H2O Innovation Inc.

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the H2O Innovation Q1 Fiscal Year 2024 Financial Results Conference Call. Bonjour, mesdames et messieurs, et bienvenue à la belle conférence d'H2O Innovation annonçant les résultats financiers du premier trimestre de l'exercice financier 2024. At this time, all participants are in a listen-only mode. Following the presentation, we'll conduct a question-and-answer session. Instructions will be provided at that time for you to queue up for questions. If anyone has any difficulties hearing the conference, please press the star key followed by zero for operator assistance at any time. Cet appel se déroulera en anglais, mais n'hésitez pas à poser vos questions en français. Before turning the meeting over to management, please be advised that this conference call will contain statements. That could be forelooking and subject to a number of risks and uncertainties and could cause actual results to differ materially from those anticipated. I would like to remind everyone that this conference call is being recorded today, November 14, 2023, at 10 a.m. Eastern Time. I would now like to turn the conference over to your host for today, Messieurs Frédéric Dugré et Marc Bancher. Please go ahead, gentlemen.

Thank you very much. My name is Mark Blanchet. I'm the CFO of H2O Innovation. This call will be held in English, but I'll just say briefly in French for our French audience. Before we begin, I invite you to download a copy of today's presentation which can be found on our website at h2o-innovation.com in the section Investors. Frédéric Degree, PS9 CEO of H2O, is joining me today for the call, which duration is approximately 30 minutes. During this call, Frédéric will give an update on the business and present highlights on the Q1 2024, ended September 30, 2023. And I will be presenting the financial results. Please take a moment to read the forward-looking statement on page 2 and the RFIS financial measurement on page 3 of the presentation. I'll now have Fred.

Thank you, Marc, and thank you for joining the call today. Well, we are starting our new fiscal year 2024 with more modest growth of 5.7% in our first quarter compared to the same period of last fiscal year. The tempered growth Revenue is mostly explained by the timing of revenue recognition associated to the deliveries of important customer orders of specialty chemicals and components. Despite this slower start, we're happy to report improvement in a gross profit margin. Indeed, following the implementation of multiple measures to improve our gross profit margin, we're now observing a positive trend in our operating profits. This is the result of our commercial teams striving to protect margin erosion, combined with our manufacturing, engineering, operating and procurement teams working relentlessly to find ways to reduce our costs. The significant CAPEX investments made in the previous fiscal year, such as the development of a mobile fleet of water and wastewater treatment systems, plastic extrusion line and the in-house blending of the specialty powder cleaner in our UK facility should continue to fuel margin expansion in the coming years. For these reasons, despite the modest revenue growth in the first quarter, we remain confident in our revenue growth target for fiscal year 2024. Our high recurrent revenue business model, combined with an impressive 37.2% growth in our consolidated backlog, now that stand at $249 million, gives us an excellent visibility to grow the corporation in the coming quarters and reach our targets presented in our three-year plan. Mark will cover the financial performance with greater details in the coming slides. Moving to page five with our largest revenue generator business pillar, the operation and maintenance. During the first quarter, the O&M team secured eight new contracts where most of them are for industrial customers. In parallel, as we continue to focus on customer retention, we successfully renewed 11 contracts and expanded scope of work in seven existing O&M projects. These new awards, combined to the scope expansion and the renewal of O&M legacy contracts, pushed the backlog to a record high of 166 million. These numbers testify to the quality of the work performed by our team and to the care provided to our numerous customers. Talking about customer care, I want to underline the extraordinary work realized by our crews from four different locations in the Southeast United States that provided assistance to our customers and team in Live Oak, Florida, after the devastating hurricane Idela at the end of August. In Q1, we finally merged and completed the integration of EC, previously acquired in fiscal year 2022, both in the states of New York This consolidation under the H2O Innovation brand will enable us to promote a more comprehensive solution offering to all customers. This final merger also provides uniform and equitable employment benefits to all workers in the state of New York and is also in line with the rest of H2O Innovation's employees' benefits. Moving to page six, let's have a look at the highlights of a water technologies and services business pillar. During the first quarter, we secured 12 new water, wastewater, and water reuse projects for a total of $29 million. These new projects contribute to keep a good balance between industrial and municipal projects in our backlog. These additions push the WTS backlog to a record high also of $84 million. Combined to our growing service and aftermarket business line, originating from our growing installed customer base, It provides us excellent visibility in the revenue and EBAC growth in the coming quarters as the chart is showing up. Lastly, the launch and the development of our mobile water treatment fleet is going full steam. Mining customers continue to show interest in such product and business solution offerings. During the summer only, we secured new leasing contracts totaling $3.4 million, bringing our actual constructed fleet in full usage and fully deployed in the field. At the end of September 2023, we had two more Flexbox Unix under construction, which had been delivered at the end of October to another mining customer. Our objective to grow our fleet to 40 units within the next five years remained the same. Now, let's have a look at the evolution of our combined backlog over the last 12 months, over the last 12 quarters at page seven. With the addition of 29 million bookings from the WTS Business Builder in Q1, combined to the renewal, scope expansion, and new O&M contracts, our combined backlog now reached 250 million at the end of Q1. This represents a 32% increase from June 30th, 2023. This record high backlog not only give us strong visibility in the expected revenue growth in the coming quarters, but it also continue us to build our North American platform combining water treatment equipment, servicing, specialty products, and O&M, which promote customer retention, thus recurrent revenues. By doing so, we continue to monetize our platform with repeat and new business with both industrial and municipal customers. Let's look at page eight on the performance of our specialty products business pillar. During the first quarter of 2024, our specialty chemical manufacturing facility in Vista, in California, obtained its HIZO 9001-2015 certification. This quality management certification for all our manufacturing activity in California should enable us to pursue our growth among our existing customers and also seduce new customers for which such quality certification is one of the application requirements. In parallel, our UK-based specialty chemical manufacturing facility continues to ramp up its powder production with growing demand for international customers. By insourcing the making of our powder-based products, we have a better control on the quality of the end products, its lead time production, and also enjoy an improved profit margin. Meanwhile, Piedmont, the specialty component product line, continued to pursue international opportunities, mostly for new desalination plants. During the same period, we secured multiple cartridge elements recurring orders, from filter housings previously installed to large desalination plants. Our maple farming equipment teams continue to work on the integration of leader evaporator acquired slightly more than a year ago. The priority remains to improve the profitability of this business line. For this reason, we continue to rationalize our combined product line while maximizing our customer offering and optimizing our cost and profit structure. It is worth to recall that following a poor maple season in spring 2023, the company took measures to optimize the cost structure and diversified into new business verticals. Through our strategic objective of transforming the maple division into an agri-food division, we intend to lower the seasonality impact and diversify our client base into other auxiliary markets where our expertise in sugar concentration and membrane filtration could be beneficial. I will now pass it on to Marc Blanchet, our CFO, who will review and discuss with you the financial performance of the company during this first quarter of fiscal year 2024. Thank you, Fred.