Earnings Call: Q1 2022

Jun 9, 2021

Good morning, ladies and gentlemen, and welcome to the ADF Group First Quarter Ended 04/30/2021 Results Conference Call. At this time, all lines are in a listen only mode. Following the presentation, we will conduct a question and answer session. This call is being recorded on Wednesday, 06/09/2021. I would now like to turn the conference over to Jean Francois Bourcier, Chief Financial Officer. Please go ahead. Good morning, ladies and gentlemen. Welcome to ADS conference call covering the first quarter ended 04/30/2021. I am currently at our Tel Ben at office, where we will hold our Annual Shareholders Meeting right after this call by way of webcast again this year in light of the COVID-nineteen situation. I will first update you on our quarterly results, which were disclosed earlier this morning by press release and then update you on our operations. But 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 for the first quarter ended 04/30/2021, which were filed with SEDAR this morning. Please also consider that although for the moment, the impact of COVID-nineteen on ADS operation is limited, the extent to which the virus can have an impact on our results will all depend on future developments, including new information that may emerge regarding the COVID-nineteen and the measures taken to contain it or address its impact, among others. This said, our revenues for the first quarter stood at $50,400,000 compared to compared with $45,800,000 for the same period last year. The increase in revenues is in line with the increase of our backlog. Gross margins at 15.4% was higher than the 10.6% reported a year ago. For the quarter ended 04/30/2021, we benefited from the emergency waste subsidy from Canada totaling $1900000.0.1600000.0 of which being recorded against the gross margin, the balance reducing selling and administrative expenses. Excluding this subsidy, gross margin as a percentage of revenues for the three months ended 04/30/2021, would have reached 12.2%. As indicated in the 01/31/2021, outlook section of our MD and A report, some pressure on margin was anticipated at the beginning of the year given the fabrication start of certain projects signed at lower prices. This said, given the upcoming fabrication mix in the coming quarters, we now expect margins to stabilize and even show an upward trend for the coming quarters. At the close of the three months ended 04/30/2021, EBITDA stood at $6,100,000 3 point 1 million dollars higher than for the same period a year ago. This favorable variance coming from the improved gross margin, as just explained, and lower SG and A expenses. Selling and administrative expenses not only benefited from the above mentioned $300,000 subsidy, but also from lower travel expenses following COVID related travel guidance, which have not significantly impacted the first quarter close a year ago. For the quarter ended last April 30, net earnings stood at $4,400,000 compared with net earnings of $68,000 a year ago. Besides the elements mentioned before, the net earnings for the quarter ended 04/30/2020, was negatively impacted by a 1,800,000 nonmonetary foreign exchange loss, whereas the FX loss was only $100,000 for the quarter ended last April 30. In addition, net earnings was also favorably impacted by lower effective tax rates considering that in light of our unrecorded U. S. Tax loss, U. S. Affiliates pretax income is not tax affected. Considering our remaining unrecorded U. S. Tax losses, we do expect to have similar low tax rates in the coming quarters. Even with the recently signed project start, which requires significant raw material purchases, we were able to not only maintain, but actually improve our overall cash flow situation. Working capital as of 04/30/2021, at $39,100,000 was just over its 01/31/2021, level. Cash flow from operations continued to reap the benefit of the increased backlog and associated fabrication volume and, as such, generated $11,800,000 during the three months ended 04/30/2021. With this, we ended the quarter close on 04/30/2021, with $24,200,000 in cash and cash equivalents, with no amount being drawn from our credit facilities and thus, in excellent position to pursue our backlog growth and execute our existing backlog, which stood at $394,900,000 as of 04/30/2021. Recent news about the COVID situation are finally encouraging. We are keeping our numerous COVID related safety and operating measures in place for the time being, but we'll be phasing them out per local health authorities' confirmed plans. We still see many bidding opportunities and are still cautiously optimistic that we will maintain our recent quarter's backlog growth. In light of that, we will maintain our cautious approach from a liquidity standpoint to provide all the required financing leeway to pursue this growth. This said, and in the coming months and quarters, we will explore investment opportunities to seek additional operating efficiency improvements. Ladies and gentlemen, thank you for your interest and confidence in ADS. I will now answer your questions. Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you wish to decline from the polling process, please press star followed by 2. If you're using a speakerphone, please lift your handset before pressing any keys. One moment for your first question. Please press 1. It appears there are no questions at this time. You may proceed. Again, I wish to thank you for your interest in ADIAC Group and remind you that we will hold our fiscal twenty twenty one shareholders' meeting this morning at eleven a. M. Coordinates for the webcast are available on our website as well as on the press release filed this morning announcing our Q1 results, which is also available on our website. Thank you. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.