Adf Group Inc

TSX:DRX

Earnings Call Transcript 2021-Q3

[Operator]

Good morning, ladies and gentlemen, and welcome to the ADF Group Third Quarter Results Conference Call. [Operator Instructions] Also note that the call is being recorded on Wednesday, December 9, 2020.And I would like to turn the conference over to Jean-François Boursier, Chief Financial Officer. Please go ahead.

[Jean-François Boursier]

Thank you. Good morning, ladies and gentlemen. Welcome to ADF's conference call covering the third quarter and 9 months ended October 31, 2020. I will update you on our results, which were disclosed earlier this morning by press release, and then update you on our operations.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 third quarter and 9 months ended October 31, 2020, which were filed with SEDAR this morning. Please also consider that, although for the moment, the impact of COVID-19 on ADF's operation is still limited, the extent to which the virus can have an impact on our results will depend on future developments, which are still uncertain and cannot be predicted at this time, including new information that may emerge regarding the COVID-19 and the measures taken to contain it or address its impact, among others.Revenues for the third quarter stood at $47.2 million compared with $42.1 million last year. Year-to-date, revenues at $135.5 million were $2.1 million higher than last year. First, and as a reminder, it is worth mentioning that revenues for the 3-month and 9-month period ended last year on October 31, 2019, were impacted by a downward adjustment of $7.7 million, with no impact on income tax, resulting from an out-of-court settlement related to a commercial dispute in Florida. This adjustment also impacted these same period's gross margin and net income.Gross margins for the third quarter at 15.9% was 13.5% higher than reported a year ago. Year-to-date, gross margin stood at 14.6% compared to 9.4% for the 9-month period ended October 31, 2019. Besides the aforementioned out-of-court settlement impact, better pricing and better absorption of fixed costs explain the quarter-over-quarter margin improvement.At the close of the 3 months ended October 31, 2020, EBITDA stood at $5 million, $7.4 million better than for the corresponding quarter a year ago. Year-to-date, EBITDA stood at $12.6 million compared to $3.6 million a year ago. The increase in gross margins and the lower selling administrative expenses, the latter coming from the lower legal fees associated to last year third quarter out-of-court settlement, explain these favorable variances.For the quarter ended October 31, 2020, net earnings stood at $2.6 million or $0.08 per share, basic and diluted, compared with negative net earnings of $4.1 million for the same period a year ago or minus $0.12 per share, basic and diluted. For the 9-month period ended October 31, 2020, net earnings stood at $4.8 million or $0.15 per share, basic and diluted, compared to negative $2 million for the 9-month ended October 31, 2019, minus $0.06 per share, basic and diluted.Besides the element -- the elements mentioned before, FX fluctuation had a $0.7 million unfavorable impact when comparing the 9-month period ended October 31, 2020 and 2019. Although the pandemic did not significantly impact ADF's operation to date, the cumulative impact of the required COVID-19-related measures and the [ initial fees ] and costs related to these measures did have a somewhat negative impact on ADF's cumulative results for the 9-month period ended October 31, 2020.Along with our improved results and following our cash management responsible approach, our working capital, liquidities and balance sheet situation also improved. Working capital as at October 31, 2020, at $37.5 million was $8.2 million better than at January 31, 2020, level. Net liquidities at $18.8 million are $27.9 million higher than at January 31, 2020. And year-to-date, cash flow from operation generated $27.8 million.In light of the uncertainty surrounding the COVID-19, we are taking a cautious approach with our liquidities, and accordingly, are tailoring our CapEx program to this situation with only $1 million spend during the 9-month ended last October 31.As mentioned in our first 2 quarterly calls, ADF, like many others, is still navigating into uncharted waters. As mentioned before, and although the impact of the COVID-19 pandemic as of this date had a limited impact on ADF's operation, we remain abreast of economic development -- developments and trends. Our order backlog stood at $282.5 million as at October 31, 2020. On November 25, 2020, we announced the award of 2 new contracts in the commercial building sector in the U.S.A., worth a total of $101 million. The scope of the largest of these contracts in terms of value and tonnage relates to the design and engineering of connection, fabrication, including industrial coating and the supply of steel, and the installation of the steel structure of a new building with a commercial vocation in the Northwestern U.S.A. The other contract is located in the Northeastern U.S.A. and consists in the supply of steel and shop drawings and the fabrication of steel structure used in the construction of a new government building. All these contracts will be fabricated out of our Terrebonne facility.Since the beginning of this fiscal year and in spite of the uncertain economic environment brought forward by the pandemic and including contractual changes on existing projects, we have been able to increase our backlog by almost $200 million. Although we are still looking at some uncertain quarters, our year-to-date results, along with the new contract announcements, are comforting us in our approach and bodes well for a next fiscal year. This said, and as we have always done, we will not stop pursuing our quest for increased backlog and operational excellence.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 registered, sir.

[Jean-François Boursier]

Thank you. Again, I wish to thank you for your interest in ADF Group. Have a nice day.

[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.