Cematrix Corporation

Well, welcome, everybody, and thank you for joining us on a spectacular year-end result webinar for Sumatrix in 2023 with record Q4 and a record year. We've got CEO Jeff Kendrick on the call, COO Randy Boomhauer, and new CFO MJ Canton, who will be answering financial questions towards the end of the webinar. Please note that if you want to answer or ask any questions, just type them in. and we'll get to those at the end of the presentation so with that congratulations all of you on a spectacular 2023 it's it's been a climb and things are just getting better from here so very happy to share this with everybody and i'll sign off screen here thank you jeff um i'll just slide down into the

Next slide's here. Just wanted to say good morning and good afternoon to everyone here that is joining us today to talk about our 2023 year, our breakout year, the great year that we had, and of course, that we continue to expect the same sort of results for the future. So welcome this morning. I just want to go over what I'll talk about today. For those of you who are new to the story, we'll tell you a little bit about what we do. I want to talk about the fourth quarter and how we beat expectations, the 2023 results for the year to date and how we beat expectations, why this was a breakout year, why we expect this trend to continue, and part of it is having the capacity to grow and that we continue to strengthen our team and we have the backlog and sales pipeline in place in order to accomplish that. At the end, once I'm done, I will pass it over to MJ who will go over the financial results for the fourth quarter. So I won't talk about the details during the presentation. Once that's over, I'll pass it back to Jeff and he will manage and control the question and answer session. Again, welcome and thank you for joining us today. So let's talk about what Simatrix does first. And essentially we produce cellular concrete onsite for numerous infrastructure construction applications. Cellular concrete is like a ready mix, but you take all the sand and gravel out of it, replace it with a carefully constituted air bubble system. By doing that, you create a lightweight material that's insulating and has some structural properties. It also has tremendous benefits over the legacy products that we replace, not the least of which includes lowering costs. Usually when you have something that's better than the alternative, it always costs more. But in our case, the in-place cost is generally less than all of the alternatives. Not only is it less cost, but you also get significant time savings in construction, sometimes over 100 times. And it's also generally more environmentally friendly than most of the products that we replace. It's important to note that cellular concrete does not replace regular concrete. The cement companies actually love us because every time we pour a cubic meter of cellular concrete or cubic yard in the US, it's a new market for their cement. So what does cellular concrete replace? We replace weak and unstable soils like peat moss or glacial silts and things like that. We replace EPS blocks, which are large styrofoam blocks, usually a meter by a meter. We replace other rigid installations, 4x8 sheets of rigid installations, as they're used in infrastructure applications. We replace lightweight aggregates and heavy growths as well at times. What are our main applications? Essentially tunnel grouting, backfilling of MSC panels, overpasses and bridge abutments as an underlay under roads that cross weakened and stable soils or frost prone or seismic prone soils. We replace heavy grouts in filling of abandonments and annulars and in tunnel grouting. And we also do numerous other annular fills and backfill applications throughout North America. Fourth quarter. B, market expectations. I think that generally in the marketplace that we're going to do around nine and a half million in sales. And we had a great quarter, did double that, over double that. Fourth quarter is generally our second best quarter, but it's always the shortest because we have the winter season coming on and of course the Christmas season as well. Fortunately, this fall, the weather was great and a lot of the regions and great weather, combined with numerous projects were scheduled resulted in another record quarter for some matrix and even with that we also executed another $18 million in new contracts. 2023. Again, record at the end of third quarter, add another record quarter, and you get a record all year long. This meant record sales, operating income, adjusted EBITDA, return of margins, profits, and cash flow. And on top of that, we announced another $57.1 million in new contracts. And that's important because a lot of those are actually going to be completed in the current year. So why was it a breakout year? We call it when preparation met opportunity, and that matrix was completely prepared for this inevitable growth. We knew it was coming. COVID and the supply chain issues of 2020 just basically delayed it. So we collectively spent years not only developing the market throughout US and Canada, but preparing ourselves for this inevitable growth. Even during COVID and the cement crisis, we continued to build the market and build our capability. We also retained our staff during COVID and built additional production capacity. And most other companies basically laid people off. We retained all the skill. Essentially, we don't talk about what we were going to do or might do like a lot of other microcap companies. We just get it done, basically. Why this growth trend is expected to continue? Essentially, the overall market is still early stage, particularly in Canada and a lot of states in the US where many of the applications are really in their very early stages of growth. Also, the product continues to perform as specified in all of the projects that have been placed. And this is building confidence in the product within the design teams and engineering teams that are out there. And of course, the ministries and departments of transportation across Canada and the U.S. that are specifying in this product for their projects or specifying this product for their projects. As a result, the overall market and overall just business itself continues to grow. We continue to win work as well based on our reputation as an experienced specialty contractor that delivers on time, on budget, and on quality. And we also are able to offer our customers something that our competitors cannot. And there's a lot of different things there, so I won't talk about that in detail. It's important to note that you can't grow without the capacity to grow. And I've mentioned in previous webcasts that we had over 175 million USD in seasonally adjusted production capacity. That was now up over 200 million USD with the addition of two new dry mix units over the past year and a half. And that is basically one shift, six days a week, part of the year. So we take into account all of the seasonality of our business. And it's important to note that we have 11 dry mix processors and eight wet mix processors, some of which can produce 250 to 300 cubic meters an hour. We also have a strong cross-train operating staff that enabled significant growth in 2023. We basically almost doubled our sales with hardly adding another operations. I think we added a couple of part-time laborers for the year. We also take advantage of trained contractor-supplied labor whenever we can. So our general contractors will provide us with skilled labor. And that, of course, helps us keep our fixed costs down because essentially our labor is fixed costs to the company. And finally, even though we don't need to grow a lot from a people perspective, we continue to strengthen our team. We have, particularly in the sales side, added new sales and sales support staff over the past year, and we'll continue that this year. That is to meet the continuing growing demand. I mentioned earlier in other webcasts that our sales teams can't even keep up right now with the number of projects that are coming up to bid on a regular basis. And we're continually trying to develop the market even further on the side as well. Because of this growth, we promoted our CFO, Mr. Boomauer with tremendous entrepreneurial spreads to COO effective January 1 of this year. And that's been a great change for the company. Of course, Randy will be managing the operational side of the business for the foreseeable future. And because of this and Randy's promotion, we've added a new CFO, Ms. Canton, MJ, and she brings a tremendous amount of senior accounting and finance experience where she gained from working for one of the largest infrastructure construction companies in Canada, and she joined us on February 5, 2024. So again, another great addition to this matrix team. And of course, we have and will continue to add additional seasonal operations staff as required to meet the sales demands. And finally, you can't grow sales without sales backlog and a sales pipeline and place to draw on that backlog. It's amazing that we put 53 million in the ground this year and we still have a backlog that's over a hundred million dollars. And this continues to grow and build or rebuild each day and each month as our sales team continues to sell more projects on a daily basis. Of note, our backlog grew by 86% last year before deducting sales. The prior year was 36%. And why this is important is that backlog is really future sales to Sumatrix for Sumatrix and its shareholders. And that backlog comes from a strong sales pipeline. And the sales pipeline are projects that engineers and designers and ministries of transportation are coming out to market with that we're either in the design or estimate and quoting stage, and they are real projects, many of which are now going cellular concrete versus the alternative products. So that's essentially the year in a nutshell. I'm going to pass it over to MJ to go over the financial results for the quarter, and then we'll pass it back to Jeff and he'll basically manage the question and answer session for us. So thank you and welcome MJ.

Thank you. Thank you, Jeff, for the nice introduction. It's been a great two months already. I'm happy to be part of this matrix team. As a reminder, you can access our financial documents on CDAR and on our website if you'd like more information. This slide summarizes our key highlights. You'll notice that all our financial KPIs have improved for 2023. Our revenue for the quarter was $19.6 million, up $11.3 million or 136% from the $8.3 million in Q4 of 2022. Revenue for the year was $53.3 million, up $24.3 million or 84% from the $29 million last year, as we had more projects completed this year across all our businesses and markets. Gross margins for the quarter was $5.4 million, 27%. a 5 million improvement from 0.4 million in the last quarter of the last year. Gross margins for the year was 11.9 million, 22%, a 9.4 million improvement from 2.5 in 2022. Our gross margins have improved significantly. Operating income, which is gross margins less SG&E, was 2.4 million in Q4 versus a 1.3 million loss in the same period of last year. This is a 3.7 million improvement. Operating income for the year was 2.7 million versus a 4.7 million loss in 2022, which is a 7.4 million improvement. Going on the right end of the slide, adjusted EBITDA, which is also important to us, is up two for the quarter at 2.9 million versus 0.8. Million in 2022, a $3.7 million improvement. For the year, adjusted EBITDA was $4.9 million versus a loss of $2.7 million, a $7.6 million improvement. Cash flow from operations, which is cash flow before working capital changes, was also positive for both the quarter and the year. We're very proud of that. In Q4, $2.9 million generated versus a cash investment of $0.7. This represented $3.6 million improvement. In 2023, we generated 4.9 million from operations versus a 2.6 million investment in 2022. Again, a 7.5 million improvement. Lastly, we had 3.3 million cash on hand at the end of 2023, up 1.4 from the previous quarter in Q3 2023, as we are generating positive adjusted EBITDA and collecting for the work done in the last part of the year. Overall, a great quarter in a remarkable year. Moving on to the next slide. On the left corner, we like to show you our seasonality. As a specialty construction contractor, our business is subject to the seasonality of the overall construction industry, especially in Canada and Northern United States, as winter and cold weather can have a significant impact on the activities of our customers, and as a direct result, our revenue. You can see at a glance that the first half of the year we do approximately on average 35% of revenue. The back half is usually more significant with roughly 40% on average for Q3 and about 25% of our revenue is executed in Q4. The graph showed the trend in the previous four years and you can also notice our organic growth as well. On the right-hand side of the slide, you can appreciate how much we have reduced our debt over the last four years. It is currently at about 3.5 million, which has been consistent over the last four quarters. And lastly, our capital structure is shown at the bottom. It has come a long way and is much more simpler. We have 135 million of share outstanding, and we have stock options and RSUs outstanding associated with the equity program. To sum things up, in 2023, we had a solid year and great financial successes. We have a solid foundation and we are ready for growth. And that completes our financial highlights for the year, Jeff.