Release Date: September 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Year-to-date revenue increased by 13.6% compared to the same period last year, reaching $182.3 million.
- Gross margins for the quarter improved significantly to 36.9%, up from 22.2% in the same quarter last year.
- Adjusted EBITDA more than doubled year-over-year, reaching $24.9 million for the quarter.
- Net income for the quarter increased to $16 million or $0.51 per share, compared to $10.5 million or $0.32 per share last year.
- Operating cash flow for the quarter was strong at $82.4 million, driven by favorable working capital variation and improved operating results.
Negative Points
- Quarterly revenues decreased by $5.3 million compared to last year, primarily due to client delays in construction site preparation.
- The $35 million in delayed revenues risk being moved forward to the next fiscal year, affecting short-term financial performance.
- SG&A expenses increased year-to-date by $3 million due to the rise in stock price, impacting overall profitability.
- There is a slowdown in the finalization of contractual agreements, particularly in the green energy sector, likely linked to the upcoming American presidential election.
- Future margins are expected to stabilize and potentially decrease as the mix of fabrication and installation work changes.
Q & A Highlights
Highlights from ADF Group Inc (ADFJF, Financial) Q2 2025 Earnings Call
Q: Inventory was down quarter-over-quarter despite a $35 million delay. Can you explain this?
A: The fabricated material doesn't impact inventory as it is included in our contract assets or liabilities depending on billing status. The inventory mentioned is for general inventory, not project-specific inventory. - Jean-Francois Boursier, CFO
Q: How sustainable are the improved margins seen this quarter?
A: Fabrication margins are sustainable, but combined fabrication and installation margins are lower. The $35 million shift had lower margins. Future margins will stabilize and likely decrease but remain higher than previous quarters. - Jean Paschini, CEO
Q: With a large net cash position, should we expect more capital allocation in the next quarters?
A: We plan to let the year run its course and reassess our position. There are no major CapEx, M&A, or share repurchase plans currently. We will evaluate our strategy after the fiscal year ends. - Jean-Francois Boursier, CFO
Q: Any updates on new contracts for the Los Angeles Olympics in 2028 or other trends driving new contracts?
A: We are in final negotiations for several contracts, but decisions may be delayed until after the U.S. elections in November. We are well-positioned to sign new projects post-election. - Jean Paschini, CEO
Q: Can you provide more details on the impact of the U.S. elections on your project pipeline?
A: The slowdown in finalizing contracts is linked to the upcoming U.S. presidential election, with differing energy investment strategies from the political parties. We expect some market hesitation but remain optimistic due to our strong order backlog and infrastructure requirements. - Jean-Francois Boursier, CFO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
