ADF Group Q2 2024 Earnings Call Transcript

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Provided by Quartr
September 7, 2023

There are 2 speakers on the call.

Operator

Good morning, ladies and gentlemen, and welcome to ADF Group Second Quarter Results Ended July 31, 2023 Conference Call. At this time, all lines are in listen only mode. Following the presentation, we will conduct a question and answer session. 1. This call is being recorded on Thursday, September 7, 2023.

Operator

I would now like to turn the conference over to Jean Francois Broussier, Chief Financial Officer. Please go ahead.

Speaker 1

Thank you. Good morning and welcome to ADF's conference call covering the 2nd quarter 6 months ended July 31, 2023. I will first update you on our quarterly and year to date results, which were disclosed earlier this morning by press release and then proceed with a quick update about our operations. First, a word of caution. Please note that Some of the issues discussed today may include forward looking statements.

Speaker 1

These are documented in ADF Group's management report 1, 2023, which were filed with SEDAR this morning. The positive trends started in our Q1 continued during our Q2. As such, We closed the quarter ended July 31, 2023 with revenues of $80,200,000 $13,800,000 higher than for the same quarter ended a year ago. Year to date, revenues stood at $160,500,000 compared to $134,400,000 for the 6 month period ended July 31, 2022. These increases are in line with the past quarters trend and our increased backlog.

Speaker 1

Gross margin as a percentage of revenues at 22.2% is up from the 12.9% margin for the quarter ended July 31, 2022, while adjusted EBITDA at $12,600,000 was $5,500,000 or 78% higher than the Q2 ended last year. Year to date, gross margins as a percentage of our revenues at 19.5% is up from the 12.5% margin for the 6 month period ended July 31, 2022, while adjusted EBITDA at $22,700,000 was $10,000,000 or 78.5 percent higher than the 6 month period ended last year. Gross margin for the 3 month 6 month periods ended July 31, 2023 benefited primarily from U. S. Projects presently being fabricated and installed.

Speaker 1

These favorable gross margin variance did not entirely trickle down to adjusted EBITDA considering the increased selling and administrative expenses. For the 3 6 month periods ended July 31, 2023, SG and A expenses stood at 6,600,000 dollars respectively, dollars 3,900,000 $5,000,000 higher than for the corresponding period a year earlier. These increases come from the higher salary levels in line with the recent inflation trends and share based compensation fair market valuation in line with ADF stock price increase. In addition, selling and administrative expenses for the 3 6 month periods ended last year on July 31, 2022 benefited from an $800,000 gain on disposal of fixed assets. We therefore closed our 2nd quarter with net income of $10,500,000 or $0.32 per share compared to $5,400,000 or $0.17 per share for the corresponding quarter a year ago.

Speaker 1

Year to date, net income stood at $15,900,000 or $0.49 per share compared to dollars 9,700,000 or $0.30 per share for the same period ended July 31, 2022. As of July 31, 2023, cash and cash equivalents stood at $52,200,000 $45,000,000 higher than as of January 31, 2023, while working capital stood at $83,000,000 26.5 percent higher than the January 31, 2023 level. Now that our investment program for the automation of our fabrication facility in Turbon is finalized, we expect full year CapEx to be under $5,000,000 with $1,800,000 being spent year to date. Yesterday, our Board of Directors approved the payment of the second $0.01 per share semiannual dividend, which will be paid on October 17 to shareholders of record as at September 29, 2023. Bolstered by our strong results, we turn to the second half of our fiscal year with sustained confidence.

Speaker 1

With a strong backlog, which reached $373,700,000 as of July 31, 2023, a sound financial position and state of the art fabrication equipment and plants, we are poised to take advantage of the market conditions allowing us to pursue our growth. Thank you for your interest and confidence in ADF. We will now answer your questions.

Operator

Thank you. Ladies and gentlemen, we will now begin the question and answer session. 1. There are no questions at this time. Please proceed.

Speaker 1

Again, we wish to thank you for your interest in and support of ADF Group. Have a nice day.

Operator

Thank you. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.

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Key Takeaways

  • Revenues for Q2 rose to $80.2 million, up $13.8 million year-over-year, with year-to-date revenues reaching $160.5 million compared to $134.4 million a year ago.
  • Gross margin expanded to 22.2% from 12.9% in the prior-year quarter, driving adjusted EBITDA up 78% to $12.6 million.
  • Net income climbed to $10.5 million ($0.32/share) in Q2 versus $5.4 million ($0.17/share) a year earlier, with YTD net income at $15.9 million ($0.49/share).
  • Cash and cash equivalents soared to $52.2 million, while backlog grew to $373.7 million as of July 31, 2023.
  • The board approved a $0.01 per share semiannual dividend and expects full-year CapEx under $5 million following completion of its fabrication automation investments.
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Earnings Conference Call
ADF Group Q2 2024
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