Thank you. Good morning, and welcome to ADF's conference call covering the second quarter and six-month ended July 31st, 2026.

I will first update you on our quarterly and year-to-date results, which were disclosed earlier this morning by press release, and then proceed with a quick update about our operations, including the impact of the latest US administration proclamations. First, a word of caution.

Please note that some of the issues discussed today may include forward-looking statements. These are documented in ADF Group's management report for the second quarter and six months ended July 31st, 2026, which were filed with SEDAR this morning.

I'll start by saying that we are the victim of our own success. I'll provide more details later, but the DRX stock increase since the beginning of the year had a significant negative non-cash impact on our financial results.

Revenues for the quarter ended July 31st, 2026, at $95 million, were $42 million higher than last year. Year-to-date, revenues stood at $194.3 million compared with $108.5 million, or 79% higher than the six-month period ended July 31st, 2025.

It is important to recall that, following the then-new tariffs uncertainty impacts, a work-sharing program was implemented at the at ADF's plant in Terrebonne, Quebec, and remained in place for virtually the entire quarter ended July 31st, 2025, thus reducing fabrication hours and, consequently, revenues for the same quarter and year-to-date. We closed the second quarter ended July 31st, 2026, with gross margin of 18.7% as a percentage of revenues, slightly down from the 20.7% margin of the quarter ended July 31st, 2025, while the year-to-date gross margin as a percentage of revenues, at 21.5%, or basically at the same level as last year, which then stood at 21.3 million percent, 21.3% for the six-month period ended July 31st, 2025.

The variation in margins, both in dollar terms and as a percentage percentage of revenues, is explained by the higher revenues contributing to a better absorption of fixed costs. The positive effect thereof was, however, mitigated by higher input costs, including the price of steel and the recent changes in tariffs.

ADF revenues and gross margin for the quarter ended July 31st, 2026, were both positively positively impacted by the final settlement of a claim against a customer of Groupe LAR. The corporation had taken a cautionary approach to this settlement, and the cumulative impact is reflected in the second quarter's results.

This adjustment had a cumulative positive impact of $20.2 million and $5.3 million on Groupe LAR's and ADF Group's revenues and gross margin, respectively, for the for the quarter and six-month periods ended July 31st, 2026. Adjusted EBITDA for the quarter ended July 31st, 2026, at $8.4 million compared with $3.7 million for the same quarter ended a year ago, while year-to-date, adjusted EBITDA stood at $26.9 million compared with $14.1 million for the six months ended a year ago.

We therefore close our second quarter with net income of $3 million, or 10 cents per share, compared with $0.9 million, or 3 cents per share, for the for the corresponding quarter a year ago. Year-to-date, net income stood at $15 million, or 52 cents per share, compared to $9.6 million, or 34 cents per share, for the same period period ended July 31st, 2025.

As previously mentioned, our results for the quarter and six-month periods closed on July 31st, 2026, were severely and negatively impacted by the costs associated with our deferred, performance, and restricted share units, mostly coming from the mark-to-market impact following DRX stock price increase since January 31st, 2026, and also by our foreign exchange loss. DSUs, PSUs, and RSUs had a negative impact on net earnings of $4.3 million and $5.6 million for the three and six-month periods ended July 31st, 2026, respectively, and therefore 15 cents per share and 20 cents per share for the same periods, while the foreign exchange loss had a negative impact of $1.8 million, or 6 cents per share, and $1.4 million, or 5 cents per share, for the same periods, respectively.

We closed the second quarter with $91.4 million in cash and cash equivalents, up by $28.7 million compared with the January 31st, 2026 closing balance. Working capital stood at $109.5 million as at July 31st, 2026.

As noted earlier, the claim settlement generated a $25 million cash inflow just before quarter-end, which positively impacted our ending cash balance. Year-to-date, operating cash flow reached $47.1 million for the six-month period ended July 31st, 2026, while $15.5 million were used to acquire property, plant, and equipment and intangible assets, including the modification of a fabrication bay at ADF's Terrebonne complex, Groupe LAR's plant expansion, and our ERP upgrade.

In light of the continuing trade uncertainty, we will also invest just over $10 million US to increase our Great Falls facility output and add new equipment to further improve efficiency. We now expect our full-year CapEx to to total just over $40 million.

Yesterday, our board of directors approved the payment of a of the second semi-annual dividend of 2 cents per share. This dividend will be paid on October 15 to shareholders of record as at September 25th, 2026.

Finally, we closed the quarter and six-month ended July 31st, 2026, with yet another record-high a record-high order backlogs reaching $693.7 million. This total this total also includes Groupe LAR's order backlog, which stood at $243.3 million at the same date.

Should be noted that the corporation order the corporation's order backlog as at July 31st, 2026, does not include the five-year extension option on the long-term contract announced on July 23rd, 2025. It is also worth mentioning that 64% of our consolidated order of our consolidated order backlog is for Canadian-based projects.

We cannot escape from the adverse impact of the US tariffs on our year-to-date results. As of now, we can confirm that the new 50% US tariff announced a few weeks ago are not impacting ADF's products, and we can also confirm that we will be getting relief from the impact of the Canadian counter-tariffs that became effective earlier this week.

Additionally, and based on the information available as of now, ADF will not be directly impacted by any of the proclamations signs signed by the US president Tuesday night. Although the latest changes have limited direct impact on ADF, they are definitely increasing the uncertainty.

This said, and as ADF has proven over its 70 years of existing of existence, we are resilient. As previously mentioned, our Q2 results were negatively impacted by the strong performance of our stock following the accounting of our share units and by a FX loss.

Once we understand this, it is important to look at the fundamentals, which, for ADF, are the backlog growth, the backlog geographic diversification, and the strength of our balance sheet. To say the least, we can say that these are strong and are the foundation to our continued growth.

Our capital investment in the [Lac-Saint-Jean?] region for Groupe LAR's facility expansion is on time and on budget, and we will soon start a plant expansion and equipment upgrade at our Great Falls, Montana facility.

Our balance sheet strength, along with the soon-to-be finalized additional financing, are enabling ADF to maintain and even improve its fabrication capacity and efficiency. Finally, and on a personal note, the process to find a new CFO following the announcement of my end-of-year retirement, as announced in May, is going well, and we are confident that an announcement will be coming soon.

As a reminder, I will retire on December 31st, 2026, after more than 16 years of service with ADF, but will remain as CFO until that date, and then, starting January 1st, 2027, will serve as a strategic advisor until a date to be confirmed to ensure a smooth transition. Thank you for your interest and confidence in ADF.

I will now answer your questions.

Morning, JF. Thanks for taking my questions and congrats on another strong quarter here.

I just want to make sure I heard something correctly. On the percent of the backlog that was from Canada, was that 45%?

64.

64%. Got it.

Yeah. A slight step-down from Q1, it seems like?

From Q1, yes. You might recall, we had some announcement at the end of June mostly for US-based project.

Obviously adding those reduce, I think we were at 72% at the end of Q1, so that's why we're slightly lower. For us, anything that looks like 50/50 or close to 50 is really really good, but still at 64, definitely a 64% of Canadian-based contact, definitely considering the environment we're in, definitely better than the 5% of Canadian content we were in back in April 2025, just over a year and a quarter ago.

Understood. Then with gross margin, we had some moving pieces in the quarter with the work Terrebonne did for LAR, but what do you see as the normalized gross margin for you guys going forward?

Then maybe how does that change going into next year?

As we don't we don't necessarily provide guidelines going forward, but to your point, I think on its own we shouldn't look at at Q2 as a as a good indication because there were a lot of moving pieces. Year-to-date, we're at 21.5.

That that does include the downward impact, as we've already explained in previous calls, the downward impact of the Groupe LAR backlog, which we still need to to sort of go through, which definitely were not at the ADF's historical level, if you want, from a margin standpoint. That will still happen in Q in Q3 in in 3 in Q3 and Q4 as long as we still have to get through the Groupe LAR's legacy legacy backlog.

This said, our regular jobs and on a ongoing basis, we should the the year-to-date margin of 21.5 are pretty good indication of what's of what's coming. Obviously, we do we are impacted by by the tariffs indirectly, as we already explained, by the higher cost of steel.

It does bring our some of our cost base it does increase our cost base, it has an impact. The the tariff, although limited, but they they do have an impact.

We are paying since April since the April, the beginning of April 2026 proclamation, approximately 10% of the commercial invoice on our the Canadian fabrication of US for US projects, so that obviously also has an impact on a portion of the project fabricated in Canada going to the US, so that lowers the margin. These are already factored in into into the margin as they stand.

As I said, without going into too much detail, but the year-to-date margins are a pretty good indication of of what's coming, and we do expect also improvement as we're getting rid of the legacy backlog. Maybe you can you can expect to see margins creep up in Q2 and in Q3 and Q4, barring any other announcement on the tariffs front.

As I confirmed at the end of the call, at the end of my text, really the latest changes, either the counter-tariff or the proclamation from Tuesday night, as we understand now, won't change that 10%, no impact. God knows what's going to be what will happen in the next days, weeks, and months.

We're obviously in a in a in a situation where the relationship is different, so, but based on what we know now, the that's what we see for the coming quarters from a gross margin standpoint.

Okay. Understood.

What about just an update on the CapEx plans? How are things progressing?

Are you guys on time with the LAR expansion?

Things are going really well from that standpoint. We're on time, on budget for LAR.

As I also mentioned, we've actually even started since the end of second quarter to work on an expansion in Great Falls also. It's not a huge investment, but it will add capacity and bring in additional newer equipment and additional equipment.

The plant has been up and running for about 13 years now, the equipment was still good, but obviously a lot of hours on those, it's going to be good to bring new equipment and further improve efficiency, but also add some operating changes that will facilitate the work in Great Falls and also add capacity in light of everything that's happening now. Things are progressing well, no issues.

Definitely no issues at Groupe LAR, much more advanced. Structure has started to go up.

We're on time, we're on budget. The equipment has been all ordered.

The schedule still good, and actually not only tracking to budget, but actually even slightly better than budget, which is great news.

Perfect. Very good.

Then just last one if I could squeeze it in would be on the SG&A. Increase, but there's the impact of the DSUs and the RSUs, but what are you just generally seeing with the SG&A line in terms of inflationary increases, salaries, labor, that kind of stuff?

Yeah. Our SG&A, excluding the DS- DSUs or the share units variation, but the the the core the the SG&A per se besides just inflation or salary increases, the base of this SG&A should not should not change drastically.

Obviously, year-over-year, and again for Q2, last year, we didn't have LAR in the consolidation consolidated into our results, obviously there's an impact on our SG&A just from the consolidation of of LAR. When we'll publish Q3, actually September 18 is going to be the the the first the one-year anniversary of the acquisition, Q3 will the comparable quarter will include a portion of SG&A, but the base of the the SG&A for us, even if volume is increasing and our revenue are increasing, we don't need to drastically increase the SG&A to meet that these additional volume or the the the increased backlog.

From the core of the SG&A, again excluding share units variation, the the SG&A should be pretty stable besides the the usual, obviously a lot of salaries included in SG&A, the yearly salary increases, which are around the 3% level or should be around the 3% level for for the coming year also. Besides that, there's no real need to to increase SG&A to meet the expected revenue growth in line with the backlog.

Fantastic. That's all for me.

Thanks for answering my questions.

Thanks, Nick.