Greetings, and welcome to the Velan Inc. Q1 results conference call. During the presentation, all participants will be in a listen-only mode. Later, 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. If at any time during the conference you need to reach the operator, please press star zero. As a reminder, this conference is being recorded, Friday, July eighth, 2022. I would now like to turn the conference over to Bruno Carbonaro, Chief Executive Officer and President. Please go ahead.
Hello, Bruno Carbonaro speaking. Before starting the presentation, I'll just present the usual disclaimer. We are just presenting our results for the first quarter of the year, fiscal year 2023, ending on May 23, 2022. There is the usual comment on the non-IFRS financial measures, and we have also, you know, the usual comment on the forward-looking information that you're used to. I'm joined today by Rishi Sharma, our new CFO, that will help me just conduct this presentation. At the end of the presentation, we will be more than happy to take any question you may have, and answer that if it's possible. To start, I'd like to present our new board of directors that was elected yesterday. There will be a lot of very familiar names.
The two changes are that we have Bill Sheffield and Robert Reich have stepped down and in place we have Peter Velan who comes back to our board of directors. Now the highlights of the Q1. I think you are now used to this, the slide and the format. Basically in terms of sales, it's CAD 75 million of sales, so it's at par with last year. I would not be honest if I didn't say that I'm disappointed. We should have done more, but basically we can explain why it's only CAD 75 million. It translated to an EBITDA of CAD -2.9 million, which is a little bit lower than last year. The main explanation is an increase of the admin costs, especially due to the ongoing freight costs.
The net loss is in sync with that, -7.4%. The good news, and it's extremely important, that we continue to have a good visibility on our activity with the backlog, which remains at a high level with CAD 5.6 million, and obviously a book-to-bill ratio which is remarkable at 1.25. In terms of liquidity, we still enjoy a very nice liquidity position with more than almost CAD 48 million of net cash. Obviously, there is a decrease from the beginning of the quarter that will be explained by Rishi later in this presentation. It's due to the low EBITDA combined with an increase in inventory and primarily of work in progress that has really boomed during the quarter due to some difficulties to ship some large orders.
Back to the backlog. Here on the right you have the visibility on the size of backlog. You can just see that it remains at a high level. We also communicate on the part of the backlog which is shippable in the next twelve months. It remains at about the same amount, which is CAD 314 million. What is important to notice is that there is an impact of us not shipping exactly what we wanted to ship. The second impact, which is extremely important, is part of our backlog is labeled in euro, especially our nuclear business in France, as most of their sales in euros.
The decrease of the value of the euro during the first quarter had an impact on the size of backlog of almost EUR 30 million. I just now hand over just to Rishi just to help us better understand the state of our sales and the value behind our cash.
Thank you, Bruno. Thank you. Good morning, everyone. Sales, as mentioned, comparable to the prior year, Q1 at about CAD 75 million or 0.6% higher. The increase in sales is primarily attributable to shipments of our large Italian operations, as you can see from the pie charts there, almost double versus prior year. When you look at our foreign subs and our operations outside of the three core markets here, you see, there's a 6.5% versus an 8.5%. I think the third party sales improvement there has given us a pickup. When we look at France, a slight decrease versus prior year. In North America, as Bruno had mentioned, some impact on delays of shipments that we've seen.
When we talk about delays, so we say really comparable year-over-year. However, the expectation for us was a bit higher. We did experience some delays resulting from supply chain and logistical issues. The attainment of customer export permits for inventory that was ready, which you can tie into our near completed WIP and our finished goods. Final negotiations and process with certain customers. If you look at EBITDA in Q1, generally and historically, Q1 is soft. We do have a bit of a higher reported EBITDA loss here, which is CAD 0.13 of a loss per share. The unfavorable movement for the quarter is primarily attributable to an increase in admin costs, selling costs.
As Bruno Carbonaro had mentioned, some pressure on supply chain logistics and outbound freight costs for final delivery, delays in obtaining of shipping containers and the resulting impact there. If we do compare EBITDA, but maybe a step higher on gross profit, in the prior year, we did qualify for emergency wage subsidies, which was about CAD 400,000 on the gross profit and CAD 600,000 in the admin. Our gross profit is improving from 26.1% normalized last year to 26.8% in the current year, which really is a focus and an emphasis from our V20 operational restructuring and the emphasis on contract execution.
If we look at the bridge really from EBITDA to free cash, the big impact on our burn of free cash flow of -CAD 4 million is coming from the EBITDA loss of -CAD 2.9 million. What's important to note is significant collections in the quarter, primarily coming from a large revenue and billing cycle in Q4. A good reduction in our AR, which has helped us. On the inventories and other working capital movements, as we tie this to some of the shipments, we were prepared for delivery, we do see an increase of about CAD 12 million, 12.2, which we do expect to be recovered throughout the course of the year.
Finally, some increase in interest, tax, and other expenses with adding on that our normal about 900,000 to 1 million spent per quarter on CapEx, which brings us to our -CAD 4 million free cash flow. It's important to note, although there is a slight burn on the free cash flow, our net liquidity and net cash remains very strong. At the end of Q4, we were in a CAD 53.5 million net positive cash position. This positive cash position drops to CAD 47.7 million. Apologies. The driver here really the free cash flow. We have a net 1 million increase in long-term debt. On the FX revaluation of our cash on hand, a drop in CAD 1.8 million for reporting purposes.
With that, we summarized kind of the key metrics. I'll pass it back to Bruno to close on the comments for Q1 and essentially what we see for the focus for the rest of the year.
Thanks, Rishi. I think, as usual, we don't provide any guidance, but I'd like to provide you some visibility on my key tasks. First is to focus on execution. We know that we need to improve our execution. It's my top priority, and we want to ensure that we can really meet our deadline for shipments and the combination of manufacturing, you know, on time, but also just fixing all the logistics issues inbound and outbound. So that's really a good focus for a good portion of my time will be focused on that. Second thing is we truly believe that we have in front of us a strong Q2 and a strong end of the year. So we have the backlog.
If we are disciplined in execution, we don't see why we can't just have the same type of year than last year. However, I think as everybody knows, you know, the economy is moving very fast, a lot of volatility in terms of competition of raw material, in terms of recession, in terms of, you know, geopolitical uncertainties, not only in Europe, but also in Asia. It's moving fast. We need to stay attentive to that and make sure that we are making the right decision to be always in a position to deliver goods to our customers. We enjoy a very strong backlog, and we see a strong pipeline of opportunities, and we absolutely want to preserve our strong liquidity and cash base.
The name of the game here is to have an active management of our working capital. That's what we did during Q1. We are on top of that, and we want to continue to really be extremely disciplined the way we allocate the capital, and we can get our money back from our AR. That was my comment for the rest of the year. Now, both Rishi and me are at your disposal to answer any question you may have.
Thank you. If you'd like to register a question, please press the one followed by the four on your telephone. Si vous désirez poser une question, s'il vous plaît appuyez sur le un suivi du quatre sur votre téléphone. Un moment s'il vous plaît. One moment please. As a reminder, to register a question, please press the one followed by the four. A titre de rappel, si vous désirez poser une question, s'il vous plaît appuyez sur le un suivi du quatre.
The first question comes from Stephen Takacsy of Lester Asset Management. Please go ahead. Je passe la ligne à vous.
Hi. Can you just give us a little more detail on, you know, why the admin costs are so high? I thought the idea was to sort of bring those down as part of the 20, and quantify, you know, what the additional freight and shipping costs were and also what charges were booked on, you know, the usual asbestos litigation as well.
Yeah. Hi, Stephen. It's Rishi. On your first point, absolutely, the focus was and is on the admin costs. On the outbound freight, if I can comment, there's operational mitigation there. With the delays and us being able to secure outbound freight, whether it's containers, in order to protect delivery time, in order to protect our LDs on contracts, we made choice to avoid those and pay a little bit more. There's a mitigation plan in place with the global sourcing team now that we look at and with freight forwarders and so on and so forth, so we expect this to taper off. On the second point for asbestos, I would say in line with prior year.
No movement or no significant movement with what we booked in prior year for Q1.
Can you give us a number or?
Prior year was 4.5 million, I believe. 4.3 million.
In the quarter?
In the quarter, yes.
Right. Yeah, that's a big number obviously that cuts into the EBITDA, you know, pretty harshly. Is there any plans to kind of deal with that going forward in a different manner? I know the accounting treatment changed year end, but is there anything going forward that the company's working on to try and mitigate these costs?
Bruno speaking. As we already said, we monitor the situation extremely closely, and we just adapt our strategy to the latest news we have.
All right. Well, that's it for me. Thank you.
Thanks.
Thank you, Stephen.
As a reminder, via the phone, you may press star one to register a question.
I show no further questions at this time.
I'll turn the call back over to our speakers for any closing remarks.
Nothing to add. I think, thanks for your attendance, and we are still happy to entertain any questions in private if you have.
Thank you. This does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.