ADF Group sees Q3 net income drop to $20 million, but backlog grows to $497.1 million amid strategic acquisitions and operational improvements.

Stood at $20 million or $0.70 per share, compared with $47.7 million or $1.53 per share for the same period ended October 31, 2023.

As previously mentioned, the October 31, 2025 quarter end included for the first time the inclusion of GRUPLAG into our consolidated results. As such, and for the period starting September 18, 2025 to the end of the quarter on October 31, 2025, GRUPLAG increased our revenues by $6.2 million, adjusted EBITDA by $0.5 million and net income by $0.2 million. We close our third quarter with $37.7 million in cash and cash equivalent $27.3 million lower when compared to the January 31, 2025 closing balance. The Group LAR acquisition explains $16.4 million of this variance plus the working capital we invested to support GRUPLAG operations since the acquisition. Working capital as at October 31, 2025 reached $101.4 million for a ratio of 2.271 compared with a working capital of $109.2 million or a ratio of 2.36 to 1 as of January 31, 2025. Year to date, operating cash flow reached $13.4 million for the ninth month period ended October 31, 2025 while we spent $8.7 million on property, plant and equipment and intangible assets acquisitions including the upgrade of ADF Group's ERP system which is scheduled to take place over the next three fiscal years. In addition, and as mentioned with the July. 23Rd multi year contract announcement, we will be investing in new equipment at our site which should bring our full year CapEx investment at approximately $11 million. Finally, we closed the quarter end nine months ended October 31, 2025 with an order backlog of $497.1 million compared with $330.3 million on the same date a year earlier and $293.1 million on January 31, 2025. It should be noted that ADF's order backlog as at October 31, 2025 includes the order backlog of GRUPLAG totaling $91.9 million and does not include the option to extend the long term contract announced last July by five years. Although still not at last year's level, our third quarter results have improved when compared to recently closed quarters. We are still seeing the effect of the new US Trade policies as they continue creating uncertainties in our markets. This said and as we have explained at our Last quarter end call and also in more detail on our October 29th analyst call. We are now working hard on GRUPLAG's integration into our operations. We are already seeing the impact from our acquisition as our consolidated backlogs U.S. content, which made up 95% of our January 31, 2025 backlog, is now only representing 43% of our October 31, 2025 backlog. This is the first of many positive impacts we will see in the coming quarters as we fully integrate GRUPLAAR and execute our investment plan. We are still finalizing the final detail of this important investment, but we will provide additional information in future communication as it becomes available. The US Market remains a key market for ADF Group, but we are now better positioned to face the new North American landscape. We will continue our method, the goal and measure development approach while maintaining our tight management of operational risks, delivering solid results to our shareholders. Thank you for your interest and confidence in ADF Group. Jean and I will now answer your questions.

Thank you ladies and gentlemen. We will now begin the question and answer session. Should you have a question, please press star followed by the 1. On your touch tone phone, you will hear prompt that your hand has been raised. Should you wish to decline from the polling process, please press STAR followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment please for your first question. Your first question comes from Nicholas Cartelucci with Atrium Research. Your line is now open.

Hey John and jf, Congrats on the quarter here.

Good morning.

Thanks for answering my questions. First one here just on the LAR Group acquisition. Maybe just walk us through the steps of integration you guys are going through right now and what that looks like and what kind of synergies we can expect on the revenue and the cost side.

Well, as we as we mentioned at the call at the end of October still. Well, besides the financial integration and the first consolidation, we're working hard. Looking at how we will invest in at last plant in the Lac Saint Jean region. We need to increase capacity in light of the. Upcoming volumes. Obviously a lot of emphasis being put on this investment. And also how to finance that investment. So that's really important. The emphasis we're putting now. Also working with them on the bidding process, trying to go back because obviously with through the acquisition process they had to sort of slow down their bidding process because of other operating issues they had while we were doing the acquisition. But now that everything is behind us and that everybody's fully on board, we're back on the bidding trend. Good things are coming as we also mentioned on our October call with the analysts. So really working with them on the bidding process. We're hopeful to be able to have nice announcement in the coming quarters. But if we're successful at, if we're successful at. Signing those jobs, we need to make sure also that we're able to have sufficient capacity. So working with all of that. So a lot of work going, going on. Obviously. The fact that the both operations have similar values really helped on the integration process. So that the process really goes well and everybody is eager to get GRUPLAG back on its usual trend. And actually even better. As for synergies, where we're still evaluating them, obviously. Some of them will come with. As the integration goes, just from an administrative perspective. There will be synergies also as we combine the operation. And obviously once we are able to have the new investment with the equipment, the new equipment, we can actually expect further. Efficiency improvement and additional synergies.

Right. Okay, perfect. Thank you for that. And then maybe just a bit on margins. If we calculate the large group margins from the numbers you guys reported, it was a bit lower than what you guys report. So where do you see that going over the long term? What is kind of the target EBITDA margins or even gross margins for the acquisition?

Well, you know, like we said before, like Jean Francois said before, you know, that facility, that shop was almost bankrupt. So right now we are working with everybody. Putting up systems. A lot of integration that we're doing. I want this shop at GRUPLAG to be able to do the same margin as us here in Talbot and in Great Hall. By investing the money that. We'Re gonna invest, the board of director approves it. The new facility is going to be. Very sophisticated and margins are going to be, like I said, as high as we have them here.

Amazing. And then. I know you guys have made the big shift over to Canada, but if we are to get some type of resolution on the trade front over the next year, you know, how quickly can you flip the switch and get back to what you guys are doing last year and the year before with, with a lot of these U.S. contracts?

Well, it's, you know. When the switch is on, we have a lot of clients in the US. on the other side of the border. But right now those clients are not able to guarantee that there's not going to be any tariffs. So by doing that, they're shifting work to somebody else. But. Whenever there's a, there's an agreement between Canada and the U.S. then listen, we're going to return and. We're going. To make sure that. We will get work and. You know, get work and produce. But still, you know. What happened with. With the new resident, it could happen years, it could happen. It could happen again. So, you know, we're working hard to diversify our backlog. I think at the beginning of the year it was 90% US. Now we're up to, now we're up to 57, 57%. So we have to keep. Canada and we have to keep, you know, all North America to make sure that, you know, we won't get, we won't, we won't get shifted again. The goal is really not to exit the US Market. From a steel manufacturing standpoint. US Market is still the biggest market and a key market. Obviously, there are some struggles now, as Jean explained, because of the tariff and the uncertainty, but we're not definitely exiting. The idea is to have a better balanced backlog, which we achieve, but not shifting the U.S. volume to Canadian volume is just increasing the Canadian volume and increasing the overall backlog. And by doing that, we were still keeping the US Market as a key market. We have to. But this said, we need also to. Be smart about it. And I think with the acquisition and the better balance, we're definitely reducing and mitigating the risk coming from the tariff uncertainty.

Yeah, absolutely. Okay, that makes sense. And then just last one for me. If you could give us some commentary on Q4 and how that's shaping up. What should investors expect?

Q4 should be similar to Q3. We're expecting, again, a good quarter. So. I'll leave it at that. Q4 is going to be a good quarter.

Got it. Okay. Thanks for the time, guys, and congrats on the improvements.

Thanks, Nick.

Ladies and gentlemen, as a reminder, should you have a question, please press star one. There are no further questions at this time. I will now turn the call over to Mr. Jean Francois for closing remarks.

Thank you. Again, we wish to thank you for your interest in and support of ADF Group. Jean and I would also like to take this opportunity to wish you all a safe and happy holiday season. Have a nice day.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines, please.