ADF Group Inc.

Good morning ladies and gentlemen and welcome to ADF group third quarter results 2024 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 0 for the operator. This call is being recorded on Thursday December 7, 2023. I would now like to turn the conference over to Jean-François Bourcy, Chief Financial Officer. Please go ahead.

Thank you. Good morning and welcome to ADF's conference call covering the third quarter and nine months ended October 31st, 2023. I will first update you on our quarterly and year-to-date results, which were disclosed earlier this morning by press release, and then proceed with a quick update about our operations. First, a word of caution. Please note that some of the issues discussed today may include forward-looking statements. These are documented in ADF Groups Management Report for the third quarter and nine-month ended October 31, 2023, which were filed with CDAR this morning. After posting two consecutive quarters of $80 million in revenues, we closed our third quarter ended October 31st, 2023 with revenues of $82.1 million, $17.1 million or 26.4% higher than last year. Year to date. Revenues stood at $242.6 million compared to $199.4 million for the nine-month period ended October 31, 2022. These increases are in line with the past quarter's trend and our increased backlog. Gross margin as a percentage of revenues at 24.4% is up from the 15% margin for the quarter ended October 31, 2022, while adjusted EBITDA at $17.8 million is $10.2 million higher than the third quarter ended last year. Year to date, gross margin as a percentage of revenues at 21.1% is up from the 13.3% margin for the nine-month period ended October 31, 2022, while adjusted EBITDA at $40.4 million was $20.2 million higher than the nine-month period ended last year. Gross margins for the three-month and nine-month periods ended October 31, 2023, benefited primarily from the operational efficiencies generated by the commissioning of the new robotic production line and new programmable and automated equipment at ADS plant in Terrebonne, and also by the improvement in margins of recently signed projects that are now in fabrication. Year-to-date, these favorable gross margin variances did not entirely trickle down to adjusted EBITDA, considering the increase in selling and administrative expenses for the nine-month period ended October 2017. 31, 2023. For the three- and nine-month period ended October 31, 2023, SG&E expenses stood at $3.8 million and $15.2 million, respectively $119,000 and $5.1 million higher than for the corresponding periods a year earlier. Year-to-date increases comes from the higher salary levels in line with the recent inflation trends and share-based compensation fair market valuation in line with ADF stock price increase. In addition, selling and administrative expenses for the nine-month periods ended last year, on October 31, 2022, benefited from an $800,000 gain on disposal of fixed assets. We therefore close our third quarter with net income of $11.2 million, or $0.34 per share, compared to $2.9 million, or $0.09 per share for the corresponding quarter a year ago. Year to date, net income stood at $27.1 million, or $0.83 per share, compared to $12.6 million, or $0.39 per share for the same period ended October 31st, 2022. As at October 31st, 2023, cash and cash equivalents stood at $44 million, $36.8 million higher than as at January 31st, 2023, while working capital stood at $94.5 million, 44.1% higher than the January 31st, 2023 levels. Now that our investment program for the automation of our fabrication facility in Terrebonne is finalized, we expect full-year CAPEX to be under $6 million, with $5.2 million being spent year to date. Finally, we close the quarter with a backlog of $339.3 million. On the workforce front, we are happy to confirm that our 189 unionized Terrebonne facility employees ratified this December 3rd, a five-year renewal of their labor agreement. We are now turning our attention to closing our fiscal 2024 year. We are still seeing a good bidding pipeline and are confident that we will be able to announce new contracts in the coming weeks. With a strong backlog, sound balance sheet, and the recently ratified union agreement for our turbine facility employees, we are well positioned to maintain our past quarter's positive trend and pursue our growth. Thank you for your interest and confidence in ADF. We will now answer your questions.

Thank you. Ladies and gentlemen, we will now take questions from analysts only. Should you have a question, please press the star followed by the one on your touch-tone phone. If you'd like to withdraw your question, please press the star followed by the two. If you're using a speakerphone, please leave the handset before pressing any keys.