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spk18: Good day and thank you for standing by. Welcome to the MATTER second quarter 2023 results webcast and conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising you that your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. there is a presentation that you can guide yourself through during the call. I would now like to hand the conference over to your speaker today, Megan McEachran, Director of External Communications and ESG.
spk01: Please go ahead. Good morning.
spk00: Before we begin this morning's conference call, I'd like to take a moment to remind all listeners that today's call includes forward-looking statements that involve estimates, judgments, risks, and uncertainties, that may cause actual results to differ materially from those projected. The complete text of Matter's statement on forward-looking information is included in section 4.0 of the second quarter 2023 earnings press release in the MD&A that is available on CDAR and on the company's website at matter.com. For those joining via webcast, you may follow the visual presentation that accompanies this call. I'll now turn it over to Matter's president and CEO, Mike Reeves.
spk05: Good morning, and thank you for attending our second quarter conference call. Today, Megan and I are joined by our Senior Vice President of Finance and CFO, Tom Holloway. During the second quarter, the company completed the process of rebranding itself as MATA, establishing a new corporate image that more fully reflects our capabilities, our purpose, and our future. We now trade under the TSX ticker symbol MATR, And I'm delighted to welcome you to our first earnings release under this new company brand. The second quarter of 2023 saw Massa continue to execute on its commitments to elevate margins, lower volatility, and focus resources on high growth opportunities serving industrial and critical infrastructure and markets. We moved closer to concluding the strategic review of our pipeline and pipe services segment, completing the sale of several smaller businesses during Q2. The broader process continues to receive significant focus, and while we are not yet positioned to announce a transaction for our core pipe coating business unit, favorable progress continues to be made, and we will provide further details when there are material developments to report. Turning to second quarter performance, the company delivered strong operating results across all segments, committed capital to high return organic growth opportunities, and continued its share repurchase activities. All three of our operating segments reported meaningful revenue and adjusted EBITDA growth during the quarter when compared to the prior year. Our industrial and infrastructure focused businesses continue to benefit from significant global investment in transportation, low emissions energy, electrification, communications and water related infrastructure. Our energy focused businesses are also experiencing rising market demand with domestic and international sales of larger diameter composite pipe expanding and pipe coating activity accelerating as offshore pipeline infrastructure expansion continues its multi-year upcycle. In parallel, we made further progress towards our 2030 environmental, social, and governance aspirations and will release our 2022 ESG report later in the third quarter. You will see in this report that we continue to successfully deliver emissions reduction. One example of this is our Rheinbach facility in Germany, where we recently implemented a heat recovery system, capturing heat from our hot water and compressor systems and using that to heat the building. The site is now heated exclusively through this recovered energy approach, lowering energy consumption, lowering emissions, and reducing our exposure to potential future European energy price volatility. The hard work of recent years to substantially strengthen our balance sheets cash generation profile positions us to pursue a disciplined high return capital allocation strategy, balancing share buybacks with investment in high margin growth to generate elevated returns for all stakeholders. Consistent with our previously shared full year capital guidance during Q2, the company communicated additional details of its substantial growth capital investments into its composite and connection technology segments. These investments into four new operating sites will enhance production capacity, efficiency, and proximity to key markets, lower risk by providing increased network redundancy, and are expected to accelerate mid- and long-term revenue growth, elevate margin profiles, and deliver attractive overall returns. The company also continued to be active under its previously launched normal course issuer bid, which it extended and expanded late in Q2. During the quarter, our team made good progress on the integration and growth of both Kanata Electronic Services, which our connection technology segment acquired late in 2022, and Triton Stormwater Solutions, which our composite technology segment acquired during Q1 of this year. With these businesses performing as expected, we remain alert to additional strategically aligned, attractively valued acquisition opportunities and have expanded our corporate development team in anticipation of a gradual increase in highly disciplined inorganic value creation. Moving to our previously announced strategic review process, late in Q2, the company completed the sale of its shore pipeline services non-destructive testing business and its UK specialty coating business, while entering into a definitive agreement to sell its Sicilian pipe coating facility, a sale that is expected to close in Q3. All of these businesses have previously been reported within the PPS segment, and in consolidation, these transactions will deliver gross proceeds of approximately $16 million for businesses that together contributed $55 million of revenue and an adjusted EBITDA loss of $3.5 million over the prior 12-month period. Looking a little closer at each of our segments, during Q2, Composite Technologies, which was previously called Composite Systems and houses our FlexPipe and Xerxes businesses, delivered revenue growth of 11% and expanded adjusted EBITDA margin by 600 basis points compared to the same period last year, reaching new record levels of quarterly performance for the segment. Sales of the company's spoolable composite FlexPipe products moved sequentially higher, with further acceleration of large-diameter product adoption and new customers onboarded in multiple operating basins. Second quarter flex pipe performance benefited from above-normal sales into international markets, primarily the Middle East, which more than offset the impact of breakup conditions in Canada. Shipments of Xerxes underground fuel storage tanks and our full range of stormwater management products were robust during the second quarter, Stepping up from Q1 as ground conditions seasonally improved across much of North America, enabling our customers to accelerate installation activity. Following the acquisition of Triton's infiltration product line late in Q1, the company's water-related product line reached a new record level of quarterly revenue in Q2. Our favorable long-term outlook for the market served by composite technologies underpins our growth capital investments. to increase capacity, improve efficiency, and lower lead times, including our commitment to establish two additional production sites in the US, one for FlexPipe and one for Xerxes Tanks, which were announced earlier this year and are now well underway. Further details of these investments may be found in the company's press release issued on April 26th. Third quarter segment revenue is likely to be similar to the second quarter as ground conditions remain favorable for Xerxes product installation and FlexPipe sales growth in North America offsets international sales returning to more normal levels. As is typical for the segment, we would expect revenue to move modestly down in the fourth quarter, driven by seasonal effects. With a healthy long-term demand outlook across the FlexPipe and Xerxes portfolio, we believe our composite technology segment is well positioned to continue its recent trend of delivering growth versus prior year periods. The connection technology segment, formerly called automotive and industrial, and housing our SureFlex and DSG Canoosa businesses, delivered a particularly robust quarter. with 12% revenue growth versus the same quarter last year and adjusted EBITDA margins approaching 24%, a new segment record. In addition to continued strong North American industrial and infrastructure demand across the segment's product portfolio and stable deliveries of heat shrink products into the European automotive market, the quarter benefited substantially from shipments of premium wiring cable into nuclear projects and a particularly significant aerospace delivery which is unlikely to recur this year. We continue to anticipate year-over-year business growth across industrial and infrastructure markets for both ShoreFlex and DSG Canusa, particularly in North America, as long-cycle infrastructure investment continues, spurred in part by U.S. and Canadian government policies. Our outlook for DSG Canusa automotive demand during the second half of 2023 remains similar to the first half. as more favorable energy dynamics in Europe are offset by the impacts of higher interest rates. The company expects connection technologies revenue in the third and fourth quarters to be higher than the same quarters of 2022. Q3 revenue is likely to move down from Q2, reflecting non-recurrence of the large aerospace-related wire and cable delivery which occurred during the first half of the year. Fourth quarter revenue is likely to move modestly further down as normal year-end inventory lowering occurs within our distributor network. The company expects the remaining quarters of 2023 to yield segment-adjusted EBITDA similar to the same quarters of 2022, as revenue expansion is offset by incremental costs incurred to spur future growth acceleration. including costs recognized in advance of North American production facility relocation, investment, and expansion. We remain vigilant to the potential impacts of European energy costs approaching the winter heating season and continue to take steps which lower the company's energy needs and risk tied to this possible issue. Overall, we maintain a constructive view of the long-term market trends which impact the ShoreFlex and DSG Canoosa businesses, and we will continue to invest growth capital to enhance our product offering, improve our manufacturing capacity, elevate our production efficiency, and lower lead times, including the recently announced commitments to bifurcate, expand, and modernize our North American production footprint. Further details of these investments may be found in the company's press release issued on June 28. Lastly, and despite multiple business divestiges over the last 12 months, our pipeline and pipe services segments saw revenue rise by 73% compared to the second quarter of 2022, delivering an adjusted EBITDA margin of nearly 11% compared to a loss in the prior year quarter. Sequentially, segment revenue and adjusted EBITDA moved up compared to a previous expectation of modest declines. This strength was the result of very robust coating activity in our Western Hemisphere organization, which delivered particularly high operational efficiency, accelerating activity on the Yellowtail project in Veracruz, Mexico, and commencing coating operations slightly earlier than previously anticipated on the STP project in Altamira, Mexico. We are particularly pleased to see the benefits of substantial business optimization activity over the last three years become increasingly visible in the adjusted EBITDA leverage delivered by our pipe coating operations as revenues rise. Pipeline and pipe services segment revenue and adjusted EBITDA during the second half of 2023 is expected to be substantially higher than Q2, reaching prior cycle peak margin levels. This outlook is driven by the timing of specific pipe coating projects and particularly impacted by coating activity and related revenue recognition on the SGP project, which will accelerate during the third quarter and reach peak levels during the fourth quarter. At the end of the second quarter, the company had recognized approximately 5% of total expected SGP project revenue, and given operational efficiencies observed to date, The company now expects SGP project coating and revenue recognition will largely be completed by the end of Q1 2024. The combination of a substantial high-quality backlog, elevated volumes of bid and budgetary quoting activity, favorable energy fundamentals, and continued successful new technology adoption positions the pipe coating business well for the current upcycle. Turning to consolidated 12-month backlog, at the end of Q2, the company's committed backlog of work to be completed within the next 12 months was just under $1.16 billion, a decrease of $152 million when compared to the prior quarter. The PPS segment secured several new Latin American pipe coating projects during Q2, However, these new awards and the movement of expected revenues from previously awarded pipe coating projects into the forward 12-month window were more than offset by the elimination of backlog tied to the SPS business, which was sold during Q2, and an increased volume of pipe coating activity executed during the quarter, including the Scarborough project in our Cabil, Indonesia facility, the Yellowtail project in our Veracruz, Mexico facility, and the SGP project in Altamira, Mexico. Total backlog, which includes committed work beyond 12 months, also moved down modestly at the end of Q2 versus the prior quarter to $1.33 billion. As execution of the SGP project accelerates during Q3 and then continues throughout Q4 and Q1 of 2024, we anticipate the PPS segment and overall company 12-month and total backlog values will lower further. although strength in bidding activity likely drives a return to backlog growth as we move through 2024. Matters bid number reflects the value of work where the company has issued a firm price with proposed contract terms against an explicit scope of work with a defined timeline for execution. At the end of Q2, the bid balance was nearly $1 billion, an increase of $150 million when compared to the prior quarter, related to the divested SPS business as the volume of new bidding activity in our composite technologies and PPS segments more than offset the movement of project from bid into backlog during the quarter. Bidding activity remains strong across the energy spectrum and is a clear indicator that customers are committed to moving forward with new and previously contemplated onshore and offshore field developments in the face of favorable commodity prices and growing global demand for natural gas. The quarter-end bid number included $8 million of conditional awards pending final investment decision, down from $168 million at the end of Q1, as several projects crossed the final investment decision threshold during Q2 and moved into backlog. Matter's budgetary number, reflecting the value of indicative pricing submitted to allow customers to build a project budget ahead of formal procurement activities, was just over $2.1 billion at quarter end, down from $2.5 billion in the prior quarter, as SPS-related budgetary quotes were removed and the movement of projects from budgetary into bid slightly exceeded new budgetary quoting during the quarter. This substantial budgetary number further supports our expectations that energy-related activity will remain elevated for several years to come. It's important to note that the majority of matters 12-month backlog, total backlog, bid, and budgetary balances are attributable to the PPS segment. Tom will now walk through the company's second quarter financial highlights.
spk20: Thanks, Mike. The second quarter's consolidated revenue was $400.6 million, 30.5% higher than the $307 million in the second quarter of 2022. Adjusted EBITDA was $67.3 million, a 105.8% increase from the prior year second quarter, primarily attributed to demand growth experienced across the company's three reporting segments, including the commencement of load-in and pipe-coating activities for the SGP project, further enhanced by continued margin expansion arising from favorable product and project mix, and the divestiture of lower-margin businesses. Turning to segment results, the composite technology segment revenue was $150.4 million, an 11% increase compared to the second quarter of 2022, and adjusted EBITDA was $34.8 million, a 50% increase from the prior year second quarter. Both revenue and adjusted EBITDA were record quarterly results for this segment. These results reflect growth in demand for composite pipe products in North America and internationally, including growth in demand for the company's larger diameter pipe products. Additionally, the segment continues to experience robust demand for underground fiberglass reinforced plastic tanks for liquid fuel and water management systems. Connection technology segment revenue was $88.7 million, a 12% increase compared to the second quarter of 2022, and adjusted EBITDA was $21 million, a 29% increase from the prior year's second quarter. The increase was driven by elevated demand for wire and cable products from North American industrial markets stemming from ongoing infrastructure spending, including shipments into the aerospace and nuclear markets. Additionally, continued demand for the company's heat shrink tubing products in industrial markets and within the automotive sector further solidified the segment's strong performance. Pipeline and pipe services segment revenue was 161.6M dollars, a 73% increase compared to the second quarter of 2022, primarily resulting from the successful execution of pipe coding project activity, including the Scarborough project in the Kapil Indonesia facility, the Yellowtail project in the Veracruz, Mexico facility, and the commencement of load-in and pipe coating of the SGP project in the Altamira, Mexico facility. This was partially offset by lower activity in the Canadian facilities in the absence of revenue associated with the SPS business sold mid-quarter and the Lake Superior consulting business sold in August of last year. Adjusted EBITDA was $17.1 million, which compared to negative EBITDA recorded in the prior year second quarter, reflecting the aforementioned higher revenue and more profitable pipe coating project mix and the impact of higher activity on manufacturing absorption. Turning to cash flow in the quarter, cash provided by operating activities in the second quarter was $30.5 million, reflecting strong operational performance. This was offset by an investment in working capital, which reflects the increased activity throughout the company, including increases in inventory required for the Scarborough project in Indonesia and the SGP project in Mexico. Cash used in investing activities in the second quarter was $48.2 million, reflecting $55.6 million of capital expenditures, offset by $6.5 million received in cash from the $8.9 million sale price from the divestiture of the Shaw Pipeline Services business. During the second quarter, cash used in financing activities was $17.3 million, including $5 million in debt repayments, $7.8 million in lease payments, and $5.5 million in share repurchases under the company's normal course issuer bid. Net cash used in the second quarter of 2023 was $37.5 million. Based on the actions completed and planned, its diversified business, current order backlog, and confidence in the outlook, the company expects to generate sufficient cash flows and have continued access to its credit facilities, subject to covenant limitations, to fund its operations, working capital requirements, and capital program, including share buyback. As of June 30, 2023, we had a cash balance of $124.5 million, debt of $182 million, and $64.1 million of standard letters of credit. Our liquidity position has benefited from the initiatives undertaken since 2020. With continued focus on reducing our operating cost base, as well as repayment of $252.5 million of outstanding net long-term debt, since the start of 2021, including $5 million paid in the second quarter. As of the end of the quarter, the company's net debt to adjusted EBITDA ratio was 0.54 times, significantly below our ceiling of 1.5 times. We also continue to purchase shares under our normal course issuer bid and repurchased 405,000 common shares during the quarter. As mentioned earlier, the company spent $55.6 million in cash on capital expenditures, including $4.1 million of outstanding payments to suppliers. Total capital expenditures in the quarter were $59.7 million, of which $56.4 million were related to growth expenditures. These are mostly related to infrastructure improvements to increase production capacity in the composite technologies and connections technologies segments and spend to support the SGP project. Looking ahead to the remainder of the year, the company still expects to spend the $160 to $180 million of capital expenditures as previously communicated. During the quarter, the company announced further details on this expected capital spend, including two new composite technologies production facilities in the U.S., as well as a new facility in the greater Toronto area and one in the U.S. for the connection technology segment, which will expand and replace its current North American footprint. The investments in these lower risk, high return opportunities are expected to create further revenue generating capacity of approximately $150 million and further expand adjusted EBITDA margins once these facilities approach efficient utilization levels. We will continue to prioritize capital spend to drive growth in our most differentiated, high value, materials-based solutions in support of industrial and critical infrastructure in markets while ensuring that sufficient capacity is available to execute on our pipe coding projects and our backlog. The company continues to execute on the strategic actions that are intended to enhance over time It's margin and operating cash flow profile lower overall volatility and deliver greater full cycle value to all stakeholders as our market leading technologies enable responsible, sustainable renewal and enhancement of critical infrastructure. Since early 2020, the company has successfully divested multiple non-core lower margin businesses and other assets, including the sales of the SPS business and the UK specialty pipe coating business that occurred in the second quarter. These efforts have generated over $220 million of cash proceeds, with the disposed businesses generating an average trailing 12-month adjusted EBITDA margin of 6%, significantly strengthening our balance sheet and margin profile while lowering organizational complexity. In September of 2022, we announced our intention to achieve maximum stakeholder value from a sale or other transaction of our pipeline performance group that currently forms the entirety of the company's pipeline and pipe services reporting segment. We have made great progress on this strategic review process through our successful rebrand and through the sales of our Lake Superior Consulting, Oilfield Asset Management, and Soccotherm Argentina businesses, as well as our specialty coating facility in Scotland. We remain fully committed to this initiative and are focused and actively working towards its completion. Proceeds generated by this transaction will be utilized to strengthen the company's balance sheet, organically and inorganically accelerate the profitable expansion of our higher margin, less volatile composite and connection technology segments, and to return capital to shareholders as conditions permit. While the expected future removal of the pipeline and pipe services segment from our portfolio will substantially lower selling general and administrative costs for the company, as previously communicated, approximately $8 million of financial and corporate expenses that are currently being allocated to this segment are expected to be absorbed back into the organization at that time. Upon closing a transaction, these costs would likely be partially offset by proceeds from a transition services agreement for several quarters, and the company will work to reduce its total corporate cost base, reflecting its simpler business portfolio over time. I'll now turn it back to Mike for some final comments.
spk05: Thank you, Tom. Over the last three years, we've taken significant steps to simplify our organization, increase average margins, lower volatility, elevate cash flow, and concentrate on a narrow range of high growth critical infrastructure oriented businesses. We remain committed to tightly controlling fixed costs, completing the strategic review of our PPS segment, and optimally deploying capital to drive high return growth. We have substantially reduced outstanding debt, are returning cash to shareholders, and leaning into high-value organic and inorganic growth opportunities, taking advantage of our unique technology portfolio and strong long-term customer demand to deploy significant growth capital and deliver elevated returns for our stakeholders. Normal seasonal cycles will continue to drive some movement quarter to quarter. However, the underlying trends for each of MATA's primary businesses are favorable and expected to remain so for several years. Long-duration North American critical infrastructure activity remains robust, and fundamental energy demand drivers persist. While we remain vigilant towards the potential impacts of geopolitical events, supply chain risks, and higher interest rates, our simplified portfolio of high-value materials-based products has limited exposure to consumer discretionary spending, and we believe has resilience in the face of recessionary forces. We expect consolidated adjusted EBITDA in Q3 2023 to rise substantially, driven primarily by a significant increase in pipe coating activity, including elevated margin contributions from the Southeast Gateway Pipeline project. I will now turn the call over to the operator and open it up for any questions you may have for myself, Tom, or Megan.
spk18: Thank you. As a reminder, to ask a question at this time, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. One moment while we compile our Q&A roster. Our first question is going to come from the line of Aaron McNeil with TD Cowan. Your line is open. Please go ahead.
spk11: Hey, morning. Thanks for taking my questions. I guess the first one I've got is around sort of these moving expenses and the connection technology segment. I'm just wondering, you know, how long do you expect these to persist? Do you expect them to change over time? And can you sort of give us a quarterly run rate?
spk05: Morning, Aaron. I think the way to think about that particular piece of that business is the facility relocation activities, which have us moving away from our very long-term footprint in the Rexdale area of Toronto and now into two different facilities, one in Ohio and one in Bourne. will certainly continue for much of 2024. I think we would expect most of those moving expenses to be incurred certainly by early 2025. There'll be some fluctuation quarter to quarter at the end of the day. reported at the time they are incurred. They're not smoothed over a period of quarters. So it's difficult to give you a perfect run rate. But what I'd say is that what we'll see in the second half of 2023 is likely to be a little less than we will see in 2024. And we will do our very best to call them out as we report each quarter as we roll through. Tom, would you add anything there?
spk20: Yeah, I think that's right, Mike. Aaron, I would say In Q3 and Q4, it's probably on the order of less than a million dollars each. And then in Q24, it ramps up a bit as the actual move activity increases. So those are very rough numbers. So not hugely material. That's how I would probably think about it right now. It's moving around a little bit, of course, as you can imagine.
spk11: That's great. That's super helpful. In terms of the sort of pipeline performance or pipeline segment, are there any sort of other odds and ends in there that you're looking to dispose of separate from a larger transaction or idle assets within the pipeline performance group that you'd look to sell separately? And if we were to use segment book value as sort of a proxy for a potential transaction value, should we be thinking about you know, reducing that, our expectations since you've sort of kind of sold off some of the odds and ends over the last couple of quarters?
spk05: Yeah, great question. Thanks for asking. I suspect others on the call have similar interests. So the smaller pieces that we concluded the sales of in Q2, and I'll include there the Italian real estate footprint, which won't actually close until Q3, but we're under a definitive agreement. We're effectively the last of what I'd call the peripheral pieces of that segment. So what's left in the PPS reporting segment is what we would describe as the core pipe coating business. When I look across the broader corporation, really the only other element that we're still working to divest is the real estate in Western Canada, which is multiple sites, but largely concentrated in NISQ. which was left over when we sold the oilfield asset management business in the second half of last year. So that's still ongoing, and we hope to get some proceeds from that real estate over the course of the next 12 months. I'll turn it to Tom to talk about valuation expectations on the remaining piece of the pipe coating business.
spk20: Yes. So, Aaron, I think if you look at the net book value of the PPS segment remaining, it's almost entirely that PPG core business. So, I don't think you need to reduce your expectations from a cash perspective, given the commentary we've given over the last few quarters. So, that being the floor would still remain a true comment for what is on the books. Sorry, the portion that Mike was referring to on the OAM Western Canada asset is not included in that segment, just to be clear, so there's no confusion as to where that sits. That was in the composites segment historically.
spk13: Okay, perfect. I'll turn it back.
spk19: Thanks, Aaron.
spk18: Thank you. And one moment while we move to our next question. And our next question is going to come from the line of Yuri Link with Canaccord Genuity. Your line is open. Please go ahead.
spk04: Hey, good morning, and thanks for taking my question. Good morning. What can we infer from PPS not being classified as held for sale at this point?
spk20: So there are, as you know, there are probably pretty strict accounting rules as to when that occurs. And one of them tends to be, it's not a hard and fast rule, but tends to be the signing of a definitive agreement. So I think the thing you can infer is that we have not signed a definitive agreement, and that's probably all you can really infer at this point. But as we said, we're making really good progress, still very committed to it, and hope to be able to say something relatively soon.
spk05: And maybe I'll add here, I know that on our last earnings call, I set the expectation that we would have something to communicate here by the time of this call. And it proved that I was modestly optimistic. And that's my fault. My apologies. But I would say that you should not infer that the lack of an announcement as we sit here at this moment in time suggests that anything is wrong.
spk04: Okay, that's fair. The quarter was obviously very strong in both go-forward segments. I think you enjoyed better utilization, especially in composite pipe and your tank plants. Can you just talk about... where utilization is versus last year and how much room there is to take it higher in these facilities because I'm just thinking you know is there a point between now and and when your expansion plans are completed where you might be capacity constrained in the interim
spk05: Yeah, so I think the obvious answer is clearly our utilization is higher now than it was at this point last year. But I treated in two separate buckets. So the flex pipe business, which, as you'll recall, has historically operated from one single site in Calgary and still does. That site certainly is more challenged when it comes to the ability to continue ramping production than our tanks network, which is why we moved when we did to establish a second pipe production facility in the Dallas area, which we certainly expect will come online as we look to the middle part of next year. I think between now and then, there may be one or two challenges where we bump up against production capacity in our Calgary site. But the team there have done an extraordinary job of finding ways to eke out incremental production. And I have great confidence that they'll continue to do that. But we definitely need to get this second plant up and running in the middle part of next year to ensure that we are not constrained in the longer term. The other thing to remember is that we are in a, I'd call it a transformation in that business with the introduction of the larger diameter products, five inch and six inch. They do take slightly different degrees of production time to make the same length when you compare them to smaller diameter. So we have to manage those things. But at the same time, generally revenue and margin is for the larger diameter products than it is for our legacy 4-inch and smaller products. So as these larger diameter products become a bigger and bigger part of our revenue stream, obviously they will continue to help propel that business upwards really on all lines of the income statement. If we turn to the tanks business we currently have six production sites to encounter for in the US and, as you know, we have initiated the construction of a seventh site in South Carolina, which we also expect will come online in the middle part of next year. We still have the ability to add additional shifts in some of our existing tank production sites. So I am less concerned at our risk of being totally maxed out on the tank side before the seventh site comes online. I would say, though, that labor is still tight in North America. and certainly in some of the areas where our sites sit. So adding shifts, while it sounds simple, does take quite amount of effort and a little bit of time. So we're very thoughtful there and working to stay ahead of it.
spk04: Okay. That's helpful. I'll hop off the call. Thanks, guys.
spk18: Thank you. And one moment while we move to our next question. And our next question is going to come from the line of Anna McBain with Cormark Securities. Your line is open. Please go ahead.
spk09: Good morning, guys. Great quarter. Most of my questions have already been asked, but I just have one on the penetration rate of some of the larger diameter piping. Just curious, what percentage of sales does this account for currently? And do you have sort of a target or goalpost around mix or where you'd like to see that end up somewhere down the line?
spk05: Yeah, morning. I think when we look at the North American market in particular, we think that the total addressable market for the larger diameter items are about the same as the smaller diameter items that have made up our historic revenue base. So you would naturally assume that over time we'd like to get to a place where our revenue stream matches the addressable market and is roughly 50-50. We're certainly not there. We are north of 10% of the revenue is coming from large diameter, but not substantially north of 10%.
spk09: Okay, perfect. That's helpful. I'll jump back into the queue. Congrats again on the court.
spk18: Thank you. And one moment while we move to our next question. And our next question is going to come from the line of Tim Monicello with ATB. Your line is open. Please go ahead.
spk14: Hey, thanks for taking the question. I guess I'll follow up on that last one. I think you guys had said there's about 10% for the large diameter pipe, you know, a couple quarters in a row here. Are you seeing that product line grow substantially, or are you just seeing the small diameter pipe grow at sort of a similar pace?
spk05: Certainly, the large diameter is growing faster than the small diameter, Tim. I mean, obviously, there's certain information I'd rather not put into the public domain for my competitors to chew on. So I have to be a little bit coy about relative share. But what I'd say is that the relative share of our revenue, large diameter to small diameter, has certainly continued to grow over the last several quarters.
spk14: Is part of the reason that it's only 10% because the facility that you have today are more geared for the smaller diameter? And will the new facility add incremental capacity for the large diameter in particular?
spk05: So I'd say that the relative share of revenue large to small diameter on the flex pipe side is driven entirely by our commercial team and their ability to capture opportunities with customers. It is not governed by our manufacturing. At the same time, there's certainly some of our production equipment in Calgary that predates the larger diameter product line and is not sized to produce that. So not all of our production activity in Calgary is suitable for large diameter. And certainly you can assume that everything that we put into the Dallas facility will be sized appropriately to cover the full spectrum of our product offering.
spk14: Okay. And then just to ask you on that. Do you still think that the five and six inch diameter pipes will represent a doubling of your total addressable market? And I guess, does that mean that you expect your 10% to grow to 50% over time?
spk03: Short answer, yes.
spk14: Great. Next one, I just wanted to touch on, you had a comment there that the stormwater management product line reached a new record level of revenue in Q2, which is great. I don't know how long ago this was, but I think you mentioned that you had hoped that that would grow to the same size as the fuel business over the next five years. Is that still the expectation?
spk21: It certainly is.
spk14: Okay. The rest of my questions have been answered, so thank you very much.
spk05: Great. Have a great day. Thank you.
spk18: Thank you, and we'll move on to our next question. Just one moment, please. Our next question is going to come from the line of Zachary Evershed with National Bank Financial. Your line is open. Please go ahead.
spk07: Thank you. Good morning, everyone, and congrats on the quarter. Thanks. Good morning. So first couple on connection technologies, any way to position the segment to be exposed to more of those one-timers, and what drives those?
spk05: So I think, again, the short answer is yes. the team did an extraordinary job of capturing some very attractive opportunities over the course of the last 12 months. Nuclear is perhaps a good example. If you look back two to three years, our nuclear revenue generation was sporadic, not necessarily material when it came from a revenue perspective, but certainly very helpful on the margin side. And here we are two, three years later, and nuclear forms Certainly not a majority, but a very healthy portion of our revenue stream, relatively consistent quarter to quarter, still at very, very nice margins. And I think that shows what can be done when you have the right team focused on the right things with the right resources and the right support from the corporation. So the team there at Connections Technology have done a fantastic job on the nuclear side, and we certainly expect to continue to grow in that subsector. Aerospace and outer space is a relatively new market for us to penetrate. So we're in the early phases where I still think, you know, it will be relatively sporadic revenue, attractive margins. And over time, we would hope that the commercial team will have exactly the same success there that they have on nuclear, make it a consistent source of revenue and attractive margin generation. They're certainly focused on that.
spk06: We have all the confidence in the world in their ability to get there.
spk07: That's good color. Thanks. And then to beat the dead horse, do you feel there's a risk of not selling PPS in 2023, or is the progress strong enough that it's essentially a lock for this year?
spk05: My lawyers would tell me that I cannot tell you there is a 100% certainty that we will sell that business. I do not have any concerns. None of us are losing sleep over the ability to get this transaction done.
spk20: Zach, the only thing I would point to is just the closing timeline is going to be driven by regulatory approvals, and we've said that several times. So it's difficult for us to, assuming we sign a deal, it's difficult for us to give you a real exact timeline on whether it closes this year or next. So just throw that out there so that when you're thinking about this, there is some risk to the timeline. But as Mike said, we're very committed to this and making progress.
spk07: Good color. Thanks. And one last one on composites. The integration of Triton, how's that progressing to becoming a one-stop shop within water management? And are you looking for additional CapEx or maybe inorganic growth in that space right now?
spk05: Yeah, so the Triton business is a little more than a quarter, full quarter under our control. And I'd say we've been very pleased with the progress that's been made. The integration process has been smooth. The team members that have joined us from that business have really embraced being part of our organization. And the product line is performing exactly as we would have hoped at this point. When we think about that business as part of the bigger hydro chain offering of stormwater management products, it was crucial for us to bring that into our own portfolio. So very pleased we were able to do that. There are one or two other elements of that hydro chain offering that we still rely on third parties for. So obviously continue to look for opportunities to bring those additional items into our portfolio. And I think from an organic investment perspective, Triton was not a particularly large business when we acquired it. And as I've said earlier on this call and multiple times before, we have very high expectations for our water business and its growth rate. So you shouldn't be surprised to see some organic growth capital go into the water business, particularly around manufacturing activities as we roll through the next several quarters.
spk06: But nothing specific to communicate as we sit here right now. Thank you very much. I'll turn it over.
spk18: Thank you. And one moment while we move to our next question. And our next question is going to come from the line of Ian Gillius with Stiefel. Your line is open. Please go ahead.
spk08: Hi. Good morning, everyone. Morning. With respect to some of the high margin sales that occurred in the quarter that were kind of one time in nature. I'm just curious, would these customers come back, be coming back yearly to buy these products or is it something that would happen every couple of years? And I'm just curious on how to think about that as we move through a longer dated forecast period.
spk05: Yeah, that's a fair question. So the particular revenue and margin that we gained from the aerospace order that was noted was spread over Q1 and Q2, although Q2, I think, saw more of the benefit than Q1. and was for a single customer for a single specific project. I think that customer is probably less frequent than once a year, but more frequent than once every three years. There is obviously a growing population of customers that we've either captured business with some variations in their cycle time. But as I said earlier, what I expect as we sit here today is that the second half of the year will not have a material benefit from additional large orders similar to the one we just completed. But certainly we would expect to see 2024 have some benefits, and those benefits ought to become more regular and more meaningful as we roll forward over the next several years.
spk08: Perfect. That's helpful. Moving to the auto exposure, there's obviously a threat of a big three auto strike coming in mid-September. I'm just wondering kind of how you're preparing the business in the event that occurs and perhaps how you're thinking about managing that strategically.
spk05: Yeah, so the piece of our business that's exposed to automotive is the DSG Canusa heat and cold shrink supply business, which is global. And automotive makes up about a half of that revenue stream in that business. Our orders from customers tend to come in approximately 90 days prior to fulfillment. And as I sit here today, we see no variation of any substance in any part of the world. in the ordering patterns of our automotive customers. Obviously, things can change, but the next 90 days doesn't appear to have a lot of variation in it. In North America particularly, we have been very successful in penetrating non-automotive end markets for that particular business. So certainly if there were to be any disruption of automotive manufacturing We would expect to see some impact but in North America Automotive makes up substantially less than 50% of our revenue stream in that business.
spk08: So I think the impacts would be fairly limited Okay, that's helpful and then last one I With respect to the competency technology segments, particularly on the pipe side, one of your peers has put out some pretty lofty goals for margin expansion through the back half of the year. I'm just curious whether you think that's already embedded in your business or you expect to see some of those same trends.
spk05: Yeah, obviously, I certainly wouldn't want to comment on anybody else's business. I don't know the details of their business as well as I know mine. What I would say is that We continue to expect larger diameter products to grow as a percentage of the overall revenue base for that business. We continue to see opportunities for our total revenue in that business to move upwards. And those two things combined would lead you to the conclusion that margins should continue to move upwards. I certainly would not say that we are perfectly optimized. We've got a very, very well-run business there, but there's always room for improvement, and we look to find those opportunities every day. So I think we are on a journey here. I think the margin within that business is likely to skew upwards rather than downwards based on the factors I've just described. And I think, you know, as we start to dig in more detail into a full year 2024 budget for that business, we will start to get a little bit more confident about where those margins might be able to get to in that kind of timeframe.
spk08: That's perfect. I'll turn the call back over. Thank you very much for your time. Thanks. Thanks.
spk18: Thank you. And again, if you would like to ask a question at this time, please press star 11 on your touchtone telephone. One moment for our next question. Our next question is going to come from the line of Keith McKay with RBC Capital Markets. Your line is open. Please go ahead.
spk10: Hi, thanks, and good morning. Just curious about the atypical strength in international composite pipe sales. Can you just describe a little bit more about what those were? and potentially how you think about international markets from here? I know there's a lot already going on, but what would it take for the international markets to become a compelling enough opportunity to make maybe larger investment to service some of those markets?
spk05: Yeah, good morning. International for FlexPipe, which specifically was the business impacted there, the international procurement approach by our customers is a little different than North America. In North America, our customers will place orders on a weekly or monthly basis, depending on their outlook for their needs. Whereas most of our international customers tend to work on full year or multi-year tender approaches. So it can be quite a long period of working to secure a tender win. and then delivering against that tender, which is exactly what we experienced in Q2. Work that had been effectively secured in prior periods was called off and we delivered it. So mostly to the Middle East and the timing was such that we had a little bit more revenue and associated margin reported in Q2 than you would perhaps expect on average. I think international continues to be a lumpy piece of our business just inherently because of the way it's structured commercially. It's not yet a piece of our business that is at a scale where I think we would seriously consider an investment in something like a production facility. But I certainly think we can get there over time. Say, I don't think that's a 2024 kind of event, but perhaps 25. We've got a very talented team. We're adding to that team. They're having great success. The technology that we offer is increasingly meeting the needs of international customers, both in terms of size and temperature rating. So as long as we can continue to execute well, I think we could position ourselves for that international business to become a substantial part of our revenue stream.
spk10: Thanks for the color there. And just finally, for Tom on the buyback, can you just run us through a little bit more about how we should be thinking about the level of buyback usage for the second half of the year? I'm guessing it might depend on what happens with the PPG business, but what's like a steady base case and then maybe a bit of a confidence interval around what we should be putting in our models for buybacks over the second half?
spk20: yeah good question keith i i think the way i would think about it is the level of spending you've been seeing in the last couple of quarters is probably about the run rate um keeping in mind that price has moved up a little bit so there might be a little bit of creep if we kept volumes the same so generally i would say use the last couple quarters as a general guide to modeling for that perspective we intend to stay active we're you know We're still very bullish, of course, and think there's a long runway to go here with or without the sale. But obviously, we're going to get that sale done. So that's how I position a key.
spk10: OK, awesome. Thanks very much.
spk18: Thank you. And I'm showing no further questions at this time. And I would like to hand the conference back over to CEO Mike Reeves for any further remarks.
spk05: Thank you very much, and thank you, everybody, for joining us this morning and for your continued interest in MATA. We're looking forward to talking with you all again next quarter and wish everybody a great day and a great weekend. Thank you.
spk18: This concludes today's conference call. Thank you for participating. You may now disconnect. you Thank you. Thank you. Thank you. you Good day and thank you for standing by. Welcome to the Matters second quarter 2023 results webcast and conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising you that your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. there is a presentation that you can guide yourself through during the call. I would now like to hand the conference over to your speaker today, Megan McEachran, Director of External Communications and ESG.
spk01: Please go ahead. Good morning.
spk00: Before we begin this morning's conference call, I'd like to take a moment to remind all listeners that today's call includes forward-looking statements that involve estimates, judgments, risks, and uncertainties, that may cause actual results to differ materially from those projected. The complete text of Matter's statement on forward-looking information is included in Section 4.0 of the second quarter 2023 earnings press release in the MD&A that is available on CDAR and on the company's website at matter.com. For those joining via webcast, you may follow the visual presentation that accompanies this call. I'll now turn it over to Matter's President and CEO, Mike Reeves.
spk05: Good morning, and thank you for attending our second quarter conference call. Today, Megan and I are joined by our Senior Vice President of Finance and CFO, Tom Holloway. During the second quarter, the company completed the process of rebranding itself as MATA, establishing a new corporate image that more fully reflects our capabilities, our purpose, and our future. We now trade under the TSX ticker symbol MATR, and I'm delighted to welcome you to our first earnings release under this new company brand. The second quarter of 2023 saw MATA continue to execute on its commitments to elevate margins, lower volatility, and focus resources on high growth opportunities serving industrial and critical infrastructure and markets. We moved closer to concluding the strategic review of our pipeline and pipe services segment, completing the sale of several smaller businesses during Q2. The broader process continues to receive significant focus, and while we are not yet positioned to announce a transaction for our core pipe coating business unit, favorable progress continues to be made, and we will provide further details when there are material developments to report. Turning to second quarter performance, the company delivered strong operating results across all segments, committed capital to high return organic growth opportunities, and continued its share repurchase activities. All three of our operating segments reported meaningful revenue and adjusted EBITDA growth during the quarter when compared to the prior year. Our industrial and infrastructure-focused businesses continue to benefit from significant global investment in transportation, low emissions energy, electrification, communications, and water-related infrastructure. Our energy-focused businesses are also experiencing rising market demand with domestic and international sales of larger diameter composite pipe expanding and pipe coating activity accelerating as offshore pipeline infrastructure expansion continues its multi-year upcycle. In parallel, we made further progress towards our 2030 environmental, social, and governance aspirations and will release our 2022 ESG report later in the third quarter. You will see in this report that we continue to successfully deliver emissions reduction. One example of this is our Rheinbach facility in Germany, where we recently implemented a heat recovery system, capturing heat from our hot water and compressor systems and using that to heat the building. The site is now heated exclusively through this recovered energy approach, lowering energy consumption, lowering emissions, and reducing our exposure to potential future European energy price volatility. The hard work of recent years to substantially strengthen our balance sheet and our cash generation profile positions us to pursue a disciplined, high-return capital allocation strategy, balancing share buybacks with investment in high-margin growth to generate elevated returns for all stakeholders. Consistent with our previously shared full-year capital guidance during Q2, the company communicated additional details of its substantial growth capital investments into its composite and connection technology segments. These investments into four new operating sites will enhance production capacity, efficiency, and proximity to key markets, lower risk by providing increased network redundancy, and are expected to accelerate mid- and long-term revenue growth, elevate margin profiles, and deliver attractive overall returns. The company also continued to be active under its previously launched normal course issuer bid which had extended and expanded late in Q2. During the quarter, our team made good progress on the integration and growth of both Kanata Electronic Services, which our connection technology segment acquired late in 2022, and Triton Stormwater Solutions, which our composite technology segment acquired during Q1 of this year. With these businesses performing as expected, we remain alert to additional strategically aligned, attractively valued acquisition opportunities and have expanded our corporate development team in anticipation of a gradual increase in highly disciplined, inorganic value creation. Moving to our previously announced strategic review process, late in Q2, the company completed the sale of its Shore Pipeline Services non-destructive testing business and its UK specialty coating business. while entering into a definitive agreement to sell its Sicilian pipe coating facility, a sale that is expected to close in Q3. All of these businesses have previously been reported within the PPS segment, and in consolidation, these transactions will deliver gross proceeds of approximately $16 million for businesses that together contributed $55 million of revenue and an adjusted EBITDA loss of $3.5 million over the prior 12-month period. Looking a little closer at each of our segments, during Q2, Composite Technologies, which was previously called Composite Systems and houses our FlexPipe and Xerxes businesses, delivered revenue growth of 11% and expanded adjusted EBITDA margin by 600 basis points compared to the same period last year, reaching new record levels of quarterly performance for the segment. Sales of the company's spoolable composite FlexPipe products moved sequentially higher, with further acceleration of large-diameter product adoption and new customers onboarded in multiple operating bases. Second quarter FlexPipe performance benefited from above-normal sales into international markets, primarily the Middle East, which more than offset the impact of breakup conditions in Canada. Shipments of Xerxes underground fuel storage tanks and our full range of stormwater management products were robust during the second quarter, stepping up from Q1 as ground conditions seasonally improved across much of North America, enabling our customers to accelerate installation activity. Following the acquisition of Triton's infiltration product line late in Q1, the company's water-related product line reached a new record level of quarterly revenue in Q2. Our favorable long-term outlook for the market served by composite technologies underpins our growth capital investments, to increase capacity, improve efficiency, and lower lead times, including our commitment to establish two additional production sites in the US, one for FlexPipe and one for Xerxes Tanks, which were announced earlier this year and are now well underway. Further details of these investments may be found in the company's press release issued on April 26th. Third quarter segment revenue is likely to be similar to the second quarter, as ground conditions remain favorable for Xerxes product installation, and flex pipe sales growth in North America offsets international sales returning to more normal levels. As is typical for the segment, we would expect revenue to move modestly down in the fourth quarter, driven by seasonal effects. With a healthy long-term demand outlook across the FlexPipe and Xerxes portfolio, we believe our composite technology segment is well positioned to continue its recent trend of delivering growth versus prior year periods. The connection technology segment, formerly called automotive and industrial, and housing our SureFlex and DSG Canoosa businesses, delivered a particularly robust quarter. with 12% revenue growth versus the same quarter last year and adjusted EBITDA margins approaching 24%, a new segment record. In addition to continued strong North American industrial and infrastructure demand across the segment's product portfolio and stable deliveries of heat shrink products into the European automotive market, the quarter benefited substantially from shipments of premium wiring cable into nuclear projects and a particularly significant aerospace delivery which is unlikely to recur this year. We continue to anticipate year-over-year business growth across industrial and infrastructure markets for both ShoreFlex and DSG Canusa, particularly in North America, as long-cycle infrastructure investment continues, spurred in part by U.S. and Canadian government policies. Our outlook for DSG Canusa automotive demand during the second half of 2023 remains similar to the first half, as more favorable energy dynamics in Europe are offset by the impacts of higher interest rates. The company expects connection technologies revenue in the third and fourth quarters to be higher than the same quarters of 2022. Q3 revenue is likely to move down from Q2, reflecting non-recurrence of the large aerospace-related wire and cable delivery which occurred during the first half of the year. Fourth quarter revenue is likely to move modestly further down as normal year-end inventory lowering occurs within our distributor network. The company expects the remaining quarters of 2023 to yield segment-adjusted EBITDA similar to the same quarters of 2022, as revenue expansion is offset by incremental costs incurred to spur future growth acceleration. including costs recognized in advance of North American production facility relocation, investment, and expansion. We remain vigilant to the potential impacts of European energy costs approaching the winter heating season and continue to take steps which lower the company's energy needs and risk tied to this possible issue. Overall, we maintain a constructive view of the long-term market trends which impact the ShoreFlex and DSG Canoosa businesses, and we will continue to invest growth capital to enhance our product offering, improve our manufacturing capacity, elevate our production efficiency, and lower lead times, including the recently announced commitments to bifurcate, expand, and modernize our North American production footprint. Further details of these investments may be found in the company's press release issued on June 28th. Lastly, and despite multiple business divestitures over the last 12 months, our pipeline and pipe services segments saw revenue rise by 73% compared to the second quarter of 2022, delivering an adjusted EBITDA margin of nearly 11% compared to a loss in the prior year quarter. Sequentially, segment revenue and adjusted EBITDA moved up compared to a previous expectation of modest declines. This strength was the result of very robust coating activity in our Western Hemisphere organization, which delivered particularly high operational efficiency, accelerating activity on the Yellowtail project in Veracruz, Mexico, and commencing coating operations slightly earlier than previously anticipated on the SGP project in Altamira, Mexico. We are particularly pleased to see the benefits of substantial business optimization activity over the last three years become increasingly visible in the adjusted EBITDA leverage delivered by our pipe coating operations as revenues rise. Pipeline and pipe services segment revenue and adjusted EBITDA during the second half of 2023 is expected to be substantially higher than Q2, reaching prior cycle peak margin levels. This outlook is driven by the timing of specific pipe coating projects and particularly impacted by coating activity and related revenue recognition on the SGP project, which will accelerate during the third quarter and reach peak levels during the fourth quarter. At the end of the second quarter, the company had recognized approximately 5% of total expected SGP project revenue, And given operational efficiencies observed to date, the company now expects SGP project coating and revenue recognition will largely be completed by the end of Q1 2024. The combination of a substantial high-quality backlog, elevated volumes of bid and budgetary quoting activity, favorable energy fundamentals, and continued successful new technology adoption positions the pipe coating business well for the current upcycle. Turning to consolidated 12-month backlog, at the end of Q2, the company's committed backlog of work to be completed within the next 12 months was just under $1.16 billion, a decrease of $152 million when compared to the prior quarter. The PPS segment secured several new Latin American pipe coating projects during Q2. However, these new awards and the movement of expected revenues from previously awarded pipe coating projects into the forward 12-month window were more than offset by the elimination of backlog tied to the SPS business, which was sold during Q2, and an increased volume of pipe coating activity executed during the quarter, including the Scarborough project in our Cabil, Indonesia facility, the Yellowtail project in our Veracruz, Mexico facility, and the SGP project in Altamira, Mexico. Total backlog, which includes committed work beyond 12 months, also moved down modestly at the end of Q2 versus the prior quarter to $1.33 billion. As execution of the SGP project accelerates during Q3 and then continues throughout Q4 and Q1 of 2024, we anticipate the PPS segment and overall company 12-month and total backlog values will lower further. although strength in bidding activity likely drives a return to backlog growth as we move through 2024. Matter's bid number reflects the value of work where the company has issued a firm price with proposed contract terms against an explicit scope of work with a defined timeline for execution. At the end of Q2, the bid balance was nearly $1 billion, an increase of $150 million when compared to the prior quarter, despite the removal of bids related to the divested SPS business. as the volume of new bidding activity in our composite technologies and PPS segments more than offset the movement of projects from bid into backlog during the quarter. Bidding activity remains strong across the energy spectrum and is a clear indicator that customers are committed to moving forward with new and previously contemplated onshore and offshore field developments in the face of favorable commodity prices and growing global demand for natural gas. The quarter-end bid number included $8 million of conditional awards pending final investment decision, down from $168 million at the end of Q1, as several projects crossed the final investment decision threshold during Q2 and moved into backlog. Matter's budgetary number, reflecting the value of indicative pricing submitted to allow customers to build a project budget ahead of formal procurement activities, was just over $2.1 billion at quarter end, down from $2.5 billion in the prior quarter, as SPS-related budgetary quotes were removed and the movement of projects from budgetary into bid slightly exceeded new budgetary quoting during the quarter. This substantial budgetary number further supports our expectations that energy-related activity will remain elevated for several years to come. It's important to note that the majority of matters 12-month backlog, total backlog, bid, and budgetary balances are attributable to the PPS segment. Tom will now walk through the company's second quarter financial highlights.
spk20: Thanks, Mike. The second quarter's consolidated revenue was $400.6 million, 30.5% higher than the $307 million in the second quarter of 2022. Adjusted EBITDA was $67.3 million, a 105.8% increase from the prior year second quarter, primarily attributed to demand growth experienced across the company's three reporting segments, including the commencement of load-in and pipe coding activities for the SGP project, further enhanced by continued margin expansion arising from favorable product and project mix, and the divestiture of lower margin businesses. Turning to segment results, the composite technology segment revenue was $150.4 million, an 11% increase compared to the second quarter of 2022, and adjusted EBITDA was $34.8 million, a 50% increase from the prior year second quarter. Both revenue and adjusted EBITDA were record quarterly results for this segment. These results reflect growth in demand for composite pipe products in North America and internationally, including growth in demand for the company's larger diameter pipe products. Additionally, the segment continues to experience robust demand for underground fiberglass reinforced plastic tanks for liquid fuel and water management systems. Connection technology segment revenue was $88.7 million, a 12% increase compared to the second quarter of 2022, and adjusted EBITDA was $21 million, a 29% increase from the prior year's second quarter. The increase was driven by elevated demand for wire and cable products from North American industrial markets stemming from ongoing infrastructure spending, including shipments into the aerospace and nuclear markets. Additionally, continued demand for the company's heat shrink tubing products in industrial markets and within the automotive sector further solidified the segment's strong performance. Pipeline and pipe services segment revenue was 161.6M dollars, a 73% increase compared to the second quarter of 2022, primarily resulting from the successful execution of pipe coding project activity, including the Scarborough project in the Kapil Indonesia facility, the Yellowtail project in the Veracruz, Mexico facility, and the commencement of load-in and pipe coating of the SGP project in the Altamira, Mexico facility. This was partially offset by lower activity in the Canadian facilities in the absence of revenue associated with the SPS business sold mid-quarter and the Lake Superior consulting business sold in August of last year. Adjusted EBITDA was $17.1 million, which compared to negative EBITDA recorded in the prior year second quarter, reflecting the aforementioned higher revenue and more profitable pipe coating project mix and the impact of higher activity on manufacturing absorption. Turning to cash flow in the quarter, cash provided by operating activities in the second quarter was $30.5 million, reflecting strong operational performance. This was offset by an investment in working capital, which reflects the increased activity throughout the company, including increases in inventory required for the Scarborough project in Indonesia and the SGP project in Mexico. Cash used in investing activities in the second quarter was $48.2 million, reflecting $55.6 million of capital expenditures, offset by $6.5 million received in cash from the $8.9 million sale price from the divestiture of the Shaw Pipeline Services business. During the second quarter, cash used in financing activities was $17.3 million, including $5 million in debt repayments, $7.8 million in lease payments, and $5.5 million in share repurchases under the company's normal course issuer bid. Net cash used in the second quarter of 2023 was $37.5 million. Based on the actions completed and planned, its diversified business, current order backlog, and confidence in the outlook, the company expects to generate sufficient cash flows and have continued access to its credit facilities, subject to covenant limitations, to fund its operations, working capital requirements, and capital program, including share buyback. As of June 30th, 2023, we had a cash balance of $124.5 million, debt of $182 million, and $64.1 million of standard letters of credit. Our liquidity position has benefited from the initiatives undertaken since 2020. with continued focus on reducing our operating cost base, as well as repayment of $252.5 million of outstanding net long-term debt since the start of 2021, including $5 million paid in the second quarter. As of the end of the quarter, the company's net debt to adjusted EBITDA ratio was 0.54 times, significantly below our ceiling of 1.5 times. We also continue to purchase shares under our normal course issuer bid and repurchased 405,000 common shares during the quarter. As mentioned earlier, the company spent $55.6 million in cash on capital expenditures. Including $4.1 million of outstanding payments to suppliers, total capital expenditures in the quarter were $59.7 million of which $56.4 million were related to growth expenditures. These are mostly related to infrastructure improvements to increase production capacity in the composite technologies and connections technologies segments and spend to support the SGP project. Looking ahead to the remainder of the year, the company still expects to spend the $160 to $180 million of capital expenditures as previously communicated. During the quarter, the company announced further details on this expected capital spend, including two new composite technologies production facilities in the U.S., as well as a new facility in the greater Toronto area and one in the U.S. for the connection technology segment, which will expand and replace its current North American footprint. The investments in these lower risk, high return opportunities are expected to create further revenue generating capacity of approximately $150 million and further expand adjusted EBITDA margins once these facilities approach efficient utilization levels. We will continue to prioritize capital spend to drive growth in our most differentiated, high value, materials-based solutions in support of industrial and critical infrastructure in markets. while ensuring that sufficient capacity is available to execute on our pipe coding projects and our backlog. The company continues to execute on the strategic actions that are intended to enhance over time Its margin and operating cash flow profile, lower overall volatility and deliver greater full cycle value to all stakeholders as our market leading technologies enable responsible, sustainable renewal and enhancement of critical infrastructure. Since early 2020, the company has successfully divested multiple non-core lower margin businesses, and other assets, including the sales of the SPS business and the UK specialty pipe coating business that occurred in the second quarter. These efforts have generated over $220 million of cash proceeds, with the disposed businesses generating an average trailing 12-month adjusted EBITDA margin of 6%, significantly strengthening our balance sheet and margin profile while lowering organizational complexities. In September of 2022, we announced our intention to achieve maximum stakeholder value from a sale or other transaction of our pipeline performance group that currently forms the entirety of the company's pipeline and pipe services reporting segment. We have made great progress on this strategic review process through our successful rebrand and through the sales of our Lake Superior Consulting, Oilfield Asset Management, and Soccotherm Argentina businesses as well as our specialty coding facility in Scotland. We remain fully committed to this initiative and are focused and actively working towards its completion. Proceeds generated by this transaction will be utilized to strengthen the company's balance sheet, organically and inorganically accelerate the profitable expansion of our higher margin, less volatile composite and connection technology segments, and to return capital to shareholders as conditions permit. While the expected future removal of the pipeline and pipe services segment from our portfolio will substantially lower selling general and administrative costs for the company, as previously communicated, approximately $8 million of financial and corporate expenses that are currently being allocated to this segment are expected to be absorbed back into the organization at that time. Upon closing a transaction, these costs would likely be partially offset by proceeds from a transition services agreement for several quarters, and the company will work to reduce its total corporate cost base, reflecting its simpler business portfolio over time. I'll now turn it back to Mike for some final comments.
spk05: Thank you, Tom. Over the last three years, we've taken significant steps to simplify our organization, increase average margins, lower volatility, elevate cash flow, and concentrate on a narrow range of high growth critical infrastructure oriented businesses. We remain committed to tightly controlling fixed costs, completing the strategic review of our PPS segment, and optimally deploying capital to drive high return growth. We have substantially reduced outstanding debt, are returning cash to shareholders, and leaning into high-value organic and inorganic growth opportunities, taking advantage of our unique technology portfolio and strong long-term customer demand to deploy significant growth capital and deliver elevated returns for our stakeholders. Normal seasonal cycles will continue to drive some movement quarter to quarter. However, the underlying trends for each of MATA's primary businesses are favorable and expected to remain so for several years. Long-duration North American critical infrastructure activity remains robust, and fundamental energy demand drivers persist. While we remain vigilant towards the potential impacts of geopolitical events, supply chain risks, and higher interest rates, our simplified portfolio of high-value materials-based products has limited exposure to consumer discretionary spending, and we believe has resilience in the face of recessionary forces. We expect consolidated adjusted EBITDA in Q3 2023 to rise substantially, driven primarily by a significant increase in pipe coating activity, including elevated margin contributions from the Southeast Gateway Pipeline project. I will now turn the call over to the operator and open it up for any questions you may have for myself, Tom, or Megan.
spk18: Thank you. As a reminder, to ask a question at this time, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. One moment while we compile our Q&A roster. Our first question is going to come from the line of Aaron McNeil with TD Cowan. Your line is open. Please go ahead.
spk11: Hey, morning. Thanks for taking my questions. I guess the first one I've got is around sort of these moving expenses and the connection technology segment. I'm just wondering, you know, how long do you expect these to persist? Do you expect them to change over time? And can you sort of give us a quarterly run rate?
spk05: Morning, Aaron. I think the way to think about that particular piece of that business is the facility relocation activities, which have us moving away from our very long-term footprint in the Rexdale area of Toronto and now into two different facilities, one in Ohio and one in Bourne. will certainly continue for much of 2024. I think we would expect most of those moving expenses to be incurred certainly by early 2025. There'll be some fluctuation quarter to quarter. At the end of the day, these are reported at the time they are incurred. They're not smoothed over a period of quarters. So it's difficult to give you a perfect run rate. But what I'd say is that what we'll see in the second half of 2023 is likely to be a little less than we will see in 2024. And we will do our very best to call them out as we report each quarter as we roll through. Tom, would you add anything there?
spk20: Yeah, I think that's right, Mike. Aaron, I would say In Q3 and Q4, it's probably on the order of less than a million dollars each. And then in Q24, it ramps up a bit as the actual move activity increases. So those are very rough numbers. So not hugely material. That's how I would probably think about it right now. It's moving around a little bit, of course, as you can imagine.
spk11: That's great. That's super helpful. In terms of the sort of pipeline performance or pipeline segment, are there any sort of other odds and ends in there that you're looking to dispose of separate from a larger transaction or idle assets within the pipeline performance group that you'd look to sell separately? And if we were to use segment book value as sort of a proxy for a potential transaction value, should we be thinking about you know, reducing that our expectation since you've sort of kind of sold off some of the odds and ends over the last couple of quarters.
spk05: Yeah. Great question. Thanks for asking. I suspect others on the call have similar interests. So, um, the, the smaller pieces that we concluded the sales of in Q2, and I'll include there the Italian real estate footprint, which won't actually close until Q3, but we're under a definitive agreement. We're effectively the last of what I'd call the peripheral pieces of that segment. So what's left in the PBS reporting segment is what we would describe as the core pipe coating business. When I look across the broader corporation, really the only other element that we're still working to divest is the real estate in Western Canada, which is multiple sites, but largely concentrated in NISQ. which was left over when we sold the oilfield asset management business in the second half of last year. So that's still ongoing, and we hope to get some proceeds from that real estate over the course of the next 12 months. I'll turn it to Tom to talk about valuation expectations on the remaining piece of the pipe coating business.
spk20: Yes. So, Aaron, I think if you look at the net book value of the PPS segment remaining, it's almost entirely that PPG core business. So, I don't think you need to reduce your expectations from a cash perspective given, you know, the commentary we've given over the last few quarters. So, that being the floor would still remain a true comment for what is on the books. The portion that Mike was referring to on the OAM Western Canada assets is not included in that segment, just to be clear, so there's no confusion as to where that sits. That was in the composites segment historically.
spk13: Okay, perfect. I'll turn it back.
spk19: Thanks, Aaron.
spk18: Thank you. And one moment while we move to our next question. And our next question is going to come from the line of Yuri Link with Canaccord Genuity. Your line is open. Please go ahead.
spk04: Hey, good morning, and thanks for taking my question. Good morning. What can we infer from PPS not being classified as held for sale at this point?
spk20: So there are, as you know, they're probably pretty strict accounting rules as to when that occurs. And one of them tends to be, it's not a hard and fast rule, but tends to be the signing of a definitive agreement. So I think the thing you can infer is that we have not signed a definitive agreement, and that's probably all you can really infer at this point. But as we said, we're making really good progress, still very committed to it, and hope to be able to say something relatively soon.
spk05: And maybe I'll add here, I know that on our last earnings call, I set the expectation that we would have something to communicate here by the time of this call. And it proved that I was modestly optimistic. And that's my fault. My apologies. But I would say that you should not infer that the lack of an announcement as we sit here at this moment in time suggests that anything is wrong.
spk04: Okay, that's fair. The quarter was obviously very strong in both go-forward segments. I think you enjoyed better utilization, especially in composite pipe and your tank plants. Can you just talk about where utilization is versus last year and how much room there is to take it higher in these facilities? Because I'm just thinking, you know, is there a point between now and when your expansion plans are completed where you might be capacity constrained in the interim?
spk05: Yeah, so I think the obvious answer is clearly our utilization is higher now than it was at this point last year. But I treated in two separate buckets. So the flex pipe business, which, as you'll recall, has historically operated from one single site in Calgary and still does. That site certainly is more challenged when it comes to the ability to continue ramping production than our tanks network, which is why we moved when we did to establish a second pipe production facility in the Dallas area, which we certainly expect will come online as we look to the middle part of next year. I think between now and then, there may be one or two challenges where we bump up against production capacity in our Calgary site. But the team there have done an extraordinary job of finding ways to eke out incremental production. And I have great confidence that they'll continue to do that. But we definitely need to get this second plant up and running in the middle part of next year to ensure that we are not constrained in the longer term. The other thing to remember is that we are in a, I'd call it a transformation in that business with the introduction of the larger diameter products, five inch and six inch. They do take slightly different degrees of production time to make the same length when you compare them to smaller diameter. So we have to manage those things, but at the same time, generally revenue and margin is for the larger diameter products than it is for our legacy 4-inch and smaller products. So as these larger diameter products become a bigger and bigger part of our revenue stream, obviously they will continue to help propel that business upwards really on all lines of the income statement. If we turn to the tanks business, we currently have six production sites, two in Canada, four in the US. And as you know, we have initiated the construction of a seventh site in South Carolina, which we also expect will come online in the middle part of next year. We still have the ability to add additional shifts in some of our existing tank production sites. So I am less concerned at our risk of being totally maxed out on the tank side before the seventh site comes online. I would say, though, that labor is still tight in North America and certainly in some of the areas where our sites sit. So adding shifts, while it sounds simple, does take quite an amount of effort and a little bit of time. So we're very thoughtful there and working to stay ahead of it.
spk04: Okay. That's helpful. I'll hop off the call. Thanks, guys.
spk18: Thank you. And one moment while we move to our next question. And our next question is going to come from the line of Anna McBain with Cormark Securities. Your line is open. Please go ahead.
spk09: Good morning, guys. Great quarter. My questions have already been asked, but just have one on the penetration rate of some of the larger diameter piping. Just curious, what percentage of sales does this account for currently? And do you have sort of a target or goalpost around mix or where you'd like to see that end up somewhere down the line?
spk05: Yeah, that morning. I think when we look at the North American market in particular, we think that the Total addressable market for the larger diameter items are about the same as the smaller diameter items that have made up our historic revenue base. So you would naturally assume that over time we'd like to get to a place where our revenue stream matches the addressable market and is roughly 50-50. We're certainly not there. We're north of 10% of the revenue is coming from large diameter, but not substantially north of 10%.
spk18: okay perfect that's helpful i'll jump back into the queue congrats again on the court thank you and one moment while we move to our next question and our next question is going to come from the line of tim monicello with atb your line is open please go ahead hey uh thanks for taking the question um i guess i'll follow up on that last one um
spk05: i think you guys had said there was about 10 for the large diameter pipe uh you know a couple quarters in a row here are you seeing that product line grow substantially or are you just seeing the small diameter pipe grow at sort of a similar pace certainly the large diameter is growing faster than the small diameter tim so i mean obviously there's there's certain information i'd rather not put into the public domain for my competitors to chew on so i have to be a little bit coy about uh
spk06: relative share, but what I'd say is that the relative share of our revenue, large diameter to small diameter, has certainly continued to grow over the last several quarters.
spk14: Is part of the reason that it's only 10% because the facilities that you have today are more geared for the smaller diameter, and will the new facility add incremental capacity for the large diameter in particular?
spk05: So I'd say that the relative share of revenue large to small diameter on the FlexPipe side is driven entirely by our commercial team and their ability to capture opportunities with customers. It is not governed by our manufacturing. At the same time, there's certainly some of our production equipment in Calgary that predates the larger diameter product line and is not sized to produce that. So not all of our production activity in Calgary is suitable for large diameter. And certainly you can assume that everything that we put into the Dallas facility will be sized appropriately to cover the full spectrum of our product offering.
spk14: Okay, and then just to answer on that, Do you still think that the five and six inch diameter pipes will represent a doubling of your total addressable market? And I guess, does that mean that you expect your 10% to grow to 50% over time?
spk03: Short answer, yes.
spk14: Great. Next one, I just wanted to touch on, you had a comment there that the stormwater management product line reached a new record level of revenue in Q2, which is great. I don't know how long ago this was, but I think you mentioned that you had hoped that that would grow to the same size as the fuel business over the next five years. Is that still the expectation?
spk21: It certainly is.
spk14: Okay. The rest of my questions have been answered, so thank you very much.
spk05: Great. Have a great day. Thank you.
spk18: Thank you, and we'll move on to our next question. Just one moment, please. Our next question is going to come from the line of Zachary Evershed with National Bank Financial. Your line is open. Please go ahead.
spk07: Thank you. Good morning, everyone, and congrats on the quarter. Thanks. Good morning. So first couple on connection technologies, any way to position the segment to be exposed to more of those one-timers, and what drives those?
spk05: So I think, again, the short answer is yes. the team did an extraordinary job of capturing some very attractive opportunities over the course of the last 12 months. Nuclear is perhaps a good example. If you look back two to three years, our nuclear revenue generation was sporadic, not necessarily material when it came from a revenue perspective, but certainly very helpful on the margin side. And here we are two, three years later and nuclear forms Certainly not a majority, but a very healthy portion of our revenue stream, relatively consistent quarter to quarter, still at very, very nice margins. And I think that shows what can be done when you have the right team focused on the right things with the right resources and the right support from the corporation. So the team there at Connections Technology have done a fantastic job on the nuclear side, and we certainly expect to continue to grow in that subsector. Aerospace and outer space is a relatively new market for us to penetrate. So we're in the early phases where I still think it will be relatively sporadic revenue, attractive margins. And over time, we would hope that the commercial team will have exactly the same success there that they have on nuclear, make it a consistent source of revenue and attractive margin generation. They're certainly focused on that.
spk06: We have all the confidence in the world in their ability to get there.
spk07: That's good color. Thanks. And then to beat the dead horse, do you feel there's a risk of not selling PPS in 2023, or is the progress strong enough that it's essentially a lock for this year?
spk05: My lawyers would tell me that I cannot tell you there is a 100% certainty that we will sell that business. I do not have any concerns. None of us are losing sleep over the ability to get this transaction done.
spk20: Zach, the only thing I would point to is just the closing timeline is going to be driven by regulatory approvals, and we've said that several times. So it's difficult for us to, assuming we sign a deal, it's difficult for us to give you a real exact timeline on whether it closes this year or next. So just throw that out there so that when you're thinking about this, there is some risk to the timeline. But as Mike said, we're very committed to this and making progress.
spk07: Good color. Thanks. And one last one on composites. The integration of Triton, how's that progressing to becoming a one-stop shop within water management? And are you looking for additional CapEx or maybe inorganic growth in that space right now?
spk05: Yeah, so the Triton business is a little more than a quarter, full quarter under our control. And I'd say we've been very pleased with the progress that's been made. The integration process has been smooth. The team members that have joined us from that business have really embraced being part of our organization. And the product line is performing exactly as we would have hoped at this point. When we think about that business as part of the bigger hydro chain offering of stormwater management products, it was crucial for us to bring that into our own portfolio. So very pleased we were able to do that. There are one or two other elements of that hydro chain offering that we still rely on third parties for. So obviously, continue to look for opportunities to bring those additional items into our portfolio. And I think from an organic investment perspective, Triton was not a particularly large business when we acquired it. And as I've said earlier on this call and multiple times before, we have very high expectations for our water business and its growth rate. So you shouldn't be surprised to see some organic growth capital go into the water business, particularly around manufacturing activities as we roll through the next several quarters.
spk06: But nothing specific to communicate as we sit here right now. Thank you very much.
spk07: I'll turn it over.
spk18: Thank you. And one moment while we move to our next question. And our next question is going to come from the line of Ian Gillius with Stiefel. Your line is open. Please go ahead.
spk08: Hi. Good morning, everyone. Morning. With respect to some of the high margin sales that occurred in the quarter that were kind of one time in nature. I'm just curious, would these customers come back, be coming back yearly to buy these products, or is it something that would happen every couple of years? I'm just curious on how to think about that as we move through a longer dated forecast period.
spk05: Yeah, that's a fair question. So the particular revenue and margin that we gained from the aerospace order that we've noted was spread over Q1 and Q2, although Q2, I think, saw more of a benefit than Q1. and was for a single customer for a single specific project. I think that customer is probably less frequent than once a year, but more frequent than once every three years. There is obviously a growing population of customers that we've either captured business with some variations in their cycle time. But as I said earlier, what I expect as we sit here today is that the second half of the year will not have a material benefit from additional large orders similar to the one we just completed, but certainly we would expect to see 2024 have some benefits, and those benefits ought to become more regular and more meaningful as we roll forward over the next several years.
spk08: Perfect. That's helpful. Moving to the auto exposure, there's obviously a threat of a big three auto strike coming in mid-September. I'm just wondering kind of how you're preparing the business in the event that occurs and perhaps how you're thinking about managing that strategically.
spk05: Yeah, so the piece of our business that's exposed to automotive is the DSG Canusa heat and cold shrink supply business, which is global. And automotive makes up about a half of that revenue stream in that business. Our orders from customers tend to come in approximately 90 days prior to fulfillment. And as I sit here today, we see no variation of any substance in any part of the world. in the ordering patterns of our automotive customers. Obviously, things can change, but the next 90 days doesn't appear to have a lot of variation in it. In North America particularly, we have been very successful in penetrating non-automotive end markets for that particular business. So certainly if there were to be any disruption of automotive manufacturing, we would expect to see some impact. But in North America, automotive makes up substantially less than 50% of our revenue stream in that business.
spk06: So I think the impacts would be fairly limited.
spk08: Okay, that's helpful. And then last one. With respect to the competency technology segments, particularly on the pipe side, one of your peers has put out some pretty lofty goals for margin expansion through the back half of the year. I'm just curious whether you think that's already embedded in your business or you expect to see some of those same trends.
spk05: Yeah, obviously, I certainly wouldn't want to comment on anybody else's business. I don't know the details of their business as well as I know mine. What I would say is that We continue to expect larger diameter products to grow as a percentage of the overall revenue base for that business. We continue to see opportunities for our total revenue in that business to move upwards. And those two things combined would lead you to the conclusion that margins should continue to move upwards. I certainly would not say that we are perfectly optimized. We've got a very, very well-run business there, but there's always room for improvement, and we look to find those opportunities every day. So I think we are on a journey here. I think the margin within that business is likely to skew upwards rather than downwards based on the factors I've just described. And I think, you know, as we start to dig in more detail into a full year 2024 budget for that business, we will start to get a little bit more confident about where those margins might be able to get to in that kind of timeframe.
spk08: That's perfect. I'll turn the call back over. Thank you very much for your time. Thanks. Thanks.
spk18: Thank you. And again, if you would like to ask a question at this time, please press star 11 on your touchtone telephone. One moment for our next question. Our next question is going to come from the line of Keith McKay with RBC Capital Markets. Your line is open. Please go ahead.
spk10: Hi, thanks, and good morning. Just curious about the atypical strength in international composite pipe sales. Can you just describe a little bit more about what those were? and potentially how you think about international markets from here? I know there's a lot already going on, but what would it take for the international markets to become a compelling enough opportunity to make maybe larger investment to service some of those markets?
spk05: Yeah, good morning. International for FlexPipe, which specifically was the business impacted there, the international procurement approach by our customers is a little different than North America. In North America, our customers will place orders on a weekly or monthly basis, depending on their outlook for their needs. Whereas most of our international customers tend to work on full year or multi-year tender approaches. So it can be quite a long period of working to secure a tender win. and then delivering against that tender, which is exactly what we experienced in Q2. Work that had been effectively secured in prior periods was called off, and we delivered it. So mostly to the Middle East, and the timing was such that we had a little bit more revenue and associated margin reported in Q2 than you would perhaps expect on average. I think international continues to be a lumpy piece of our business just inherently because of the way it's structured commercially. It's not yet a piece of our business that is at a scale where I think we would seriously consider an investment in something like a production facility. But I certainly think we can get there over time. Say, I don't think that's a 2024 kind of event, but perhaps 25. We've got a very talented team. We're adding to that team. They're having great success. The technology that we offer is increasingly meeting the needs of international customers, both in terms of size and temperature rating. So as long as we can continue to execute well, I think we could position ourselves for that international business to become a substantial part of our revenue stream.
spk10: Thanks for the color there. And just finally, for Tom on the buyback, can you just run us through a little bit more about how we should be thinking about the level of buyback usage for the second half of the year? I'm guessing it might depend on what happens with the PPG business, but what's like a steady base case and then maybe a bit of a confidence interval around what we should be putting in our models for buybacks over the second half?
spk20: yeah good question keith i think the way i would think about it is the level of spending you've been seeing in the last couple of quarters is probably about the run rate um keeping in mind that price has moved up a little bit so there might be a little bit of creep if we kept volumes the same so generally i would say use the last couple quarters as a general guide to modeling for that perspective we intend to stay active we're you know we're We're still very bullish, of course, and think there's a long runway to go here with or without the sale. But obviously, we're going to get that sale done. So that's how I position it, Keith.
spk10: OK, awesome. Thanks very much.
spk18: Thank you. And I'm sure I know further questions at this time. And I would like to hand the conference back over to CEO Mike Reeves for any further remarks.
spk05: Thank you very much and thank you everybody for joining us this morning and for your continued interest in MATA. We're looking forward to talking with you all again next quarter and wish everybody a great day and a great weekend. Thank you.
spk18: This concludes today's conference call. Thank you for participating. You may now disconnect.
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