ADF GROUP INC. ANNOUNCE THE RESULTS FOR THE FISCAL YEAR ENDED JANUARY 31, 2023

HIGHLIGHTS

• Revenues of $250.9 million.
• Net income of $14.9 million, representing a 56% increase over the fiscal year ended January 31, 2022.
• The Corporation's order backlog ⁽¹⁾ stood at $376.5 million on January 31, 2023.

TERREBONNE, QC, April 13, 2023 /CNW/ -

ADF GROUP INC. ("ADF" or the "Corporation") (TSX: DRX) recorded revenues of $250.9 million during the fiscal year ended January 31, 2023, compared with $280.7 million the previous fiscal year. This decrease in revenues is mainly attributable to the inclusion of high-volume projects with accelerated production schedules that increased the revenues of the previous fiscal year ended January 31, 2022, but with much lower margins than normally generated by our Corporation.

Gross margin, as a percentage of revenues ⁽²⁾, went from 8.8% for the fiscal year ended January 31, 2022, to 14.2% for the fiscal year ended January 31, 2023. This increase, as a percentage of revenues, is mainly due to the projects mentioned above, as well as by internal efficiency improvement generated by the investments to automate fabrication processes at our plant in Terrebonne, Quebec.

Adjusted earnings before interest, taxes, depreciation, and amortization (adjusted EBITDA) ⁽³⁾ for the fiscal year ended January 31, 2023, totalled $26.1 million, which is $8.4 million or 47% higher than at the same date a year earlier.

For the fiscal year ended January 31, 2023, ADF posted net income of $14.9 million (or $0.46 per share, basic and diluted) compared with a net income of $9.6 million (or $0.29 per share, basic and diluted) a year earlier.

As at January 31, 2023, the Corporation had a working capital of $65.6 million, 69% more than at the same date a year ago. The Corporation remains in a sound position to continue its ongoing operations and pursue its development projects.

As at January 31, 2023, the Corporation's order backlog ⁽¹⁾ stood at $376.5 million, compared with $373.1 million as at January 31, 2022. The majority of projects in hand will be completed progressively by the middle of the fiscal year ending January 31, 2025.

Financial Highlights

Fiscal Years Ended January 31,		2022
(In thousands of Canadian dollars, and dollars per share)	$	$
Revenues	250,890	280,740
Adjusted EBITDA^(3)	26,119	17,759
Income before income tax expense	16,854	11,059
Net income for the year	14,935	9,563
— Basic and diluted per share	0.46	0.29
Cash flows from operating activities	(2,612)	2,669
(In thousands)	Number	Number
Average number of outstanding shares (basic and diluted, in thousands)	32,640	32,635

__________________________________
1	The order backlog is an additional financial measure. Refer to the "Non-GAAP Financial Measures and Other Financial Measures" section of this press release for the definition of this indicator.
2	Gross margin, as a percentage of revenues is an additional financial measure. Refer to the "Non-GAAP Financial Measures and Other Financial Measures" section of this press release for the definition of this indicator.
3	Adjusted EBITDA is a non-GAAP financial measure. Refer to the "Non-GAAP Financial Measures and Other Financial Measures" section of this press release for the definition of this indicator.

New Financing Agreement

On February 10, 2023, the Corporation reached an agreement with its Canadian financial institution on the terms and conditions amending its Canadian operating credit facility. Once finalized, within the next few weeks, the credit facility will increase from $30.0 million to $40.0 million ; this amount remaining subject to a margination calculation but only when the Corporation draws an amount greater than $20.0 million. The other conditions will remain similar to the current ones.

Outlook

"ADF closed its fiscal year ended January 31, 2023 with encouraging results, an increase in the order backlog, better margins and a net income 56% higher than that of the previous fiscal year" said Mr. Jean Paschini, Chairman of the Board and Chief Executive Officer. He concluded by pointing out that, "Our major investments in automation over the past two fiscal years have now been completed and allow us to face economic challenges with confidence".

Dividend

On April 12, 2023, ADF Group announced the payment of a semi-annual dividend of $0.01 per subordinate voting share and per multiple voting shares, which will be paid on May 17, 2023, to Shareholders of Record as at April 28, 2023.

Conference Call with Investors

A conference call with investors is scheduled for Thursday, April 13, 2023, at 10 a.m. (Montreal time) to discuss the results of Corporation's fiscal year ended January 31, 2023.

To join the conference call without operator assistance, you can register with your phone number on https://emportal.ink/3l04Il2 to receive an instant automatic reminder.

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 this conference call will be available from 1:00 p.m. on Thursday, April 13, 2023, until 11:59 p.m. Thursday, April 20, 2023, by dialing 1-888-259-6562, followed by access code 047645 #.

The conference call (audio) will also be available at the 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, 2023

ADF Group Inc. will hold its Annual General Meeting of Shareholders via webcast, on Wednesday, June 7, 2023, at 11 a.m. (EST). 

Shareholders' meeting details and webcasting connection instructions will be made available in the weeks preceding the meeting.

Results for the first quarter ending April 30, 2023, will also be disclosed during the Shareholders' meeting.

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 Information | This press release contains forward-looking statements reflecting ADF's objectives and expectations. These statements are identified by the use of verbs such as "expect" as well as by the use of future or conditional tenses. By their very nature these types of statements involve risks and uncertainty. Consequently, reality 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 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 losses, and
• Depreciation and amortization of property, plant and equipment, intangible assets, and right-of-use assets.

Net income is reconciled with adjusted EBITDA in the table below:

Fiscal Years Ended January 31,	2023	2022
(In thousands of Canadian dollars)	$	$
Net income	14,935	9,563
Income tax expense	1,919	1,496
Net financial expenses	1,999	1,174
Amortization	5,323	5,054
Foreign exchange loss	1,943	472
Adjusted EBITDA	26,119	17,759

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.

All amounts are in Canadian dollars unless otherwise specified.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

As at January 31,	2023	2022
(In thousands of Canadian dollars)	$	$
ASSETS
Current assets
Cash and cash equivalents	7,193	7,130
Accounts receivable	90,921	40,424
Current income tax assets	714	1,548
Contract assets	42,541	29,998
Inventories	10,679	9,690
Prepaid expenses and other current assets	2,332	2,312
Total current assets	154,380	91,102
Non-current assets
Property, plant and equipment	90,378	83,629
Right-of-use assets	21,848	21,587
Intangible assets	3,640	3,357
Other non-current assets	1,371	1,375
Total assets	271,617	201,050
LIABILITIES
Current liabilities
Accounts payable and other current liabilities	39,985	34,421
Current income tax liabilities	235	―
Contract liabilities	44,533	13,770
Other current liabilities	964	―
Current portion of lease liabilities	806	841
Current portion of long-term debt	2,258	3,357
Total current liabilities	88,781	52,389
Non-current liabilities
Long-term debt	44,927	28,702
Lease liabilities	3,528	3,772
Deferred income tax liabilities	9,240	7,571
Other non-current liabilities	156	166
Total liabilities	146,632	92,600
SHAREHOLDERS' EQUITY
Capital stock	68,127	68,120
Contributed surplus	6,435	6,435
Accumulated other comprehensive income	8,107	5,861
Retained income	42,316	28,034
Total shareholders' equity	124,985	108,450
Total liabilities and shareholders' equity	271,617	201,050

CONSOLIDATED STATEMENTS OF INCOME

Fiscal Years Ended January 31,	2023	2022
(In thousands of Canadian dollars, except the number of shares and the amounts per share)	$	$
Revenues	250,890	280,740
Cost of goods sold	215,321	256,046
Gross Margin	35,569	24,694
Selling and administrative expenses	14,773	11,989
Net financial expenses	1,999	1,174
Foreign exchange loss	1,943	472
	18,715	13,635
Income before income tax expense	16,854	11,059
Income tax expense	1,919	1,496
Net income for the fiscal year	14,935	9,563
Earnings per share
—  Basic and diluted per share	0.46	0.29
Average number of outstanding basic and diluted shares (in thousands)	32,640	32,635

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Fiscal Years Ended January 31,	2023	2022
(In thousands of Canadian dollars)	$	$
Net income for the fiscal year	14,935	9,563
Other comprehensive income (loss):
Exchange differences on translation of foreign operations ^(a)	2,246	(25)
Comprehensive income for the fiscal year	17,181	9,538

a)  Will subsequently be reclassified to net income.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

	Capital Stock	Contributed Surplus	Accumulated Other Comprehensive Income	Retained Income	Total
(In thousands of Canadian dollars)	$	$	$	$	$
Balance, February 1, 2021	68,120	6,435	5,886	19,124	99,565
Net income for the fiscal year	―	―	―	9,563	9,563
Other comprehensive income (loss)	―	―	(25)	―	(25)
Comprehensive income (loss) for the fiscal year	―	―	(25)	9,563	9,538
Dividends	―	―	―	(653)	(653)
Balance, January 31, 2022	68,120	6,435	5,861	28,034	108,450

	Capital Stock	Contributed Surplus	Accumulated Other Comprehensive Income	Retained Income	Total
(In thousands of Canadian dollars)	$	$	$	$	$
Balance, February 1, 2022	68,120	6,435	5,861	28,034	108,450
Net income for the fiscal year	―	―	―	14,935	14,935
Other comprehensive income	―	―	2,246	―	2,246
Comprehensive income for the fiscal year	―	―	2,246	14,935	17,181
Dividends	―	―	―	(653)	(653)
Shares Issuance	7	―	―	―	7
Balance, January 31, 2023	68,127	6,435	8,107	42,316	124,985

CONSOLIDATED STATEMENTS OF CASH FLOWS

Fiscal Years Ended January 31,	2023	2022
(In thousands of Canadian dollars)	$	$
OPERATING ACTIVITIES
Net income for the fiscal year	14,935	9,563
Non-cash items:
Amortization of property, plant and equipment	4,118	3,543
Amortization of right-of-use assets	835	1,013
Amortization of intangible assets	370	498
Gain on disposal of property, plant and equipment	(802)	(2,111)
Unrealized loss on derivative financial instruments	968	513
Unrealized foreign exchange (gain) loss	(1,158)	705
Share-based compensation	724	361
Income tax expense	1,919	1,496
Government grants	(1,280)	―
Net financial expenses	1,999	1,174
Others	(250)	(148)
Net income adjusted for non-cash items	22,378	16,607
Change in non-cash working capital items^(1)	(25,850)	(12,511)
Income tax recovery (paid)	860	(1,427)
Cash flows (used in) from operating activities	(2,612)	2,669
INVESTING ACTIVITIES
Acquisition of property, plant and equipment	(11,463)	(21,477)
Acquisition of intangible assets	(698)	(589)
Others	80	77
Cash flows used in investing activities	(12,081)	(21,989)
FINANCING ACTIVITIES
Issuance of long-term debt	20,000	30,000
Repayment of long-term debt	(2,216)	(17,878)
Payment of lease liabilities	(804)	(963)
Dividends paid	(653)	(653)
Interest paid	(2,177)	(988)
Others	7	(316)
Cash flows from financing activities	14,157	9,202
Impact of fluctuations in foreign exchange rate on cash flow	599	(558)
Net change in cash and cash equivalents during the fiscal year	63	(10,676)
Cash, and cash equivalents, beginning of fiscal year	7,130	17,806
Cash and cash equivalents, end of fiscal year	7,193	7,130

(1) The following table sets out in detail the components of the "Change in non-cash working capital items":

Fiscal Years Ended January 31,	2023	2022
(In thousands of Canadian dollars)	$	$
Accounts receivable	(48,647)	20,342
Contract assets	(12,011)	(21,099)
Inventories	(550)	(2,714)
Prepaid expenses and other current assets	103	2,382
Accounts payable and other current liabilities	5,478	(2,041)
Contract liabilities	29,787	(9,366)
Others	(10)	(15)
Change in non-cash working capital items	(25,850)	(12,511)

Segmented Information

The Corporation operates one operational sector, being, the non-residential construction industry, primarily in the United States and Canada. This sector includes the following areas of expertise: the design and engineering of connections, fabrication, including industrial coating, and installation of complex steel structures, heavy steel built-ups, as well as miscellaneous and architectural metalwork.

Fiscal Years Ended January 31,	2023	2022
(In thousands of Canadian dollars)	$	$
Revenues
Canada	36,913	39,810
United States	213,977	240,930
	250,890	280,740

As at January 31,	2023	2022
(In thousands of Canadian dollars)	$	$
Non-current assets ^(1)
Canada	74,424	68,907
United States	42,813	41,041
	117,237	109,948

(1)	The non-current assets mainly include property, plant and equipment, intangible assets, right-of-use assets, investment tax credits and others non-current assets.

Revenues from external clients were allocated to each country on the basis of the project's location.

During the fiscal year ended January 31, 2023, 62% of the Corporation's revenues was realized with three (3) clients, each representing 10% and more of its revenues (86% with three (3) clients during the fiscal year ended January 31, 2022).

The following table presents the breakdown of revenues for each of these clients:

Fiscal Years Ended January 31,	2023	2022
(In thousands of Canadian dollars)	$	$
Client A ^(1)	―	168,950
Client B ^(1)	57,386	40,610
Client C ^(2)	―	31,381
Client D ^(1)	46,069	―
Client E ^(1)	52,886	―
	156,341	240,941

(1)	From the United States
(2)	From Canada

SOURCE ADF Group Inc.

Jean Paschini, Chairman of the Board of Directors and Chief Executive Officer; Jean-François Boursier, CPA, Chief Financial Officer, Telephone: [phone], Website: www.adfgroup.com