Earnings Call: Q2 2021

Sep 10, 2020

Good morning, and gentlemen, and welcome to the ADF Group Second Quarter and First Semester 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 this call is being recorded on Thursday, 09/10/2020. And I would like to turn the conference over to Jean Francois Bourci, Chief Financial Officer. Please go ahead. Thank you. Good morning. Welcome to ADF's conference call covering the second quarter and six months ended 07/31/2020. 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 second quarter and six months ended 07/31/2020, which were filed with SEDAR this morning. Please also consider that although for the moment the impact of COVID-nineteen on ADF's operations is limited, the extent to which the virus can have an impact on our results will depend on future developments, which are very 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 second quarter stood at $42,500,000 compared with $54,100,000 last year. Year to date, revenues at $88,300,000 were $3,000,000 lower than last year. Although our quarter over quarter fabrication hours have increased, the lower revenues can be explained by the lower installation hours based on project execution timing for both quarters ended July 2039. Gross margins for the second quarter at 17.4% was 6.8% higher than reported a year ago. Year to date, gross margin stood at 13.9% compared to 12.6% for the six months period ended July 3139. Better pricing, better absorption and the finalization of some contractual changes explained the quarter over quarter margin improvement. At the close of the three months ended 07/31/2020, EBITDA stood at $4,600,000 1 point 6 million dollars better than for the corresponding quarter a year ago. Year to date, EBITDA stood at $7,500,000 compared to $6,000,000 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 third quarter out of court settlement explain these favorable variances. For the quarter ended 07/31/2020, net earnings stood at $2,100,000 or $06 per share basic and diluted compared with net earnings of $419,000 for the same period a year ago or $01 per share basic and diluted. For the six month period ended 07/31/2020, net earnings stood at $2,200,000 or $07 per share basic and diluted compared to $2,000,000 for the six months ended July 3139, dollars zero '6 per share basic and diluted. Besides the elements mentioned before, FX fluctuation had a $1,100,000 favorable impact quarter over quarter, while the impact was $700,000 unfavorable when comparing the six months periods ended July 2039. 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 07/31/2020 at CAD35.4 million was CAD6.1 million better than its 01/31/2020 level. Net liquidities at CAD14.7 million are $23,800,000 higher than at 01/31/2020. Year to date, cash flow from operations generated $21,600,000 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 the situation with only $400,000 spent during the six months ended last July 31. These operating inflows enable us to reduce the drawn credit facility by 13,100,000 and finished the quarter with no amount being drawn from our credit facilities. As mentioned in our first quarter reporting and our 07/31/2020 MD and A, ADF, like many others, is currently 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 ADF's operations, we remain abreast of economic developments and trends. Our order backlog stood at $314,500,000 as of 07/31/2020. Although the bidding pipeline is still very active, we are finding that finalizing new contracts is somewhat a bit more challenging with all parties involved taking more time to better understand the coming months. Even though we have said this before, we feel it is appropriate to reaffirm that risk management was, is, and will always be of paramount importance for ADF. In these uncertain times, our approach offers us comfort and allows us to face these challenging times with determination. Ladies and gentlemen, thank you for your interest and confidence in ADF. I will now answer your questions. Thank you, Mr. Thank Mr. Simply press star followed by 2. And if you're using a speakerphone, we do ask that you please lift a handset before pressing any keys. Please go ahead and press star one now if you have a question. And at this time, Mr. Boussier, we have no questions registered, sir. Please proceed. 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.