5N Plus Inc.

Good morning, ladies and gentlemen. Thank you for standing by and welcome to the five and plus second quarter 2026 results conference call. At this time, note that 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, please press star then one on your telephone keypad. and if you require immediate assistance for the operator, please press star zero. Je vais maintenant céder la parole à Stefano Bertoli, directeur des communications et des affaires corporatives. I will now turn the floor over to Stefano Bertoli, director of communication and corporate affairs. Please go ahead, sir.

Bonjour à toutes et à tous. Good morning, everyone, and thank you for joining us for our Q2 2026 results conference call and webcast. We will begin with a short presentation, followed by a question period with financial analysts. Joining us this morning is Richard Perron, our president and CEO, and Alban Fournier, our CFO. We issued our financial results yesterday and posted a short presentation on the investor section of our website. We would like to draw your attention to slide two of this presentation. Information in this presentation and remarks made by the speakers today will contain statements about expected future events and financial results that are forward-looking. and therefore subject to risks and uncertainties. A detailed description of these risk factors that may affect future results is contained in our management's discussion and analysis of 2025, dated February 24th, 2026, and available on our website and in our public filings. In the analysis of our quarterly results, you will note that we use and discuss certain non-IFRS measures, which definitions may differ from those used by other companies. For further information, please refer to our management discussion and analysis. We now turn the conference over to Rishabh.

Thank you, Stefano. Good morning, everyone, and thank you for joining us. While the second quarter presented a more challenging operating environment, our results demonstrated the strength of demand across our strategic end markets and the resilience of our business. We delivered another quarter of solid growth, capping a strong first half of 2026 in support of our full-year objectives. Revenue increased 28% in Q2 and 30% year-to-date, reaching just over $240 million for the first six months of the year. Adjusted EBITDA increased 10% in a quarter and reached $55.8 million year-to-date, representing growth of 24% over the same period last year. Profitability remains strong, although margins reflected higher input costs as expected and temporary reduced operational efficiencies. Most of these cost pressures are expected to be recovered over time. The equipment downtime and suboptimal operations experienced during the quarter and associated incremental expenses are temporary in nature. Turning first to specialty semiconductors. The business delivered a strong quarter reflecting structural demand across our strategic end markets. Terrestrial renewable energy had a standout quarter, with higher volumes translating into record quarterly revenue. This performance reflects our key customers' continuous expansion and reinforces our position as a critical supplier within its value chain. Commercial activity also remained very strong in space solar power. We secured significant new contracts awards in H1 and participated in a record level of bids by dollar value during the quarter. This momentum reinforces the structural growth of this end market. It also underscores Azure's position as a global leader and SolarCell Technology and a partner of choice. The quarter, however, was not without challenges. Both our renewable energy and space power businesses experienced comparable levels of unplanned equipment maintenance. Our teams responded quickly through contingency planning, operational flexibility and targeted inventory allocation. We continued to support customer demand and maintain deliveries during the quarter. Our teams continue to resolve the remaining issues and strengthen preventive maintenance measures. Beyond these temporary operational impacts, margin contraction and specialty semiconductors also reflected our middle input costs. A portion of these costs is expected to be recovered over subsequent quarters, although the timing will vary by product and customer. In the meantime, we are working to partially offset these pressures through economies of scale and continued operating efficiencies. Performance Metros also delivered a solid quarter. Segment revenue increased nearly 40%, driven primarily by our volumes of business-based products. As anticipated, margins continue to normalize from their record levels achieved last year and sustained in the first quarter. This reflects higher metal input costs and a significant increase in chemical costs in recent months. Even so, the business continues to generate profitable growth and demonstrate the resilience of its portfolio. Halfway through the year, we continue to take a pertinent approach to our outlook. Dual political risks continue to evolve rapidly and influence inflation across many regions. Virus input and operating costs remain elevated. We're also increasing production volumes and operating our equipment at high capacity while integrating a significant number of new employees. In this context, we remain firmly focused on discipline execution and operational excellence. As we enter Q3, our priorities are to improve operational and maintenance processes, advance our productivity initiatives, and execute our capacity expansion plans. These expansion plans all remain on plan. Finally, our balance sheet continues to provide us with significant financial flexibility. Organic investment remains a priority as we expand capacity to support contracted demand. We also continue to actively evaluate external opportunities that could complement or extend our capability. Near-term impacts and quality variations aside, we are building a business position to deliver sustainable, profitable growth over the long term by supplying advanced materials to critical industries. That strategy continues to be validated. Customers increasingly value secure, reliable Western supply chains, particularly in markets tied to renewable energy, space, security, and advanced technology. These trends reinforce the value of our differentiated capabilities, manufacturing footprint, and long-standing customer relationships. As a result, we remain well positioned to create sustainable value by executing our growth strategy. With that, I'll turn the call over to Alban, who will review our financial results and outlook in more detail.

Thank you, Richard, and good morning to all of you. Before turning to the results, I would like to reiterate Thank you. Turning now to our financial performer. Revenue increased 28% to $122.4 million in Q2 2026 compared with Q2 2025. For the first half of the year, revenue reached $240.3 million, an increase of 30% over the same period last year. The increase primarily reflected higher volumes in renewable energy and more favorable product mix in space power. also reflected higher volumes of bismuth-based products. Adjusted gross margin increased to $37 million in Q2 2026, representing 30.3% of sales. This compares with $33 million or 34.6% of sales in the second quarter of last year. While adjusted gross margin increased in absolute dollars, margin percentage declined. This primarily reflects higher metal input costs, temporary operational inefficiencies associated with the production ramp-up, and higher chemical costs. For the first half of the year, adjusted gross margin represented 32.6% of sales. Adjusted EBDA increased 10% to $26.6 million in Q2 2026 compared with Q2 2025. Year-to-date adjusted EBITDA reached $55.8 million, slightly above the midpoint of our full-year guidance range. Net earnings amounted to $19.7 million, or $0.22 per share, compared with $15.2 million, or $0.17 per share, in the second quarter of last year. In specialty semiconductors, Revenue increased 25% year-over-year to $89.2 million. The increase was primarily driven by higher volumes in renewable energy. Adjusted gross margin represented 30.2% of sales compared with 32.7% in Q2 2025. This decrease primarily reflected higher metal input costs and lower operating efficiency. Adjusted EBDA increased by 16% to $22.1 million. Higher volumes mitigated the impact of suboptimal operational performance and higher maintenance expenses. Backlog remained at the maximum level of 365 days as per our definition, with the effective backlog for this segment continuing to well surpass the 12-month mark. In performance materials, revenue increased 38% year-over-year to $33.2 million, driven by higher volumes of business-based products. Adjusted gross margin was 30.9% of sales, compared with 41.1% in the prior year period. The decrease reflected the anticipated margin normalization with a higher metal input and chemical cost. Adjusted EBITDA increased 7% to $8.5 million. The increase was primarily attributable to a more favorable product mix and higher volumes, net of higher metal input and chemical costs. Backlog represented 99 days of annualized revenue, reflecting the timing of contract renewals and the continued execution of long-term contracts. Turning now to our balance sheet and cash flow. In Q2 2026, cash used in operating activities was $1.9 million compared to cash from operating activities of $22.3 million in Q2 2025. Year-to-date operating cash flow reflects continued growth in working capital in line with revenue and COGS increases. Looking ahead, we expect net working capital to evolve broadly in line with revenue. Cash from investing activities includes $16.6 million of PP&E capex year-to-date, with proceeds from the renewal of our total return swap. These proceeds were largely used to reduce debt. As a result, our financial position continues to strengthen. Net debt stood at $23.7 million as of the end of June, compare with $50.3 million at the end of 2025. Our net debt to adjusted EBITDA ratio improved to 0.21 times. This highlights the strength of our balance sheet and provides significant financial flexibility to support our long-term growth. Turning now to guidance, in specialty semiconductors, structural growth across our core end market continues to support demand, particularly in renewable energy and space power. In performance materials, pricing conditions are normalizing largely as anticipated. More broadly, we continue to operate in a dynamic, rising cost environment. We notably expect margins to come under additional pressure in the near term due to higher metal input costs and chemical costs, which will partially be recovered with a timeline of at least two quarters. Against this backdrop, we are reaffirming our 2026 full-year adjusted EBITDA guidance of between $100 and $105 million. This reflects our confidence in continued revenue growth and higher growth margin dollars during the second half. It also incorporates a prudent assessment of ongoing operating and input cost environment. That concludes our formal remarks. I will now turn to call back to the operator for the question and answer session with financial analysis. Thank you.

Merci. Si vous souhaitez poser une question, s'il vous plaît, appuyez sur l'étoile suivie du 1 sur votre clavier téléphonique. Un moment s'il vous plaît pour votre première question. Thank you. If you'd like to ask a question, please press star 1 on your telephone keypad. One moment please for your first question. Your first question comes from Baltej Sidhu from National Bank of Canada. Please go ahead.

Hey, good morning, Richard and Alban. Good morning. So you noted higher metal input costs and the unplanned equipment maintenance at both the renewable and solar side as the primary drivers for the pressure and the . Could you help us think about the relative impact of both those factors as it pertains to margins?

Yeah, we assess that both factors, the higher metal input cost and the operational difficulties have had a fairly equal impact on our gross margin during the second quarter of the year. So it's been fairly well shared between both parameters.

Great. And I think Richard had noted that the unplanned maintenance is temporary. How much of an impact could we see in the second half of the year and, by extension, didn't have any impact on the backlog and decision to maintain guidance?

At this point in time, we don't foresee impacts from a delivery perspective in H2. All of our people applying themselves, obviously, on the remaining issues. improving our preventive plan, better staffing our night and weekend shifts, so everyone is applying themselves to train this around. So we continue to say it's a temporary measure with no expected impact from a shipment perspective in H2.

Great. And then turning over to the ongoing capacity expansions, how much of an impact did it have on margins in Q2? And would it be correct to think of it as not being able to attribute it to the absorbed overhead?

I'm not sure I missed the beginning of your question, Beltesh.

Oh, yeah. So how much of an impact did the ongoing capacity expansion have on the margins? And is it accurate to assume that this is largely attributed at all to unabsorbed overhead?

Yeah, exactly. It's a combination of unabsorbed overhead and also extra maintenance expenses, OK? That's all we come up with. As Adam just mentioned earlier, the actual impact in Q2 was pretty balanced between the two. So a combination of it in the case of the equipment, a combination of extra maintenance expenses, and as you just referred to on Absorb operating costs during the period.

Fantastic. And the last one for me is just on the PM side. And we've noted in the past few quarters, we expect the pricing to normalize. Would you say that Q2 represents a reasonable run rate for the business or could we see incremental pressure just given what you're seeing in the market as of today?

In the case of performance materials going forward, it will depend in large to the actual product and client mix to be realized over H2. Q2 was particularly low. So going forward, I guess the gross margin around the year-to-date could be used for the moment. The tricky part remains chemical costs and other costs like this that continues to be on the rise. Nitric acid, caustic soda, and all of those chemicals that we're using on the rise, that's the unknown part. From a forecasted client and product mix at this point in time, the year-to-date gross margin could be used as an assumption for H2 on performance ratios.

Understood. Thank you, Yann. I'll pass the line. Thanks. Thank you.

Your next question comes from Ammar Ezzat from Canaccord Juniority. Please go ahead.

Good morning. Thanks for taking my questions. Maybe just on the equipment, I think, Richard, your comments suggested that some but not all of it has been resolved. Did I misunderstand? Then can you help us understand, are these issues like a function of the operational intensity associated with the significant volume and capacity ramp? Or can you just tell us what's the nature of the equipment issues you've had?

Well, we've been integrating a number of equipment, new equipment in a sense, new design and else. All of that at the same time, we've been integrating a large number of new employees and we're pushing every equipment we have close to its limit. While in parallel, we continue to increase capacity by adding additional equipment to meet demand of 27 and so on and so forth. So it's really a combination of large number of new equipment, new equipment with different designs and operating parameters, a large number of new employees. We need definitely to better staff our night and weekend shifts, and we need to improve our preventive maintenance in light of those new equipment and parameters that we're working with today.

Understood. And are they largely resolved? I understand you won't have any issues delivering. but are these equipment issues largely resolved?

Most of them, but we still have issues here and there throughout the different product lines that we have. All of those issues are being addressed by some key members of the team and else and with the support of external contractors and else. We're bringing on board a bit more larger number of spare parts, for example, and all of these things. We used to operate manufacturing operations with various sites. So look, we're playing, it's more challenging because there's a larger, there are more equipment, as I've just said, new design and all. But look, we're addressing all of those issues. We have contingency plans. So on that basis, we don't see any foreseen issue or risk of not making required shipments in H2.

Fantastic. Your revenue is obviously extremely strong, significantly ahead of expectations, but we spoke to EBITDA was only modestly ahead because of some of the issues you've outlined. But I'm wondering how much of the revenue upside actually came from higher physical volumes versus The metal prices, and sometimes you've got contractual pass-throughs, so they could inflate your sales, and they're just like pass-throughs. Or would you quantify the revenue, the strong revenues, as really mostly volume-driven, i.e. very high quality?

As we've mentioned, in the case of bismuth, clearly volume. Same thing with renewable energy. and to a smaller extent, because of different operational challenges, to a smaller extent, our space solar business. But overall, volume is the main factor behind the increase in revenue.

Fantastic. Then maybe one last one for me. On CapEx, I'm just looking at the year to date, you guys are approximately 17 million and I appreciate you know like there's some of the equipment issues that you've outlined and I believe that you said you guys are building redundancy as well but I believe a couple of quarters ago you guys mentioned like the 2026 output for CapEx would be similar to 2025 that's like 20 or 21 million. Do you guys have a revised sort of full year expectation for us?

On a net cash out basis considering that some of the equipment that we'll be adding and the U.S. is supported by a government grant. So the value remains valid at this point in time. We did do our work, brought on board different equipment earlier in the year than later this time in order to be ready to address 2027 volume requirements.

Fantastic. Congrats on the very strong revenues and I'll pass the link.

Your next question comes from Michael Glenn from Raymond James. Please go ahead.

Hey, Richard. Just hoping that you can dig into some of the backlog that you're looking at in terms of the Azure project wins right now. We've been reading a lot about these space-based data centers. Are you seeing any projects come in with those type of build-outs?

The data centers in space, those are still under development. It will take probably a couple of years before you actually see those being launched and else. So at this point in time, it's too early. As I've said in our introduction, in terms of bids that we've placed in this first half of the year on a dollar basis, it's at least twice the dollar amount compared to last year's same period. But to our knowledge, none of those are specific to data centers. And based on our intel of the market, this is still a product development, under product development phase.

And are you in Azure, are you able to indicate, did you add new customers in the segment this quarter?

New customers? No, I cannot say specifically. We've been supplying for years all of those primaries that are subcontractors. And there's been a few newcomers in the last two, three years. But for most of them, if not all of them, they're already clients of Azure Space.

Okay. And then just on the renewable side, I'm not sure if it translates to the space side as well. Can you give an update on where your product line sits with perovskite and the timeline associated for any significant increase in perovskite volumes from 5M Plus?

But currently, the strategy for the company is to focus on the individual elements, making up perovskite, rather than the actual encapsulation technology or else. At this point, it's still early stage for the outside China to introduce perovskite as a tandem material. So it's still early stage. We believe before any meaningful volume, an introduction of PerroScribe in a commercial phase, we're still most likely a year or two away.

Okay. And is this only applicable to terrestrial, or would it be applicable to both space and terrestrial?

It could be applied on both, but the terrestrial applications are a lot more advanced in terms of introduction. Okay. Thank you.

Your next question comes from Daniel Lavoie from Ventum Financial. Please go ahead.

Good morning, Richard, Alban, Stefano. Congratulations for the quarter. I've got two questions to start. One is the overall capacity expansion and the recent issues surrounding unplanned maintenance. Just wondering if that makes you think differently about the pace of capacity expansion. And when looking at agers and customer, what needs to happen for you to see accelerating demand and give you confidence in taking a bolder move in terms of adding more capacity? And the second question is related to guidance. when looking at the guidance for 2026 obviously the very strong half at 55.8 million of realized EBITDA in H1 it kind of implied like a flat issue but the dollar into H2 despite the strong revenue momentum so I understand there's some there's some couple of quarter for pass through for the hourly middle input cost but can you just help us understanding that that maps for the margin over there thank you

Okay, so on capacity expansion, same approach that we've been applying ourselves to in the last two, three years. In line with earning contracts, we're reassessing the capacity that we need to have installed, and we take at that point in time the appropriate measures to add capacity. So that's the approach we'll continue to apply. We'll try to correlate as much as we can are undertaking with capacity investments. So that's for the first question. In terms of, you had a question on forward-looking. Look, we continue to take a prudent approach. Okay, halfway through today, we continue to take a prudent approach. I mean, it's a complex environment. We see a lot of inflation across many regions. And as you know, those factors continue to contribute to ongoing uncertainty, and often, with a very limited warning to us. So forward-looking for the second half, we take a prudent approach and we anticipate a certain lag, especially for middle input costs in order to recover.

Thanks. And lastly, if I may, is the CDSC line up and running right now in Montreal?

Yes.

Oh, CDSC, sorry, sorry. At this point in time, the plan is to have it to start running at some point in the second half, most likely around the end of Q3. We currently have products that are being pre-qualified, but the ramp-up and the formal qualification will occur later in the second half of this year. Thank you.

Have a good day. Thanks.

Your next question comes from Nick Boychuk from ATB Cormac. Please go ahead.

Nice morning guys. I'm curious, you mentioned that some of the larger constellations you're bidding on, the size of the backlog, the RFP, what makes these either interesting to you guys? Is there something about the characteristic of the style of constellation, size of the opportunity? Just looking for a little bit of colour, especially as that pertains to the mixed comments that you made this quarter about how Azure had positive mix.

Look, it's quite diversified in terms of referring to the high number and high dollar value of the bids. It's highly diversified as to the clients and the hand constellation and our satellite programs. It varies a lot. There's nothing very specific that came up in H2 other than it's a large number with actually large dollars actually of bids that have been placed.

Okay. Anything in terms of the industry, though? Is everyone still acting rationally and sort of behaving as you would expect, or are you starting to see a little bit more increased demand, either regionally, by constellation, by customer?

No, at this point in time, the distribution region and else is similar to what we've been experiencing for the last couple of years. It's just the number of the dollar values that have been, as I've just said, at least twice... This first half of the year compared to the same period last year.

Okay. And then on the metal pass-through, what's the timing and the lag that you expect you'll be able to recover some of those costs?

The metal pass-through, we expect it to happen with at least two quarter lags and in the partial way, it won't be 100%. So we are at the point where we see the margin for Q2 2026 being extended in the second half of the year within approximately one percentage point.

Okay, thanks Alban. So is it fair to assume then on that comment that The normalized margins this quarter, excluding the unplanned maintenance and the price impacts of the metals, it would have been about two percentage points higher than where it currently landed?

Mathematically, assuming it's about half, that's our estimate.

Yeah, that would work.

Excellent. Thanks so much, guys.

Your next question comes from Nelson Nguyen from RBC Capital Market. Please go ahead.

Great thanks and good morning everyone. So your comment in terms of adding a lot of equipment and lots of employees, just to clarify, that's in the terrestrial renewable energy side or both renewables and Azure space as well?

It's almost equally attributable to both terrestrial and space.

Okay, got it. And then I think You mentioned that the ramp up in the Azera space side is taking place in the second half of the year. So on the renewable energy side, obviously you have more volumes with First Solar over the next few years as well as starting last year. Is that ramp pretty gradual over last year, this year, and the next two years?

This year, we definitely have more volume than last year, and then for the coming two years, we'll have more volume, but not of the same magnitude in terms of incremental volume, if you compare it to 25 to 26. Okay, but each year, we'll have more volume. Yeah, 26 is a bigger volume increase, and then 27 and 28 are also increased volume, but of a smaller scale.

Got it. Okay. And then... Just on the balance sheet, net debt was standing at around $24 million. So it sounds like you are on track to be roughly net debt-free by the end of the year. I think you commented that working capital will be consistent with revenue increases. Is that correct?

Yeah, that's correct.

It's going to be aligned with growth, plus or minus, obviously, some additional investment we may make in terms of safety stock.

But essentially in line with revenue growth.

Okay.

Plus whatever specific action we need to take for safety inventory or strategic inventory, but roughly in line with revenue.

Okay. And then I know you previously talked about M&A opportunities and how you want to Thank you very much.

Look, we continue to scour markets for many opportunities. Obviously, despite some corrections, as you referred to, in the space industry, it remains across many, many sectors that we cover quite high still today. But we continue to be very optimistic to get around on something accretive and strategic to five and plus.

But things are definitely expensive still today. Okay, got it. And there's one last question. Just marine shipping costs, I don't know how big of an exposure you have on shipping costs, but since the Iran war, can you just talk about how that has impacted your transportation costs?

So you're talking about the increased shipping costs that we see right now in the market. So I think, you know, we cannot single out this factor, but overall contributes to the increase we see in our chemical products, generally speaking. So it's one factor which we cannot single out, but which is a contributor.

Okay, got it. I'll leave it there. Thank you.

Your next question comes from Frédéric Tremblay from Desjardins Capital Market. Please go ahead.

Thank you. Good morning.

Good morning.

On the two-quarter lag to recover higher metal costs, I'm just curious, is that a lag because the metal prices went up so fast that it's going to be more gradual to recover? to implement price actions, or is it more contractual in nature? Just trying to better understand the two-quarter dynamic there.

It's a combination of both, obviously, the speed and the magnitude plus. After that, the recovery depends on a per-product and a per-client basis, so contractual.

Okay, perfect. And then just on the bidding environment you mentioned, I'm just wondering about competitive discipline, meaning is the higher middle environment being properly reflected in new contracts and new bids across the industry, or are we resetting to a different margin level given the middle environment?

I think, as Richard mentioned, there is... There is a way to structure contractually our growth. We're working on it, so there will be a capacity to pass through middle costs with a delay and with a certain percentage, but we are building that to our growth.

Okay, and then last question, just on the US-Germanian refining capacity expansion and the grant that you received or announced. Do you have an update on that, on how that's progressing?

It's progressing as per plan. It's a fairly large project at the end, so we're expanding the building that we're in today. We started to receive some additional equipment. We have ordered more equipment that is on its way. So to complete the project, it's going to take probably close to a year and a half, two years. But gradually, we're adding more capacity and capabilities from one quarter to the next. So it's actually, it's all a plan.

Okay, that's all. Thank you.

Your next question comes from Jonathan Goldman from Scotiabank. Please go ahead.

Hey, good morning, guys, and thanks for taking my questions. I just want to clarify a couple points on the margin discussion. So gross margin was down 430 basis points year on year, and you're saying half of that was due to the unplanned maintenance. Is that correct?

Yeah, yeah, that's about that, yeah.

Okay, and when do you think you would recover that impact? Would it be a couple quarters, a few quarters, but the unplanned maintenance part, the overhead efficiencies from that, when would that be resolved?

Okay, so unplanned maintenance and ELF, we're applying ourselves to resolve the remaining issues that we have. So for us, this is temporary, and we have mitigation plans and ELF. and we don't foresee any issue in order to realize contracts on hand in H2. Metal is a bit more tricky because it varies from, as I've said earlier, it varies from product and clients and by default also contracts that are different depending on the business lines and clients and products. So for that, we take a period approach and we see at least two quarters for that to be resolved.

Okay, that makes sense, and maybe I missed this in the prepared remarks, but did you mention additional margin pressure before we come back to the normalized margins when you recover the metal prices?

Nothing specific other than, look, it's a complex environment, and inflation, chemicals, energy, and else can occur with a limited warning. That's why we continue to take a prudent approach on our guidance and and forecast for the second half of the year.

Okay, and Alban, I missed your comment. You said the margins in the second half kind of being where the Q2 level is within 1%. Is that correct?

Yeah, that's the view that we currently have, that the gross margin that we've seen for Q2 would probably be good projections for the second half within one percentage point range.

Okay, understood. And then very strong growth in performance materials on the W line. I've always thought of this business as kind of a GDP type of growing business, and I think, Richard, you mentioned a lot of that was supported by volume. So I'm just trying to understand what's supporting the strong growth there, and how should we think about the balance of the year in terms of the top line and performance material?

Typically, historically, if you look at a numerous number of years, performance materials would typically do better in the first half than the second half. With many of our clients under that segment, I guess reducing the inventory at the end to show a better balance sheet and else. So typically, historically, the first half from a volume perspective has always been better than the second half. So that's essentially what we anticipate will happen again this year.

Okay, it makes sense. And on Azure, can you give us an update on the order book? How much of the order book is fully booked, you know, in 27, and how much orders are you currently taking to 28 and maybe beyond?

Look, 26 is, at this point in time, 26 is sold out, 27 is sold out, and we continue, obviously, we're assessing opportunities to increase further capacity for 27. But at this point in time, we're working out scenarios for 28, 29, and 30 forward.

Okay, perfect. And maybe one more for me. If you could just remind us your capital allocation priorities. I mean, balance sheets are in great shape. It got better. I think an earlier analyst mentioned it might be leveraged neutral by the end of the year. But how do you evaluate M&A versus buybacks here, organic growth? And what's the runway for organic growth to expand capacity further?

With no surprise, and I'll let Alban compliment, but with no surprise, organic growth, proper inventory levels is the priority at this point in time because, as you know, commercially we have a lot of visibility and we need to fulfill those contracts.

And just to compliment that, you know, as I've said, we're making room in our band sheet. We continue to scan for M&A opportunities. So we want to have the room and the capability to make a valuable acquisition if it presents itself.

And is there any update on the M&A pipeline? Has anything become more interesting lately?

There is nothing specifically.

No, we have obviously a list of files that we do spend more time than others, but nothing that we can communicate this morning.

Okay, fair enough.

Thanks for taking my questions. I'll get back in queue.

Thank you.

Encore une fois, si vous souhaitez poser une question, s'il vous plaît, appuyez sur l'étoile suivie du 1 sur votre clavier téléphonique. As a reminder, if you'd like to ask a question, please press star 1 on your telephone keypad. Your next question comes from Baltej Sidhu from National Bank of Canada. Please go ahead.

Sorry, I have myself on mute there. Thanks again for taking my question. I just wanted to quickly ask on Azure and other product lines you may be considering, just the number of satellites that are looking to be set up into orbit over the next 10 years. Right now, you're tackling TrueLEO, MEO, and GEO. Are you looking at opportunities within the VLEO market, and then how should we think about the product suite that could culminate?

At the present time, as you know, our technology is referred to as 3-5 multi-junction solar cells applied to what I often refer to as true LEO, MEO, and GEO distances from Earth. Are we contemplating adding a new product line to address the video market? Maybe, but nothing confirmed or very concrete this morning. So we continue to focus on high-end applications for solar cells.

Great, thank you. I'll pass the line.

And there are no further questions at this time. I will turn the call back over to Richard Perron for closing remarks.

Look, I would like to wish you all a good day and thanks for being with us this morning.

Ladies and gentlemen, this concludes today's conference call. You may now disconnect.