Velan Q1 2024 Earnings Call Transcript

Quartr
Provided by Quartr
July 7, 2023

There are 3 speakers on the call.

Operator

Greetings, and welcome to the Valane Q1 Financial Results Conference Call. As a reminder, it's being recorded Friday, July 7, 2023. I would now like to turn the call over now to Bruno Carbonaro, Chief Executive Officer and President. Doctor. Itau, please go ahead.

Speaker 1

Hi, everyone. Thank you for joining today our conference call. Let's start by presenting the usual disclaimer that you will also find on the second page of the presentation that will be posted shortly on our website in the Investor Relationships section. As always, the first section of the disclaimer mentions that the presentation provides an analysis of our consolidated results for the quarter ended May 31, 2023. The Board approved these results yesterday, July 6, 2023.

Speaker 1

The second paragraph refers to supplementary financial results, which are reconciled at the end of this presentation. Finally, the last paragraph refers to forward looking information, which are subject to risks and uncertainties and can't be guaranteed. The forward looking statements contained in this presentation are expressly qualified by this cautionary statement. This being said, now let's proceed with the call. Welcome to our Q1 fiscal year 2024 conference call.

Speaker 1

I'm joined today by Rishi Sharma, our CFO. I will start with a brief Summary of our results following by a detailed presentation by Rishi and then my closing comments. We won't be taking any questions at the end of the call today as last time. So the key highlights of the Quarter as follows. Sales for the quarter amounted to €67,700,000 A decrease of €7,300,000 or 9.8% compared to the same quarter of the previous fiscal year.

Speaker 1

The decrease for the quarter is primarily attributable to accelerated shipments in the Q4 of the previous fiscal year Due to increased customer demand and a capacity to also increase our production rapidly. It's also attributable to delays on certain shipments in the current quarter caused by customer readiness issues And finally, a shortage of deliverable orders in our Italian operations. Negative EBITDA of €3,800,000 and net loss of €8,300,000 for the quarter compared To a negative EBITDA of €2,900,000 and a net loss of €7,400,000 last year. The decrease in EBITDA is primarily attributable to decrease in gross profit, partially offset by a decrease in administration costs. Our net cash amounted to a solid €58,600,000 at the end of the quarter, an increase of €8,400,000 since the beginning of the fiscal year, driven by continued improvements in operating cash flow generation.

Speaker 1

I now hand over to Rishi, who will provide you more details on

Speaker 2

the performance of the quarter.

Speaker 1

Thank you, Bruno. Hello, everyone.

Speaker 2

To look at the backlog, the total backlog increased by 26,200,000 or 5.6% since the beginning of the fiscal year, which amounted to $490,500,000 at the end of the quarter. The increase in the backlog is primarily due to a strong book to bill ratio of 1.36 as a result of bookings outpacing sales in the current quarter. It's important to note that within the next 12 months, the backlog sorry, the backlog ex goodwill within the next 12 months is relatively stable from the Q1 of the previous year. Bookings amounted to $91,800,000 for the quarter, a decrease of $1,600,000 or 1.7 percent compared to the Q1 of last year. This decrease is partially attributable to lower marine orders recorded in our North American operations, but partially offset by an increase upstream in gas and nuclear orders recorded in our Italian and French operations, respectively.

Operator

If we look at

Speaker 2

our sales, sales were lower for the quarter as mentioned by Bruno, decreasing by $7,300,000 or 9.8 percent compared to the first quarter of last year. Again, the decrease in sales for the quarter is primarily attributable to the decreased shipments of large orders in our Italian and French operations. This decrease was caused as well by an acceleration of shipments in the Q4 of the prior fiscal year as a result of customer demand and our increased production ramp up, delays on certain shipments in the current quarter caused by customer readiness and commercial issues and finally a shortage of the deliverable backlog in our Italian operations. The decrease in sales for the quarter was partially offset by increased shipments in our North American operations that continue to ramp up despite also being faced with a variety of commercial customer issues and related delays in shipments. Let's now move to our EBITDA.

Speaker 2

EBITDA for the quarter amounted to a negative $3,800,000 or $0.18 per share compared to a negative $2,900,000 or $0.13 per share last year. The unfavorable movement in EBITDA for the quarter is primarily attributable to lower gross profit, partially offset by the decrease in administrative costs. Our gross profit was impacted by the lower volumes and therefore absorption related costs. If we look at the gross profit decrease for the quarter totaling $15,100,000 or 22.2 percent compared to last year's $20,100,000 or 26.8 percent for the last year. The decrease in gross profit percentage for the quarter, as mentioned, is primarily attributable to the lower sales volume, which did impact the absorption of our fixed production overhead costs.

Speaker 2

Our gross profit was also negatively impacted by the unfavorable unrealized foreign exchange translations relating to the fluctuation of the U. S. Dollar against the euro when compared to the similar movements of the previous year. Finally, a decrease in gross profit was also due to the unfavorable effect of the product mix delivered in the Q1. Administration costs for the quarter amounted to $21,500,000 a decrease of $4,300,000 or 16.7 percent.

Speaker 2

The decrease in administrative costs for the quarter is primarily attributable to the recording of the last quarter of the previous year of an asbestos provision for potential settlement values of future unknown claims. The settlement expense in the Q1 of fiscal year 'twenty three amounted to 3,200,000 The decrease in administrative costs for the quarter is also due to lower outbound freight costs, which have now stabilized, sales commissions in reaction to the lower quarterly sales volume, as well as an overall control on the S and A cost structure. Let's now look at the cash position of the company. If we look at net cash, our cash increased by $8,400,000 since the beginning of the fiscal year. The free cash flow generated for the same period was $9,600,000 The favorable movements in cash provided by operating activities for the quarter is primarily attributable to favorable movements in non cash working capital items, partially offset by the decrease in EBITDA.

Speaker 2

The positive non cash working Capital items for the quarter consisted primarily of a significant decrease and in collections of our accounts receivable, mainly explained by the high volume of revenues that we secured in Q4 of the last fiscal year and partially offset by negative non cash working capital movements, which were primarily due to an increase in inventories in reaction to the overall increase in backlog and combined with the temporary shipment delays as explained previously. I'll now pass it back to Bruno for his closing comments for Q1.

Speaker 1

Thanks, Tricci. We are obviously disappointed by the temporary shipment delays offset in the Q1 of this fiscal year, That we remain confident for the remaining part of the year for a couple of reasons. A, our backlog has improved during the quarter, highlighted by similar bookings from last year. Secondly, our cash base increased during the quarter, thanks to consistent focus on working capital management And finally, I ensure you that despite a tougher quarter, execution remains our top priority, And we will address issues encountered this quarter to improve and meet our own time delivery commitments. Finally, We are also dedicating all the necessary resources and efforts to prepare a successful closing of the transaction with Flowserve.

Speaker 2

That's now the end of the presentation. Thanks for your attention.

Operator

Thank you. That does conclude the conference call for today. We thank you for your participation. Please disconnect your lines and have a great day everyone.

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Key Takeaways

  • Sales declined 9.8% year-over-year to €67.7 million in Q1, driven by accelerated prior-year shipments, customer readiness delays, and shortages in Italian deliverable backlog.
  • EBITDA was negative €3.8 million (-€0.18/share) versus ‑€2.9 million last year, and net loss widened to €8.3 million from €7.4 million, primarily due to lower gross profit offset in part by reduced administration costs.
  • Net cash rose €8.4 million to €58.6 million, reflecting stronger operating cash flow and disciplined working capital management despite lower EBITDA.
  • Order backlog grew 5.6% to $490.5 million with a book-to-bill ratio of 1.36; bookings fell 1.7% as lower North American marine orders were partly offset by gains in gas and nuclear segments.
  • The company remains confident in full-year outlook, prioritizing execution to resolve delivery delays and advancing preparations for the closing of the Flowserve transaction.
A.I. generated. May contain errors.
Earnings Conference Call
Velan Q1 2024
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