This call is being recorded on Friday, July 12, 2024. I would now like to turn the conference over to Rishi Sharma, Chief Financial and Administrative Officer. Please go ahead.
Thank you, operator. Good morning, 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 mentions that the presentation provides an analysis of our consolidated results for the Q1 ending May 31st, 2024. Board of Directors approved these results yesterday, July 11, 2024. Second paragraph refers to non-IFRS 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 that 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 U.S. dollars unless indicated otherwise.
I now turn the call over to Mr. Jim Mannebach, Chairman of the Board and CEO of Velan.
Well, thank you, Rishi, and good morning, everyone. If you're following along with the investor presentation, please turn to page four for a general overview of the Q1. Velan opened fiscal 2025 with a strong performance across its core markets, generating sales growth of 14.5% year-over-year. Our order backlog closed at $528 million, with a strong gross margin reported as well at just above 30% in the quarter. The double-digit sales growth can be attributed to an increase in shipments from our North American operations, including important project deliveries and a solid performance from our MRO business. Supported by a strong backlog, sales from our Italian operations, which revolve around oil and gas, were also robust despite some shipment delays.
From a market standpoint, we are particularly excited about expanded opportunities in the nuclear sector based on heightened interest in small modular reactors or SMRs. They're gaining traction in Europe and North America and indeed around the rest of the world as well. Due to its sheer size, the U.S. offers massive potential for deploying SMRs. But as I noted, we're also seeing other countries highly interested in the clean energy, safety features, and cost effectiveness of this emerging technology. As a whole, nuclear power deployments, which are critical to reducing greenhouse gas emissions, were recently fast-tracked through the passing of a bipartisan bill entitled the ADVANCE Act in the U.S. Senate. Looking ahead, we anticipate a nuclear power growth cycle for at least the next decade, not only in the U.S., but on a global basis.
Clearly, Velan should benefit from this long-term growth cycle, as we are the leading valve supplier for all nuclear-related technologies on a global basis. As announced earlier this week, a CAD 50 million dollar agreement, a CAD 50 million 10-year alliance agreement was reached with Bruce Power for valves reflecting strong demand for nuclear power in Canada. This milestone agreement, which includes refurbishment and technical services, could reach over CAD 100 million , if all options and projects are firmed up over the course of Bruce Power's asset management and life extension projects in Ontario.
Turning to slide five, I mentioned our order backlog reached nearly $530 million at the end of the Q1, up 7.5% from the beginning of the year on the strength of solid bookings. At quarter end, 70.5% of the backlog, representing orders of over $372 million, are deliverable within the next 12 months. As a result, we remain on track for delivering sales growth in fiscal 2025. Bookings improved 19.6% year-over-year to $109.8 million in the Q1 of fiscal 2025. The growth mainly reflects a robust order increase in North America, driven by new projects in the MRO business, along with higher bookings for oil refinery projects in Germany and nuclear power service and spares in France. These factors were partially offset by reduced oil and gas shipments in Italy. Currency movements had a positive effect of $1.1 million on bookings in the quarter.
Given that bookings outpaced sales, our book-to-bill ratio stood at 1.42 at the end of the Q1 of fiscal 2025, and 1.10 for the last 12 months. Of note, 1.10 marked our best book-to-bill ratio in nearly three years on a rolling 12-month basis. In summary, Velan delivered strong Q1 results across the board, heightened by sales, highlighted by sales, margin and profitability, gains year-over-year, combined with a growing order backlog.
At this point, I'll turn the discussion over to Rishi for a more in-depth review of the financial results of the quarter. Rishi?
Thank you, Jim. Turning to our Q1 results on slide seven, sales totaled $77.5 million, up 14.5% from the Q1 of fiscal 2024. As previously mentioned, the growth was mainly driven by increased shipments from our North American and Italian operations. Currency movements had a $0.6 million negative effect on sales in the quarter. By customer geographic location, North America accounted for nearly 49% of total revenues in the Q1 of fiscal 2025, compared to 51% in the Q1 of 2024. Europe represented 24% of total revenues in the Q1 of 2025, reflecting solid sales activity in Italy versus 19% in the same period in 2020. Asia Pacific at 16%, Africa and Middle East at 10%, as well as South and Central America at 1%, rounded off the sales breakdown in the Q1 of fiscal 2025.
Moving to gross profit on slide eight . It amounted to $23.8 million for the Q1 of 2025, up 58.2% from $15.1 million last year. The significant increase was primarily due to higher sales volume, which positively impacted the absorption of fixed production overhead costs, more favorable product mix compared to last year, and production efficiency gains. As a percentage of sales, gross profit reached 30.7% compared to 22.2% last year.
Administration costs totaled $21.8 million, or 28.1% of sales in the Q1 of fiscal 2025, compared to $21.5 million or 31.8% of sales a year ago. This year's administration costs include a $0.1 million in restructuring expenses, mainly consisting of severance payments, while last year's costs included $0.5 million in expenses related to the proposed transaction with Flowserve Corporation. EBITDA amounted to $3.7 million in the Q1 of fiscal 2025, compared to -$3.8 million last year. Excluding this year's restructuring costs and last year's expenses related to the proposed Flowserve transaction, adjusted EBITDA reached $3.9 million, up from -$3.3 million last year. The year-over-year increase was mainly driven by higher sales volume, combined with a significant improvement in gross profit.
Net loss totaled $1.1 million, or $0.05 per share in the Q1 of fiscal 2025, compared to a net loss of $8.3 million, or $0.38 per share last year. Excluding the after-tax effect of restructuring costs and expenses related to the proposed Flowserve transaction, adjusted net loss was $1 million or $0.05 per share, versus an adjusted net loss of $7.9 million or $0.37 per share last year. The year-over-year variation can be attributed to higher adjusted EBITDA in the Q1 of 2025, partially offset by greater net finance costs and income tax expense.
Moving on to cash flow from operations on slide nine. It reached $4.9 million in the Q1 of fiscal 2025, down from $10.7 million in the corresponding period a year ago. The decline in cash for the quarter was primarily due to less favorable positive changes in non-cash working capital movements, partially offset by an increase in EBITDA. Finally, our financial position remains healthy. As at May 31st, 2024, the company held cash and cash equivalents of $35.8 million and short-term investments of $5.7 million, while long-term debt, including the current portion, amounted to $24.8 million.
Turning to our outlook for the remainder of fiscal 2025 on slide 10. Velan delivered strong Q1 results, highlighted by a growing order backlog of $528.3 million and a book-to-bill ratio of 1.42. As Jim stated earlier, orders of $372.3 million at the quarter end, or 70.5% of the total backlog, are expected to be delivered within the next 12 months. Consequently, we are reiterating our expectations to deliver sales growth in fiscal 2025.
I will now turn the call over to the Operator for the Q&A session.
Thank you, ladies and gentlemen. We will now begin the question-and-answer session. Should you have a question, please press star followed by the one on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question.
Your first question comes from Alex Ciarnelli with SM Investors. Your line is now open.
Yes. Hi, good morning. Congratulations on the call and the results. North America, from the prepared remarks, experienced a handsome revenues. Could you give some color which verticals performed particularly well?
North America, there's primarily three segments that we would call projects, severe service and MRO. MRO, mostly coming from the distribution, parts for DCs, you know, spares, replacement valves and so on. Projects being heavy project-related contracts, such as fabricated bed, we've secured some orders and severe service in the traditional product. Those are kind of the three ways that we look at the North American business.
You don't break it out by, let's say, nuclear, oil, things like that?
Nuclear, we do have a vertical as well, that's embedded within those segments. That primarily relates to our operations in Canada and some in the U.S. For oil and gas, traditional refinery and mainly downstream verticals.
I'm sorry, I missed the last part. Oil and gas, you were saying?
Uh, downstream.
In the U.S., downstream.
U.S., yeah.
U.S. downstream. Okay. Well, since we're talking about the verticals, I'll just ask one more there. On the past documents, you don't break the revenue by different verticals, right?
No.
No, we only look at the revenue split geographically.
Would you break it, or for competitive reasons, you prefer not to?
Prefer not to.
Prefer not to. Okay. I don't know if you break this out, but if you do, what is the percentage of MRO as a percentage of total revenue?
So MRO is looked at in different ways. If you're looking purely at spares, and parts, you know, we're at about 9%-11%. If you look at and include, replacement valves, you know, then you trend up towards, 28%-29%.
Then, if I may ask a question on the recent announced contract with Bruce Power. How is the cadence?
What is the cadence?
I'm sorry?
You broke up there just for a second. Can you repeat the question? How was what? How was what?
Okay. Uh, the, uh- The announced deal with-
The announced deal with-
Bruce Power.
Bruce Power.
What would be the cadence? Is it front-loaded? Is it linear? Also, what terms? $50 million or $100 million? And then the word you talked about, alliance. I don't know if that means a joint venture or it just means another way to say long-term contract. Thank you.
Okay. So I think into the, to address the last point of your question, I think you could probably look at it more as a long-term supply agreement with Bruce Power. As we talked about at the last quarter, obviously, there's an increase in interest and uptick in nuclear activity, not only in Europe, but also in North America, Canada, and the U.S. People are recognizing that they need to strike these kind of agreements with Velan as a leading supplier of critical valves in the industry to assure their supply chain going forward.
In terms of the cadence or how that might stretch out, most of the time in nuclear, a lot of this work is for refurbishment and extension. So some of it is front-end, but a lot of it builds as time goes by, principally because of long lead times within the nuclear industry anyway. So I think probably not linear, wouldn't be a way to look at it, but not so much of a hockey stick either. It-
Progressive.
Yeah, it's a progressive ramp-up over the 10-year cycle.
What makes the difference between $50 million and $100 million?
Yeah. So there's obviously, when you look at the supply of what's currently expected to be built, if you look at the infrastructure plan, secure at least $50 million, and then there's projects in the pipeline. And as they are firmed and options come through, that's where we see the potential doubling of the value of the contract.
Okay. Perfect. If I would see, t hen another one for me, the MDA. I noticed that there's an increase in delinquency on accounts receivable, especially in-
Yeah.
I don't know if it means anything, but if there's some color.
No, I think what it means is timing. There were, outside, principally outside North America, there were some large receivables that were collected basically right after the quarter, which would have altered the, the aging that you saw. I noticed the same thing and asked the question to the finance people, of course. But if we look into the collections right after the end of the quarter, return to the more normal state. I think over time, you know, if you think about it on a continuum, the company continues its focus on maximizing its cash and the efforts to ensure prompt collection of receivables continue to bear fruit. So I think the end of the quarter was, as we sit here today, it was more of an aberration just for timing of collections.
Okay. So after the call, sorry, after the quarter ended, what you're saying, you collected and you're back to-
Yeah. Yeah, right. So to bring the aging more in alignment with more recent historic trends.
Yeah, and maybe just to add to that, if you look at the current bucket, there's a lot of efforts to collect current. Sometimes, you know, receivables get held up for certain reasons. So with the customer base, clear as much as we can currently, and as Jim mentioned, address the snags, and shortly after the quarter, most of that collection.
Okay, thank you. That's all for me. Thanks.
Thank you.
Ladies and gentlemen, as a reminder, should you have a question, please press star one. There are no further questions at this time. I will now turn the call over to Jim.
Thank you, operator. Thank you everyone for joining us today. We look forward to sharing our Q2 results with you guys in the fall, and hope you have a great day and a great summer. Take care. Bye for now.
Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.