Release Date: December 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Year-to-date revenues increased by 8.1% compared to last year, reaching $262.2 million.
- Gross margins improved significantly, with a year-to-date margin of 31.7%, up from 21.1% the previous year.
- Adjusted EBITDA saw a substantial increase, reaching $72 million, which is 78.1% higher than last year.
- Net income for the third quarter rose to $16.4 million, or $0.55 per share, compared to $11.2 million, or $0.34 per share, a year ago.
- The company has a strong cash position with $65.5 million in cash and cash equivalents, supporting future growth and share repurchase plans.
Negative Points
- Quarterly revenues decreased by $2.2 million compared to the same quarter last year.
- Order backlog decreased from the beginning of the year, which may indicate potential future revenue challenges.
- SG&A expenses were impacted by the mark-to-market valuation of DSUs and PSUs, leading to fluctuations in expenses.
- The company faces potential market hesitations due to recent tariffs and the upcoming US election.
- Despite strong financial performance, the company's valuation remains low, with shares trading at approximately 3 times EBITDA.
Q & A Highlights
Q: Are you confident in signing new contracts to ensure growth in fiscal 2026 despite the current backlog concerns?
A: Jean Paschini, CEO, emphasized that there is no need to panic about the backlog, which stands at $330 million. He is confident that the backlog will increase soon due to ongoing negotiations and bids. The current backlog has good profit margins, and the company is focused on maintaining growth in both top and bottom lines.
Q: Why did ADF Group decide to initiate a Normal Course Issuer Bid (NCIB) after not having one since 2016?
A: Jean-Francois Boursier, CFO, explained that the decision was driven by the current low valuation of the company, which is around 3 times EBITDA. The company has excess cash and sees the NCIB as the best use of funds, especially given the market opportunities and growth prospects.
Q: With 35% of the backlog being fabrication hours, how should we view margins for Q4 and fiscal 2025?
A: Jean-Francois Boursier, CFO, stated that margins should remain strong in Q4 and the first quarter of next year due to favorable projects in the backlog. While future projects' margins are uncertain, even a 25% margin would be considered good.
Q: Can you provide an update on the $35 million potential gain mentioned in Q2?
A: Jean-Francois Boursier, CFO, clarified that the delay was due to installation issues not caused by ADF. The installation has now started, but the revenue will be recognized later, likely next year, rather than adding to any specific quarter.
Q: Is there a possibility of expanding capacity if demand increases, and how does ADF compare to competitors?
A: Jean-Francois Boursier, CFO, mentioned that ADF has room to expand at both its Quebec and Great Falls plants. Regarding competitors, most steel fabricators have gone private, making ADF one of the few publicly traded companies in this sector.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
