What you need to know: • ADF reported Q3 financial results that were in line with our expectations on revenue and beat our expectations on EBITDA. • Revenue came in at $80.0M (-3% YoY) vs. our $80.4M and EBITDA came in at $24.0M (+35% YoY) vs. our $19.0M. • While the impact of the Trump victory and tariffs is still uncertain, management remains positive on its end markets and backlog. This morning, ADF Group (DRX:TSX, ADFJF:OTC) reported Q3 financial results (ending October 31st) that were in line on revenue and beat our expectations on margins. The standout was EBITDA margin which came in at 30% compared to our expected 24%. While the U.S. election and potential tariffs have been in focus for investors lately, management stated that it is too early to assess the impact, but its outlook remains bullish on infrastructure spending. We are maintaining our BUY rating and $23.00/share target price on ADF Group. Key Highlights • Revenue came in at $80.0M vs. our estimate of $80.4M (revised down from $89.2M in our last note). This represented a 3% decline YoY. 36% of revenue was comprised of fabrication hours. • The order backlog came in at $330.3M (-3% YoY, -23% QoQ). 35% of the backlog consisted of fabrication hours, compared to 45% last quarter. The backlog extends until January 2026. • Gross margin for the quarter was 30.4%, beating our estimate of 29.0% and 24.4% in Q3/24. Management attributed this to better absorption of fixed costs, increased fabrication volume, automation, and a favourable product mix. • EBITDA of $24.0M (30% EBITDA margin, +35% YoY) compared to our estimate of $19.0M (24% margin) and $17.8M in Q3/24 (22% margin). • EPS of $0.55 (or $16.4M in net income) compared to our estimate of $0.39/share (or $12.3M net income). EPS was up 62% YoY. • ADF spent $1.4M in capex in the quarter, translating to negative FCFF as A/R increased by $27.5M. The Company ended the quarter with $65.5M in cash and $46.4M in debt. Outlook Management outlined that it is too early to identify the potential impacts of the U.S. election and possible tariffs. However, the team did restate that given the need for infrastructure spending and the previously announced investment programs, they remain bullish on the sector. Management also reminded investors to view its financials on an annual basis, rather than quarter-to-quarter as things can be lumpy at times. Management specifically highlighted the modernization of U.S. airports as a growth driver but warned of slower growth in the green energy sector. ADF also guided that lower inflation and interest rates should encourage investments across North America. On the conference call, management was very optimistic, stating that it is in various negotiations for new contracts, but plans to focus on higher margin orders as seen in Q2 and Q3, rather than forcing topline growth.