ADF Group Inc.

be available to answer your question at the end of the call. We are currently at the Sheraton Laval where we will hold our 2024 Annual Shareholders Meeting after this call at 11 a.m. I will now 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, 2024, which were filed with CDAR this morning. We are off to a very good start with revenues of $107.4 million, which is $27.1 million, or 34% more than the first quarter ended a year ago. Gross margin as a percentage of revenues at 29.2% is up from the 16.8 margin for the quarter ended April 30, 2023, while adjusted EBITDA at $23.1 million was $13.1 million, or 130% higher than the first quarter ended last year. These increases are in line with the increase observed in recent quarters and are largely largely attributable to a better absorption of fixed costs in line with the increase in defabrication volume, the continued favorable impact of the investments in automation at ADS plants in Terrebonne, Quebec, and a favorable mix of fabricated projects. These favorable variances were tempered by higher SG&A expenses This increase coming from the adjustment in the market value of deferred shared units and of performance share units, this marked market adjustment being $5.4 million higher than last year, in line with the increase in the corporation share price. We therefore close our first quarter with net income of $15.3 million or 47 cents per share compared to $5.4 million or 16 cents per share for the same quarter a year ago. Besides the adjusted EBITDA impact, the increase in net income also comes from lower net financial expenses, which benefited from interest revenues coming from our outstanding cash balances. Looking at the balance sheet, we posted that April 30th, 2024, cash balances $24 million lower when compared to our January 31st, 2024 balances. In parallel, at quarter end, we had outstanding receivable of $121.7 million, with many of these amounts being collected since April 30, 2024. All this to say that our consolidated cash balances, as of today, are not only back to our $72.4 million year-end level, but actually exceeding that. In fact, as of this morning, our consolidated cash balance Cash balances stood at $81.5 million. Considering this, we are not concerned with the cash flow from operation, which required $22.3 million for the first three months closed on April 30, 2024. Tapex for the first quarter ended last April 30, totaled $1.4 million, and were mostly for maintenance of our Terbon and Great Falls Fabrication Facilities. We expect four-year CAPEX to be under $5 million. Finally, we closed the quarter with a backlog of $427.5 million, excluding the contracts worth $90 million announced after the quarter end on May 28. Most of these new contracts coming from additional work relating to the second phase of a contract previously announced in December 2023. As I just mentioned, liquidities are, as of today, back to our January 31st level and even exceeding these levels. As such, the corporation believes that the available cash exceeds the amounts required to support the growth and execution of our order backlog on N as of April 30th, 2024, and to meet our financial covenants plan for fiscal 2025. Given ADS' favorable financial position, The size of our order backlog and our cash flow generation profile, the Board of Directors evaluated the options available to the corporation with respect to the use of excess cash to create value for shareholders, including dividends and share repurchases, and opportunities to finance certain projects that could provide additional long-term competitive advantages and allow the corporation to benefit from prompt payment discounts negotiated with with its suppliers. With this in mind, the corporation intends to enter into private agreements within 30 days from tomorrow with Jean, Pierre, and Maryse Paschini, members of the board of directors and corporation management team, through their respective holding companies to purchase, for cancellation, up to a maximum of 3 million shares the corporation at a price to be agreed upon by the parties at the minimum discount of 3% on the price of the last independent transaction immediately before the proposed repurchase. The Corporation Board of Directors has established a special committee composed of independent directors to review the terms of the proposed repurchase and to make a recommendation to the Board of Directors respect thereto. A favorable decision has been obtained from the Autorité des Marchés Financiers to exempt the corporation from the requirements applicable to share bids under applicable legislation. If such agreements are entered into, the corporation will issue a press release and information relating to the share repurchase, including the number of shares involved and the total purchase price, following the completion of the proposed repurchase, if any. Jean, Pierre, and Marie Paschini have informed the corporation that shares in question will be sold to the corporation for asset diversification and estate planning purposes and that they are not considering any further share sales and that they remain fully committed to growing the corporation. Furthermore, the Corporation Board of Directors approved the amendment to ADS dividend policy to increase the semi-annual dividend from one cent per share to two cents per share. The amendment will apply to the next dividend payment scheduled for October 2024. Please, however, note that the declaration of payment of dividends remains at the discretion of the Corporation Board of Directors. We are happy with our fiscal 2025 start of the year and are favorably looking at the upcoming quarters. We will continue our efforts to grow our backlog and generate liquidity. We are also happy with the market reaction to our operational and financial performances. On April 26, our stock reached $15.20 per share, beating ADF's historical high of $15 per share. which was achieved almost 23 years ago in December 2001. We have since continued to reach new eyes, which reaffirms our strategic decision and careful approach of the past years. We will continue our efforts 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 on our state-of-the-art facilities. Thank you for your interest and confidence in ADF. Zhai and I will now answer your questions.

Thank you. Ladies and gentlemen, if you would like to ask a question, please press star 1. If you would like to withdraw your question, please press star 2. Again, to ask a question, press star 1. One moment, please, for your first question. Your first question comes from Nicholas Cortellucci from Atrium Research. Please go ahead.

Good morning, gentlemen. Congrats on another fantastic quarter here. Good morning. So my first question, kind of going back to the last call, I wanted to ask you guys about the longevity of this cycle. So how are things looking for fiscal 26 and beyond? Do you think you can post another year of 10% plus top line growth?

Well, what we're seeing right now, I think for the next two to three years, there's going to be growth, okay? Growth, the market, okay? The market's growing. And for us, we're going to see growth this year, next year, and the year after. So we see it. We see good potential for the next three to five years.

Okay, perfect. And then with that, what is the capacity situation like, and do you foresee that being a challenge?

Right now, there's no limit of the capacity. We don't talk about capacity. Whatever projects that we get, we're going to put them in the shop and we're going to fabricate them. You know, our shop right now, it's set up to $700 million, $800 million, even $1 billion. I've got no problem there with the facility that we have.

Okay. Thank you very much. Congrats again, and we'll jump back in the queue. Thank you.

Ladies and gentlemen, as a reminder, if you'd like to ask a question, please press star 1. And there are no further questions at this time. I will turn the call back over to Jean-François Boursier for closing remarks.

Again, we wish to thank you for your interest in ADF Group and remind you that we will hold our fiscal 2024 shareholders meeting in just a few minutes at 11 at the Charleston Laval Hotel. Thank you. Thank you.

Ladies and gentlemen, this concludes your conference call for today. You may now disconnect. Thank you.