Cematrix Corporation

All right, we're going to get started as the participants are entering the webinar. I'm Grant Howard, very pleased to be hosting this webinar with the Simatrix team on their first quarter great record results. I'm going to start with the fairest one of the group. That's Marie Josie Canton and MJ. She is the CFO, Jeff Kendrick, the CEO, and Randy Bumauer, the COO. With that team, I'm going to turn it over to you. And again, congratulations.

Thank you, Grant. And thank you, everyone, for being here today. Randy, MJ, and I wanted to welcome you to our um first quarter webcast and talk about another record quarter for some matrix uh of course it's good morning to you people in the west and it's good afternoon to you individuals joining us from the east so welcome to you all we'll talk about the disclaimer we'll move on to um what we're going to be talking about today first i want to show you a little project video on um a project we completed in the Brooklyn Bridge in New York City. I'm going to talk a little bit about what Simatrix does for those of you who are new to the story and also just a refresher for those who have heard this story before. Talk a bit about our record first quarter, the record three quarters in succession that we've just achieved. Talk about 2024 and strong results we expect to continue. why this growth trend will continue, why are we in a position to move forward, including the capacity for continued strong growth, the fact that we continue to strengthen our team, and that we have a backlog and sales pipeline in place in order to achieve that growth. So first of all, before I start the video, this is, I always like this video because it's a rehab project that we're doing at the Brooklyn Bridge in New York City. And someone once sang a long time ago, if you could make it here, you can make it anywhere. And Sumatris is pouring a lot of product in New York City. So let me play this video for you, give you an idea of what we do. No, I will stop it there. But it's important to note that the reason we're growing is that not only are we pouring in New York City, but we're pouring projects. Last year in Philadelphia, we did a runway taxi project, a large one there. We did a big wharf backfill project in Houston. We did several tunnel projects in St. Louis, San Antonio, Texas, British Columbia, Toronto. And we did some overpass backfill projects in Bellingham, Chicago, and some other areas as well. And we also did a sports field underlay project in Calgary. So a wide range of projects. And of course, everywhere in between too as well. So what are we doing? We produce a product that's called cellular concrete on site for infrastructure construction applications. So the concrete is like ReadyMix, it's cement based, but we take the sand and gravel out and we replace it with a microscopic air bubble system. By doing that, we create a lightweight material that's insulating and it has some structural properties as well. There's tremendous benefits over the legacy products that we replace, not the least of which is it's lower in cost. Usually if you have something that's better than the alternative, it always costs more. But in our case, the installed cost is generally quite lower. Not only is it quite lower, but generally we can complete the project significantly faster than the alternative. And the product itself is generally more environmentally friendly than the products to replace. It's important to note that we don't replace regular concrete. We replace things like weak and unstable soils, EPS block, which are large styrofoam blocks. We replace rigid insulations, lightweight aggregates, and heavy grouts in some cases, and other materials too, but those are the main ones. And we replace them to do, and the five main applications are tunnels, using tunnels to put infrastructure under cities like new water lines and sewer lines. We use it to backfill overpasses, bridges, and big concrete panels you see along freeways called MSC panels. We use it to replace or to underlay roads, highways, and runways that cross weak and unstable seismic prone or frost prone soils. We use it to fill abandoned water lines and sewer lines and pipelines and culverts, and that's a big business across Canada and the US. And also as an insulating sub-base for all infrastructure like buildings and industrial facilities. So those are the main applications. And because we don't replace regular concrete, the cement companies actually love us because every time we pour a cubic meter of our material, it's a new market for their cement. Who would have thought that you would be using cement to insulate pipes and things like that. It's just not a normal application for the cement and we use a lot of cement in our applications. So record first quarter. Again, This is the result of carryover sales from 2023 and good weather. And these, of course, were higher margin projects, as you can see by the results for the year. I won't speak to the results yet because MJ is going to be covering that as she goes through the financial results. And of course, this is off season for some matrix. And there's a misnomer that it might mean that we're not doing anything, but it actually is one of their busiest times of year because not only were you doing projects, but we're you know, servicing, maintaining, and sometimes rebuilding the equipment that we have for the upcoming years. Of course, we're in the middle of our sales season, so landing and bidding and designing projects, you know, is a daily process for us. Of course, from an accounting perspective, we're busy as well. And of course, we're busy collecting cash from all the sales we sold in the third and fourth quarter of 2023 as well. And because it's the main project design and sales season we've executed another 18 million new contracts this year already and that will continue for the foreseeable future. also wanted to highlight the fact that this is the third record quarter in succession. So first quarter we did $8.4 million in sales versus our previous record in 2023 of 7.2 million. We had a record fourth quarter of 19.6 versus our record in 2022 of 8.3 million. And same thing with the third quarter record at 20.4 million versus our previous record of 11.6 also in 2022. And the important thing is that they were profitable sales. And so each of those years or periods were profitable was positive EBITDA as well. What does the future look like? Well, 2024 is going to be strong as expected. Now, we saw our sales grow by 84% last year. They won't grow by 84% this year. And a lot of last year's sales were makeup because of all the delays related to COVID and the cement crisis, the supply crisis that we had in 2022. So that was an unusual year. Do we expect strong growth for the foreseeable future? Absolutely. And we'll probably average... 30% over the next five years, but some years will be lower. And we expect 2024 will be probably lower than the 30%, but no guarantees of that yet either. We also continue to bid on, continue to build that backlog in both US and Canada. And to keep up with this demand, we've actually hired additional sales staff. So this will help us to continue to increase our sales, not only in 2024, but for the future as well. So why is this growth trend expected to continue? And again, we stated this last webcast to us because the overall market size continues to grow because it's still early stage for many applications in many states and in many provinces. So in the U.S., it's about 10 to 15 years ahead of the Canadian market, but it's still in the early growth stage, even though it's growing dramatically. And a large part of this is because the product continues to perform. It's been in the ground for over 20 and 30 years now. So this has built confidence in the design engineering terms, teams in the ministries of transportation, municipalities and governments that specify these materials for these projects. And as a result, the overall market continues to grow dramatically. And it's important to note here that this does not include the replacement infrastructure that the billions of dollars that have been approved in the US and the trillions of dollars that actually has to be spent on replacement infrastructure over the next 10 years. So again, this hasn't hit the ground for us yet, but because it relates to bridges and highways and roads and tunnels, it's going to affect our market and make it stronger. Why are we able to grow? Of course, we have the capacity to grow. And that's why we saw our sales grow from 29 million to 53 million in 2003. It's because we have a tremendous amount of capacity in our equipment and our people. We have over 200 million USD in seasonally adjusted production capacity. So that's one shift part of the year. We get double the shifts and then increase that capacity. We have 11 dry mix processors and eight wet mix processors that basically go across the country on a daily basis to port projects. We also have a strong cross-strain operational staff that we didn't lay off during COVID, and we keep employed by, again, maintaining and servicing our equipment in the first quarter when we're usually the slowest. We also, in order to reduce the amount of labor that we do carry our operating staff that we do carry, we take advantage of trained operating staff from our general contractors as well. This helps keep our staff lower and because labor is really in the operation staff is a fixed cost to some matrix. We also continue to strengthen our team. Our overhead is fairly set, but there are areas where we still need to strengthen. First and foremost, of course, as on the sales side, as mentioned earlier, we just added a new salesperson in Chicago and a new project manager in order to manage the growth that's happening in the U.S. market. And as mentioned in the previous webcast, Mr. Broomhauer is with us today, was promoted from CFO to COO effective January 1, and we added Ms. Canton as our CFO effective February 5, 2024. Both have been great additions to us to Matrix and will continue to enable us to grow for the foreseeable future. We've also added a few new operations staff because as the sales numbers continue to grow, we're going to have to continue to add key people to our operations staff and train them to prepare them for the upcoming growth. We also have the backlog in sales pipeline in place. So, you know, although our backlog was diminished a little bit by a change in scope in one of the tunnel projects we had landed earlier, we still have an extremely strong background or backlog. So the reduction in scope of that project will affect us a little bit in 2024, but not much. because the project was scheduled to start at the end of the year, but it's mostly scheduled for next year and we expect to replace all of those sales or hopefully all of those sales next year and not have and expect our growth to continue for the foreseeable future. Also that our backlog or our pipeline continues to remain strong at over $400 million. These are the projects that we draw projects on. or from, and again, that continues to remain strong. I want to highlight the two pictures on here, because this is the extreme. This is why they use cellular concrete in these projects. This is actually a project that was done in England a number of years ago. It's a Canary Wharf project. I don't know if you can remember the Canary Wharf, but It was an expansion of the office areas in the London area, and it was built on weak and unstable soils. And so they built the highway first, and it's actually in between these two, in the left-hand picture, in between the two formworks on the left and right-hand side. And they had to put all of their water lines, sewer lines, and everything, electrical equipment, Everything had to go in here. And then the only material to use was cellular concrete. It was actually produced on the Thames River on a barge and then pumped into place. And this is an extreme, but this is why cellular concrete is being used right across North America, various applications. It is the right solution for these applications where the other products were only being used because they were only products available at the time. So that is it for me. I'm going to pass it on to MJ to go over our Q1 financial highlights, and then we'll pass it back to Grant, who will monitor the question period. So, MJ.

Thank you, Jeff. Good afternoon or good morning, everyone, depending on where you're sitting. As a reminder, if you wish to get more information, our documents are located on our website or on Cedar Plus. So let's go through our Q1 2024 financial highlights. As Jeff mentioned, traditionally, Q1 is our slowest quarter due to cold weather in Canada and northern United States. However, we had our third record quarter in the history of the company, which is great. So revenue for the quarter was 8.4 million in Q1 versus 7.2 in 2023 or 1.2 million entries as we executed work on large tunnel backfill and grout projects. Gross margins was up at 2.6 million or 30% in Q1 versus 0.7 or 10% in 2023. This is up 1.9 million. The margins were positively impacted by our project mix and good levels of revenue to cover our fixed costs. Operating income, which is gross margins minus SG&A, was 0.3 million in Q1 versus the loss of 1.2 million in 2023. That's up 1.5 million. It's a great improvement for us. Adjusted EBITDA also positive at 1 million in Q1 versus a negative 0.7 million in 2023 was up 1.7 million, also a first in our history as results of record Q1 revenue and improved margins. Cash flow from operations before non-cash working capital changes is up 1.6 million to 0.9 million in Q1 compared to an investment of 0.7 in 2023. We're really proud of it. Finally, cash. We had 7.9 million of cash on hand at March 31st. It went up 4.6 million from year end as expected. as we collected on our Q4 record revenue and Q1. So if we can move on to the next slide, thanks Jeff. So on the upper left corner, you can see our seasonality of our business with our revenue split by quarter. Generally revenue in the first half of the year is about 34%, Q3 38% and Q4 28%. You can also appreciate our organic growth in the last few quarters. On the right-hand side, you see our borrowings by quarter. It has been significantly reduced over the last four years, and for the last four quarters, we are about $4.2 million in debt, mostly because of two loans we have with the BDC and some leases. We've added a graph this year about our gross margins percent by quarter, so you can see they're improving. and when you look at the graph 2021 and 2022 it was impacted by supply chain and pandemic challenges and we are now showing strong and improved margins supported by our revenue growth in project mix discovers our financial highlights q1 is a great start of the year for us thank you andre so that's it for some matrix uh for our presentation today and we'll go to our question period with uh