Greetings, and welcome to the Velan Incorporated Q3 Financial Results conference call. Bonjour, et bienvenue à la conférence téléphonique Velan, résultats financiers du troisième trimestre. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. At that time, if you have a question, please press the one followed by the four on your telephone. Pendant la présentation, tous les participants seront en mode écoute seulement. Une période de questions suivra la présentation. Si vous souhaitez poser une question, appuyez sur le un suivi du quatre sur votre téléphone. If at any time during the conference, you need to reach an operator, please press star zero. Si vous avez besoin d'un téléphoniste, s'il vous plaît appuyez sur l'étoile suivi du zéro. As a reminder, this conference is being recorded on Friday, January twelfth, 2024.
Nous vous rappelons que la conférence téléphonique d'aujourd'hui est enregistrée vendredi, le 12 janvier, 2024. I would now like to turn the conference over to Rishi Sharma. Je cède la parole à Monsieur Rishi Sharma.
Thank you, operator. Good morning, everyone, and thank you for joining us for our conference call. Let's start by discussing the disclaimer from our related IR presentation, which is available on our website in the Investor Relations section. As usual, the first section of the disclaimer mentions that the presentation provides an analysis of our consolidated results for the third quarter ended November 30, 2023. The board of directors approved these results yesterday, January 11, 2024. The second paragraph refers to non-IFRS as supplementary financial measures, which are defined and reconciled at the end of the presentation. The last paragraph refers to forward-looking information, which are subject to risks and uncertainties and are not guaranteed to occur. Forward-looking statements contained in this presentation are expressly qualified by this cautionary statement. Finally, all amounts are expressed in US dollars unless indicated otherwise.
I would now like to turn the call over to Mr. James Mannebach, Interim CEO and Chairman.
Thank you, Rishi, and good morning, everyone. During our last conference call, we communicated the unfortunate termination of the acquisition agreement with Flowserve Corporation, following the French government's refusal to approve the transaction. The chapter is now behind us, and we've turned our focus at the company to strengthening the organization and growing the business. We believe Velan has tremendous assets at its disposal to further expand its global market reach. Of course, this includes an agile workforce, diversified manufacturing capacity, and above all, a solid brand reputation. As a supplier of critical equipment to essential industries, we anticipate growing demand for our products, driven by energy transition trends and by our proven ability to provide solutions for the most demanding applications in a variety of market niches.
Delving deeper into environmental matters, many of our customers have started carbon emission reduction targets and programs accordingly related thereto, and are increasingly looking for energy-efficient solutions to reach these objectives. Velan is directly aligned with this secular growth trend, as we have dedicated significant resources to environmentally driven solutions for many, many years. Our main goal of the company is to support our customers with safe and reliable flow control products for their existing and emerging needs. The energy transition underway creates challenges for customers in several industries, including nuclear, oil and gas, as well as process and power. Their challenges become our opportunities, and as a key equipment supplier, we are excited about playing a leading role worldwide in this ongoing transformation.
In parallel, we expect maintenance, repair, and overhaul activity, which we refer to as MRO, on our extensive base of installed equipment to continue providing a recurring revenue stream. To make sure we can rapidly capture growing opportunities, I've assumed the role of Interim CEO alongside my duties as Chairman of the board. My 35-year experience in flow control industry and 5-year tenure on the Velan board should serve the company well. I'm also pleased to report that Rishi has been promoted to the role of Chief Financial and Administrative Officer to oversee all Velan's administrative functions, in addition to his oversight of the financial team. Over and above, the entire Velan team is committed to building shareholder value through profitable sales growth and cash flow.
Turning to our operating performance, Velan's backlog has increased 4.5% to $485 million since the beginning of the fiscal year. Of this, $361 million is expected to be delivered in the next 12 months. The increase is mainly attributable to changes in the profile of scheduled backlog shipment dates. The strengthening of the euro also slightly improved our position in backlog as well. Third quarter bookings reached $78.3 million, down $99 million from last year, as we are facing a tough comparable period in which North American operations recorded large marine orders in the prior fiscal year. This was partially offset by higher oil and gas bookings in Italy.
Sequentially, bookings were nearly 10% higher than those of the second quarter, and I'm pleased to report that the pickup in activity is continuing so far in the fourth quarter. For instance, we recently signed new large-scale orders in Italy, which constitutes a record for our subsidiary. We're very pleased with the strong commercial activity we are seeing all across Europe. As for our financial results, Rishi will provide more details in a minute, but in a nutshell, third quarter sales of $80.9 million reflected reduced sales activity in North America, which contrasted with large shipments reported during the same period last year. Lower sales, combined with a drop in gross profit due to reduced volume and the execution of a certain low-margin project, negatively affected our profitability.
Net loss totaled $77.3 million in the third quarter of fiscal 2024, while EBITDA was - $2.3 million. Although third quarter results were disappointing and unacceptable, we anticipate shipments to accelerate in the fourth quarter, driven by the execution of large-scale projects. In addition, our strong backlog and the recent uptick in bidding and booking activity provide confidence as we look to projected sales in the new year. In summary, I want to stress that Velan's global presence, diversified customer base, and focus on critical applications represent significant advantages in a highly competitive industry. We're resuming our focus on growth, and we are confident about our future opportunities worldwide. At this point, I turn the call over to Rishi to share a financial review for the quarter.
Thank you, Jim. As previously mentioned, our backlog has increased 4.5% since the beginning of the fiscal year, reflecting a book-to-bill of 1.46 on a year-to-date basis. With a ratio of nearly one to one in the third quarter, the backlog held steadily sequentially at $485 million during the period. Bookings have increased sequentially, and commercial activity remains quite robust in the nuclear sector in France, as well as the oil and gas sector. Turning over to the income statement, sales totaled $80.9 million in the third quarter of fiscal 2024, down 15% from one year ago. The variation essentially reflects a reduction in North American sales due to last year's shipment of a large oil and gas order.
It also reflects lower MRO contracts based on extended transit times for orders passing through the Panama Canal that was affected by this year's unusually low water levels. These elements were partially offset by a positive $1.9 billion impact on sales from the strengthening of the euro average rate against the US dollar in the quarter. On a geographical basis, sales outside of North America grew 6.5% to account for 43.6% of total revenues, compared to 34.8% last year, mainly reflecting the solid activity in both France and Italy. Gross profit reached $16.4 million, compared to $29 million in the same period last year. The decrease is mainly due to lower sales volume, which impacted the absorption of fixed production overhead costs and to the execution of a low-margin project during the quarter.
These factors were partially offset by unrealized foreign exchange gains related to the fluctuation of the US dollar against the euro and the Canadian dollar. As a percentage of sales, gross profit amounted to 20.2%, compared to 30.4% last year. Administration costs decreased 15.2% year-over-year to $21.6 million. The decline reflects the recording in last year's third quarter of a $3 million provision for potential settlement value of future unknown asbestos-related claims and lower freight costs based on reduced sales volumes. As a result, EBITDA was -$2.3 million in the third quarter of fiscal 2024, compared to $6.1 million last year. The variation is primarily related to a decrease in gross profit, partially offset by lower administration costs.
Net income, net loss totaled $7.3 million, or $0.34 per share, compared to net income of $2.7 million, $0.13 per share in the prior year. The year-over-year difference stems from lower EBITDA and higher finance costs. Moving on to cash flows. Cash used by operating activities amounted to $4.9 million in the third quarter of 2024, versus using $3.4 million last year. The unfavorable movement in cash for the quarter is attributable to a decrease in EBITDA, partially offset by favorable movements in working capital items and net change in long-term provisions and customer deposits. During the quarter, as previously mentioned, we completed the purchase of the remaining 25% minority interest stake in our French subsidiary, Segault SAS, for $5 million.
As that minority interest was included in the current portion of long-term debt, this transaction explains most of the $6.3 million in cash used by financing activities. Finally, our financial position remains solid. As at November 30, 2023, net cash and overall liquidity position stood at $26.4 million and $97.5 million, respectively. We believe our strong liquidity position, along with future cash flows from operations, are sufficient to meet all financial obligations and satisfy projected working capital requirements while allowing Velan to execute its business strategy by capturing profitable growth opportunities that may arise. I'll now turn the call back over to Frank Reiter for the to kick off the Q&A session.
Thank you. If you would like to register a question, please press the 1 followed by the 4 on your telephone. You will hear a three-tone prompt to acknowledge your request. If your question has been answered and you would like to withdraw your registration, please press the 1 followed by the 3.
Si vous désirez vous enregistrer pour poser une question, veuillez appuyer sur le un suivi du quatre sur votre téléphone. Vous entendrez alors une triple tonalité indiquant que votre question a bien été enregistrée.... Au cas où votre question aurait été répondue et que vous souhaitez l'annuler, appuyez sur le un suivi du trois. Un moment pour la première question. One moment please for the first question. We have a question from Alex Ciernelli from SM Investors. Please proceed.
Yes. Hi, thank you for taking my question. I have a few, if I may. The first one, just on the Flowserve broken deal, since you brought it up. How did that process come around? Was it like in a part of a process, actually, or they just came and knocked on your door and, like, unsolicited the bid?
Yeah, it was a process. It wasn't an unsolicited bid. The board took a decision prior to look at potential strategic options. And this involved reaching out through our advisor to numerous equity and other investors, to which Flowserve was ultimately chosen as, among that crowd, the most advantageous and likely to preserve and grow off of our legacy. So it was a process, not a knock on the door.
I agree. I think in a recent article, you were talking about tightening the integration of capabilities to drive business. Maybe you can give some color on what you mean by that?
Integration of the businesses? Yeah. I think what we're looking at here is we've got tremendous strengths and capabilities around the world. I referenced to Italy, for instance, it's a tremendous success in the end of the third quarter and strength into the fourth quarter. We think there's a better opportunity to exploit our competencies, market, product, manufacturing, in a more integrated fashion around the world than we've traditionally done in the past. Often, if you look back in the past, you know, the international operations in France and Italy were much more autonomous, which we think there's some strength in keeping that in place. But we don't know that we've fully recognized the value of the synergies as a global company.
So that's what we're looking at, to try and drive, more benefit out of looking at the business globally. The brand is a very eminent brand globally. Our activities to exploit the brand and our, our value proposition should be as well.
Okay. I guess that also answers most or partly of my third question, which is, one of the goals is to increase margins, which I'm assuming is a function of, you know, volumes and, you know, I guess I see admin costs coming down as, like, fewer provisions.
Sure.
And then you talk about the capability integrations. Are there any other levers you're looking at?
Yeah. Certainly, we're looking at, you, you mentioned, operating expenses. We're looking at ways to reduce further operating expenses in line with our projections for top line growth and redeploy some of the, spending in areas, currently into areas that will drive more growth and product development. I think there's some opportunity for us also, to further exploit, if you will, our position in India with respect to, greater collaboration there. We've long had engineering capabilities in India that work very well with the Montreal group, and we want to see that continue to grow and thrive into the future.
I'm just sorry to ask you this, but I don't remember. What is the percentage of revenues of MRO? I don't know if you disclose it, though.
For consolidated MRO?
Yeah, consolidated, yeah.
Yeah, I'd say about 10%-15% consolidated for the company.
This is another great question, because at 10%-15%, given the installed base we have, we should be exploiting that position more, so this is an area of focus for us as well, our own spares. As you know, typically, margins are generally better with MRO and spare than they would be with the other two. We think we've got some great opportunity to, as I said, further exploit the installed base that we have globally.
I agree. And then, lastly, for me, at the moment, the search of the CEO, how is that going?
Well, the board has a long-standing succession plan in place, and when the prior CEO, Bruno, left, of course, we were able to move quickly to fill that position with me. We had a board meeting yesterday to chart-
Perfect.
Review the staff. Sir?
Yeah. No, perfect. Yeah, thanks. That's okay.
Yeah. Okay. So as the processes are going, we expect we'll have news in the near term on that front.
Yes. Okay, thank you.
Okay, thank you.
As a reminder, to register for a question, please press the one followed by the four. A titre de rappel, si vous souhaitez poser d'autres questions, veuillez appuyer sur le un suivi du quatre maintenant. There are no further questions at this time.
Very good. Thank you, Frank. We appreciate your help with this, and thank everyone who listened in to the earnings call. We look forward to reporting again at the conclusion of our fiscal year after February. Thank you again. Have a wonderful day.
That does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your line.