ADF Group Inc.

Good morning, ladies and gentlemen, and welcome to the ADF Group Inc. Results for the three-month period ended April 30, 2026 conference call. At this time, note that all participants' lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. And if at any time during this call you require needed assistance, please press star zero for the operator. I'm sorry, star zero for the operator. Also note that this call is being recorded on Tuesday, June 9, 2026. I would now like to turn the conference over to Mr. Jean-Francois Boursy, Chief Financial Officer. Please go ahead, sir.

Yes, ma'am. Good morning and welcome to ADF's conference call covering the first quarter ended April 30, 2026. I am with Keir Kostini, Chief Operating Officer of ADF, who will be available to answer your questions at the end of the call. We are currently an hour from hosting our 2026 Annual Shareholders Meeting, which will take place here at our corporate office in Petbun. 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, The first quarter ended April 30, 2026, which were filed with CDR this morning. Our fiscal 2027 is off to an excellent start. Even if we are dealing with the numerous and never-ending past changes, we are still keeping our focus and managing these challenges proactive. Revenues during the three-month period ended April 30, 2026, Total $99.3 million, 78.8% higher than the $55.5 million for the same period ended a year ago. The increase comes from the recently signed contracts, which are now in fabrication. It is also worth mentioning that our first quarter revenues a year ago were negatively impacted by the then recently announced The gross margin at $24.0 million almost doubled when compared with the same period of the previous fiscal year. Gross margin as a percentage of revenues went from 22% during the three-month period ended April 30, 2025, to 24.2% during the same period ended April 30, 2026. The increase in margin, both in dollars and as a percentage of revenues, is explained by the higher revenues, which improves the absorption of fixed costs, despite higher input prices, including the price of steel and the recent changes to tariffs. The revenues and margin for the quarter ending April 30th, 2026, are now inclusive of the group law acquisition which was finalized in September 2025. As such, our revenues and growth margin for the quarter ended April 30, 2026, included $18.1 million and $1.3 million, respectively, coming from growth loss. For the three-month period ended April 30, 2026, Selling and administrative expenses amounted to $7.6 million, boasting a $4.2 million increase compared with the same period a year. This variation is mainly explained by the adjustment in the market value of deferred shared units and in performance shared units granted to external board of directors members and certain members of senior management, in line with the variation in the corporation share price during the periods analyzed. The acquisition of Group Law also had an upward impact on selling administrative expenses of $1.1 million during the three-month period ended April 30, 2026. We therefore close our first quarter with an income of $12 million, or 42 cents per share, compared to $8.7 million, or 30 cents per share for the same quarter, a year ago. Our balance sheet remains very strong. We closed our first quarter and did last April 30th with cash and cash equivalent of $62.1 million, only $0.6 million lower than our January 31st, 2026, ending back. Working capital stood at $111.9 million for a 2.2 to 1 ratio. Acquisition of property, planning equipment, and intangible assets for the first quarter and the last April 30th total $9 million, including the modification of an existing fabrication bay in Tabun, the start of the expansion capex in Metabichuan for Gopla, and the redesign of the corporation's integrated ERP software package. We actually had the first shovel ceremony last week for our LAR extension project. We expect foliar paybacks to be approximately $35 million. Finally, we closed the corridor with a record-breaking backlog of $645.8 million. This backlog includes $266.5 million coming from GoPla, which includes the multi-year contract announced last April. Worth mentioning, the April 30, 2026 backlog includes 72% of Canadian projects. As previously mentioned, we are very satisfied with the results of our first order, which is highlighted by the progress of our operating activities and the ongoing growth of our order backlog. As announced this past April, we have finalized a long-term contract in the hydroelectric sector in Quebec for Gauguin, which confirms our optimism expressed in our year-end reporting and communication, Annihilates the importance of the investments we will make in the coming quarters to not only increase the production capacity of Glucolab's plant, but also outfit it with state-of-the-art equipment. Our financial position remains strong, and we are continuing our discussion with the goal of securing adequate financing for our capital investment in Lex Asia. As such, We were able to reach an agreement with the federal government for a $12.5 million loan, which, subject to certain conditions, would be 50% forgivable and 50% interest-free. We expect to have the full financing package confirmed before the end of the second quarter and being next July 31st. Though our market remains active, U.S. virus policy remains a significant irritant and will continue to have pressure directly and indirectly for our cost structure. This being said, and as shown by our results for the first quarter, our proactive approach allows us to continue our orderly growth and minimize the risks associated with existing uncertainties. Thank you for your interest and confidence in ADF. Gary and I will now answer your questions.

Thank you, sir. Ladies and gentlemen, if you do have any questions at this time, please press star followed by one on your touch-down phone. You will then hear a prompt that your hand has been raised. And should you wish to withdraw from the polling process, please press star followed by two. And if you're using a speakerphone, you will need to lift the handset first before pressing any keys. Please go ahead and press star one now if you have any questions. Thank you. And your first question will be from Nicholas Cotellucci at Atrium. Please go ahead.

Good morning, gentlemen. Thanks for answering my questions. And congrats on the quarter here. It's a really strong result. So I was wondering about the timeframe on the large HAPEX thing. Is it kind of a phased approach, or how long do you think it will take to get a meaningful revenue impact from that?

Well, construction actually, as I mentioned, we had the first shovel ceremony last week. We actually started construction on the site yesterday. We plan to have the building closed out before winter, so around November, December. Finalize the setup during the winter, so technically April, May, the plan should be up and running. So, Starting with the second quarter of next fiscal year, we should start to see some impact from the additional volume and the improved efficiency coming from the new equipment.

Great. And would you be able to tell us what large capacity was prior to this, maybe just in dollars versus after, or maybe even just a percentage increase if that would be easier?

Well, they typically, volume-wise, with the mix of product they presently have, they were able to do about 100 million, maybe a bit more. The expansion will double the capacity. So, again, depending on mix, we should be able to double. On a revenue standpoint, it always depends on on margins and the pricing of the projects, but basically the expansion should double the capacity.

That sounds good. And then for JF, on the SG&A levels going forward, is this kind of the baseline, what we saw in 2004 and 2001, if we exclude the stock-based competition?

Yes, pretty much. Law is included, so as I mentioned, the impact of law alone in Q1 is 1.1. We can grow the revenues without really having to grow much of the CNA, at least not significantly, so besides inflation on salaries, the CNA should be pretty flat. There's always the Okay, got it. Understood.

And then last one for me, if you guys have an update on more of kind of like the growth sectors or growth projects, whether that's nuclear or data centers, are you seeing any more volume in areas like that?

Yeah, we've got some volume coming into space also. We're looking at some job, great job, that we can do a great falls and all that, so I think there's a lot of job fitting, there's competition, there's niche work that we can do. We're in Canada, there's a lot of work coming with, you know, I look back and other places in Ontario also, some nuclear stuff, so all the business estimating, I mean, basically, so we do our gang to do more estimates so we can pick up more work, but that's usually pricey. So for us, I mean, the market is good. I mean, the reason why we're able to do what we're doing is that we can do jobs in the States by American actors, not initially with the Great Fault Plan. And some other stuff, I mean, even with the tariffs, with the new victim, we can become better than Montreal. And Laura, well, Laura, I think, is quite an acquisition, and it's more if you're getting They're going to do their work. I mean, there's enough clients, and I think the volume is going to be there for the next five years.

Yeah, very good. Okay, thanks for answering my question, and congrats again, Jens. Thanks, Dave. Thanks.

Once again, ladies and gentlemen, if you do have any questions, please press star followed by one on your next phone phone. Thank you. Next question will be from Sebastian Charlin at Agave Capital. Please go ahead.

My first question is regarding the gross margin. I think a very positive surprise this morning. Last quarter, I believe the guidance or perhaps what we discussed was more in the lower 20% range, 20 to 22. It seems we're recovering towards that 24 and up, despite the lower margin contracts at law. I'm just wondering what could explain the stronger performance in Q1? I think we were more expecting this in the second half of the year. Has there been any project pulled forward, anything exceptional? Do you expect a second quarter to be weaker?

Well, I'd love to be more precise on the guidance, and that's why we don't provide specific guidance. Sometimes it's not a whole lot of things. It's just a project coming in sooner than expected or one not coming in with lower margin as soon as expected. So it's really more a matter of the product mix. So it's not a huge shift, but to your point, maybe a point or two higher than we might have expected. I expect margins in the second quarter to be pretty similar, as with considering the volume that we should be able to tackle in that second quarter. And we also mentioned at the year end, we're still working on the integration of , so in the second half of the year, we should start seeing some of those, Some of the benefits from the synergies being driven by this, but the step change will really be, as I mentioned on the first question, the step change will really be next year when the new, the addition and the expansion in Gauguin kicks in with the new equipment. But, again, we were obviously happy with the numbers. And I guess it just shows that we've been able to execute the project, but as I said, sometimes it's not a whole lot. It's just timing of maybe a couple of weeks that might have pushed some of the margins up higher than expected.

Got it. That's helpful. And apologies, I shouldn't have said guidance. Perhaps I should say you manage your expectations right. So that was a positive surprise. On the financing agreement news, that's great to see the feds, the federal, coming in with this. I was wondering, would it be crazy to expect the provincial level to maybe come in as well, especially in the Saguenay-Lac-Saint-Jean region?

It wouldn't, but still having discussions, so... Hopefully we'll be able to button down everything we're working on but we're looking at obviously both levels of government and we've always had a good relationship at both levels so we're pleased to be able to finalize on the federal side and working for the rest of the package so we'll have more to say in the coming weeks. Definitely unless something drastic happens, but we should be able, as I said, we should be able to button down everything by the end of the quarter.

Got it. And maybe the last one for me, I think we understand now that it's pretty much buckled up for the foreseeable future, plus the expansion plan. If we focus back on Terrebonne and even Great Falls, Can you comment on perhaps the capacity that's left there? Maybe the percentage or calendar-wise for 26 and 27?

Well, Great Falls, obviously, with the issues with tariffs, it's definitely much easier to sign contracts for U.S. projects being fabricated in Great Falls because obviously you where you take the Paris discussion out of the equation. So as it stands now, our great fall plan is getting pretty full for the year, and we already have volume for next year. At the moment this year, obviously, in normal circumstances, we do have good volume coming from the U.S., As surprising as it may seem, and even with the difficulties, we're still having projects, U.S. projects that are coming in, where we manage the terrorist impact along with our clients, and we're also, because of the success we have and the fact that the Expansion in LAV for GOPLAV is not in place. We're also doing volume that would have normally been done at the GOPLAV site. So we're helping out LAV, which fills some of the capacity here in Tubbun. For next year, you saw the backlog. So we're starting also to have good volume. The long-term contract gives us longer-term visibility, which is something new for ADF, which is also really nice to have, the longer-term visibility. And as I mentioned, the markets are still, inside of everything, the markets are still strong. There's still a lot of projects out there. So the plan is to fill as much as possible the shops. The initial objective was really to put additional effort on law, and I think we've been pretty successful of doing that. So now it's just making sure that we fill the capacity here in Tebun for the remainder of the year and next year. But we still have room. There's still capacity available. So things are looking good. And there's always a possibility also in Great Falls, as we have mentioned in previous communications, should we get to that point. There's nothing on the table now, but we're obviously monitoring the situation.

Got it. That's it for me. Congrats again. Thanks.

Thank you. And at this time, as you will see, we have no other questions registered. Please proceed.

Again, we wish to thank you for your interest in ABF Group and to remind you that we will hold our fiscal 2026 elders meeting in just a few minutes at 11 here at our corporate office in Taiwan for that. Thank you.

Thank you, sir. Ladies and gentlemen, this does indeed conclude the conference call for today. Once again, thank you for attending. At this time, we ask that you please disconnect your lines. Enjoy the rest of your day.