W elcome to the Velan Inc. Q3 Financial Results conference call.
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The presentation and participants will be in a listen-only mode. After this, we'll conduct a question- and- answer session. At that time, if you have a question, please press the one followed by four on your telephone.
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If you need time to call, but you still reach an operator, you may press star followed by zero. As a reminder, this conference is being recorded today, Thursday, January 13th, 2022 . I would now like to turn the call over to Bruno Carbonaro, Chief Executive Officer and President. Please go right ahead.
Good morning. Bruno Carbonaro speaking. I'm the CEO of Velan since December 1st, 2021 when I succeeded Yves Leduc. I'm in this conference with Benoit Alain, the CFO of Velan. Just to give you a little bit of my background, I joined the company in November 2019 in the capacity of President under Yves, and as you may have noticed with my accent, I'm French. We've slightly changed the format of this call, and we'll use you know the support of a brief presentation to present our results for Q3. This presentation will be available in French and in English on our website. Let's move on to the first slide, which shows our principal markets.
You see that we are active in different markets, the navy business, especially in the U.S., the nuclear business, especially in Europe, but also in Asia and in North America. Fluid service applications, a lot of ball valves for fluid applications into refineries and in the mining business. The oil and gas, which is both upstream, where we put in the oil and gas and projects where we have refineries and petrochemical. The MRO and aftermarket business which is mainly based in North America but has also some connections in Asia and Europe. Let's move on to the next slide, where I want just to have the opportunity to present our new board of directors.
We have now 10 persons on the board, and we have three new members that joined us in 2021, Suzanne Blanchet, Robert Raich, and Edward Kernaghan. Suzanne is the new Chair of the Audit Committee of the company. It's extremely important that you see that it's a blend of member of the family and senior executive with a lot of experience as directors. Now, let's move on to the results and highlights of the quarter. As you see, we try just to show the results more than speaking to them. Basically you see that the sales for Q3 reached CAD 110 million, which is a second quarter in a row above CAD 100 million.
Basically, it's one among the best quarters in the past five years. On the EBITDA front, we report an EBITDA of CAD 13.3 million, which is comparable in amount to last year. You will see in the subsequent slide that it's completely reached in a different manner, which speaks to our results in terms of proportional results. The net income is positive at CAD 4.5 million, and that's the second time in a row that we have a profitable quarter. Just to have a look at the future, it's extremely important that we have a look at our backlog. We have a backlog of CAD 443 million. We still have a very high backlog.
The book-to-bill ratio from the beginning of the year, so from the first day of the year till the end of the third quarter, is one. Basically, the decrease of the backlog, which is a slight decrease, around CAD 20 million, is mainly due to the appreciation of the dollar versus the euro and extremely strong billings in the two last quarters. In terms of cash, as you see, there is a slight decrease of our net cash. Basically, we used the cash generated by our operations to pay down our revolving credit facility by CAD 11.9 million. Can we move to the next slide, please? Okay. I want to explain in details our EBITDA.
As you see, to the left of the slide, it's one of the best EBITDA in the recent time. It's around equivalent to the EBITDA of the third quarter last year. Last year, if you remember, most of the EBITDA came from a restructuring and transformation income. Basically, we sold the former Plant Two in Montreal, and the proceeds of the sale were incorporated somehow in the EBITDA. If you go to the right of the slide, now we readjust the EBITDA of last year from CAD 13.8 million- CAD 5.7 million, which is really comparable to the CAD 13.3 million that we report this year.
Basically, if we want to break up, you know, the different variances, the first is the volume, the mere volume of sales with a CAD 13.5 million increase and a good mix. The margin mix has improved also. There is a fixed foreign exchange, you know, benefit of CAD 1.8 million. That's the positive side of it. On the negative side of it, you have an increase of the admin costs, including, you know, the sales commissions that were higher because the volume of the sales was also higher.
A decrease of the federal subsidies, the CEWS, and you have all the details in the press release between, you know, the CEWS in the admin costs and the CEWS in our direct labor costs. The other is 0.6. Basically a strong increase from CAD 5.7 million adjusted EBITDA to CAD 13.3 million. That's a very strong third quarter in terms of EBITDA. If we move on to the next slide, then you see on the slide how we use the cash generation generated by the EBITDA. Basically, if we start just to the right of the slide, I think CAD 13.3 million of EBITDA translates into the free cash flow of CAD 6.2 million.
That's a ratio about 25%, which is a fair ratio. It could have been better, but it's not a bad ratio. You see that the main focus we have is on working capital. We've managed to reduce our accounts receivable by CAD 11.7 million and our inventories by CAD 7 million, sorry. Basically, it shows you that we have a strong focus and strong discipline in our working capital, and we will continue to do so in the future quarters. On the negative side, we have a reduction of accounts payable linked to the purchasing cycles. We have a reduction of the customer deposits, basically because we've, it's really a timing issue for projects, and the rest is less important.
Basically, we generated CAD 6.2 million of free cash flow out of an EBITDA of CAD 13.3 million. Now you see how we use that, basically, on the left, where you see that basically, we generated CAD 6.2 million of free cash flow. We had also a gain on disposal of properties and plants, and mainly due to operations in Korea. Then using that, we decreased our debt by repaying our revolving facility by CAD 11.9 million. Then the rest, you can see. A strong discipline in the cash management, on top of having an EBITDA, which is a nice EBITDA for the quarter. Let's move on to the next slide. Yeah. I want to focus on the backlog.
Basically, that's the only metric we comment, you know, with the investors when it pertains to future operations. It's extremely important in the project business to have a sense of your backlog, total backlog, and more importantly, the share of your backlog that you can ship in the next 12 months. That's something that we report generally. Here you see that the total backlog is a slight decrease at CAD 523 million, and CAD 350 million is shippable in the next 12 months. Basically, it's stable. That's been stable in the last 18 months. Basically, that's a book-to-bill ratio of CAD 1 million. If I'm completely honest, the performance in terms of bookings of the Q3 was fair but not extremely good.
We see some dynamics on the market in the various regions, be it North America, India, and China, that could lead to increased backlog and booking in the next quarters. Let's move on to the next slide. I'd like to highlight some of the markets where we are pretty active and some of you know if you follow us for a long time that the Coker business, which is reported under the severe service segment, is one of our sweet spots. I'd like to give you a couple of details around the typical project that we gain, and that's a project that we got at the end of the quarter.
Most of it will be reported in Q4 technically. It's a CAD 4.2 million project for a refinery in Egypt, and basically it's through a European EPC, that's Technip. Basically, in terms of number of valves, it's really important because it shows you exactly the type of projects we are pursuing. It's around 70-75 different valves, but in four different categories. You have gate valves and ball valves, and you have switch valves that are very specific. Basically, by just assembling a bundle of technology, we were able just to offer a much better offer to the EPC at a reasonable price. That allowed us just to get this business.
Basically, on this type of business, CAD 4.2 million, basically, we will have people working on it, not only in North America, especially the engineering office, but also in Europe, because most of the valves will be manufactured either in Portugal or in Italy. Basically, it was extremely important for the customer to have them manufactured in Italy because they had access to a financing which was of Italian origin if we were just able to show that we were manufacturing in Italy. That's the type of value that we as an international group with operations in different geographies can assemble for the benefit of our customers. I suspect that we can go to the next slide just to show, you know, our face.
Bruno Carbonaro, that's me, and Benoit with me, and we will be more than happy to answer any question you may have. Let's open the floor to any question.
If you'd like to register a question on the telephone, you may do so now by pressing one followed by four on your telephone. You will hear a three-tone prompt to acknowledge your request. If your question has been answered and you'd like to withdraw your registration, you can press one followed by three. Using a speakerphone, please lift your handset before entering your request. One moment please for our first question.
As a reminder, if you'd like to ask a question, you may do so now by pressing one four on your telephone keypad to register your question. Mr. Carbonaro, we seem to have no questions queued up on the phones at this time.
Okay. Let's wait an additional two or three minutes, and then we can adjourn, I suspect.
Very good. Once again, it'll be one four to register any questions or comments through the telephone.
Mr. Carbonaro, at this time, we have no questions queued up on the phones.
Okay. I suspect that it's time for me to conclude. Thanks a lot for coming into the line, and I'm more than happy just to answer any of the questions you may have after the conference, or you can direct also your questions to Benoit, that you see, his email address. Don't hesitate to call us if you have any private question you may want to ask. Thanks a lot.
Thank you all. That does conclude the conference call for today. We thank you for your participation as we disconnect your lines. Have a good day, everyone.