Release Date: July 12, 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 14.5% year-over-year sales growth in Q1 2025.
- The company's order backlog reached nearly $530 million, up 7.5% from the beginning of the year.
- Gross profit increased by 58.2% to $23.8 million, with a gross margin of 30.7%.
- Velan Inc (VLNSF) secured a $50 million, 10-year alliance agreement with Bruce Power, potentially reaching CAD100 million.
- Bookings improved by 19.6% year-over-year to $109.8 million, driven by new projects in North America and higher bookings in Europe.
Negative Points
- Net loss totaled $1.1 million or $0.05 per share in Q1 2025, though improved from a net loss of $8.3 million last year.
- Currency movements had a negative effect of $0.6 million on sales in the quarter.
- Administration costs remained high at $21.8 million, representing 28.1% of sales.
- Cash flow from operations decreased to $4.9 million from $10.7 million in the corresponding period last year.
- Reduced oil and gas orders in Italy partially offset the overall growth in bookings.
Q & A Highlights
Q: North America from the prepared remarks experienced a handsome revenue. Could you give some color on which verticals performed particularly well?
A: For North America, there's primarily three segments: projects, severe service, and MRO. MRO mostly comes from distribution, parts for adhesives, spares, replacement valves, and so on. Projects involve heavy project-related contracts such as IT-related businesses, and severe service includes traditional products. These are the three ways we look at the North American business.
Q: Maybe you can break it out by, let's say, nuclear oil or things like that?
A: Nuclear is embedded within those segments and primarily relates to our operations in Canada. For oil and gas, it includes traditional refinery and downstream verticals in the US.
Q: On the past documents, you don't break the revenue by different verticals, right?
A: No, we only look at revenue split geographically.
Q: Would you break it or for competitive reasons, you prefer not to?
A: Prefer not to.
Q: What is the percentage of MRO as a percentage of total revenue?
A: MROs are looked at in different ways. If you're looking purely at spares and parts, it's 5% to 11%. If you include replacement valves, it trends up towards 28% to 29%.
Q: On the recently announced contract with Bruce Power, how is it structured? Is it front-loaded or linear? Also, what terms of $50 million or $100 million?
A: It's more of a long-term supply agreement with Bruce Power. The work is for refurbishment and extension, so some of it is pruning, but a lot of it builds over time due to long lead times in the nuclear industry. It's a progressive ramp-up over the 10-year cycle.
Q: What makes the difference between $50 million and $100 million?
A: The initial $50 million is secured based on the current infrastructure plan. The potential doubling to $100 million depends on firmed-up projects and options in the pipeline.
Q: There's an increase in delinquency on accounts receivable, especially outside North America. Can you provide some color?
A: The increase is mainly due to timing. Large receivables were collected right after the quarter, which would alter the aging you saw. The company continues to focus on maximizing cash and ensuring prompt collection.
Q: So after the quarter end, you collected the receivables?
A: Yes, collections after the quarter end brought the aging more in line with recent historic trends.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
