ADF Group Q4 2024 Earnings Call Transcript

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April 11, 2024

There are 6 speakers on the call.

Operator

Good morning, ladies and gentlemen, and welcome to ADF Group Results for the Financial Year Ending January 31, 2024 Conference Call. At this time, all lines are in listen only mode. Following the presentation, we will conduct a question and answer session. This call is being recorded on Thursday, April 11, 2024. I would now like to turn the conference over to Jean Francois Boursier, Chief Financial Officer.

Operator

Please go ahead.

Speaker 1

Thank you. Good morning. Welcome to ADF's conference call covering the 12 month period ended January 31, 2024. With me today is Jean Paschini, ADF's CEO, who will be available to answer your questions after my comments. We are very pleased with the improvements in our results over the recent years and more particularly during the fiscal during fiscal 2024.

Speaker 1

We are seeing the positive results that are coming from the sustainable and profitable investment programs we completed over the course of the past 15 years, which all put together totaled over $110,000,000 Amongst the strategic investment we decided on, always with the future in mind, we can include a new fabrication complex in Great Falls, Montana, a major plan for engineering aiming at improving overall productivity and efficiency and more recently significant investments to add new generation robotics and increase automation here at our complex in Terbon. Tremendous work is made continually by all of the F, by all at ADF and each achievement ensures we remain in the top tier experts of our industry. This said and before I update you on ADF's annual results and changes in financial position, which were disclosed earlier this morning by press release, Let me remind you that some of the issues discussed today may include forward looking statements. These are documented in ADF Group's Management report for the 2024 fiscal year, which will be filed with SEDAR before the end of the month. Revenues for the fiscal year ended January 31, 2024 reached $331,000,000 80 point $1,000,000 or 32% higher than last fiscal year.

Speaker 1

The increase in revenues is in line with our order backlogs growth. As a percentage of revenues, the gross margin went from 14.2% in fiscal 2020 3 to 22% during the fiscal year ended January 31, 2024. This significant increase is explained by the level of fabrication activity compared with the previous fiscal year, thus generating a better absorption of fixed costs as well as by the improvement in internal efficiency from the investments made in recent years in automation at ADF's plant in Terrebonne, Quebec. Adjusted EBITDA totaled $55,900,000 or 16.9 percent of revenues compared with $26,100,000 or 10.4 percent of revenues a year ago. It is worth mentioning that for the period ended a year ago on January 31, 2023, the corporation obtained the forgiveness of a COVID related loan of $1,300,000 or US1 $1,000,000 issued to one of ADF's US subsidiaries.

Speaker 1

This forgiveness resulted in a recognition of a government grant mostly against salary expense in last year's Q2 ended on July 30 1, 2022. Selling and administrative expenses amounted to $22,800,000 or 6.9 percent of revenues, dollars 8,000,000 higher than last year. Most of this variance is coming from increase in wages in line with the cost of living as well as the market value adjustment of deferred shared units and performance share units in line with the increase in the corporation share price that went from $2.12 per share as of January 31, 2023 to $8 per share a year later as of January 31, 2024. Year to date, ABF posted net income of $37,600,000 or $1.15 basic and diluted per share compared with a net income of $14,900,000 a year ago or $0.46 basic and diluted per share. Cash flows from operating activities generated $77,900,000 while we invested $6,500,000 in CapEx, mostly for the maintenance of fabrication equipment at ADS plants in Terrebonne, Quebec and in Great Falls, Montana.

Speaker 1

As at January 31, 2024, working capital stood at $110,100,000 44,500,000 higher than last year. Our January 31, 2024 cash and cash equivalents stood at $72,400,000 which is $65,200,000 higher than a year ago. Yesterday, the Board of Directors approved the payment of a semiannual dividend of $0.01 per share which will be paid on May 15, 2024 to shareholders of record as of April 26, 2024. Our order backlog reached 510 $900,000 as of January 31, 2024 that is $134,400,000 or 35.7 percent higher than the closing balance a year ago. Quickly looking at the 4th quarter results, revenue stood at $88,400,000 compared with $51,500,000 for the corresponding quarter a year ago.

Speaker 1

4th quarter gross margin as a percentage of revenues stood at 24.5% compared with 17.5% during the same quarter last year. Finally, the corporation recorded a net income of $10,500,000 or $0.32 per share during the last quarter of the 2024 fiscal year compared with a net income of $2,300,000 or $0.07 per share for the same period in fiscal 2023. As I just mentioned, our fiscal 2024 results are encouraging and attest to our steadfast approach of the past few years. The current fiscal year is off to a good start with strong liquidities and order backlog exceeding the $50,000,000 mark. Given the current level of our order backlog to begin this new fiscal year and the award of upcoming new contracts, we expect revenues for the fiscal year ending January 31, 2025 to increase.

Speaker 1

In light of this, we expect our liquidities to maintain their upward movement. We have initiated discussion internally and with our Board of Directors and will confirm in future communications how we plan to invest these excess funds. Obviously, these improved results could not have been achieved without the hard work of our 500 plus talented employees across our various offices, fabrication plants and paint shops and on job sites across Canada and the U. S. They are the driving force behind ADF's success and we are truly grateful for their great work.

Speaker 1

In these lines, in November 2023, we have signed a 5 year collective agreement with our turbine unit employees. Considering all of this, we are confident that we continue ADS profitable growth. We will remain cautious in our approach and we'll closely monitor economic developments in order to adjust our strategies accordingly as we've always done. Thank you all for your interest and confidence in ADF. Jean and I will now answer your questions.

Speaker 2

Thank

Operator

question comes from Nicholas Cortellucci with Atrium Research. Please go ahead.

Speaker 3

Good morning, gentlemen, and congrats on another excellent quarter here.

Speaker 1

Good morning. Thanks for your Nick.

Speaker 3

I mostly wanted to ask about the longevity of the cycle we're currently in. So I know you guys have contracted out for this year for growth, but how do you think about how the cycle progresses into fiscal 'twenty six and if you're starting to contract for that period yet?

Speaker 2

What we see right now, we see a lot of work for the next 3 to 5 years, okay? A lot of work, a lot of battery plants, a lot of airports, a lot of bridge. So I would say for the next 3 to 5 years, market is going to be very, very good.

Speaker 3

Understood. All right. Thanks for that. And then the other question I had was more about what particular sectors or project types you're seeing most of the growth from? I know there was a big pharmaceutical project you guys took on, but is there any other key trends or drivers that we can think about?

Speaker 2

Pharmaceutical, industrial, airports, commercials. So we see all of our I would say all where we work commercial, industrial, infrastructures, I would say there's quite a bit of there's a lot of work for the next 3 to 5 years. So I cannot tell you it's going to be more industrial, more pharmaceutical. Right now, it's very, very busy.

Speaker 3

Okay, perfect. Thanks for that. I'll hop in the call back in the queue. That's all the questions I had. Thanks.

Speaker 2

Thank you.

Operator

Next question comes from Jesus Sanchez with Castanart. Please go ahead.

Speaker 4

Congrats again for a great quarter.

Speaker 2

Thank you. I

Speaker 4

want to ask you about, do you have any plans to perform any kind of update into our Montana facility in terms of automation like we have done in Quebec?

Speaker 2

Well, right now, the Montana facility doesn't do the exact same work that we do here in Quebec, okay? If I would have bought a robot 3 years ago in Montana, we would never use it because it's a different kind of work. There's a lot of trusses, there's a lot of build ups. And so right now, as we talk today, there's no use for a robot down in Montana. And if you look at all the automation that we have, the drills, the all the equipment that we have, it's the last it's state of the art.

Speaker 2

It's very good equipment. So by doing different kind of work right now, there's no use to it, but you never know if we sign another kind of contract in the next future, then yes, a robot would be suitable. But right now as we speak right now, it's not.

Speaker 4

Okay. Thank you very much. That will be all.

Speaker 1

Thank you. Thanks.

Operator

Next question comes from Brent Todd with Canaccord Genuity. Please go ahead.

Speaker 5

Hey guys. Yes, fantastic year. Great quarter.

Speaker 2

Good morning.

Speaker 5

Good morning. Great to talk to you. Yes, just I think, John, you alluded that you expect this to be a year of growth. You had a great Q4 in terms of margin. Given your fixed costs and stuff, do you expect those margins to increase then through the year?

Speaker 2

No, I would say the margins are good. Okay. Maybe they could increase, but right now I'm not promising anything. Right now what we're seeing for this year, it's growth, bottom line and top line. So we see a very good year.

Speaker 2

But I'm not going to promise you today that our gross margins are going to grow. I'm going to keep it like it is. And if they grow, it's going to be beneficial for everybody.

Speaker 5

Okay, very good. Well, I'll settle for a year of growth, both top and bottom line. That'd be awesome. Great job. Thanks, guys.

Speaker 2

Thank you.

Operator

There are no further questions at this time. Please proceed.

Speaker 1

Thank you. Before we conclude today's conference call, I would like to remind you that ADS will hold its shareholders meeting on June 11 at 11 am, which will be held at the Sheraton Hotel in Laval. Financial results for the Q1 ending April 30, 2024 will also be disclosed during our shareholders' meeting. Additional meeting information will be made available in the coming weeks. Thank you again for your interest towards ADF.

Speaker 2

Thank you.

Operator

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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Earnings Conference Call
ADF Group Q4 2024
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