Velan Inc.

Bonjour et bienvenue à la conférence téléphonique, présentation des résultats du quatrième trimestre de l'année fiscale 2022. Greetings and welcome to Verlaine Inc. Q4 Financial Results. Pendant la présentation, tous les participants seront à mode d'écoute seulement. Une période de questions suivra la présentation et vous pouvez demander des questions en français ou en anglais. Et si vous souhaitez poser une question, appuyez sur le 1, sur le 4, sur votre téléphone. The presentation participants will be in a listen-only mode. After this, we'll conduct a question-and-answer session. You can ask a question either in French or in English. At that time, if you have a question, you can press the 1 followed by the 4 on your telephone at any time in the presentation. If you need to speak on the phone, you can press the 3 followed by the 0. If you need to reach an operator, you may press the star followed by the 0. We remind you that today's telephone conference was recorded on Thursday, And as a reminder, this call is being recorded Thursday, May 19, 2022. I now would like to turn the conference over to Bruno Carbonaro, Chief Executive Officer and President. Please go ahead.

Bonjour et bienvenue. Welcome to our investor presentation to review the results of the fourth quarter of the fiscal year 2022. I'm joined today by Benoit Allain, the CFO of the company, and I'll start by briefly presenting and commenting our results for the Q4 and the full year, and then giving you some elements on the outlook. We then will open the line for your questions. First to start, the usual disclaimer. I'll let you a couple of seconds to review it. It's nothing new, but it's absolutely mandatory. Without further ado, let's comment on the highlights of the fourth quarter of the fiscal year. So the sales are mounting to 125 million, which is a big increase versus the same quarter of the previous year. Some of it is linked, especially 8.8 million of that are linked to the reversal of some performance guarantees. But even if we exclude that, this quarter is the best of the company in the last five years. In terms of EBITDA, 16.6 million, which is a big gap versus the 1.6 million reported for the same quarter of last year. And paradoxically, we report a net loss. which is surprising, but basically, as you may see on the slide, the big explanation of that is a de-recognition of 32.6 million of different tax assets. In terms of backlog, we still have a very high backlog, above 500 million, even if you recall that our book-to-bill ratio is below 1, so it's only 88%. But I'll expand further in the next slides on that. And to finish, I want to comment on the strong net cash position of the company, which is above $50 million. And at the same time, as I will explain later, we were able to reimburse a fair amount of our outstanding debt. Now, having a look at the EBITDA on the left of the slide, you have an historical view of the EBITDA on the quarter-per-quarter basis. And as you see, that's the third quarter in a row where we can just report a very nice EBITDA, and there is a big contrast between what you see for 2022 and, for example, what you've seen in 2018 and 2019. now to the to the right we have used an explanation of the variance between the 16.6 million of this year and the 1.6 million of last year and i focused my attention on the two first bars basically at the same time we increased immensely the volume and we mentioned the margin which is always complex in our business not having to compromise on prices to make your volumes. And basically, we found a way, or just we focused in line to be at the same time increasing the volume of our cooking ourselves and also maintaining the margin at a more than acceptable level. Then I'd like to comment on how we generate the cash. EBITDA is good, but cash is king. And you see to the left, you know, the transformation from EBITDA to free cash flow. 6.7 of pre-cash flow out of an EBITDA of 16.6. I would comment this performance as fair. It's not where I'd like just to be. And you see the three, four bars that explain the variation of our working cap with a good performance on inventory that are still too high but are decreasing for the quarter. And the AR that are increasing mainly through timing, you know, impact of ourselves and the AP that are also decreasing, which is not what we expected. But basically, rest assured that we are actually and currently working on that to increase the ratio of consummation from EBITDA to free cash flow. And to the right, you have the usage of the free cash flow we had. So you have the starting position in terms of net cash of 68 million. Then you have the free cash flow. Then you have the disposal of Q1. And then you end up, you know, with the cash position, which is Here, $60.5 million, out of which you have $7 million of short-term investment. So technically, it's not cash, but if we need to transform that into cash, it's easy. It takes some time, but there is no problem in terms of just transforming that into cash. Now let's have a look at the full year. As mentioned before, the sales for the full year amount to $411 million, which is the best number in the last five years. I'm very proud of the second bullet point, which is an increase of our gross profit of 610 basic points from 26.7%, which was fair, to 32.8%, which is good. So basically, you have a lot of effort behind this number, and basically, it gives you a sense of the health of the business at Belan. In terms of EBITDA, you know, the figure speaks by itself. Almost 40 million of EBITDA, which represents $1.8 per share, and it's more than double the results we published for last year. In terms of loss, I already explained why we have a net loss, which is linked to exceptional items. And I think that it's important to report to you that as a result of the good performance of the company financially and the healthy cash position, the board has approved an eligible quarterly dividend of $0.03 per share, which was what we had in place two years ago, so that we would reinstate something which was going And I'm happy that we can share with our shareholders some of the value we created. Let's now move on to some element of perspective for the company. As I mentioned to you, the backlog is still healthy. Both are million. It's book-to-bill ratio below one, but it's not very low. And what is extremely important is the portion of the backlog which is shippable in the next 12 months. And if you go to the right of the slide, you have the stack bars. And the bottom part or the bottom portion of the stack bar are exactly what we can ship in the next 12 months. And you see that it's about the same number as last year. So, basically, what we are saying is that the backlog we have is sufficient for us to make decent numbers next year. So basically, it's good, and we continue to have, I think, a good traction on the market for the bookings in the first two months of the year. To try to give some color around our bookings, as we did last time, last time we presented to you a job required for a refinery in Egypt, We decided just to highlight here not a single project, but a very loyal customer that most of you know if you have been part of the industry in North America in the last 30 years. Their name is Sunbelt, and basically you can just have a description of who they are. But I want just to emphasize the fact that it's the type of company we have a partnership with. So basically what I call a partnership is shared efforts to promote towards the end customer the value of our product lines and our brand. And basically, you see that the effort that we have together currently are around HF Acid Bout and Coker product lines. And basically, what is good is it's important for them, it's important for them, and we work together. And it really is a good indication of the type of customer we want to favor in the future. We believe that the future of BELAN is around our key customers, key accounts, and we put in place a very clear management of our key accounts to make sure that they grow with us, we grow with them. So basically, we have a joint future, and Sundance is obviously one of those loyal customers that we will help grow and that they will help us grow. On this page, which is pretty unusual, you see three pictures, and you see two pictures for CFOs. So, basically, it's normal because Benoit Allain, the CFO in place, will step down in a couple of days, as we have announced to the market in December. And I want to thank him for what he did during his tenure, a little bit more than one year, basically help us modernize our pilot processes and systems and I can tell you that I see difference now compared to one year ago. So I'd like just to wish him well for the next step in his career and I'd like you to join, to welcome, I'd like you, sorry, to welcome Rishi Sharma is an excellent complement to the team. As you may have seen, he has an amazing professional background, and I know that he will tremendously help me and the company grow in the future. Now it's time for me to open the floor for any questions you may have.

Thank you. I would like to ask you a question. And if you'd like to register a question, you may do so by pressing the 1 or by the 4 on your telephone. You'll hear a three-tone prompt to acknowledge your request. If a question has been answered or to draw your registration, you can press the 1 or by the 3. Again, you can ask questions for 1-4, so 1-4-2-4, and you can ask your question either in French or in English. And our first question comes from Michael Dume, private investor. Our first question from Michael Dume, private investor. Go right ahead.