Cematrix Corporation

I'm Grant Howard, and thank you for attending today, the Q3 webinar, financial results webinar with Sumatrix. We're going to get straight into this. I would like to introduce Jeff Kendrick, CEO, Randy Boomauer, the COO. and Regio C Canton, the CFO. And just before you start, Jeff, just as a reminder, folks, at the bottom of your screen, you'll see the Q&A button. Any questions that you have, please submit them through that. And Jeff, I'm going to hand this over to you now.

Well, thank you, Grant. And thanks for managing this today for us. Wanted to welcome everybody, Randy, MJ, and I want to welcome everybody to our third quarter review of our third quarter results and the year to date results. And of course, we all know that we had previously disclosed that there was going to be a delay in revenue this year. But as we go through this review, there's certain things we want you to remember at the end or the key things that we'd like you to keep in mind as we go through this presentation. Number one, 2024 is still going to be our best year ever, second best year ever, despite the delays in projects. The projects were delayed but not lost, and that's important to note. Most of these delayed projects will start early in 2025, which is also going to be good for the company. In 2025, it's forecast to be a good year even before the addition of these projects. So, again, it's a short-term issue, and we're looking at 2025 to be a rebound year. And we, again, thank you for being part of this presentation today and look forward to your questions at the end of the period. So what we're going to cover today, I'm going to show you a short project video. Again, this is in our goal to educate our investors as to what we do. I'm going to go over the business as much as what we do as an update for a refresher or for those of you who know the story and as an explanation of what we do for those who are new to the story. We'll talk about our solid third quarter results despite the delays. We'll talk about the year-to-date sales that are down due to those project delays. The next thing we'll talk about is those delays themselves. Again, to try to be fully transparent here, we want to show you the projects that we're talking about, what has been delayed and how long they will be delayed. Talk about the growth trend that will continue. In the background, we've had a very good year growing the business on top of what, or besides what the delays that have happened out there. We'll talk about the backlog and the sales pipeline, which is still strong. Like a little bit about the TSX uplisting and life financing that we completed during the quarter. And then I will pass it on to MJ for a discussion of our third quarter financial highlights and trends. So before I start the video, I'll tell you a little bit about it. A lot of people think of our business as very large projects, but a big part of our business is the small to medium size, and even specialty projects like this South Battery Park project, which is basically on the shores of New York, overlooking the Statue of Liberty, or vice versa, the Statue of Liberty is overlooking this project. This is a project that came out of the Sandy hurricane a few years back and again they're trying to rebuild the structure around the shores. Normally you would think of not using a lightweight material in this kind of circumstance because they'll probably look at flooding in the future as well, but because the soils are very weak along the shores, they need a lightweight material as a base and they put ballast over top of it to ensure that it will not float when the flooding happens again. So anyways, let me play this video for you. It's a good revelation of one of those specialty projects that we do across North America on a daily basis. you you Well, as you can see, that project was completed by Mix On Site, which is the Chicago-based company we bought a number of years ago. They're part of the Symmetris Group, and they are doing projects across North America or the U.S. on a regular basis. I'll now go over the business of Simatrix. Again, we're in the sale and onsite production of a product that's called cellular concrete. Cellular concrete is a lightweight material that is cement-based where we take out all the sand and gravel and we replace it with a microscopic air bubble system. By doing that, we create a lightweight material There's many benefits over the legacy products that we replace. Now, there are many benefits, though the most significant of which are lower installed in installed costs, sometimes in the millions of dollars, particularly when you're talking about tunnel construction. It's significantly faster construction. We have equipment that can pour up to 250 cubic meters per hour, and it's generally more environmentally friendly than the products we replace, particularly in a life cycle situation. It's important to note that we don't replace regular concrete. We replace things like weak and unstable soils, EPS block, which is large blocks of styrofoam, other four by rigid installations that are used in infrastructure construction, lightweight aggregates, and in some cases, heavy grouts. Our major applications include tunnel backfill or bridge abutment and overpass backfill, underlays for highways and runways, abandonments like water lines and sewer lines, and of course as an insulating sub-base for industrial, commercial and residential facilities as well. So we did have a solid third quarter. Important to note again, historically third quarter is one of our best quarters. And we did have a good quarter in, but nowhere near, of course, the record results that we saw in 2023. Sales was down, but utilization was actually almost stronger because we completed a number of small to medium-sized projects. It's also important to note that the tunnel business was largely inactive during the quarter, where last year we did two very large tunnels, particularly during September and October. Even though utilization was strong, all of our staff kept safe, and that's very important to us. We had no medical or emergency injuries or or time loss because of injuries, which is great for the company. And as predicted, of course, our stronger margins resulted in income and positive EBITDA for the quarter. Of course, the continued delays in projects meant that year-to-date sales are reasonable, but nowhere near the record sales that were experienced in 2023. This is due entirely to a number of delayed projects. Project delays are normal in the industry, but it's unusual for a construction company to have a majority of its projects delayed at the same time. It's not that it can't happen, but it is unusual. It's important to note as well that 2023 itself was an abnormal year as well. And as Symmetrix replaced, 8 million of projects were delayed and landed another 18.5 million sales over its original forecast. So it was an incredible year. Now, in 2024, we also landed a number of projects to replace the projects that were delayed, but not enough to overcome the shortcoming from the 2024 delays. The good news is that, again, the delays are largely short-term, so the 2025 is looking to be a very good year. Just to go over some of the delays so you get an idea of what we're talking about. We had six major projects being done in the second half of the year. Now, the first one, the $4 million U.S. tunnel that was supposed to start in January 2024 didn't start until April or May, June. And then because of actual delays during the project is now not going to be completed until mid-November or in the next week. We have another million-dollar U.S. tunnel that was supposed to be done in the fourth quarter. That will now start early in the new year. We have $3 million U.S. from a $10 million U.S. tunnel that was supposed to be done in the fourth quarter because of delays on site from the general contractor. It will not start until the first quarter of 2025 as well. Also 7.5 million U.S. from a $16 million U.S. overpass project. It's originally scheduled to start in August, then September, October, and now because of Hurricane Helena that rolled through in October, it will not start until January. But these are all projects that are going to be going forward. Same with the overpass backfill projects. This was actually a $5 million project, $2.5 million of which has already been completed. The balance of this project will now go in the second quarter of 2025. And the reason for this is because the Ministry of Transportation changed the design before the overpass went ahead, which delayed going forward with our material. The growth trend that we're experiencing is continuing in the background, even though sales have been delayed and it's expected to continue, but it will be lumpy at times. This will not be a linear growth at all times. Our job in senior management, of course, is to continue to reduce the effect of these sales delays by basically building up the top line and reducing the effect of seasonal sales through regional expansion. If you think of a big company like Berg Construction, they will have, if they have $15 to $18 million in delayed sales, it doesn't affect their top line. They're doing $4 billion in sales. So again, as we grow our sales, these short-term delays will have lesser effect on our business as we move forward. The backlog has slowed a little bit. Growth has slowed a bit in 2024, which is not unusual. It's typical in a U.S. election year where there's not as many U.S. projects that come out. Of course, we expect that will change again in 2025 as the new government starts to move forward. It will also continue to grow as cellular concrete continues to gain acceptance across North America. and infrastructures begin to filter in from this replacement infrastructure projects that are going on in the US. And it's a reminder that the market is still very early stage, even in the US. And one of the questions that's probably going to come up is, is the new government or the election of the Trump government going to have any effect on our business? And generally no, because all of our, we don't sell anything across the border. None of the tariffs that have been spoken about are going to affect our business. And secondly, the Republicans tend to put more product in the ground. And so we may see more of this replacement infrastructure actually hitting the ground over the next five or so years. So that may be good for our business. But generally, it will not have a negative effect on our business. Our backlog in sales pipeline is in place, continues to remain strong. That 74.7 million is largely for the balance of this year and next year. Some of it may slide into 2026, but generally it's a very short-term backlog at this time. Our sales pipeline remains strong at 400 to $450 million. And within that pipeline, we're working on a number of projects, over a million, and some very large projects as well. There's no guarantee that they will come our way, but we tend to land a significant number of the projects that are out in the marketplace. Of course, in the past quarter, we completed the TSX-UP listing on July 15th. It was very well received by our shareholder base. On October 29th, we successfully completed an oversubscribed $6.6 million life financing that accomplished what we were trying to accomplish with it by strengthening our shareholder base and putting us in a strong position to pursue M&A opportunities in 2025 and beyond. This financing, of course, was led by Beacon Securities and supported by Centurion One. Of course, this stronger cash position and the already strong balance sheet that we already in place puts us in a very good position as we move forward as a company. Also adding to that is the fact that even though sales have been delayed, we're still generating our own cash and having positive cash flow and positive EBITDA. So with that, I will pass it on to MJ for a review of our Q3 and year-to-date financial highlights. After that, Grant will monitor the question and answer session for us.

Thank you, Jeff. Let's go through our key financial metrics for the third quarter. Starting with revenue, as mentioned earlier on this call, our revenue was impacted by several project delays. Revenue for Q3 was $10.1 million compared to $20.4 million in Q3 2023, a 50% decrease, and $25 million year-to-date versus $33.7 million in 2023. This is a 26% decrease. Moving on to gross margins, gross margin as a percent of revenue has improved significantly, 27% in Q3 versus 23% in 2023. This is a 4% gross margin increase. 26% year-to-date versus 19% in 2023, a 7% gross margin increase. This leads to operating income of $700,000 in the current quarter versus $2.5 million in 2023, which was our best year ever if you remember. We reported a small loss of $100,000 year-to-date versus income of $0.4 million last year. Adjusted EBITDA was both positive for the quarter and the year. $1.4 million in Q3 versus $3.2 million in 2023, that's a 56% decrease. $1.8 million year-to-date versus $2.1 million in 2023, a 14% decrease. Cash flow from operations before non-cash working capital changes, also positive for the quarter and the year. $1.3 million in Q3 compared to $3.1 million last year. That's a 58% decrease, and 1.7 million year-to-date versus 2 million in 2023, which is a 15% decrease. Cash on hand at September 30th was 9.9 million, up 8 million from September 2023, when we had 1.9 million in the bank, and up 6.6 million from December 31st cash balances. Can we go to the next slide? Thank you, Jeff. So let's look at our financial trends. Upper left corner is our revenue per quarter, still solid at 10 million, as Jeff mentioned. You can also visually see our seasonality. The construction industry is largely dependent on the weather, so we tend to be slower in the first few months of the year. On the lower left corner is our gross margin percent. As mentioned earlier, we are seeing significant improvement as we are performing well on site. On the upper right side of the slide, we have our borrowings per quarter. It has come a long way from our from 2020. Jeff just mentioned it, but finally you can see a summary of our live financing. We've raised in July, we issued 14.7 million shares with 8.2 million warrants for 6.6 million gross proceeds. If you'd like more information, you can see our documents on our website, or you can go to Cedar Place. Grant, I'll pass it back to you for questions.