA for the quarter ended April 30, 2021, would have been $4.2 million or $1.4 million less than the EBITDA for the quarter ended last April 30.

It is also important to note that the quarter ended April 30, 2022, was temporarily impacted downward by work related to the automation investments at our Terrebonne plant. Given the scale of the construction site, our production teams did an exceptional job of maintaining the production schedules, but our usual operational efficiency was temporarily affected.

We, therefore, closed our first quarter with net income of $4.3 million or $0.13 per share, virtually the same levels as the corresponding quarter a year ago. Taking into account the ramp up, including the purchase of steel of projects announced at the very end of our last fiscal year, cash flows from operations required funds of $4.7 million.

We also, as previously mentioned, continued our CapEx investment program at our Terrebonne facility, which required additional investment of $3.5 million during the quarter ended April 30, 2022. As announced with our year-end results, we received the first amount of our new financing with Investissement Québec in the amount of $15 million. We should be able to draw down the remaining $5 million of these loans within the next 2 quarters, including the BDC loan announced and cashed in for -- with our fiscal 2022 year-end, the impact of these loans rebalance our balance sheet.

In this sense, the quarter ended April 30, 2022, posted a working capital of $54.4 million for a ratio of 1.9:1, which are levels not reached since the last 5 years. With this, we closed the quarter ended April 30, 2022, with $12.8 million in cash and cash equivalents, with no amount being drawn from our credit facilities and thus, in excellent position to pursue our backlog growth and execute our current backlog, which stood at $325.4 million as of April 30, 2022.

Talking about our backlog, we announced yesterday the signing of new contracts totaling $90 million. Contract amounts, which are not included in our quarter end just confirmed backlog balance. These projects will be one of the first that will be fabricated using our brand-new robotic line and automated equipment, a very important and exciting step for ADF.

We still see many bidding opportunities and should be able to confirm additional contract signings soon. In light of these new contracts, including the ones announced last January 31, 2022, working capital management will remain a priority for ADF. As we have previously explained, backlog growth exerts pressure on our working capital, but we are comfortable with our existing credit facilities. Our CapEx investment program is winding down and we expect full year CapEx to stand at $8 million.

In light of this, we are confident that we have the operational and financial means to pursue our growth and improve our results. Ladies and gentlemen, thank you for your interest and confidence in ADF. I will now answer your questions.

[Operator]

[Operator Instructions] And at this time, Mr. Boursier, we have no questions. Please proceed.

[Jean-François Boursier, executive]

Thank you. Again, I wish to thank you for your interest in ADF Group, and remind you that we will hold our fiscal 2022 shareholders meeting this morning at 11. Connection details to access the live webcast are available on our website as well as on the press release filed this morning, also available on our website. Thank you.

[Operator]

Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines.