Release Date: October 11, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Velan Inc (VLNSF, Financial) reported a significant improvement in net income, achieving $100,000 compared to a loss of $2.1 million a year ago.
- The company experienced a 60% increase in bookings and a 20% rise in sales year-over-year, driven by strong performance in sectors like nuclear power, defense, and oil and gas.
- Cash flow from operations improved significantly, reaching $10.1 million in the quarter and $15 million for the first half of the fiscal year.
- Velan Inc (VLNSF) secured a main services agreement with GDH SMR Technologies Canada Limited, positioning itself as a first-mover in supplying small modular reactors (SMRs) with proprietary valve technology.
- The company's order backlog increased by 11.5% to $548 million, with 72% of the backlog expected to be delivered within the next 12 months, indicating strong future sales potential.
Negative Points
- Despite the positive financial performance, Velan Inc (VLNSF) faced a $5.2 million nonrecurring revenue gain related to a canceled agreement, which did not contribute to gross profit.
- Currency movements negatively impacted sales by $0.6 million during the quarter.
- The company's gross profit margin decreased to 27% from 29.1% last year, partly due to higher inventory provisions.
- Administration costs increased to $24.8 million, driven by higher sales commissions, which could impact future profitability.
- The company faces potential logistical risks and supply chain disruptions due to geopolitical tensions in regions like the Middle East.
Q & A Highlights
Q: You don't break out revenues in terms of volumes and pricing. Can you provide any color on that?
A: Rishi Sharma, Chief Financial and Administrative Officer: We comment on volume and its effects on profit with absorption but don't discuss market-specific pricing due to its sensitivity.
Q: With all the nuclear contracts, what is your Total Addressable Market (TAM) for nuclear?
A: John Ball, Executive Vice President - Global Finance: It's challenging to size the nuclear market, especially with SMR technology in its early stages. However, Velan is well-positioned with key industry relationships, ensuring a significant role in the market's growth.
Q: Can you clarify the financial impact of the $5.2 million contract cancellation?
A: Rishi Sharma, Chief Financial and Administrative Officer: The revenue is included, but there's no gross profit as the cost of sales equates to the revenue. The balance sheet reflects a provision against the inventory value.
Q: Are there risks from Middle East conflicts affecting your operations?
A: James Mannebach, Chairman and CEO: The primary risk is logistical, such as disruptions in the Suez Canal. While a full-scale war poses risks, our immediate concern would be the safety of our colleagues globally.
Q: Should we expect lower gross margins and higher admin costs due to new nuclear contracts?
A: Rishi Sharma, Chief Financial and Administrative Officer: Gross margins should remain stable, with potential improvements as contracts mature. Admin costs, driven by commissions, may stabilize with continued commercial activity.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
