ADF Group Inc.

Good morning ladies and gentlemen and welcome to ADF group first quarter results ended April 30th, 2023 conference call. At this time, all lines are in a listen only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Wednesday, June 7th, 2023. I would now like to turn the conference over to Jean-François Boursy, Chief Financial Officer. Please go ahead.

Thank you. Good morning. I am with Jean Paschini, Chairman of the Board and CEO of ADF. We will provide additional information about this morning's contract announcement as well as an outlook. We are 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. Connection details are available on our website as well as on the press release disclosed this morning. I will first update you on our quarterly results which were disclosed earlier this morning by press release. 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, 2023, which were filed with CDAR this morning. We are off to a good start with revenues of $80.3 million, which is $12.3 million, or 18% more than the first quarter ended a year ago. Gross margin as a percentage of revenues at 16.8% is up from the 12.1% margin for the quarter ended April 30, 2022, while adjusted EBITDA at $10 million, was $4.4 million, or 79% higher than the first quarter ended last year. These increases stem from the increased backlog, including the new projects worth $260 million announced in December 2022 and January 2023, and from the improved efficiencies coming from our new automated equipment at our turbine fabrication facility. It is also important to note that the quarter ended April 30th, 2022 had been temporarily impacted downward by work related to the just mentioned automation investments. We therefore close our first quarter with net income of $5.4 million or 16 cents per share compared to $4.3 million or 13 cents per share for the same quarter a year ago. As we have discussed on our call for the January 31st, 2023 results, receivables were higher than usual with the start of projects recently signed. The collection of those receivables during the quarter ended April 30th, 2023 explains most of the $41.2 million of cash inflows from operating activities. Now that our investment program for the automation of our fabrication facility in Tarbun is behind us, we expect full-year CAPEX to be under $5 million, with $0.7 million being spent in the quarter ended April 30, 2023. With this, we close the quarter ended on April 30, 2023, with $46.5 million in cash and cash equivalent, 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 $312.4 million as of April 30th, 2023, excluding the new contracts announced since the end of the quarter. In addition, on April 28th, 2023, We entered into a new agreement with our Canadian financial institution for our Canadian operating credit facility, which increased from $30 million to $40 million. This amount remains subject to our margination calculation, but only when we need to draw over $20 million. All other terms and conditions remain similar to the previous terms. I will now turn the call to Jean.

Thank you, Jean-Francois. We announced a week ago a series of new contracts totaling over $140 million, one of which is a major high-volume project in pharmaceutical industry in the U.S. Midwest region. These new contracts will be carried out at our turbine plant, with most of the volume being fabricated where a new robotic fabrication lines. Apart the efficiency gain from our new equipment and considering the level of our order backlog, our robotic line allows us to free up valuable production hours to work on higher complexity projects. As Jean-Francois mentioned, our gross margins are already showing the positive effect of our last investment, and we are confident. we will be able to fully benefit from our last investment and improving production-related costs, efficiency, and profitability with every new project we sign. Looking forward, we are encouraged by the bidding opportunity and still see growth in our market, and we feel confident we will be able to announce new contracts soon. We will continue our effort to pursue our growth and achieve improved results, and we remain focused on continuing building ADF on the know-how of our personnel, our long-standing industry expertise, and our state-of-the-art facility. Thank you for your interest and confidence in ADF Group. We will now answer your questions.