Velan Inc.

Unless indicated otherwise, all amounts are expressed in U.S. dollars, and all financial metrics discussed are from continuing operations. I now turn the call over to Mr. Jim Monabat, Chairman of the Board and CEO of Vela. Thank you, Rishi. Good morning, afternoon, and evening, everyone.

Vela delivered healthy adjusted EBITDA of $9.5 million. on sales of $71.7 million, driven by the execution of high-margin projects and continued tight management of operating expenses. With respect to sales, let me point out that, as expected, most rescheduled orders from the previous quarter were captured in Q3 2026. A similar customer dynamic occurred in certain complex projects in the third quarter, leaving us again with orders worth a few million dollars still pushed out to later periods. Let's turn to slide five. Our order backlog reached $296.8 million at the end of the third quarter, up 8% from the beginning of the year. At quarter end, 80.4% of the backlog, representing orders of $238.5 million, were deliverable within 12 months, compared to 83.4% at the end of Q3 last year. Bookings amounted to $77.9 million in the third quarter of fiscal 2026, a year-over-year increase of 32%, further driving momentum in our backlog. The strong growth reflects higher bookings by our North American operations in the nuclear and oil and gas sectors, along with increased bookings by our Italian and Chinese units. These factors were partially offset by reduced orders from the German operation. In North America, the line secured a valve order of more than 20 million Canadian dollars from Ontario Power Generation, or OPG, for reactors being refurbished at the Pickering Nuclear Generation Station, confirming our leadership position in this fast-growing nuclear sector. First shipment is scheduled for January 2027, with subsequent deliveries to be completed by the end of January 28. Note that the line supported the original valves more than 45 years ago, and has continuously supported the Pickering complex throughout its construction and refurbishing program. Turning to slide six, I'd now like to address the recent announcement regarding the proposed sale of the land holdings controlling interest in the company to Toronto-based Berkhill Equity Partners Management Inc. The land holding, which is held by certain land family members, has agreed to sell its 15.6 million multiple voting shares representing approximately 72% of the land's outstanding shares and 93% of its aggregate voting rights, to Burchill at a price of $13.10 Canadian per share for aggregate gross proceeds of $203.9 million Canadian dollars. This is a private transaction and is expected to close in the first half of calendar 2026, subject to receipt of require regulatory approvals and other customary rules and conditions. The transaction is not subject to any financing conditions or approval by our shareholders. The Latin Special Committee of Independent Directors recommended to the Board of Directors that it's in the best interest of the company to facilitate the consummation of this transaction. And while the company is not a party to the private transaction, it has entered into a cooperation agreement with the parties which will ensure a smooth transition with Birch Hill as we jointly secure regulatory approvals and complete other customary closing conditions. The company continues to draw its inspiration from our founder, A.K. Bland, and the tireless efforts of the Bland family since our founding more than 75 years ago. We are extremely proud of our heritage and look forward to growing on our legacy as a world-leading Canadian valve company. Birch Hill has a proven track record of partnering with Canadian industrial leaders and accelerating performance. Their broad business experience and deep access to capital will enable the land to speed advancement of our business plan, which is focused on value creation for all stakeholders, including customers, employees, and, of course, shareholders. We look forward to partnering with Birch Hill as we accelerate the execution of our strategic plans. Before turning the call back over to Rishi, I want to reiterate on slide seven. Wind is well positioned in its main markets through its trustworthy brand, high-quality products, and proven expertise in developing solutions for the most critical applications. Nuclear energy is enjoying a strong resurgence driven by massive power requirements and rising demand for clean energy sources. Our recent contract wind with OPG is a clear example of governments refurbishing existing reactors to meet their energy requirements well into many future years. New deployment of small modular reactors or SMRs are also expected to be part of the overall solution. As a reminder, the land is a key supplier to the first SMR initiative in North America at OPG's Darlington site. On the oil and gas front, We've recently witnessed geopolitical pressures in key strategic areas, highlighting the global need for this fossil fuel. Of course, the land remains impartial, but we stand to benefit since the company supplies the most reliable engineered valves to the majority of refineries in North America, along with a growing presence overseas, especially in the Middle East, through our announced joint venture in the Kingdom of Saudi Arabia. These two sectors, nuclear and oil and gas, We're the driving force behind a remarkable 32% bookings growth in the third quarter. If we add our important presence in other areas, such as defense, liquefied natural gas, and mining, the underlying theme is that the land is well-positioned to leverage strengths across a wide range of industrial sectors throughout the world. Rishi, I turn the call back over to you.

Thank you, Jim. Turning to our third quarter results on slide nine, sales totaled 71.7 million US down 2.4% from $73.4 million one year ago. The decline reflects lower shipments from our Italian operations following strong sales in last year's third quarter. And, as Jim mentioned, customer dynamic resulted in orders totaling a few million dollars being pushed out to later periods. These factors were partially offset by higher sales in India and Germany, along with a positive foreign exchange impact. By customer geographic location, North America represented 48% total sales in the quarter compared to 55% last year. Asia Pacific accounted for 33% of total revenues versus 44% a year ago. For its part, Europe represented 8% of sales this year with Africa, the Middle East, as well as South and Central America rounding off our quarterly sales. Moving to slide 10, gross profit reached $27.2 million in Q3 2026, compared to $28.3 million last year. As a percentage of sales, gross profit remained relatively steady, reaching 37.9% compared to 38.6% last year. This stability was driven by higher margin projects, though offset by lower absorption due to reduced volume and tariff impacts. Currency movements had a slight positive effect on gross profit for the period. Administration costs decreased to $16.5 million or 23% of sales in the third quarter of fiscal 2026 from $17 million or 23.2% of sales one year ago. The year-over-year reduction can be attributed to cost reduction initiatives. We also incurred restructuring expenses of $1.3 million in Q3 2026, which consisted of transaction-related costs. Excluding non-recurring elements, Adjusted EBITDA amounted to $9.5 million in the third quarter of fiscal 2026 versus $14.3 million last year. The year-over-year variation can be attributed to a lower gross profit and to a slight increase in other expenses, mainly caused by unfavorable currency movements on unrealized variations. These factors were partially offset by the favorable effect of a provision reversal. Net income totaled $3 million or $0.14 per share in Q3 2026 compared to a net loss of $47.8 million or $2.22 per share last year. Excluding non-recurring elements, adjusted net income amounted to $4 million versus $8.5 million a year ago. On slide 11, for the first nine months of fiscal 2026, Sales were relatively stable year-over-year and were up more than 2% excluding last year's non-recurring revenue contribution. Gross profit, meanwhile, was marginally down both in dollars and as a percentage of sales. Turning to slide 12, cash flow from operating activities before net changes in provisions used $6.7 million in the third quarter of fiscal 2026 compared to $0.6 million used a year ago. The unfavorable movement in cash was mainly due to negative changes in non-cash working capital items versus last year. More specifically, a temporary increase in accounts receivable and late-stage work and process inventory related to changes in customer delivery schedules were largely responsible for the year-over-year variation. Once this customer dynamic normalizes, cash inflows are expected to follow. During the quarter, we also paid $1.5 million in dividends representing regular payments for dividends declared. It should be noted that the company has agreed to suspend the payment of dividends until the closing of the transaction between Bell & Holding and Birch Hill. Ordinary course dividends are planned to resume thereafter, as if and when declared by the Board of Directors. Finally, our balance sheet remains strong at quarter end with $36.3 million in cash and cash equivalents and short-term investments of $0.4 million. Bank indebtedness stood at $16.1 million, while long-term debt, including the current portion, was $17.7 million. Considering our credit facility, working capital financing, letters of credit and guarantees, we have access to multiple sources of additional funds. Altogether, Bellin has approximately $86 million readily available to execute its strategy and finance its expansion to sustain long-term profitable growth. I now turn the call over to the operator for the Q&A session.