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spk00: Good morning, ladies and gentlemen, and welcome to the VLAN Inc. Q1 Financial Results Conference Call. At this time, all lines are in 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 Friday, July 12, 2024. I would now like to turn the conference over to Vrishi Sharma, Chief Financial and Administrative Officer, please go ahead.
spk05: Thank you, operator. Good morning, and thank you for joining us for our conference call.
spk01: Let's start by discussing the disclaimer from our related IR presentation, which is available on our website in the investor relations section. As usual, the first section mentions that the presentation provides an analysis of our consolidated results for the first quarter ended May 31st, 2024. Board of Directors approved these results yesterday, July 11, 2024. Second paragraph refers to non-IFRS supplementary financial measures, which are defined and reconciled at the end of the presentation. The last paragraph refers to forward-looking information, which are subject to risks and uncertainties that are not guaranteed to occur. Forward-looking statements contained in this presentation are expressly qualified by this cautionary statement. Finally, all amounts are expressed in U.S. dollars and less indicative otherwise. I now turn the call over to Mr. Jim Leinebach, Chairman of the Quarter and CEO of Cummins.
spk03: Well, thank you, Rishi, and good morning, everyone. If you're following along with the investor presentation, please turn to page four for a general overview of the first quarter. The lot opened fiscal 2025 with a strong performance across its core markets, generated sales growth, of 14.5% year-over-year. Our order backlog closed at $528 million, with a strong gross margin reported as well at just above 30% in the quarter. The double-digit sales growth can be attributed to an increase in shipments from our North American operations, including important project deliveries and a solid performance from our MRO business. Supported by a strong backlog, sales from our Italian operations, which revolve around oil and gas were also robust despite some shipment delays. From a market standpoint, we are particularly excited about expanded opportunities in the nuclear sector based on heightened interest in small modular reactors or SMRs. They're gaining traction in Europe and North America and indeed around the rest of the world as well. Due to its sheer size, the U.S. offers massive potential for deploying SMRs. But as I noted, we're also seeing other countries highly interested in the clean energy, safety features, and cost effectiveness of this emerging technology. As a whole, nuclear power deployments, which are critical to reducing greenhouse gas emissions, were recently fast-tracked through the passing of a bipartisan bill entitled the Advanced Act in the U.S. Senate. Looking ahead, we anticipate a nuclear but on a global basis. Clearly, Vaughan should benefit from this long-term growth cycle, as we are the leading valve supplier for all nuclear-related technologies on a global basis. As announced earlier this week, a $50 million agreement, a $50 million Canadian 10-year alliance agreement was reached with Bruce Power for valves reflecting strong demand for nuclear-powered candidates. This milestone agreement, which includes refurbishment and technical services, could reach over 100 million Canadians if all options and projects are firmed up over the course of Bruce Power's asset management and life extension projects in Ontario. Turning to slide five, I mentioned our order backlog reached nearly 530 at the end of the first quarter, up 7.5% from the beginning of the year on the strength of solid bookings. At quarter end, 70.5% of the backlog representing orders of over 372 million are deliverable within the next 12 months. As a result, we remain on track for delivering sales growth in fiscal 2025. Bookings improved 19.6% year-over-year to 109.8 billion in the first quarter of fiscal 2025. The growth mainly reflects a robust order increase in North America driven by new projects in the MRO business, along with higher bookings for oil refinery projects in Germany and nuclear power service and spares in France. These factors were partially offset by reduced oil and gas shipments in Italy. Currency movements had a positive effect of 1.1 million on bookings in the quarter. Given that bookings outpaced sales, our book-to-bill ratio stood at 1.42 at the end of the first quarter of fiscal 2025 and 1.10 for the last 12 months. Of note, 1.10 marked our best book-to-bill ratio in nearly three years on a rolling 12-month basis. In summary, the line delivered strong first quarter results across the board, heightened by sales, highlighted by sales, margin, and profitability, gains year over year, combined with a growing order of backlog. At this point, I'll turn the discussion over to Rishi for a more in-depth review of the financial results of the quarter. Rishi?
spk01: Thank you, Jay. Turning to our first quarter results in slide 7, sales totaled $77.5 million, up from 14.5% from the first quarter of fiscal 2024. As previously mentioned, the growth was mainly driven by increased shipments from our North American and Italian operators. Currency movements had a 0.6 million negative effect on sales in the quarter. By customer geographic location, North America accounted for nearly 49% of total revenues in the first quarter of fiscal 2025, compared to 51% in the first quarter of 2024. Europe represented 24% of total revenues in the first quarter of 2025, reflecting solid sales activity in Italy versus 19% in the same period in 2025. Asia-Pacific at 16%, Africa and the Middle East at 10%, as well as South and Central America at 1% rapid off the sales breakdown in the first quarter. Moving to gross profit on slide 8, it amounted to $23.8 million for the first quarter of 2025, up 58.2% from $15.1 million last year. The significant increase was primarily due to higher sales volume, which positively impacted the absorption of fixed production overhead costs, more favorable product mix compared to last year, and production efficiency gains. As a percentage of sales, gross profit reached 30.7% compared to 22.2% last year. Administration costs totaled $21.8 million, or 28.1% of sales, in the first quarter of fiscal 2025, compared to $21.5 million, or 31.8% of sales a year ago. This year's administration costs include $0.1 million in restructuring expenses, mainly consisting of severance payments, while last year's costs included $0.5 million in expenses related to the proposed transaction with the Flosser Corporation. EBITDA amounted to $3.7 million in the first quarter of fiscal 2025, compared to negative $3.8 million last year. Excluding this year's restructuring costs and last year's expenses related to the proposed Flosser transaction, Adjusted EBITDA reached $3.9 million, up from negative $3.3 million last year. The year-over-year increase was mainly driven by higher sales volume combined with a significant improvement in gross product. Net loss totaled $1.1 million, or $0.05 per share, in the first quarter of fiscal 2025 compared to a net loss of $8.3 million, or $0.38 per share, last year. Excluding the after-tax effect of restructuring costs and expenses related to the proposed flow-through transaction, adjusted net loss was $1 million, or $0.05 per share, versus an adjusted net loss of $7.9 million, or $0.37 per share, last year. The year-over-year variation can be attributed to higher adjusted EBITDA in the first quarter of 2025, partially offset by greater net finance costs and income tax expense. Moving on to cash flow from operations on slide 9, It reached $4.9 million in the first quarter of fiscal 2025, down from $10.7 million in the corresponding period a year ago. The decline in cash for the quarter was primarily due to less favorable positive changes in non-cash working capital movements, partially offset by an increase in the EBITDA. Finally, our financial position remains healthy. As of May 31, 2024, the company held cash and cash equivalents of $35.8 million and short-term investments of $5.8 million. including the current portion amounted to $24.8 million. Turning to our outlook for the remainder of fiscal 2025 on slide 10, Bella delivered strong first quarter results highlighted by a growing order backlog of $528.3 million and a book-to-bill ratio of 1.42. As Jim stated earlier, orders of $372.3 million at the quarter end, or 70.5% of the total backlog, are expected to be delivered within the next 12 months. Consequently, we are reiterating our expectations to deliver sales goals in fiscal 2025.
spk05: I will now turn the call over to the operator for the Q&A session.
spk00: Thank you, ladies and gentlemen. We will now begin the question and answer session. Should you have a question, please press star, followed by the one on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star, followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. Your first question comes from Alex Ciarnelli with SM Investors. Your line is now open.
spk02: Yes, hi, good morning. Congratulations on the call and the results. North America, from the prepared remarks, experienced a handsome increase Could you give some call on which verticals perform particularly well?
spk01: North America, there's primarily three segments we would call projects, severe service, and MRO. MRO mostly coming from the distribution parts for DCs, spares, replacement valves, and so on. Projects being heavy project-related contracts such as emulated beds that secure someone's orders and severe service in the traditional product world.
spk05: Those are kind of the three ways that we look at the North American business. But you don't break it out by, let's say, nuclear oil or things like that?
spk01: Nuclear, we do have a vertical as well that's embedded within those segments. That primarily relates to our operations in Canada and some in the U.S. For oil and gas, traditional refinery and mainly downstream.
spk05: I'm sorry, I missed the last part. Oil and gas, you were saying? Downstream. In the U.S. Downstream, okay.
spk02: Since we're talking about the verticals, I'll just ask one more there. On the past documents, you don't break the revenue by different verticals, right?
spk03: No.
spk05: No, we only break it. We only look at the revenue split geographically.
spk02: And would you break it, or for competitive reasons, you prefer not to?
spk01: Prefer not to.
spk02: Prefer not to, okay. I don't know if you break this out, but if you do, what is the percentage of MROs as a percentage of total revenue?
spk01: So, MROs looked at it in different ways. If you're looking purely at spares and parts, you know, we're at about 9 to 11 percent. If you look at and include replacement valves, you know, then you trend up towards 28, 29 percent.
spk05: Then if I may ask a question on the
spk02: recently announced a contract with Bruce Power.
spk05: How is the cadence? I'm sorry? You broke up there just for a second.
spk03: Can you repeat the question?
spk02: How is what? The announced deal with Bruce Power. What would be the cadence? Is it front loaded? Is it linear? Also, what In terms of $50 million or $100 million. And then the word you're talking about, alliance. I don't know if that means the joint venture or just means another way to say long-term contract. Thank you.
spk03: Okay. So I think to address the last point of your question, I think you could probably look at more as long-term supply agreements. with Bruce Bauer. As we talked about at the last quarter, obviously there's an increase in interest and uptick in nuclear activity, not only in Europe, but also in North America, Canada, and the U.S. People are recognizing that they need to strike these kind of agreements with Milan as a leading fire of critical valves in the industry to assure their supply chain going forward. In terms of the cadence or how that might stretch out, most of the time in nuclear, a lot of this work is for refurbishment and extension. So some of it is front end, but a lot of it builds as time goes by, principally because of long lead times within the nuclear industry anyway. So I think probably not linear wouldn't be a way to look at it, but not so much of a hockey stick either. Progressive. Yeah, it's a progressive ramp up over the 10-year cycle.
spk05: What makes the difference between $50 million and $100 million? Yeah.
spk01: So there's obviously when you look at the supply of what's currently expected to be built, if you look at the infrastructure plan, it's secure at least $50 million, and then there's projects in the pipeline as they are firmed and options come through. That's where we see the potential doubling of the value of the contract.
spk05: Okay. Perfect. Another one for me, the MDA.
spk02: I noticed that there's an increase in delinquency on accounts receivable, especially in the MDA one. I don't know if it means anything, but there's some color.
spk03: No, I think what it means is timing. There were in outside, principally outside North America, there were some large receivables that were collected basically right after the quarter, which would have altered the aging that you saw. I noticed the same thing and asked the question of the finance people, of course. But if we look into the collections right after the end of the quarter, return to the more normal state, continues its focus on maximizing its cash and the efforts to assure prompt collection of receivables continue to bear fruit. So I think the end of the quarter was, as we sit here today, not okay. It was more of an aberration just for time in the collections.
spk02: Okay. So after the call, sorry, after the quarter ended, what you're saying, you collected...
spk03: Yeah, right. So to bring the AAT more in alignment with more recent historic trends.
spk01: Yeah, and maybe just to add to that, if you look at the current bucket, there's a lot of efforts to collect current. Sometimes, you know, receivables get held up for certain reasons. So with the customer base, clear as much as we can currently, and as Jim mentioned, address the snags shortly after the quarter.
spk05: Okay, thank you. That's all for me. Thanks. Thank you.
spk04: Ladies and gentlemen, as a reminder, should you have a question, please press star 1. There are no further questions at this time.
spk00: I will now turn the call over to Jim.
spk03: Thank you, operator. And thank everyone for joining us today. We look forward to sharing our second quarter results with you guys in the fall and hope you have a great day and a great summer. Take care. Bye for now.
spk00: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.
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