Earnings Call: Q3 2021

Dec 9, 2020

Good morning, ladies and gentlemen, and welcome to the ADF Group Third Quarter 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. Also note that the call is being recorded on Wednesday, 12/09/2020. And I would like to turn the conference over to Jean Francois Bourfis, Chief Financial Officer. Please go ahead. Thank you. Good morning, ladies and gentlemen. Welcome to ADF's conference call covering the third quarter and nine months ended 10/31/2020. I will update you on our results, which were disclosed earlier this morning by press release and then update you on our operations. 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 third quarter and nine months ended October 3120, which were filed with SEDAR this morning. Please also consider that although for the moment, the impact of COVID-nineteen on ADS operation is still limited, the extent to which the virus can have an impact on our results will depend on future developments, which are still uncertain and cannot be predicted at this time, including new information that may emerge regarding the COVID-nineteen and the measures taken to contain it or address its impact, among others. Revenues for the third quarter stood at $47,200,000 compared with $42,100,000 last year. Year to date, revenues at $135,500,000 were $2,100,000 higher than last year. First, and as a reminder, it is worth mentioning that revenues for the three months and nine months period ended last year on October 3139, were impacted by a downward adjustment of $7,700,000 with no impact on income tax resulting from an out of court settlement related to a commercial dispute in Florida. This adjustment also impacted the same period's gross margin and net income. Gross margins for the third quarter at 15.9% was 13.5% higher than reported a year ago. Year to date, gross margin stood at 14.6% compared to 9.4% for the nine month period ended October 3139. Besides the aforementioned out of court settlement impact, better pricing and better absorption of fixed costs explain the quarter over quarter margin improvement. At the close of the three months ended 10/31/2020, EBITDA stood at $5,000,000 7 point 4 million dollars better than for the corresponding quarter a year ago. Year to date, EBITDA stood at $12,600,000 compared to $3,600,000 a year ago. The increase in gross margins and the lower selling and administrative expenses, the latter coming from the lower legal fees associated to last year's third quarter out of court settlement, explain these favorable variances. For the quarter ended 10/31/2020, net earnings stood at $2,600,000 or $0.08 per share basic and diluted compared with negative net earnings of $4,100,000 for the same period a year ago or minus $0.12 per share basic and diluted. For the nine month period ended 10/31/2020, net earnings stood at $4,800,000 or $0.15 per share basic and diluted compared to negative $2,000,000 for the nine months ended October 3139, minus $06 per share basic and diluted. Besides the elements mentioned before, FX fluctuation had a $700,000 unfavorable impact when comparing the nine month period ended October 2039. Although the pandemic did not significantly impact ADF's operation to date, the cumulative impact of the required COVID-nineteen related measures and the inefficiencies and costs related to these measures did have a somewhat negative impact on ADF's cumulative results for the nine month period ended 10/31/2020. Along with our improved results and following our cash management responsible approach, our working capital, liquidities and balance sheet situation also improved. Working capital as of 10/31/2020, at $37,500,000 was $8,200,000 better than its 01/31/2020 level. Net liquidities at $18,800,000 are $27,900,000 higher than at 01/31/2020, and year to date, cash flow from operations generated $27,800,000 In light of the uncertainty surrounding the COVID-nineteen, we are taking a cautious approach with our liquidities and accordingly are tailoring our CapEx program to this situation with only $1,000,000 spent during the nine months ended last October 31. As mentioned in our first two quarterly calls, ADF, like many others, is still navigating into unchartered waters. As mentioned before, and although the impact of the COVID-nineteen pandemic as of this date has a limited impact on ABS operation, we remain abreast of economic developments and trends. Our order backlog stood at $282,500,000 as of 10/31/2020. On 11/25/2020, we announced the award of two new contracts in the commercial building sector in The USA, worth a total of $101,000,000 The scope of the largest of these contracts in terms of value and tonnage relates to the design and engineering of connection, fabrication, including industrial coating and the supply of steel and the installation of the steel structure of a new building with a commercial location in the Northwestern USA. The other contract is located in the Northeastern USA and consists in the supply of steel and shop drawings and the fabrication of steel structure used in the construction of a new government building. Both these contracts will be fabricated out of our Dublin facility. Since the beginning of this fiscal year and in spite of the uncertain economic environment brought forward by the pandemic and including contractual changes on existing projects, we have been able to increase our backlog by almost $200,000,000 Although we are still looking at some uncertain quarters, our year to date results, along with the new contract announcements, are comforting us in our approach and bodes well for our next fiscal year. This said, and as we have always done, we will not stop pursuing our quest for increased backlog and operational excellence. Ladies and gentlemen, thank you for your interest and confidence in ADF. I will now answer your questions. Thank you, mister Dusky. Ladies and gentlemen, if you do have a question, please press star followed by one on your touch tone phone. You will then hear a three tone prompt acknowledging your request. And if you should decide to withdraw your question, simply press star followed by 2. And if you're using your speakerphone, we do ask that you please lift the handset before pressing any key. Please go ahead and press star one now if you do have any questions. And at this time, Mr. Boucher, we have no questions registered, sir. Thank you. Again, I wish to thank you for your interest in ADF Group. Have a nice day. Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines.