DRX ADF Group Inc

HIGHLIGHTS OF THE QUARTER

• Revenues up 33.8% to $107.4 million compared to the same period last year.
• Gross margins as a percentage of revenues ⁽¹⁾ at 29.2% compared to 16.8% a year before.
• Net income of $15.3 million, up $9.9 million or 184.2%.
• Order backlog ⁽¹⁾ at $427.5 million as at April 30, 2024, excluding new contracts announced on May 28, 2024.
• Announcing cash utilization strategy, including the intention to repurchase up to 3,000,000 shares and the increase of the semi-annual dividend from $0.01 per share to $0.02 per share.

TERREBONNE, QC, June 11, 2024 /CNW/ -

(All amounts are in Canadian dollars unless otherwise noted.)

ADF GROUP INC. ("ADF" or the "Corporation") (TSX: DRX), a North American leader in the fabrication of steel superstructures, recorded revenues of $107.4 million in the first quarter ended April 30, 2024, compared with $80.3 million for the same period a year earlier.

Gross margin, as a percentage of revenue ⁽¹⁾, went from 16.8% for the 3-month period ended April 30, 2023, to 29.2% for the same period ended April 30, 2024. The improvement in margins is in line with the increase observed in recent quarters and is largely attributable to a better absorption of fixed costs, in line with the increase in the fabrication volume, the continued favorable impact of the investments in automation at ADF's plant in Terrebonne, Quebec, and a favorable mix of projects.

Adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) ⁽²⁾ at $23.1 million, is $13.1 million or 130.3% higher than as at April 30, 2023.

For the first quarter ended April 30, 2024, ADF recorded a net income of $15.3 million ($0.47 per share, basic and diluted) compared with a net income of $5.4 million ($0.16 per share, basic and diluted) for the same period last year.

As at April 30, 2024, the Corporation's order backlog ⁽¹⁾ reached $427.5 million excluding the contracts announced on May 28, 2024, totaling $90.0 million.

As at April 30, 2024, the Corporation had a working capital ⁽¹⁾ of $127.5 million, while cash flows from operating activities required liquidities of $22.3 million for the quarter ended April 30, 2024.

Financial Highlights

Cash Utilization Strategy of the Corporation

As at April 30, 2024, cash and cash equivalents totaled $48.4 million, a decrease of $24.0 million compared to January 31, 2024. The Corporation was not drawing down its current credit facility as at April 30, 2024 and January 31, 2024. It should be noted that as at the date of this press release, and in light of cash inflow since April 30, 2024, the cash and cash equivalents balance had returned to the January 31, 2024 level, which were then $72.4 million.

The Corporation believes that the available cash will significantly exceed the amounts required to support the growth and execution of its order backlog on hand as at April 30, 2024, and to meet its financial covenants planned for fiscal 2025.

Given the Corporation's favorable financial position, the size of its order backlog and its cash flow generation profile, the Board of Directors is evaluating the options available to the Corporation with respect to the use of excess cash to create value for shareholders, including dividends and share repurchases, and opportunities to finance certain projects that could provide additional long-term competitive advantages and allow the Corporation to benefit from prompt payment discounts negotiated with its suppliers.

With this in mind, the Corporation intends to enter into private agreements, within 30 days of June 12, 2024, with Jean, Pierre and Marise Paschini, members of the Board of Directors and the Corporation's management team, through Les Placements Jean and Diane Paschini Inc., Gestion P.R. Paschini Inc., Les Placements M.A.P.S. Inc. and Groupe JPMP Inc., to purchase, for cancellation, up to a maximum of 3,000,000 Subordinate Voting Shares of the Corporation (including up to 2,500,000 Multiple Voting Shares converted into Subordinate Voting Shares), at a price to be agreed upon by the parties at a discount of at least 3% to the market price of the Subordinate Voting Shares on the TSX and the price of the last independent trade of a board lot of the Subordinate Voting Shares on the TSX immediately prior to the proposed repurchase. The Corporation's Board of Directors has established a Special Committee composed of independent directors to review the terms of the proposed repurchase and to make a recommendation to the Board of Directors with respect thereto, and a favorable decision has been obtained from the Autorité des marchés financiers ("AMF") to exempt the Corporation from the requirements applicable to issuer bids under applicable legislation. If such agreements are entered into, the Corporation will issue a press release and information relating to the share repurchase, including the number of shares involved and the total purchase price, will be available on SEDAR+ www.sedarplus.ca following the completion of the proposed repurchase, if any. Jean, Pierre and Marise Paschini have informed the Corporation that the shares in question will be sold to the Corporation for asset diversification and estate planning purposes, that they are not considering any further share sales and that they remain fully committed to growing the Corporation.

Furthermore, the Corporation's Board of Directors approved the amendment to its Dividend Policy to increase its semi-annual dividend from $0.01 per share to $0.02 per share. The amendment will apply to the next dividend payment scheduled for October 2024. We note, however, that the declaration and payment of dividends remains at the discretion of the Corporation's Board of Directors.

New Contracts

On May 28, 2024, the Corporation announced the award of a series of new orders in Quebec, in Western Canada and the U.S. Midwest totaling $90.0 million. A portion of these contracts comes from additional work relating to the second phase of a contract previously announced in December 2023, which consists of the design and engineering of connections, fabrication including industrial coating, the supply of the steel, as well as erecting of steel structure and heavy steel components of a large-surface industrial building. Fabrication work began in February 2024. This project will extend over a period of approximately 12 months. This series of contracts also included a project in the industrial sector in Quebec, as well as a contract awarded in Western Canada in the public infrastructure sector.

Outlook

"We started the 2025 fiscal year strong. With revenues for the 3-month period ended April 30, 2024, exceeding $100 million, we are building on the momentum of the recent quarters. This increase in revenues also allows us to improve our margins and thus record a significant increase in net income" said Jean Paschini, Chairman of the Board of Directors and Chief Executive Officer.

Conference call with Investors

An investor conference call will be held this morning, June 11, 2024, at 10 a.m. (EST) to discuss results for the first quarter ended April 30, 2024.

To join the conference call without operator assistance, you can register with your phone number on https://emportal.ink/3xHjN0U to receive an instant automated call back. You can also join the conference call with operator assistance by dialing 1 (888) 390-0620 a few minutes prior to the conference call scheduled start time.

A replay of the conference call will be available from 1:00 p.m, June 11, 2024, until midnight, June 18, 2024, by dialing 1 (888) 259-6562; followed by the access code 249160 #.

The conference call (audio) will also be available at www.adfgroup.com. Members of the media are invited to join in listening mode.

ANNUAL GENERAL MEETING OF SHAREHOLDERS FOR THE FISCAL YEAR ENDED JANUARY 31, 2024

ADF Group Inc.'s Annual Meeting of Shareholders will be held on:

About ADF Group Inc. | ADF Group Inc. is a North American leader in the design and engineering of connections, fabrication, including the application of industrial coatings, and installation of complex steel structures, heavy steel built-ups, as well as in miscellaneous and architectural metals for the non-residential infrastructure sector. ADF Group Inc. is one of the few players in the industry capable of handling highly technically complex mega projects on fast-track schedules in the commercial, institutional, industrial and public sectors. The Corporation operates two fabrication plants and two paint shops, in Canada and in the United States, and a Construction Division in the United States, which specializes in the installation of steel structures and other related products.

Forward-Looking Statements | This press release contains forward-looking statements that reflect ADF's objectives and expectations. These statements are identified by words such as "expects" as well as by the use of future and conditional verb tenses and include, but are not limited to, the Corporation's intention to repurchase up to 3,000,000 Subordinate Voting Shares of the Corporation. By their nature, these statements involve risks and uncertainties. In particular, there can be no assurance that an agreement will be reached between the parties with respect to the proposed repurchase. Consequently, actual facts may differ from ADF's expectations.

Non-GAAP Financial Measures and Other Financial Measures | Are measures derived primarily from the consolidated financial statements but are not a standardized financial measure under the financial reporting framework used to prepare the Corporation's financial statements. Therefore, readers should be careful not to confuse or substitute them with performance measures prepared in accordance with GAAP. In addition, readers should avoid comparing these non-GAAP financial measures to similarly titled measures provided or used by other issuers. The definition of these indicators and their reconciliation with comparable International Financial Reporting Standards measures issued by the International Accounting Standards Board ("IFRS Accounting Standards") is as follows:

Adjusted EBITDA

Adjusted EBITDA shows the extent to which the Corporation generates profits from operations, without considering the following items:

• Net financial expenses;
• Income tax expense ;
• Foreign exchange gains, and
• Depreciation and amortization of property, plant and equipment, intangible assets, and right-of-use assets.

Gross Margin as a Percentage of Revenues

Gross margin as a percentage of revenue indicator is used by the Corporation to assess the level of profitability for a given period based on the project mix for that same period. This indicator is subject to fluctuations in project prices and also in the operational efficiency of the Corporation. The indicator of gross margin as a percentage of revenues results from dividing gross margin by revenues.

Order Backlog

The order backlog is a measure used by the Corporation to assess future revenue levels. The order backlog includes firm orders obtained by the Corporation, either through a firm contract or a formal notice to proceed confirmed by the client. The order backlog disclosed by the Corporation therefore includes the portion of confirmed contracts that have not been put into production.

Working Capital

The working capital indicator is used by the Corporation to assess whether current assets are sufficient to meet current liabilities. It is therefore equal to current assets, less current liabilities.

All amounts are in Canadian dollars unless otherwise specified.

SOURCE ADF Group Inc.