Q1 2026 Velan Inc Earnings Call

July 10, 2026

Speaker #1: Good morning, ladies and gentlemen, and welcome to the Velan Q1 2026 financial results conference call. At this time, all lines are in listen-only mode.

Operator: Good morning, ladies and gentlemen, and welcome to the Velan Inc. Q1 financial results conference call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. Please turn your attention to the disclaimer from Velan's related IR presentation, which is available on its website in the investor relations section. The first paragraph mentions that the presentation provides analysis of Velan's consolidated results for Q1 ended 31 May 2026, which the board of directors of the company approved yesterday, 9 July 2026. The second paragraph refers to non-IFRS and supplementary financial measures, which are defined and reconciled at the end of the presentation.

Operator: Good morning, ladies and gentlemen, and welcome to the Velan Inc. Q1 Financial Results Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. Please turn your attention to the disclaimer from Velan's related IR presentation, which is available on its website in the investor relations section.

Speaker #1: Following the presentation, we will conduct a question-and-answer session. If, at any time during this call, you require me to get assistance, please press *0 for the operator.

Speaker #1: Please turn your attention to the disclaimer from Velan's related IR presentation, which is available on its website in the Investor Relations section. The first paragraph mentions that the presentation provides analysis of Velan's consolidated results for the first quarter ended May 31, 2026, which the board of directors of the company approved yesterday, July 9, 2026.

Operator: The first paragraph mentions that the presentation provides analysis of Velan's consolidated results for Q1 ended 31 May 2026, which the board of directors of the company approved yesterday, 9 July 2026. The second paragraph refers to non-IFRS and supplementary financial measures, which are defined and reconciled at the end of the presentation. The last paragraph addresses forward-looking information, which is subject to risks and uncertainties that are not guaranteed to occur.

Speaker #1: The second paragraph refers to non-IFRS and supplementary financial measures, which are defined and reconciled at the end of the presentation. The last paragraph addresses forward-looking information, which is subject to risks and uncertainties that are not guaranteed to occur.

Operator: The last paragraph addresses forward-looking information, which is subject to risks and uncertainties that are not guaranteed to occur. Forward-looking statements contained in this presentation are expressly qualified by this cautionary statement. Finally, unless indicated otherwise, all amounts are expressed in US dollars. This call is being recorded on Friday, 10 July 2026. I now turn the conference over to Rishi Sharma, President and Chief Executive Officer. Please go ahead.

Speaker #1: Forward-looking statements contained in this presentation are expressly qualified by this cautionary statement. Finally, unless otherwise stated, all amounts are expressed in U.S. dollars.

Operator: Forward-looking statements contained in this presentation are expressly qualified by this cautionary statement. Finally, unless indicated otherwise, all amounts are expressed in US dollars. This call is being recorded on Friday, 10 July 2026. I now turn the conference over to Rishi Sharma, President and Chief Executive Officer. Please go ahead.

Speaker #1: This call is being recorded on Friday, July 10, 2026. I now turn the conference over to Rishi Sharma, President and Chief Executive Officer. Please go ahead.

Speaker #2: Thank you, Operator. Good morning. Bonjour. I'm here with Imran Gibbons, Chief Financial Officer of Velan. Thank you for joining us for our conference call, and I invite you to turn to Slide 3 of the presentation.

Rishi Sharma: Thank you, operator. Good morning. Bonjour. I am here with Imran Gibbons, Chief Financial Officer of Velan. Thank you for joining us for our conference call, and I invite you to turn to slide three of the presentation. The past couple of years have been highly active for Velan, as we undertook numerous initiatives to unlock shareholder value, reduce our risk profile, and position the company for sustainable growth. These efforts culminated in an important milestone with last month's closing of Birch Hill's acquisition of Velan Holdings' majority interest. With this transaction now completed, we are entering a new chapter in our history from a position of strength. Backed by a strong balance sheet, a solid brand reputation, product quality, and expertise in critical applications, we are well-positioned to strengthen our leadership across the markets we serve. Please turn to slide four.

Speaker #2: The past couple of years have been highly active for Velan, as we undertook numerous initiatives to unlock shareholder value, reduce our risk profile, and position the company for sustainable growth.

Speaker #2: These efforts culminated in an important milestone with last month’s closing of Birch Hill’s acquisition of Velan Holdings’ majority interest. With this transaction now completed, we are entering a new chapter in our history from a position of strength.

Rishi Sharma: These efforts culminated in an important milestone with last month's closing of Birch Hill's acquisition of Velan Holdings' majority interest. With this transaction now completed, we are entering a new chapter in our history from a position of strength. Backed by a strong balance sheet, a solid brand reputation, product quality, and expertise in critical applications, we are well-positioned to strengthen our leadership across the markets we serve. Please turn to slide four.

Speaker #2: Backed by a strong balance sheet, a solid brand reputation, product quality, and expertise in critical applications, we are well-positioned to strengthen our leadership across the markets we serve.

Speaker #2: Please turn to slide 4. Before discussing our results, I would like to sincerely thank Jim Manobak, the Board of Directors, and our shareholders for their confidence and support during this leadership transition.

Rishi Sharma: Before discussing our results, I would like to sincerely thank Jim Enebak, the board of directors, and our shareholders for their confidence and support during this leadership transition. I am honored to lead Velan as we begin this next chapter in the company's history. I would also like to recognize Jim for his leadership and contributions to Velan. His support and guidance have been invaluable, and I am pleased that we will continue to benefit from his experience as a member of our board. The board has welcomed Patrick Duncan, partner at Birch Hill, as Chair, along with Josh Lundy and Shauna Gow. The three current directors will continue to serve as independent board members, including Daniel Desjardins, who has been appointed Lead Director. The board now consists of seven directors, four of whom are independent.

Speaker #2: I am honored to lead Velan as we begin this next chapter in the company's history. I would also like to recognize Jim for his leadership and contributions to Velan.

Speaker #2: His support and guidance have been invaluable, and I am pleased that we will continue to benefit from his experience as a member of our board.

Speaker #2: The Board has welcomed Patrick Duncan, Partner at Birch Hill, as Chair, along with Joshua Lundy and Shawna Gamble. The three current directors will continue to serve as independent Board members, including Daniel Dejavin, who has been appointed Lead Director.

Rishi Sharma: The board has welcomed Patrick Duncan, partner at Birch Hill, as Chair, along with Josh Lundy and Shauna Gow. The three current directors will continue to serve as independent board members, including Daniel Desjardins, who has been appointed Lead Director. The board now consists of seven directors, four of whom are independent. I would also like to thank Ivan, Peter, Rob, and Tom Velan for their longstanding service and contributions to the company, helping build up its 75-year legacy.

Speaker #2: The board now consists of seven directors, four of whom are independent. I would also like to thank Ivan, Peter, Rob, and Tom Velan for their longstanding service and contributions to the company.

Rishi Sharma: I would also like to thank Ivan, Peter, Rob, and Tom Velan for their longstanding service and contributions to the company, helping build up its 75-year legacy. I would also like to congratulate Imran Gibbons on his promotion to Chief Financial Officer. Imran has played an important role in strengthening our financial discipline and strategic planning capabilities, and I look forward to working closely with him as we execute on our priorities. Turning to the quarter on slide five, while results were below last year, it is important to note that most of the factors impacting our performance were external in nature, primarily relating to geopolitical and regional conflicts and its effect on our customer activity, order timing, and shipment schedules. Bookings totaled $48 million and sales were $57.8 million, while our backlog remains solid at $275 million, with approximately 70% expected to be delivered over the next 12 months.

Speaker #2: Helping build up its 75-year legacy. I would also like to congratulate Imran Gibbons on his promotion to Chief Financial Officer. Imran has played an important role in strengthening our financial discipline and strategic planning capabilities, and I look forward to working closely with him as we execute on our priorities.

Rishi Sharma: I would also like to congratulate Imran Gibbons on his promotion to Chief Financial Officer. Imran has played an important role in strengthening our financial discipline and strategic planning capabilities, and I look forward to working closely with him as we execute on our priorities.

Speaker #2: Turning to the quarter on slide 5, while results were below last year, it is important to note that most of the factors impacting our performance were external in nature, primarily relating to geopolitical and regional conflicts and their effect on our customer activity, order timing, and shipment schedules.

Rishi Sharma: Turning to the quarter on slide five, while results were below last year, it is important to note that most of the factors impacting our performance were external in nature, primarily relating to geopolitical and regional conflicts and its effect on our customer activity, order timing, and shipment schedules. Bookings totaled $48 million and sales were $57.8 million, while our backlog remains solid at $275 million, with approximately 70% expected to be delivered over the next 12 months.

Speaker #2: Bookings totaled 48 million, and sales were $57.8 million, while our backlog remained solid at $275 million, with approximately 70% expected to be delivered over the next 12 months.

Speaker #2: Certain shipments were deferred as a result of these external factors, and they are expected to be realized in future periods. At the same time, there are areas within our control where we see opportunities for improvement.

Rishi Sharma: Certain shipments were deferred as a result of these external factors. They are expected to be realized in future periods. At the same time, there are areas within our control where we see opportunities for improvement. Cost discipline remains a core priority for Velan, and we continue to focus on rightsizing our cost structure to improve operating leverage as the business grows. While we have made meaningful progress, we remain committed to driving further efficiencies across the organization and ensuring our cost base supports long-term profitable growth. Accordingly, we are advancing a transformation plan focused on optimizing our operations, leveraging our global scale, simplifying our organizational structure, and modernizing our facilities as we prepare for anticipated growth across nuclear, defense, energy, and other critical markets. These initiatives are designed to improve execution, enhance delivery performance, strengthen customer service, and support profitable growth.

Speaker #2: Cost discipline remains a core priority for Velan, and we continue to focus on right-sizing our cost structure to improve operating leverage as the business grows.

Speaker #2: While we have made meaningful progress, we remain committed to driving further efficiencies across the organization and ensuring our cost base supports long-term profitable growth. Accordingly, we are advancing a transformation plan focused on optimizing our operations, leveraging our global scale, simplifying our organizational structure, and modernizing our facilities as we prepare for anticipated growth across nuclear, defense, energy, and other critical markets.

Rishi Sharma: While we have made meaningful progress, we remain committed to driving further efficiencies across the organization and ensuring our cost base supports long-term profitable growth. Accordingly, we are advancing a transformation plan focused on optimizing our operations, leveraging our global scale, simplifying our organizational structure, and modernizing our facilities as we prepare for anticipated growth across nuclear, defense, energy, and other critical markets.

Speaker #2: These initiatives are designed to improve execution, enhance delivery performance, strengthen customer service, and support profitable growth. We are also investing in our commercial capabilities to expand market share across our product portfolio.

Rishi Sharma: These initiatives are designed to improve execution, enhance delivery performance, strengthen customer service, and support profitable growth. We are also investing in our commercial capabilities to expand market share across our product portfolio. We look forward to providing more details on these initiatives as we progress. In that context, let's turn to slide six, where I would like to spend a few moments discussing the outlook for our key markets and why we believe Velan is positioned to benefit from the opportunities ahead.

Rishi Sharma: We are also investing in our commercial capabilities to expand market share across our product portfolio. We look forward to providing more details on these initiatives as we progress. In that context, let's turn to slide six, where I would like to spend a few moments discussing the outlook for our key markets and why we believe Velan is positioned to benefit from the opportunities ahead. Nuclear power remains a major growth driver for Velan, supported by growing demand for reliable, low-carbon energy and increasing investment in reactor refurbishments, life extension programs, SMRs, and new build projects. With more than 55 years of nuclear expertise, a global installed base, and leadership across reactor technologies, we are very well positioned to benefit from these opportunities. In Canada, the recently announced Nuclear Energy Strategy reinforces the important role nuclear power will play in meeting future electricity demand, energy security, and economic growth.

Speaker #2: We look forward to providing more details on these initiatives as they progress. In that context, let's turn to slide 6, where I would like to spend a few moments discussing the outlook for our key markets, and why we believe Velan is positioned to benefit from the opportunities ahead.

Speaker #2: Nuclear power remains a major growth driver for Velan, supported by growing demand for reliable, low-carbon energy and increasing investment in reactor refurbishments, life extension programs, SMRs, and new build projects.

Rishi Sharma: Nuclear power remains a major growth driver for Velan, supported by growing demand for reliable, low-carbon energy and increasing investment in reactor refurbishments, life extension programs, SMRs, and new build projects. With more than 55 years of nuclear expertise, a global installed base, and leadership across reactor technologies, we are very well positioned to benefit from these opportunities.

Speaker #2: With more than 55 years of nuclear expertise, a global installed base, and leadership across reactor technologies, we are very well positioned to benefit from these opportunities.

Speaker #2: In Canada, the recently announced nuclear energy strategy reinforces the important role nuclear power will play in meeting future electricity demands, energy security, and economic growth.

Rishi Sharma: In Canada, the recently announced Nuclear Energy Strategy reinforces the important role nuclear power will play in meeting future electricity demand, energy security, and economic growth. The strategy supports both reactor refurbishment and new build opportunities, including SMRs, while promoting Canadian nuclear expertise on the global stage.

Speaker #2: The strategy supports both reactor refurbishment and new build opportunities, including SMRs, while promoting Canadian nuclear expertise on the global stage. As a preferred supplier to the CANDU ecosystem, and through our long-standing relationship with Atkins Relais, we believe Velan is well positioned to participate in future CANDU refurbishments and new reactor projects, both in Canada and internationally.

Rishi Sharma: The strategy supports both reactor refurbishment and new build opportunities, including SMRs, while promoting Canadian nuclear expertise on the global stage. As a preferred supplier to CANDU ecosystem and through our long-standing relationship with AtkinsRéalis, we believe Velan is well positioned to participate in future CANDU refurbishments and new reactor projects in both Canada and internationally. Many of the opportunities in our pipeline are tied to funded projects that are advancing through engineering and procurement stages, including our contribution to the GEH SMR program. As a result, we expect a meaningful portion to convert into bookings in the near term, with execution occurring largely within the next 24 months and revenue contribution beginning during that period. Turning to slide seven. In defense, rising global security concerns continue to drive investment in naval modernization programs.

Rishi Sharma: As a preferred supplier to CANDU ecosystem and through our long-standing relationship with AtkinsRéalis, we believe Velan is well positioned to participate in future CANDU refurbishments and new reactor projects in both Canada and internationally. Many of the opportunities in our pipeline are tied to funded projects that are advancing through engineering and procurement stages, including our contribution to the GEH SMR program.

Speaker #2: Many of the opportunities in our pipeline are tied to funded projects that are advancing through engineering and procurement stages, including our contribution to the GEV SMR program.

Speaker #2: As a result, we expect a meaningful portion to convert into bookings in the near term, with execution occurring largely within the next 24 months and revenue contribution beginning during that period.

Rishi Sharma: As a result, we expect a meaningful portion to convert into bookings in the near term, with execution occurring largely within the next 24 months and revenue contribution beginning during that period. Turning to slide seven. In defense, rising global security concerns continue to drive investment in naval modernization programs. Given our leading position in nuclear propulsion valve applications, we are actively pursuing several opportunities that we believe could translate into orders and execution activity over the next two years.

Speaker #2: Turning to slide 7, in Defense, rising global security concerns continue to drive investment in naval modernization programs. Given our leading position in nuclear propulsion valve applications, we are actively pursuing several opportunities that we believe could translate into orders and execution activity over the next two years.

Rishi Sharma: Given our leading position in nuclear propulsion valve applications, we are actively pursuing several opportunities that we believe could translate into orders and execution activity over the next two years. In oil and gas, while geopolitical uncertainty affected customer activity, bidding levels remain healthy. Deferred maintenance activity in North America and potential infrastructure investments in the Middle East are creating attractive opportunities. Given our strong market position and our joint venture in Saudi Arabia, we are well positioned to capture this demand, particularly in shorter cycle MRO opportunities that can convert to revenue more quickly. As anticipated on slide eight, Velan's financial results were affected by the factors discussed earlier. Order bookings and delivery schedules and related profitability have moved out into future periods. Bookings were constrained by uncertainty and reduced in North America by the MRO activity.

Speaker #2: In oil and gas, while geopolitical uncertainty affected customer activity, bidding levels remain healthy. Deferred maintenance activity in North America and potential infrastructure investments in the Middle East are creating attractive opportunities.

Rishi Sharma: In oil and gas, while geopolitical uncertainty affected customer activity, bidding levels remain healthy. Deferred maintenance activity in North America and potential infrastructure investments in the Middle East are creating attractive opportunities. Given our strong market position and our joint venture in Saudi Arabia, we are well positioned to capture this demand, particularly in shorter cycle MRO opportunities that can convert to revenue more quickly.

Speaker #2: Given our strong market position and our joint venture in Saudi Arabia, we are well-positioned to capture this demand, particularly in shorter-cycle MRO opportunities that can convert to revenue more quickly.

Speaker #2: As anticipated, on slide 8, Velan's financial results were affected by the factors discussed earlier. Order bookings and delivery schedules, and related profitability, have moved out into future periods.

Rishi Sharma: As anticipated on slide eight, Velan's financial results were affected by the factors discussed earlier. Order bookings and delivery schedules and related profitability have moved out into future periods. Bookings were constrained by uncertainty and reduced in North America by the MRO activity. Since MRO activities and bookings are frequently converted into sales within the same period, reduced activity and refinery shutdowns in the Middle East had an adverse impact on sales.

Speaker #2: Bookings were constrained by the uncertainty and reduced in North America by the MRO activity. Since MRO activities and bookings are frequently converted into sales within the same period, reduced activity and refinery shutdowns in the Middle East had an adverse impact on sales.

Rishi Sharma: Since MRO activities and bookings are frequently converted into sales within the same period, reduced activity and refinery shutdowns in the Middle East had an adverse impact on sales. Shipments were deferred to future periods, but the majority is expected to be recaptured by the end of the fiscal year. Reflecting lower bookings, the order backlog decreased slightly to $275 million, with about 70% deliverable over the next 12 months. As anticipated and previously discussed, our backlog is progressively evolving towards a structure that reflects a growing share of longer duration, large-scale contracts, particularly in the nuclear and defense sectors, which increases backlog visibility and extends delivery timelines. Finally, our financial position remains solid with nearly $35 million in cash and cash equivalents on hand. Additionally, our new credit agreement signed after quarter end provides us with greater liquidity and flexibility to execute our business strategy going forward.

Speaker #2: Shipments were deferred to future periods, but the majority is expected to be recaptured by the end of the fiscal year. Reflecting lower bookings, the order backlog decreased slightly to $275 million, with about 70% deliverable over the next 12 months.

Rishi Sharma: Shipments were deferred to future periods, but the majority is expected to be recaptured by the end of the fiscal year. Reflecting lower bookings, the order backlog decreased slightly to $275 million, with about 70% deliverable over the next 12 months. As anticipated and previously discussed, our backlog is progressively evolving towards a structure that reflects a growing share of longer duration, large-scale contracts, particularly in the nuclear and defense sectors, which increases backlog visibility and extends delivery timelines.

Speaker #2: As anticipated and previously discussed, our backlog is progressively evolving towards a structure that reflects a growing share of longer-duration, large-scale contracts, particularly in the nuclear and defense sectors, which increases backlog visibility and extends delivery timelines.

Speaker #2: Finally, our financial position remains solid, with nearly $35 million in cash and cash equivalents on hand. Additionally, our new credit agreement, signed after quarter end, provides us with greater liquidity and flexibility to execute our business strategy going forward.

Rishi Sharma: Finally, our financial position remains solid with nearly $35 million in cash and cash equivalents on hand. Additionally, our new credit agreement signed after quarter end provides us with greater liquidity and flexibility to execute our business strategy going forward. We'd now like to turn the call over to Imran Gibbons for the financial review.

Speaker #2: We would now like to turn the call over to Imran Idris for the financial review.

Rishi Sharma: We'd now like to turn the call over to Imran Gibbons for the financial review.

Speaker #3: Thank you, Rishi, and good morning, everyone. Please turn to slide 9. Our order backlog stood at $275.1 million at the end of Q1, down slightly from the previous quarter due to shipments exceeding bookings during the period.

Imran Gibbons: Thank you, Rishi, and good morning, everyone. Please turn to slide nine. Our order backlog stood at $275.1 million at the end of Q1, down slightly from the previous quarter due to shipments exceeding bookings during the period. Bookings totaled $48 million in Q1 compared to $78.2 million last year. As mentioned, challenging market conditions resulted in lower bookings in our North American, Italian, and German operations, as well as for MRO activity, mainly in North America. Turning to the P&L on slide 10. Q1 sales totaled $57.8 million, compared to $72.2 million last year. The decrease was mainly due to the impact of geopolitical and regional conflicts, which resulted in shipments being deferred to subsequent periods. This situation mostly affected volume coming out of our North American and Italian operations. By customer geographic location, North America was our principal market in Q1, accounting for 57% of total sales.

Speaker #3: Bookings totaled 48 million in Q1, compared to 78.2 million last year. As mentioned, challenging market conditions resulted in lower bookings in our North American, Italian, and German operations, as well as for MRO activity, mainly in North America.

Speaker #3: Turning to the P&L on slide 10, first quarter sales totaled $57.8 million, compared to $72.2 million last year. The decrease was mainly due to the impact of geopolitical and regional conflicts, which resulted in shipments being deferred to subsequent periods.

Imran Gibbons: Turning to the P&L on slide 10. Q1 sales totaled $57.8 million, compared to $72.2 million last year. The decrease was mainly due to the impact of geopolitical and regional conflicts, which resulted in shipments being deferred to subsequent periods. This situation mostly affected volume coming out of our North American and Italian operations. By customer geographic location, North America was our principal market in Q1, accounting for 57% of total sales.

Speaker #3: This situation mostly affected volume coming out of our North American and Italian operations. By customer geographic location, North America was our principal market in Q1.

Speaker #3: Accounting for 57% of total sales. Asia Pacific represented our second largest revenue-generating region, with 21% of sales, while Africa and the Middle East was third at 16%.

Imran Gibbons: Asia Pacific represented our second-largest revenue-generating region with 21% of sales, while Africa and the Middle East was third at 16%. Turning to slide 11. Gross profit was $11.4 million or 19.6% of sales versus $20.6 million or 28.6% of sales in the prior year. The decrease primarily reflects the impact of lower business volume on the absorption of fixed production overhead costs, as well as a $1.3 million increase in our provision. Excluding this factor, gross profit was approximately 22% of sales. Administration costs totaled $15.7 million compared to $18.3 million a year ago. The reduction is attributed to cost reduction initiatives and lower sales commissions. Adjusted EBITDA, which excludes restructuring expenses and non-recurring provision adjustments, was -$2.1 million compared to +$3.8 million last year. The decrease reflects lower gross profit, partially offset by lower administration costs.

Speaker #3: Turning to slide 11, gross profit was $11.4 million, or 19.6% of sales, versus $20.6 million, or 28.6% of sales, in the prior year. The decrease primarily reflects the impact of lower business volume on the absorption of fixed production overhead costs, as well as a $1.3 million increase in our provision.

Speaker #3: Excluding this factor, gross profit was approximately 22% of sales. Administration costs totaled $15.7 million, compared to $18.3 million a year ago. The reduction is attributed to cost reduction initiatives and lower sales commissions.

Imran Gibbons: Administration costs totaled $15.7 million compared to $18.3 million a year ago. The reduction is attributed to cost reduction initiatives and lower sales commissions. Adjusted EBITDA, which excludes restructuring expenses and non-recurring provision adjustments, was -$2.1 million compared to +$3.8 million last year. The decrease reflects lower gross profit, partially offset by lower administration costs.

Speaker #3: Adjusted EBITDA, which excludes restructuring expenses and non-recurring provision adjustments, was negative $2.1 million, compared to a positive $3.8 million last year. The decrease reflects lower gross profit, partially offset by lower administration costs.

Speaker #3: As a result, the adjusted net loss was $6.9 million, compared to an adjusted net income of $0.1 million in the prior year. Turning to cash flows on slide 12, cash used by operating activities before net change in provisions was $17.4 million, compared to $15.5 million last year.

Imran Gibbons: As a result, the adjusted net loss was $6.9 million compared to an adjusted net income of $0.1 million in the prior year. Turning to cash flows on slide 12. Cash used by operating activities before net change in provisions was $17.4 million compared to $15.5 million last year. This year's unfavorable cash variation reflects negative changes in non-cash working capital items, mainly decreases in accounts payable and accrued liabilities, as well as in short-term customer deposits. These factors were partially offset by lower inventories. The increase in working capital is primarily attributed to operational factors that have temporarily increased the amount of capital invested in the business, such as securing material procurement ahead of executing long-term contracts. Efforts remain focused on improving working capital efficiency through inventory management, timely collection of receivables, and optimization of cash flows. We concluded the Q1 with a solid financial position.

Speaker #3: This year's unfavorable cash variation reflects negative changes in non-cash working capital items, mainly decreases in accounts payable and accrued liabilities, as well as in short-term customer deposits.

Speaker #3: These factors were partially offset by lower inventories. The increase in working capital is primarily attributed to operational factors that have temporarily increased the amount of capital invested in the business, such as securing material procurement ahead of executing long-term contracts.

Imran Gibbons: The increase in working capital is primarily attributed to operational factors that have temporarily increased the amount of capital invested in the business, such as securing material procurement ahead of executing long-term contracts. Efforts remain focused on improving working capital efficiency through inventory management, timely collection of receivables, and optimization of cash flows. We concluded the Q1 with a solid financial position.

Speaker #3: Efforts remain focused on improving working capital efficiency through inventory management, timely collection of receivables, and optimization of cash flows. We concluded the first quarter with a solid financial position.

Speaker #3: Cash and cash equivalents totaled $34.6 million as at May 31, 2026, while long-term debt stood at $16.8 million and bank indebtedness at $17.6 million.

Imran Gibbons: Cash and cash equivalents totaled $34.6 million as at 31 May 2026, while long-term debt stood at $16.8 million and bank indebtedness at $17.6 million. Subsequent to the end of the quarter, we secured a new 5-year, $80 million revolving credit facility with a major Canadian chartered bank. This facility strengthens our capital structure by increasing available liquidity and lowering our cost of capital. Proceeds were used to repay existing North American debt. The new facility in place provides us the flexibility to accelerate the execution of our strategy and to invest in our core capabilities to sustain profitable growth and create long-term value for our shareholders. I now turn the call over to Rishi for his concluding remarks.

Speaker #3: Subsequent to the end of the quarter, we secured a new five-year, $80 million revolving credit facility with a major Canadian chartered bank. This facility strengthens our capital structure by increasing available liquidity and lowering our cost of capital.

Speaker #3: Proceeds were used to repay existing North American debt. The new facility in place provides us the flexibility to accelerate the execution of our strategy and to invest in our core capabilities to sustain profitable growth and create long-term value for our shareholders.

Imran Gibbons: The new facility in place provides us the flexibility to accelerate the execution of our strategy and to invest in our core capabilities to sustain profitable growth and create long-term value for our shareholders. I now turn the call over to Rishi for his concluding remarks.

Speaker #3: I now turn the call over to Rishi for his concluding remarks.

Speaker #2: Thank you, Imran. Turning to my closing remarks on slide 13, we are entering an exciting new chapter in Velan's 75-year history. We have a solid balance sheet, a growing backlog of strategic projects, and a strong opportunity pipeline.

Rishi Sharma: Thank you, Imran. Turning to my closing remarks on slide 13, we are entering an exciting new chapter in Velan's 75-year history. We have a solid balance sheet, a growing backlog of strategic projects, and a strong opportunity pipeline. We are well-positioned to execute strategy and create long-term value. Across our core nuclear, defense, and energy markets, we continue to see attractive opportunities supported by favorable long-term fundamentals. Importantly, many of these opportunities are advancing through engineering and procurement stages, providing us visibility towards future bookings and execution activity. At the same time, we are advancing our transformation program focused on operational excellence, cost optimization, and profitable growth. By improving execution, enhancing our commercial effectiveness, modernizing our operations, and leveraging technology across the organization, we are positioning Velan to better serve our customers and capture growth opportunities.

Speaker #2: We are well positioned to execute our strategy and create long-term value. Across our core nuclear, defense, and energy markets, we continue to see attractive opportunities supported by favorable long-term fundamentals.

Speaker #2: Importantly, many of these opportunities are advancing through engineering and procurement stages, providing us visibility toward future bookings and execution activity. At the same time, we are advancing our transformation program, focused on operational excellence, cost optimization, and profitable growth.

Rishi Sharma: Importantly, many of these opportunities are advancing through engineering and procurement stages, providing us visibility towards future bookings and execution activity. At the same time, we are advancing our transformation program focused on operational excellence, cost optimization, and profitable growth.

Speaker #2: By improving execution, enhancing our commercial effectiveness, modernizing our operations, and leveraging technology across the organization, we are positioning Velan to better serve our customers and capture growth opportunities.

Rishi Sharma: By improving execution, enhancing our commercial effectiveness, modernizing our operations, and leveraging technology across the organization, we are positioning Velan to better serve our customers and capture growth opportunities. While near-term market conditions remain dynamic, we are confident in our long-term outlook and in our ability to build a stronger, more competitive, and more profitable Velan. I now turn the call over to the operator for the Q&A session.

Speaker #2: While near-term market conditions remain dynamic, we are confident in our long-term outlook and in our ability to build a stronger, more competitive, and more profitable Velan.

Rishi Sharma: While near-term market conditions remain dynamic, we are confident in our long-term outlook and in our ability to build a stronger, more competitive, and more profitable Velan. I now turn the call over to the operator for the Q&A session.

Speaker #2: I now turn the call over to the operator for the Q&A session.

Operator: 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 touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the 2. If you are using a speakerphone, please lift the handset before pressing any keys. One moment please. There are no questions at this time. I will now turn the call over to Rishi for closing remarks.

Speaker #1: Thank you, ladies and gentlemen. We will now begin the question-and-answer session. Should you have a question, please press star followed by one on your touch-tone phone.

Speaker #1: You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star, followed by 2.

Speaker #1: If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please. There are no questions at this time. I will now turn the call over to Rishi for closing remarks.

Speaker #2: Thank you, operator. Thank you, everyone, for joining us today. We look forward to sharing our second quarter results in October. I wish you a wonderful and safe summer.

Rishi Sharma: Thank you, operator. Thank you, everyone, for joining us today. We look forward to sharing with you our Q2 results in October. I wish you a wonderful and safe summer. Also note that we'll be hosting our annual general meeting of shareholders on Tuesday, 25 August 2026 at 4:30 PM, to be held in virtual format. Thank you to all and have a great day.

Speaker #2: And also note that we will be hosting our Annual General Meeting of Shareholders on Tuesday, August 25, 2026, at 4:30 p.m. The meeting will be held in a virtual format.

Speaker #2: Thank you all, and have a great day.

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

Q1 2026 Velan Inc Earnings Call

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