ADF Group (TSX:DRX) released fourth-quarter financial results and hosted an earnings call on Thursday. Read the complete transcript below.
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Summary
ADF Group reported revenues of $258.7 million for the fiscal year ended January 31, 2026, down from $339.6 million the previous year, with a gross margin decrease from 31.6% to 23.1%.
The company’s results were impacted by US tariffs, which increased raw material costs and delayed projects, but the acquisition of Groupe Lahr added $20 million in revenue and $2 million to the gross margin.
Adjusted EBITDA was $43.5 million, a decrease from $91.3 million the previous year, mainly due to lower gross margins and increased selling and administrative expenses.
ADF Group’s order backlog was $561.1 million as of January 31, 2026, and the company anticipates revenue growth for fiscal year 2027 despite tariff challenges.
The company plans to invest $35 million in fiscal year 2027 for plant expansion and modernization, primarily for Groupe Lahr, and is negotiating financing for these investments.
Management expressed satisfaction with the company’s improved position despite ongoing trade uncertainties and is optimistic about future growth, particularly in the hydroelectric sector and Canadian projects.
Full Transcript
OPERATOR
Good morning ladies and gentlemen and welcome to the ADF Group’s results for the fiscal year ended January 31, 2026. Note that at this time all lines are in a listen only mode. Following the presentation we will conduct a question and answer session and if at any time during this call you require immediate assistance, please press star zero for the operator. Also note that this call is being recorded on Thursday, April 16, 2026 and I would like to turn the conference over to Jean François Bourcier, Chief Financial Officer. Please go ahead.
Jean François Bourcier
Thank you. Good morning. Welcome to ADF’s conference call covering the 12 month period ended January 31, 2026. I am with Thierry Paschini, President and Chief Operating Officer of ADF, who will be available to answer your question. At the end of the call, I will first update you on our full year results which were disclosed earlier this morning by press release and then proceed with a quick update about our operations including our recent new contracts announcement and the recent US Tariff change. This said, let me remind you that some of the issues discussed today may include forward looking statements. These are documented in ADF Groups Management report for the 2026 fiscal year which will be filed with SEDAR in the coming days. On this very call a year ago and in spite of exceptional results, we were confirming the significant uncertainties that the then recently announced US Tariffs were bringing to our markets and operations a year later and considering all the tariffs related turmoil, we can confirm that we without a doubt close our fiscal 2026 with exceptional results and in a much better position to face these uncertainties in light of Groupe LAR’s acquisition. Revenues for the fiscal year ended January 31, 2026 reach $258.7 million compared to $339.6 million last year. As a percentage of revenues, the gross margin went from 31.6% in fiscal 2025 to 23.1% during the fiscal year ended January 31, 2026. As just mentioned, fiscal 2025 was an exceptionally good year with a favorable project mix. The fiscal 2026 results have been impacted by the US tariffs both directly with higher raw material costs and indirectly with delays in project signing and fabrication start. As such, and as already mentioned in previous calls, ADF implemented a work sharing program at its Terrebonne, Quebec facility earlier this year which reduced fabrication hours but also enabled ADF to reduce the cost impact, although not entirely considering that the Canadian employment program compensated some of these reduced hours. The Groupe LAR acquisition added $20 million in revenue since its acquisition was finalized on September 18, 2025 and added $2 million to our consolidated gross margin for the same period. Adjusted EBITDA totaled $43.5 million or 16.8% of revenues, compared with $91.3 million or 26.9% of revenues a year ago. The year over year decrease comes from the previously explained gross margin variances and by the selling administrative expenses which at $23.2 million were $1.1 million higher than a year ago, all of the increase being explained by the inclusion of Group LAURE in our consolidated SGAs. We closed our January 31, 2026 fiscal year with a mostly non monetary foreign exchange gain of $2.1 million compared to a $5.6 million loss a year ago, most of this variance coming from the from the end of year mark to market valuation of our FX contracts on end at both year ends year to date, ADF posted net income of $26.3 million or $0.93 basic and diluted per share, compared with a net income of $56.8 million a year ago or $1.84 basic and diluted per share. Cash flows from operating activities generated $49.4 million, while we invested $11.1 million in capex, mostly for equipment maintenance at both our plants in Turbonne, Quebec and in Great Falls, Montana. We plan to invest close to $35 million for our 2027 fiscal year, the majority of this amount being for our Group LAR plant expansion and modernization in parallel. We are presently negotiating financing packages for these investments. We will be able to provide further updates on our next call. As of January 31, 2026, working capital stood at $104.8 million, just $4.4 million lower than last year. Also on January 31, 2026, cash and cash equivalents stood at $62.7 $62.7 million, which is actually $2.7 million higher than a year ago. Even considering the conclusion of RNCIB and the acquisition of goplau. Yesterday, the Board of Directors approved the payment of a semiannual dividend of $0.02 per share, which will be paid on May 15, 2026 to shareholders of record. As at April 27, 2026, we closed the year with an order backlog of $561.1 million as at January 31, 2026, excluding the new contracts totaling $157.3 million announced last week, the ending backlog included $138.2 million of contracts from which also excludes last week’s announcement Quickly Looking at the fourth quarter results, ADF recorded revenues of $78.8 million, up $1.4 million from the fourth quarter of 2025 fiscal year. Fourth quarter revenues this year did include $13.8 million coming from the from Groupe LAR. The gross margin as a percentage of revenue stood at 21.5% for the fourth quarter ended January 26, compared with 31% for the corresponding quarter of fiscal 2025. The margin decrease between these two quarters is primarily explained by the mix of products and fabrication, including lower margins coming from the LAR projects. We recorded a net income of $6.4 million during the last quarter of fiscal 2026, compared with net income of $9.1 million for the corresponding period of fiscal 2025, with minimal impact coming from LAR, which basically broke even for the quarter. Because the corporation carries out contracts that vary in complexity and in duration, upward and downward fluctuation may occur from quarter to quarter. In light of this, revenue and order, backlog growth must be analyzed over several quarters, not just from one period to the next. As mentioned at the beginning of the call, the situation was bleak a year ago and we’re definitely very satisfied with how everything turned out, including our overall financial results, our ending balance sheet and cash situation, and with the conclusion of the LAR acquisition. As we have seen as recently as two weeks ago with the latest tariffs announcement, we are still in a we are still in for more surprises and sadly, uncertainties. Talking about these last tariffs modifications, we can now confirm that for the time being, our US projects fabricated in Turbone will now be impacted by a 10% tariff which is applied on the value of the commercial invoice, including profit. And this in spite that the steel used to fabricate this project comes from US Mills. Although not ideal, we can say that our recent backlog shift from US to Canadian projects, aided by our July 2025 long term contract and GRUPLA acquisition reduce what could have been a much higher cost increase for ADF. Additionally, we are working with our US clients to alleviate some of these additional costs. This said, what this latest announcement definitely brings is additional uncertainties to our market as it confirms the unpredictability of the overall trade situation. Nevertheless, as we announced last week, we are still focusing on the elements that we do control and as such we have been able to further increase our backlog. The largest of the series of new contracts in terms of values and duration is for the fabrication and delivery of various heavy steel structures for a project in the hydroelectric sector in Quebec. This project is a four year master contract for Groupe Lahr. Since the acquisition, we’ve been able to grow LAO backlog and we are still active as the hydroelectric market delivers its expected growth. We are on the verge of breaking ground in Metabechuan for our group LAW plant expansion and modernization, which is a key step in our continued growth. In light of all of this, we do anticipate revenue growth for our fiscal year ending January 31, 2027, despite the ongoing challenge of finalizing contracts with our US customers that would normally be carried out at our plant located in Terraban, Quebec. However, given that the capital investment that I just mentioned will not have a significant operational impact in the fiscal year ending January 1st January 31st, 2027, we expect margins to somewhat stagnate in the first quarters of fiscal year 2027, especially when adding the recently announced tariff change. This trend will be reversed as the integration of Groupe LAR continues and we complete the projects inherited at the time of GOU Cloud’s acquisition. The acquisition of goauclau, the new Canadian US allocation of our order backlog and the optimal utilization of our fabrication facility in Great Falls, Montana allow us to still look forward to fiscal year 2027 with optimism allowing us to continue our orderly growth despite tariffs uncertainties. Thank you all for your interest and confidence in ADF. Pierre and I will now be happy to answer your questions.
OPERATOR
Thank you, sir. Ladies and gentlemen, if you do have any questions, please press Star followed by one. On your touchtone phone. You will then a prompt that your hand has been raised. And should you wish to decline from the polling process, please press Star followed by two. And if you’re using your speakerphone, you will need to lift the handset first before pressing any keys. Thank you. Please go ahead and press Star one. Now if you have any questions, first question will be from Nick Cortelucci at Atrium. Please go ahead.
Nick Cortelucci
Good morning gentlemen. Thanks for taking my questions here. Morning, Nick. Morning. Morning. First thing I wanted to wonder I was wondering about was the new four year contract. What does the timing look like on that for getting started?
Thierry Paschini
Yeah, most of the volume that contract will not have much impact in our FY27. Most of the fabrication will start next year. So it’s going to be four years, but with limited impact or close to no impact on our revenues this year for FY27.
Nick Cortelucci
Okay, thank you. And are you guys seeing anything in kind of these growth markets you’re going after? Maybe being nuclear or data centers, anything like that?
Thierry Paschini
Yeah, we’re looking at a couple of those projects. Like I say right now we’re bidding on some stuff, data centers, stuff like that. But with the tariffs right now and that new 10%, well, we need to be a bit more competitive. So it’s going to cost us 5% on our margin. But there’s a lot of work out there. So I think it’s feasible that we should be able to get some work by the end of the year.
Nick Cortelucci
Okay, thank you. Regarding the CAPEX plan and operational efficiencies for lahr, how do you see that playing out kind of sequential improvements throughout the year here?
Thierry Paschini
Well, the construction will occur this year. It’s really so the expansion itself will not really happen this year. So we shouldn’t see too much efficiency gain margin wise in FY27 because the plant will be up and running only late in the first quarter of next fiscal year. But as I mentioned earlier, we’re in. Besides the expansion and the new equipment, we are working with LAO on optimizing the synergies between the two entities and we’re still in that process. So that as I mentioned, should start to transpire on our actual margin, probably more so in the second half of the year. And lastly, as I also mentioned, we with the acquisition, there was a backlog that was in place that had a certain margin profile in it. Obviously you can understand that last year while LAW was trying to cope with their situation and as we were negotiating, they were still trying to get business and maybe not have the same leverage in negotiating contract that they normally do. So some of the contract that were that were signed in the past months might not be as that might not have carried the usual margin. So they are still positive, they’re still good. As you, as you saw from the number I’m giving, it’s definitely not the same level of margin. So it did have a downward impact on our overall consolidated margin. But this said, it’s added volume. The good news is that we are growing. As we had mentioned, we’re seeing huge potential from LA on the hydroelectric side. We’ve been pretty successful in signing new contracts, actually probably even better than we had anticipated. We’re still seeing lots of opportunities going forward, but obviously for all of that to work out, we do need to have a successful expansion. So we’re obviously spending a lot of time on not only finalizing the bids and making sure that the construction starts on time and the project and the entire project is on time so that we meet our deadline. So once that all pans out FY28 and the following years are really will really start showing the full positive impact of that acquisition along with what we hope will be a return to normal to our more ADF regular structural work as we see what will come out of the U.S. right.
Nick Cortelucci
Okay, thank you. So that kind of 2 million gross margin from LAR, that’s kind of a backwards looking number. And the new contracts, from what I get at that you guys are signing are more up to that ADF standard or getting closer to it.
Thierry Paschini
Well, pushing that way. Obviously there are things we need to do to further improve, including the actual operation. So obviously with the new equipment they’ll definitely be able to be more efficient with the work. So that helps. This is something that ADF has been really good at doing over the years is maintain our equipment as as efficient as possible and always invest to be as optimal as we could be from an efficiency standpoint. So there are things we can do now. There are definitely things that will further. There’s definitely going to be a huge step with the new equipment and the expansion but working and definitely negotiating with not only higher margins but also with more favorable payment terms and overall conditions. So we’re really putting, I think we’ve been talking for a number of years about how careful we are contract signing and our risk management. So we’re putting all our processes in place so that we bid projects both for law and ADF or actually for law the same way and with the same due diligence that we did for our ADF bid. So that should all translate into better terms and better margins.
Nick Cortelucci
Yeah, that makes sense. And then just last one here from the tariff commentary you had there, I think kind of the summary is that you guys qualify for the 10% tariff because the steel is purchased from US steel mills, but because it’s being applied to the total value, it’s a net negative.
Thierry Paschini
Oh, it’s been applied to the fabrication and the material even though it’s from the states. So we’re penalized, I mean $300 a ton basically, which amounts to maybe 5% on the margin. Depends. The kind of margin depends on work. There’s a lot of work in the states right now. I mean most of the plants are busy so we’ll be able to charge a bit more and compensate for that 5%. That’s what I think. So right now, bigger guys out there, five or six of the biggest companies are busy for the next two years, which is a good sign for us because there are more work coming up.
Jean François Bourcier
So we’ll see. I mean I think it is think there’s an opportunity because cash flow wise and financial wise were very sound. It’s just a question of hitting the right job with the right margin. Just to further explain on the tariffs, Nick, the. With the previous there were tariffs, but more specifically on the steel and the aluminum. If we were buying our steel from US mill, there were, we were basically, there were basically no tariffs. We had the exemption. Now in spite of buying all the steel, there is that additional 10% and that 10% applies not just on the material but on the commercial invoice, including profit. So I think it just highlights the fact that it is still nobody knows. And there were no advance notice. From all we understood things were sort of moving along and then all of a sudden you’ve got coming out of nowhere that 10% announcement that nobody saw coming. So as I mentioned on the call, we’re not thrilled with it but obviously the moves we made over the past year are definitely paying off because the same 10% announcement with our old setup, 85% volume and the majority of the turban fabrication going to us, that announcement could have had the potential of being a really significant negative impact on us. Luckily, well, luckily considering the mix, the portion of volume fabricated in turbo and going to the US is much lower. And as I mentioned also we will be working really hard with our clients. I think we think we’ve got a couple of opportunities maybe to pass some of those costs along to the clients and for the upcoming contracts as PIAO just explained, we’ll have that discussion. And obviously everybody’s in the same boat. This is not something that’s just specific to adf. All the Canadian steel manufacturer have the same tariffs and actually all Canadian fabricators doing businesses with the US have the same that have steel and aluminum in their components of the same impact. So as we’ve always did, we’ll negotiate, make sure that it makes sense so that it won’t help from the, it won’t reduce the time the negotiation of signing new contracts will take. And it’s too bad because we’re starting slowly but surely. I think everybody was starting to get used to the setup. But as I mentioned, the announcement that happened just reconfirmed to everybody that we’re still in an unknown and uncertainty situation.
Nick Cortelucci
Okay, understood. Well I think you guys have definitely made some major improvements as you said, from where we were at a year ago. So definitely better positioning going into this and hopefully it all ends up in your guys favor. So thanks for answering my Questions and I’ll hop back in a queue.
OPERATOR
Thanks, Nick. Ladies and gentlemen, a reminder to please press Star one should you have any questions. Thank you. Next will be Anis Gamasi at Bastion Asset Management. Please go ahead.
Anis Gamasi
Hi, thank you for taking my question. Maybe just to wrap up the gross margin commentary. So as I look at the next fiscal year, you know you’ve done 23% this year. Do you expect sort of the full year for next year to be similar with the first half being lower and the second half maybe higher? Or do you expect for the full year overall gross margins to be lower than fiscal, the current fiscal year?
Thierry Paschini
Well, we don’t provide guidelines, margin guidelines, but suffice to say that we’re definitely not expecting huge improvements. So I’d really be satisfied to maintain the same type of margins for the full year with maybe margin being a bit more sluggish in the first half of the year and improving in the second. But it all, I think it will depend on what happens next, how successful we are in signing new contracts and avoiding these new tariffs. But based on what we’re seeing now, based on the backlog, based on the, I’d be satisfied to maintain or slightly improve year to date on a full year basis, what we’ve been able to do this year, but really in two steps.
Anis Gamasi
Understood. Maybe second question, you know, broader picture question here. You know, we’re witnessing sort of a significant acceleration in Canadian infrastructure active activity. I’m interested in your perspective on sort of how ADF’s current capacity and, you know, footprint aligns with the demand shift. Are you seeing this momentum translate into your bidding pipeline within your traditional projects and maybe beyond that in Canada specifically?
Thierry Paschini
Basically we’re following our customers. I mean, these guys like the Pomerleau and all the big guys, EBC, LSDawn, I mean, they’ve been chasing us and looking at some work. Right now we’re looking at major work in Montreal airport, some more work in Ontario, also some work out west. We’re looking basically with the oil right now, which is going up, there’s going to be some major investments. So we’ve got our feet in the right place right now and we know these customers. So I think that probably right now we get 57% of our work is here in Canada, maybe it’s going to be more than 50%. We got work in the States, but our plan in Montana right now is busy. But we still can add more work in there. So I think infrastructure wise we can do bridge work, we can do any type of work with facility here in Turbon. So like I say, the work is there, the bids are coming in and we’ll be looking at getting more work on the Canadian side. And capacity wise we don’t have. And capacity wise there’s no issue. We still have sufficient capacity so we’ve got room to add in Turbone. And obviously with go cloud expansion that we’ll be doing this year, we will provide them with the additional capacity. So it’s not, definitely not a problem to grow further, grow the backlog with the. With the facilities as they are today.
Anis Gamasi
Thank you very much. That was it for me.
Thierry Paschini
Thank you.
OPERATOR
And at this time, Mr. Bourcier, it appears we have no other questions registered. Please proceed.
Jean François Bourcier
Thank you. Before we conclude today’s conference call, I would like to remind you that ADF will hold its shareholders meeting on June 9th at 11am and our AGM will be held this year at our corporate office here in Terrebonne, Quebec. Financial Results for the first quarter ending April 30, 2026 will also be disclosed during our shareholders meeting. Additional meeting information will be made available in the coming weeks. Thank you again for your interest towards adf.
OPERATOR
Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending and at this time we do ask that you please disconnect your lines. Enjoy the rest of your.
Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company’s SEC filings and official press releases. Corporate participants’ and analysts’ statements reflect their views as of the date of this call and are subject to change without notice.
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