CEMATRIX Corporation (CEMX.TO) Earnings Call Transcript & Summary

The purpose of today's presentation is to give our audience an introduction and a better understanding of the business through a presentation and then questions with management. We'll have a very large audience today that includes some existing investors, but mostly people that are fairly new to the company. Our webinar structure today is geared for participants that are less familiar with the business. The discussion will be led by CEO, Randy Boomhour, who is also joined by CFO, Marie-Josee Cantin. We'll break for questions at the end of the formal presentation. When we do break, we encourage questions. As a reminder, we're only going to take questions through the web portal. If you're listening over the telephone, please access the web link sent earlier to ask a question. You can submit a question using the text box within the portal at any time. I'll ask the question on the air for everyone to hear and then [indiscernible] will answer. I'm not going to reference any names, but simply read the questions asked. As we have a very large audience today, if I can't get to your question online and has not yet been addressed during the call and can't be, I'll come back to you by e-mail. I will not read the forward-looking statements, but I do state they apply, and I reference them on this PowerPoint. With that said, once again, thank you for joining us. Remember, this is fairly informal, and we do encourage questions to help you better understand the business and its growth path. And now I'll turn the call over to Randy to start his part of the discussion and presentation.

Thank you very much, Glen. Really appreciate that introduction. Great job. Yes, thank you, everyone, for joining us. We'll go through our presentation here, tell you a bit about the company and why we think it's a great investment. I've got a video at the end that I'm going to load up and show you about a current project and kind of highlight some of the key aspects of our business, and we'll hop into it. As Glen said, the forward-looking statements disclaimer applies. So I won't go into detail of that. I think everyone -- all these investors know about that. Our first slide really is just meant to sort of be almost like an executive summary. It's key investor highlights. CEMATRIX is an innovative cellular concrete solutions company. We're a leading provider of lightweight, cost-effective, durable cellular concrete for infrastructure projects. We have a very strong competitive advantage that I'll talk about here in a future slide and work primarily as a subcontractor for major North American general contractors. There's a really significant market opportunity in front of us. We're an industry leader, as I've mentioned. The global cellular concrete market for all the various applications is estimated in the billions and growing. And there's a lot of tailwinds around infrastructure spending in Canada and the U.S., in particular, due to aging infrastructure that needs to be repaired or replaced and new infrastructure to support growing populations. We're really proud of our financial strength and the overall growth trend in our business. Despite stepping back in revenue last year versus 2023, our cumulative annual growth rate for revenue growth since 2017 is 24%. In 2024, we had revenue of $35 million, EBITDA of just over $3 million and cash flow from operations of $4.9 million. This year, year-to-date as of June, our revenue is over $17 million, adjusted EBITDA of over $2 million and cash flow from operations of over $2 million. We have $8.6 million in cash and no long-term debt as of June 30, and we're forecasting to have a record year in 2025. So those are kind of the key salient points. I'd like to do a quick intro. Glen sort of introduced most of the team already, but there's myself as CEO; MJ, who's our CFO; and Jordan Wolfe, who's the President of MixOnSite, which is our largest subsidiary based out of the U.S. Our Board of Directors includes Minaz, Patrick or Rick, Steve, Anna and John. And several of our directors have been with us since the beginning since we first went public and Anna and John both joined in the last 5 years. In terms of capital structure, we have about 150 million shares outstanding, fully diluted almost 167 million shares. Insider ownership is at 15 million shares. And of those the 2 largest insiders are Jordan with just over 12 million shares and myself with just under 2 million shares. I really like this time line. I've been sort of advised a couple of times not to show it, but I just think it shows the progression of the company. It's actually really hard to start a company out of your garage into a business that's doing over $50 million in revenue. And it really just goes to show the staying power of CEMATRIX and how we survived many kind of company killer type events on a macro level. And then really, we hit an inflection point in 2023, where the business hit a record year and really became financially sustainable for the long-term. So I've talked a lot about the company. I haven't talked much about cellular concrete. So I think it's important to understand the product itself. Cellular concrete is made by mixing cement, water and a foaming agent together. The foaming agent creates a bubble structure in the mixture, and that bubble structure results in a cellular structure when the concrete sets. It's really the properties of cellular concrete that make it -- make sense in certain construction applications. And these properties include it's cost effective, which is really kind of the most important. If you're not cheaper than the alternative products, you're going to have a really hard time penetrating the market. It's low density and lightweight, has a high bearing capacity. It's extremely pumpable. It's highly full and self-leveling. It's self-compacting, has thermal insulating properties and it's durable and excavatable. And it's really these properties that make it all into the applications in the infrastructure space that really lead to the opportunities for us. These applications are listed on the right-hand side here of the presentation, and they include lightweight engineered fill, MSE retaining wall fill, lightweight insulating road subbases, flowable self-compacting fill, pipe and covert abandonments, tunnel annular grout and shallow utility and foundation insulation. We got some pictures here on the bottom, which represents some of the applications. This one on the far left is here us putting in a road subbase over weaker unstable soils there. This one here on the middle left is actually providing lightweight fill against a bridge embankment. This one here second from the right-hand side is us providing a road subbase for a slope here. And then the final one here is a lightweight fill against MSE wall. So we talked about the customers a little bit. CEMATRIX is almost always a subcontractor to a general contractor. Occasionally, we will contract directly with an owner. It's usually on small scopes of work and usually with owners that have some kind of in-house capability. So like a large industrial player or an oil and gas company or a railroad, something like that. We worked with many of the largest general contractors in North America. This isn't a comprehensive list down here in the bottom left, but it shows you some of the names that we've worked with in the recent past year. Earlier in the presentation, I talked about our competitive advantage. The #1 competitive advantage we have is our reputation. We've been successfully delivering cellular concrete solutions on time and on budget for over 25 years. And probably more important than our reputation, but it's really tightly connected is our team and expertise. We have over 200 years of in the field experience. And I really just can't emphasize enough how important that is. Our equipment is the next one, is we have a large fleet of advanced equipment for producing cellular concrete with the capacity to grow. And we think our fleet is bigger than any other of our competitors out there. Our size and scale, we have multiple locations from coast to coast. We've successfully completed projects across Canada and the U.S. And then lastly, we're more sustainable. We're generally more environmentally friendly than the legacy products that we replace. So this is always tricky, but it's super important to talk about. Ideally, the best way to determine the size of the market would be to go and add up each individual opportunity in the marketplace for a year and then add those up and see what it totals. While that sounds good in theory, in practice, it's almost impossible to do because you just don't know if you see them. So we sort of rely on third-party data to estimate the size of the global market. The estimates vary quite considerably. We've seen ranges from as low as $4 billion from market research future to as high as $27 billion from allied market future or market research. Now these estimates are worldwide. They're for all applications of cellular concrete. And obviously, we don't compete in all worldwide markets, and we don't do all the applications for cellular concrete. But I think the point of the data is more to say the market for cellular concrete is pretty significant and it's growing. In addition, cellular concrete can replace other lightweight fill products or competitive products for us, and that just makes the market a multiple size bigger than just the cellular concrete market. In terms of opportunity, we mentioned it earlier, but infrastructure spending in Canada and the U.S. is increasing. And that's because infrastructure needs to be repaired and replaced. Populations continue to grow, and that's going to require new infrastructure, and it just places additional load on existing infrastructure. So because of these 2 things, we expect spending to increase now in the present, which we're seeing in terms of the number of bids we're able to bid on, and we expect it to continue into the future. And these things will provide a significant tailwind for our business. So in terms of company financials, I think it's just important to talk about these things. We used to always just focus on the numbers. But on the right-hand side here, we got some insights that we want to share with investors and potential investors to help you understand the business better. But before I get that, I'll just touch on the highlights here on the left is we did have a step back in 2024 revenue versus 2023, but the overall trend line is one of growth. And we've got a great chart here that MJ is going to show you on the next slide that really just demonstrates that growth line. Since 2017, our business has grown by 24% on a cumulative annual growth rate. And we're forecasting that 2025 is going to be a record year. We have a positive bottom line. We're generating cash. So adjusted EBITDA was $3.3 million in '24. Cash flow from operations was $4.9 million in '24. We've got a healthy balance sheet with $8.6 million in cash with low leverage because we have no long-term debt as at Q2 2025. So some keys to understanding our business as an investor is the revenue growth will be lumpy. So many times I've talked to investors who are hoping that CEMATRIX is going to be like System as a Service or a software company where the revenue is going to grow 10% every quarter. But unfortunately, our business just doesn't work like that. The financial results are going to be variable based on the timing of when large projects start and stop. Construction also is a seasonal business. So most of our markets where we have the biggest presence are markets that experience winter. As a result, construction slows down in the winter and speeds up in the non-winter months. So in Q1, our revenue averages 18% over the last 5 years, Q2, 18%, so about 36% in the first half of the year, 36% in Q3 and 28% in Q4. So roughly 1/3 first half, 2/3 second half. And again, I caution you, these are just averages. Obviously, each year, the numbers are going to be higher or lower depending on what's happening. We are a specialty contractor. That means margins tend to be higher than general contractors because we have more bench time and more fixed costs. So you have to have higher margins to cover those off. Project size definitely impacts margins. Larger projects have more competition. And as a result, the margins are lower. I think it's also important to note that we have excess capacity, which enables us to do significantly more revenue with existing equipment and staffing levels. We have more excess capacity on the equipment side than we do on the staffing level side, but we could easily do 2 to 3x the revenue that we're doing currently with existing equipment. And if we were to double revenue, we'd have to maybe increase crew staffing by 20%. So not a significant increase compared to the overall revenue increase. So with that, I'm going to turn it over to MJ to just really briefly touch on our Q2 highlights before we go on with the rest of the presentation. So MJ, over to you.

Thank you, Randy. Good afternoon, everybody. I'm not going to go through all numbers on this slide, but what's important to note is that we had a record first 6 months and a record quarter. All metrics are up compared to the previous year. So looking at revenue, we had $17.3 million year-to-date gross margin, 30% of revenue, and I'm going to show you graphs for both revenue and gross margin on the next slide. Operating income is positive at $1.1 million. Randy touched base on the seasonality of our business. So having positive operating income in the first part of the year is great. We also have positive adjusted EBITDA of $2.4 million year-to-date. We have positive cash flow from operations of $2.3 million year-to-date. And as Randy mentioned, we had about almost $9 million in our coffers of cash on our balance sheet. Looking at the graph on the left-hand side, Randy mentioned that our trend line is growing. You can see that at a glance, but just to point out that in orange is the first 6 months only and the other bars are full year numbers. So as you can see, we did $17.3 million 6 months -- the first 6 months, and we almost did the same volume in 2018. And as I mentioned, the trend line is going up even if we had a step back last year. So 24% if you do the CAGR since 2017. Gross margin, again, the orange bar is for the first 6 months, 32% of revenue, and it's largely primarily driven by the higher revenue in our project mix. And the dip that you see mid-graph around 2022 is when we had the pandemic, and we had some supply chain issues and some cement shortages. A picture is worth a thousand words. You can see on the bottom, our debt and interest. We made significantly progress like significant strides since 2018. We reduced our interest cost by a lot, our debt by a lot. And then right now, we have an equipment loan that's outstanding on our books. So pretty great progress for us. We cleaned up our balance sheet. For our share structure, so at the end of Q2, we had 150.2 million shares outstanding. For the first time in the history of the company, we reduced that number with the normal course issuer bid or NCIB. We purchased back 700,000 shares in last quarter. From a potential dilutive instrumental outstanding, we have $5.9 million of options, 2.4 million restricted share units, $8.2 million in warrants for a total of $167 million. The warrants are set to expire in July of 2026, and the price range for those is between $0.45 and $0.60. Moving on to our backlog. Our backlog continues to grow with our sales success, which is great. And at the end of the quarter in 2024, we had $69.6 million in backlog. And for Q2, we ended up the quarter with $76.4 million. So it grew despite our record sales. We announced since the beginning of the year, $43.6 million in new project awards. The most recent awards was done last week. We announced $11.9 million. Some of these awards are going to start in 2025 and 2026. And then these awards are also tied to numerous or various applications for our product. Randy, I'll pass it back to you for some closing remarks.

Perfect. Thank you, MJ. Good job. So I always kind of want to end with just why should you invest? Why CEMATRIX versus your other choices? So number one is we're an industry leader. We're really well positioned to capitalize on the large opportunity in the growing infrastructure construction segment, which we talked about. We are a growth company. We have growing revenue, as we've mentioned several times, 24% annually per year since 2017 with positive adjusted EBITDA, positive cash flow from operations and a strong balance sheet. We've done some searching. And if you were to look in the Canadian public market space for a company that has revenue of greater than $50 million with positive EBITDA, positive cash flow, but a market cap under $50 million, you'll only find one company that fits those 4 criteria. It's CEMATRIX. That leads into my third point, which is we believe that we're currently undervalued based on traditional valuation metrics, whether that's a forward multiple of revenue or a forward multiple of adjusted EBITDA, we think we're undervalued. There's no new capital raises required to fund the burn rate. The only new capital should be in support of an accretive acquisition. And this leads to the last point is we have capital to deploy. We have cash sitting on our balance sheet. Our balance sheet has very low leverage. So we're looking for opportunities to continue to grow organically and via acquisition if the right opportunity shows up. We're not going to do an acquisition just to do an acquisition. But if it's accretive and it makes sense, we're absolutely going to look to do that. On the right-hand side here is our Investor Relations contacts. And then at the bottom right here is our analyst coverage. So we're covered by Russell Stanley at Beacon Securities, who regularly puts out research on the company, which can help provide a third-party independent view of the company. So that's the end of our presentation. Before we go to the Q&A here, I want to basically share a video of you -- a video of CEMATRIX with you that shows us working at the North Carolina project. For those of you that have been following us for a while, we've been talking about the North Carolina project probably since 2020, and it finally started for us this year, which was a great relief to us. And it really just highlights some of the key aspects of our business. So I just want to stop here. I'm going to load up this video real quick and show you guys. I'm going to turn down the music. The music is kind of loud and obviously, it's not that important to the actual content of the video, and I'll stop the video in certain places to highlight things. In order to highlight those things, I'm going to use my mouse. I'm hoping that you guys will be able to see my mouse here as I move it around. So give me 1 second here while I do this. So I'm going to stop sharing that. I'm going to share the video. And then I'm going to play this. I'm going to turn down the volume a little bit because as I say, the music is a bit loud. Here we go. So this is actually a great shot really just to stop here right at the beginning. So you can see here what we're doing is we're building up cellular concrete here heading into a new overpass, where the crane is, is where the bridge deck is eventually going to go, and they're using cellular concrete to build up the approach to these overpasses. This project in North Carolina has 5 different bridges that we're doing, and so we're doing each side. And so here, you can see the different lifts heading up to the top, and we're doing the exact same thing on the other side. So this is a great shot of our equipment here for mix on site. And you can see here, we actually have some Pacific International Grout equipment here. These 2 cylinders here at the bottom left, just bottom center, these are called guppies, its essentially portable cement powder storage. It goes from the guppies into the silos here and then from the silos into our actual production unit here, which is on the other side of the silos. And you can see here, this is a cement bulker pouring into the guppies to assist production. And essentially, what happens is we run a line and the line comes back here and goes back away from where the camera is standing here. So this is also a great demonstration of what the product looks like as we're pouring it out. Once the video plays here, you'll be able to see it a bit more. But essentially, when we're pouring the product, it looks much like -- almost like a milk shake when it comes out. And so you can see here where we've done pores and cells on either side, and now we're filling in one of these middle cells. It is also kind of -- you can see the high bearing capacity that I talked about, and you'll see it a little further up here. If you look at kind of top center, you can see a small excavator, which is actually sitting on our material here after it's been poured. So that's it for the video. So Glen, I'll hand it over to you for the Q&A section.

Super. Thanks, Randy. Thanks, Sanjay, for that. Tons of questions in the queue already. And again, to our audience, if you have a question, please use the Q&A text box. I noticed a couple of you guys raise your hand. I can't really speak with you over the Zoom portal live. So use the Q&A section to ask a question. So we'll get going. Randy, could you please provide some insights into your supply chain? Specifically, what are the key input materials that are sourced for your finished products? And are you currently facing any supply chain challenges?

Yes. I mean if you go back to kind of how cellular concrete is made, right, it's cement, water and foaming agent. So the 2 key components are foaming agent and cement or ready-mix. So in -- and basically, none of those categories are we experiencing any type of supply chain challenges. I would say that word kind of got a lot of airtime in 2022, but it's not really a relevant risk to us in 2025, and we don't see it being a relevant risk going forward.

Got it. And what about inflation, either inflationary or deflationary input prices right now in your product mix?

Yes. I wish we saw deflationary input pricing, Glen. We don't really see that. Cement is a commodity. So in theory, it should be subject to that. But there's a lot of stickiness to prices, especially when they want to -- when they should be going down. So we do see inflation. Whenever we have a large project, we lock in the price of cement to match what we bid. So we don't ever have exposure on the commodity side there. Where we probably see the most pressure on inflation really is around labor. Our labor is concentrated in some pretty tight labor markets and really kind of getting back to our key competitive advantage, it really is our people. And so we have seen some inflationary pressure on the labor side. We're doing other things to control costs, though, that's really kind of helped mitigate our overall cost increases, especially when you look at our overall SG&A increase versus last year.

Okay. Super. You mentioned foaming agent. Is there any proprietary technology about your foaming agent or the process involved in its creation and additional -- in addition to the concrete, is there any IP protection around your product set?

Yes. So we have our own in-house proprietary foaming agent formula, which basically the biggest advantage is, it provides us a cost advantage. You can buy commercially available foaming agent that works very well for cellular concrete from 2 different suppliers out of the U.S., both of which we also buy from so that we understand the properties of it. And so really, the IP for us is the combination of all those things. It's the experience, it's the equipment and it's the foaming agent. It's the set of all things and how they work together.

Okay. Super. Do you have a favored relationship status with any of your general contractors? Or with how many of them do you have those long-standing relationships? Are there 1 to 3 general contractors that you're targeting to make a breakthrough with to land new customers?

So we don't really have favored status. I'm not sure exactly what the investor means by that, but that doesn't really exist. So we're a specialty contractor. So we could work with a general contractor 3 times in a row, and then they could do 6 projects in a row that don't require cellular concrete. So it's not like regular concrete where you need it for every project or site preparation where you need it for every greenfield. Really cellular concrete, it has to be a specific engineering need for it to be applicable in that project. And sometimes there just is no need. So for us, we have business development activities with owners, with general contractors, with design engineers. We're talking to all the people that could be involved in a project and try to establish relationships. But more importantly, to just let them know that cellular concrete is an option for them in their geotechnical challenges, and it could solve problems for them. And that's really where we focus on.

Under what circumstances is cellular concrete not the best option?

Well, it's usually cost, right? And so -- or if there's no weak or unstable soil. So I occasionally go and look at the investor tap boards and I'll see things like, well, why don't they use cellular concrete for every road in North America. And the answer to that is simple. It's just too expensive. But where you do have a road that goes over a weaker unstable soil, that significantly reduces the longevity of that piece of road. And so in that case, spending the extra money to have a cellular concrete base makes a huge difference in the total cost of ownership of that road. And so in that situation, cellular concrete makes a ton of sense. If you have a situation where you could just replace the in-situ excavated dirt because there's no load considerations, then that's obviously much cheaper than cellular concrete. So again, we wouldn't win in that situation. So it really just comes down to practicality and cost and then where you have certain geotechnical challenges where cellular concrete can solve those for you.

You talked a little bit during your formal remarks about your utilization capacity. Can you talk about how many production facilities you currently operate? And what capacity of utilization do they operate at? And I had a separate question allotted to this is, given your Q3 is your sort of busiest period, can you talk about your utilization capacity in Q3?

Yes. I mean, for competitive reasons because we're the only public company in this space, we don't share how many units we have, and we don't share the utilization of those units. What I will say is we're pretty busy this third quarter. I don't know if we're as busy as our highest ever third quarter, but we're pretty busy. And right now, utilization in Q3 is very, very high for equipment and crew.

Can you drill down on the competition you see in the cellular concrete space? And I guess what other cellular concrete providers are you competing with when you're winning projects?

So in Canada -- because every market is different, right? Like often, I think people are looking for me to make one statement that kind of fits every situation, and it never works like that. But in Canada, there's very few large cellular concrete players. We believe we're really the only large cellular concrete player. So in Canada, the biggest competition we have is alternative products. For smaller cellular concrete jobs, there are small true mom-and-paw businesses, businesses that are doing less than $1 million a year or $2 million a year, and they would compete for smaller jobs and often be able to win those because of either mobilization costs or just overhead. In the U.S., the market is different. In the U.S., there are 5 or 6 significant -- significantly sized cellular concrete players, not mom-and-pop shops. So you're talking about companies that are doing more than $10 million a year. And so there, we're competing against other cellular concrete companies, and then we're also competing against other lightweight fill materials. And so the competition there is it's different. Competition is always bigger or more stringent on larger projects because your cost to mobilize becomes very small over the total size of the job. For small to medium-sized projects, competition is tougher because the mobilization cost into a market or an opportunity can be a significant portion of the total bill. So being local actually helps quite a bit.

I'm going to read this question and I'll probably add to it. So the question is, what is the typical time line from a project award to completion? And then maybe myself from experience with you guys, talk about the scale of projects is that I think that sort of plays into that.

Yes. And so -- and then people hate this answer, but unfortunately, it's true is, it depends, right? So sometimes I could put out a quote today and go do the work in 2 days. It can be that quick. That's almost always a very small job. For any job that's super large, there's always going to be a procurement process that's followed. So those projects doesn't matter if you have "favorite status", doesn't matter your relationship, those are always put out to bid to multiple suppliers. And so that process could take 3 to 12 months to get that sorted out. Then sometimes there could be permitting challenges that takes longer. And then it depends where is our scope. So if we're talking about filling behind MSE panels, our scope of work is kind of near the middle of the project. If you're talking about grouting a tunnel, our scope of work is right at the very end. So the North Carolina project, for example, we bid that first in 2019, and we're just doing the work now. It's going to continue into 2026. before it will finally be done. That's obviously the exception, but it just highlights how long it could be. And so the answer is it truly depends. It depends on how big it is, and it depends on what the application is.

Okay. Since you mentioned the competitive nature of larger bids, what are the moats or competitive differentiators versus peers that protect the margins and returns over the long term of your business as a whole?

Yes. So I mean, the #1 thing is you have to be cost competitive, right? Like I think investors are always looking for some kind of moat where people will pay more. But it just doesn't work like that in construction. You have to first be price competitive. And then after that, you have to have a history of doing what you say you're going to do. So if you say you're going to fill that and you're going to do it in 10 days, it better meet the spec and you better be done in 10 days. And that's why I get back to, and that's why we spend time upfront on the competitive advantage is the reputation and the experience is super critical because if you go and say you can do it in 10 days and meet the spec and you miss that, well, you're not going to get another opportunity with that general contractor for 5 or 10 years, basically until the people turn over there. So being able to execute in the field is absolutely essential to what we do.

I've had a few questions on this topic. The topic is data centers. So I guess the question is, are you benefiting from the construction or the boom that we're seeing in data centers? And do you play a role -- any role in those?

Yes. There's kind of a couple of hot buttons for investors these days, right, that are sort of evaluators or valuation inflators, right? It's like AI, it's crypto and it's rare earth minerals. And so like one of the -- I get this question a lot actually around data centers. And again, it really boils down to are there situations where there's weaker unstable soils where those data centers are going in or are there geotechnical challenges where you need to reduce the lateral or vertical load in the application. So if those 2 situations exist, then yes, there's a potential for work for us. If those 2 situations don't exist, then there probably isn't an application for cellular concrete. And so again, it's not one of those situations where you can say, if a data center is being built, there's a cellular concrete component. It doesn't work like that. It really depends on the geotechnical situation.

Have you seen any impact or do you expect to see any impact from tariffs?

No. So we've talked about tariffs multiple times. There's very little of our business that crosses the U.S.-Canada border. The only thing that might cross it occasionally is a part or a spare part for our equipment. But that's a very minor portion of our expense. The one part of tariffs that we hadn't really thought too much about, but the North American cement market is not self-sustaining, meaning they have to import cement to meet the demand. So if the U.S. were to impose tariffs on, say, Greece or Turkey or some cement producing country and bringing that cement into a local market where we're trying to procure cement, we could see a price increase. But as I mentioned earlier, whenever we bid a project, we get a firm price from the cement supplier and we lock that in before we basically give a bid to the customer. So we're protected. So bottom line for us, tariffs are really a nonissue other than the overall sort of macroeconomic concerns it creates for business in general.

What is your general M&A philosophy? What would an ideal acquisition candidate look like? What multiples are paid in your industry and you would consider paying? If you could address that. We've got a few questions around this topic. So general M&A.

Yes. So again, I don't won't get into specifics of our strategy, but -- or multiples. But I will say that the first target would be one of these large cellular concrete companies. So that's our core business. It's what we know the best, and that would be the ideal target. There's about 6, maybe 7 companies that fit that profile. Now we've talked to all of them at some point in the past, whether it's 5 years ago or in the last year. And our general sense is none of them are for sale. But that's where we're going to start. But in order to actually start those conversations, the first thing we had to do is deliver this year and fix our share price because when we do these deals, we want to have a component of that deal that is based on equity. But where the equity was priced in the recent past, it was just so cheap, it wouldn't make sense to do that. It would be super dilutive. That said, if we can't buy one of those companies, the second tier or second tier of ideas we would look in as a company that does something similar to us in a market that we're really interested in. So an example would be someone that's doing chemical grouting in a market like Florida maybe or Texas or on the West Coast, that would be the second. And so in those situations, we would look to place cellular concrete in there, leverage their customer relationships to grow cellular concrete in those markets and then also look to take their expertise and knowledge with whatever the core business they have, whether it's chemical grouting or contact grouting or whatever it is, into our other businesses and maybe grow in those markets -- some of those markets. And then the third thing that we would consider after exhausting the other 2 tiers would be another building material technology. And so we tried to do that actually 2 years ago with our investment in Glavel. Glavel, as you know, is a foam glass aggregate company, another lightweight filling material. They have the advantage of being perceived as more green because of the nature of them using recycled glass as the key input into their product. But unfortunately, Glavel's need for capital outstripped our ability to provide it. So our path to owning 51% of that doesn't exist anymore. But we would consider an opportunity like that. But if did it, we would look to buy the whole thing, not do what we did with Glavel. So in a nutshell, Glen, that's kind of -- those are the types of companies we're looking at. Ideally, we would be looking at buying a company somewhere between 4 to 6x EBITDA, something like that. But it really just depends. If we thought the opportunity was exceptional in some ways, maybe we will pay more. If we thought we could be opportunistic, maybe we would pay less. It really is -- it's really hard to say. It's not like we do 10 acquisitions a year and have a formula. It's really very situational.

And I guess on this topic, would you consider acquisitions or growth outside of the North American market?

Yes, that's a good question. So the bottom line is we're paid to kind of consider and look at almost everything. We try to be very ruthless and not spend time on things that we don't think have a chance. And so my honest answer is I think the Canadian and U.S. markets provide enough opportunity for us to grow here in the short term without having to look beyond those.

Okay. Can you describe your current sales force and the sales process to secure a customer?

Yes. So again, because we're the only public company, we won't get into a lot of details on our sales force. But I would -- basically, the way we classify it is there's 2 categories. There's chase the bid, which is looking for public procurement opportunities, where the advantage of that is they're easy to find. The disadvantage to that is they're also easy to find for our competition. So it means that if you're bidding those works, there's multiple competitors that are in there with you. But it's a very good way to win business, especially if you're perceived as a market leader, which we are, and you're competitive on price and you have a history of delivering for your customers. So we often think we do pretty well there. The second is, and it's tougher is what we call strategic selling. So strategic selling is really that business development aspect that I talked about earlier, where we're out talking to design engineering firms, where we're out talking to other general contractors, where we're doing lunch and learns for different contractors or engineering offices. We're essentially trying to spread the word about cellular concrete and why it works. And some people seem to think if you do one project with Bird or Aecon or whoever fill in the blank, that everybody in that company knows you, but it doesn't work like that. Those companies are filled with people. So even if you do one successful project, that project team may know you and love you, but you still got to keep interacting with that general contractor, keep doing lunch and learns so that more people in that company are aware of cellular concrete and where it could benefit them in their business and their projects.

Are there any geographic areas across North America that account for most of your business? Are there any new geographies that you're targeting in the next year or 2?

So if you were to look at our financial statements, we shown the split between Canada and the U.S. About 20%, 25% of our business is in Canada and about 70%, 75%, 80% is in the U.S. And again, like anything, it varies year-to-year. In terms of concentration in the U.S., it's essentially more concentrated around the Midwest and the East Coast. And again, that has to do with that theory that I shared with you guys earlier about sales success. So you're going to have more success in small to midsized projects, the closer it is to your home base because of the cost to mobilize. And then you can mobilize a large project anywhere. And we've done large projects literally in, I think, all 50 states. So that's really how the sales break down.

And can you or do you break out, I guess, concentration of revenue per customer in terms of your top 3, top 5, top 10 customers?

We do not break that down, but we don't have significant revenue concentration by customer. And it just gets back to what I talked about before is, you could do a really big project with somebody in 2024 that required a lot of cellular concrete for grouting, and then next year they might not have a project for us. So our customer mix changes quite a lot year-to-year. We do have reoccurring customers, but they're not every year.

Okay. Randy, what do you see as your greatest challenge in growing the business profitably? What, if anything, keeps you awake at night? And what competitive products are out there that you're most -- that you most respect or fear?

Yes, it's a really good question. Several good questions in there, actually. The first is some people get afraid of competition and they think competition is bad. From my perspective, I love competition, especially if it's good competition. which may seem odd to some people. The reason why I love that is because in procurement processes, they never want to see a situation where there's a sole provider. That makes people who buy things very nervous because they're like, well, what happens if something happens to company X to provide this, what do we do? So they always want to see other competitors where they could get the product from. So that -- to me, that's very important in those processes. The second thing I like about other competitors is that's somebody else out there helping us spread the word about cellular concrete. It's somebody else out there delivering successful cellular concrete projects. And the reason why I like that is because I'm pretty confident that when we go head-to-head with them, that we can do better than them because of the competitive advantages that we have listed previously. So I won't repeat those. But essentially, for me, competition is a great thing, and I'm not worried about it. I don't really worry about other competitive products per se. Like we're a niche product, and that means -- when you hit that specific niche where cellular concrete makes sense, it makes sense because we're probably the only product that can fit that situation. So if that's having to grout a tunnel underground where you have to pump long distances, there's not many alternative products. So I'm pretty confident about our ability to be successful there. If you talk about lightweight fill behind the MSE wall, there are other products that you could use like EPS block or a Foam Blast aggregate, but cellular concrete is often chosen again because of its properties. It's easy to install, it's quick to install and it has a high load-bearing capacity. So I'm really confident that when cellular concrete makes sense, we'll be competitive. And so I don't really stay up at night worrying about competitors or competitive products. That's not what keeps me up at night.

You guys recently had a CEO transition, obviously, from Jeff to yourself. Can you talk about how your vision is different than Jeff's in any way?

Yes. Great question. Thanks for that, Glen. So like Jeff and I worked together for about 4 years. And when Jeff hired me, he hired me with the plan to someday take over for him, assuming things went properly. And obviously, they did go properly in terms of his point of view and the Board's point of view. On all the major things, Jeff and I were highly aligned. And that's why since Jeff's left, you haven't seen massive changes in terms of how the company operates or the things that we do. There are subtle changes in terms of how we communicate. One of the essential characteristics of an entrepreneur is you have to be an optimist. You have to be able to sell the future and the future is great. And Jeff was so good at that. But sometimes that would get in the way of kind of accurate forecasting. And so we're also trying to be more direct and more honest with investors even if we think they won't like it. So there are some things that we say that we know people aren't going to like, but we're saying them anyway because that's what we think is going to happen or that's how we think it works. And that's just part of being more honest and direct. But on all the major things, Jeff and I are highly, highly aligned. And so investors shouldn't expect dramatic changes. What they should expect is we're going to stick to the plan, and we're going to profitably grow this company.

Does the company have any strategic alliances related to sales or inputs?

So we have a strategic partnership with Lafarge or Amrize now in Canada. And that relationship was really important in the early days in terms of getting access to some customers and getting access to cement or ready-mix in the early days when people weren't so sure about cellular concrete and how it worked, especially in Canada. But outside of that, we don't really have those alliances. And honestly, we don't really need them. That's not how this business works, and it's not how it's grown. I go back to the way to grow this business is through alliances, it's through executing in the field and doing a good job. So you create a success loop with the customer. And it's just ensuring as many people as possible know about cellular concrete and know that it's an option for their geotechnical challenges.

You mentioned during your presentation that you reached an inflection point that take you into financial sustainable future. What drove that inflection? And what gives you the confidence that this is not a temporary boost?

Yes, that's another great question. So really, what happened is there's a certain amount of fixed costs associated with, a, running a cellular concrete business because of that bench time, because of the investment in equipment, because of the investment in shops and location. And there's also a certain amount of investment and fixed costs associated with being public. And so we need a certain amount of revenue, and it's probably between $25 million to $30 million in revenue to pay for those fixed costs. Once we get above that revenue level, all that extra project margin starts to fall to the bottom line in the form of EBITDA and cash flow. And so that's really what's changed. And again, a lot of people told me 2024 wasn't a great year. And I personally found that pretty offensive because 2024 was a great year, and we proved that even on a down year, we are actually still able to have positive EBITDA and still have positive cash flow from operations. And so at the end of 2025, we will have demonstrated 3 consecutive years of positive EBITDA and positive cash flow from operations. And so that's why I look at 2023 as a true inflection point and true change in the business and not just some temporary onetime fluke.

Okay. Super. Now we do have quite a few financial type questions here, and I've sort of been saving them. We've got about 11 minutes left to go in the queue. So I'll start to get to those questions at this time. How do you recognize revenue, when your bid is accepted or when you start a project or when you finish a project? And does cellular contract have the same life -- sorry, the cellular cement, I think that have the same as traditional contract -- concrete?

Yes. So in terms of revenue recognition, we recognize revenue when we put product in the ground. So we don't recognize it when we sign the contract. We don't recognize it at the end. It's basically as we work, we recognize revenue. And most of our projects are fairly short in nature. So they might -- almost all of them would start and finish within a month. So revenue recognition is pretty simple, where you get a longer project like North Carolina that would span multiple months. As I said, again, it's how many cubic meters do we place in the ground, what's the cubic meter, cubic yard worth, and that's the revenue we recognize.

Can you talk about any short-term or long-term debt and its structure?

Yes. Why don't I hand this one off to MJ.

The only debt that we have right now is the equipment financial loan. It's about $1.6 million. And I think one of the questions was about the short-term portion of it. So it's roughly $100,000 that we have in short-term debt. Other than that, we don't have any debt.

Okay. How do you -- how do your gross margins compare to those of your peers? And where do you see opportunities to enhance margin performance going forward?

Yes, great question. Honestly, I wish I knew the answer, Glen, right? As I said kind of multiple times in this call, we're the only company that's public in this space. So I literally can't tell you what the margins are from our competitors. I can tell you in terms of price that we're competitive, but I don't know their cost structure. In terms of improving our margins, we kind of look at 3 things is, one, we look at how accurate and how well are we doing at the time of the bid estimate. So our costs coming in the way we expect. Two, are we doing things to execute in the field to help our profitability? So if it's a 5-day job, we bid it like that. Can we do it in 4 days and save the customers some money and we make some more money for ourselves. And then the last one is just understanding the situation. So if it's pretty much an open pour, large volume open pour where there's not a lot of technical expertise needed other than you need the equipment to do the volume, and you know what's a chase the bid situation where you could have all 6 of the largest other companies there, well, you're going to have to be pretty tight on the margin to win it. If it's a situation where you need to pump extremely long distances, and we think maybe we're the only company that can do that or there's some kind of technical expertise where it's not just straight and you need to kind of understand that, then we can -- in those situations, we can demand and get a higher margin and get paid for that expertise. So we're basically trying to improve margins on 3 different fronts.

Can you talk about how much business do you have booked for next year compared to this time last year?

Unfortunately, I can't. We haven't really gotten into the 2026 planning cycle. And honestly, even if I had that data, I wouldn't share it here because we don't provide that type of data, and we don't provide that type of guidance. I will say, looking at 2026 based on our backlog of projects, I feel pretty confident it's going to be a good year for us.

You said that you're expecting record revenue in 2025. Are you expecting record to go along with that?

Well, I don't think we've ever said record revenue, Glen. I think what we've always said is we're going to have a record year. And so I do think that we're going to have a record EBITDA and income to basically match that statement.

Can you talk about big projects over $10 million that are in your bid pipeline and quantify them in any way?

Again, we're not going to do that for competitive reasons. I will say a project over $10 million is rare. We don't see very many projects that size. We have bid on multiple projects of $5 range around that size, and we've been relatively successful with those projects.

Okay. Can you mention when did the North Carolina project become part of your backlog? Or when was it awarded?

So it was awarded in, I want to say, November or December 2020, around there, sort of late 2020.

Can you touch on why 2023 was such a particularly high revenue year?

Yes, great question. I've got this multiple times in other situations. And I think it really related to COVID and then the supply chain challenges. And then what happened was once those restrictions lifted and the supply chain sort of sorted itself out, all of a sudden, a whole bunch of projects kind of got greenlighted and started all in 2023. And it was essentially pent-up demand or pent-up contract start and a lot of these things just kind of came on. And one of the things that really helped us was the push in Canada to get the Trans Mountain Pipeline expansion done. And so we really got a lot of work by being a part of that project that really helped push up our 2023 results.

Can you comment on what your current publicly announced backlog is and how you calculate backlog?

Yes, I'll turn it over to MJ again.

So our current backlog is at $76.4 million as of Q2, and we calculate backlog when we have a project that's awarded. That's when we add it to backlog.

Can you talk to the executive compensation of the company, the structure and what are the performance incentives?

Yes. So the company very much believes in pay for performance. If you look at our management information circular, it can be a bit misleading because 2023 bonuses are paid in 2024. And so some people interpret that, oh, they got big bonuses for 2024, even though that the results went down. But that pay actually relates to 2023, which was a record year. We basically target base salaries at 25% of the -- our peer group. So again, not targeting the upper range and the way senior executives do well is they have to perform in the business. And we try to make sure we have high alignment with shareholders. So many of our bonuses actually aren't paid in cash, were actually paid out in stock-based compensation awards.

You have announced a share buyback program. Are the 700,000 shares that you've announced, are they canceled after the buyback? And can you just talk about your overall strategy and use of capital in your share buyback?

Yes. So the share buyback really kind of serves 2 purposes. One is we've been telling people that we think the shares are undervalued. So the NCIB, the purpose of it, one of the reasons why we do it is to put our money or the company's money where our mouth is. And so we actually actively went out and bought those shares because we felt like they were good value for shareholders, one of the best values possible for shareholders. I'm sorry, what was the other part of the question, Glen...

I guess just your overall strategy and thoughts around the buyback.

Yes. So -- and then in terms of the overall strategy and in terms of capital allocation, I think both MJ and I would like to see the company do more of those, but the Board has taken more of a conservative approach and has asked us to preserve that capital for a possible acquisition. But I would like to say doing some form of NCIB every year would be part of our overall capital allocation strategy.

Are there any medium-term financial goals that you can share or any financial KPIs that you're looking to improve?

Yes, it's a great question. I mean the main KPIs that we follow internally are the same ones that we show investors. And so if you think back to that slide that MJ talked about of the key highlights from Q2, those are really the things that we focus on, right? So it's revenue and is it growing? It's gross margins and are the gross -- do the gross margins make sense. At some point, gross margins plateau, right? They're not going to increase forever. Business doesn't work that way. They're going to plateau. And then we look at operating income. So -- and as part of that is SG&A. So are we controlling SG&A while still delivering revenue growth and gross margin improvement because you'll see lots of companies that will double SG&A for like a 10% revenue increase. And to me, that doesn't make any sense. We're not going to do that. And then lastly, we're looking at EBITDA. And really, that's the one that matters the most to us for running the business. So I could probably sell a whole lot of cellular concrete if I didn't really care about making money. But what I really care about most instead of just top line growth of revenue is making money. And so that is the #1 metric that we focus on is EBITDA and then cash flow from operations.

This question, I think, is more for MJ. Can you just discuss the capital structure of the company right now, including any warrants or other securities that play into that?

Yes, I can go over what I mentioned earlier in our call. So we had 150.2 million shares outstanding. We do have some options. They are ranging between $0.18 to $0.59. We have about $5.9 million of those. RSUs, we have $2.4 million. The life warrants, there's 2 buckets, one for the people that purchased those and some broker warrants. The broker warrants at $0.45 and the other ones are at $0.60. There is more information on our financials, if you want to look at it. I think it's Note 12 from memory. But yes, they're set to expires -- expire, those warrants in July of next year, 2026.

I'm just doing a time check. We've got a couple of minutes left. So I'm going to ask one additional question that I think a few people brought up here. I think most of the questions have been answered. If they haven't, please e-mail me. And then Randy, I'll ask you for some closing remarks. So the last question is, are you finding any use cases for AI internally, perhaps increased productivity in sales, supply chain management or any application of AI into your business?

Yes. And I'm always hesitant to this because I don't want to be accused of like AI washing, but AI is definitely making things easier. So one of the places where I think AI has made the biggest impact for us is just contract reviews. So we use an AI tool now to review every contract in-house, which saves a ton of time reading. And we know by doing that, that we're hitting and finding the key causes that tend to provide got you moments later on. So that's one place. We also see it providing value on the sales side, either tracking down leads or tracking down people with the right title or just helping our sales guys write proposals or write letters to customers. So those are 2 tangible places. I would say, in each of those cases, I'm not sure that, that's actually saving money per se, but it's definitely helping us better manage those risks and helping us do a better job of presenting our -- from an outward-facing point of view.

Really appreciate it. Great presentation and fantastic Q&A sessions from our audience and obviously, yourself and MJ. Randy, maybe some closing remarks, and then we'll end the call.

Yes. I just wanted to say, first, thank you, Glen, really appreciate the opportunity to do this and to reach out to this group of potential investors and current investors. Very much appreciated. And I just want to say from MJ and I's point of view, we've never been more excited about the future of the company and the prospects for this year and going into next year. We're just -- we've been able to kind of stack up a lot of successes kind of in a row. And I think we're starting to people that we're going to do what we say we're going to do. And that's really what we want to get across, I guess, is that we want investors to have the confidence that when we say we're going to have a record year that we're going to have a record year. And then also let investors know that even in a down year, you're still -- we're still going to be a company that produces cash flow and generates positive EBITDA. So really excited about the future. And yes, couldn't be more proud of what we have accomplished so far.

Thank you. Thank you, MJ. Thank you, Randy. Thank you to our audience. This concludes this presentation.

Goodbye.