CEMATRIX Corporation (CEMX) Earnings Call Transcript & Summary

[Technical Difficulty] 2026 financial results conference call. Joining me on the call today are Randy Boomhour, President and Chief Executive Officer; Marie-Josee Cantin, Chief Financial Officer and Jordan Wolfe, President of MixOnSite. After management's formal remarks, we'll conduct a Q&A session. We'll take covering analyst questions live via the online stream to the webinar portal and all other questions through the Q&A text box if you could see in the bottom portion of your Zoom window. Before we begin, I'd like to remind everyone that today's call and the accompanying presentation contain forward-looking information within the meaning of the applicable securities laws. These statements reflect management's current expectations and assumptions and are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those we discuss today. The complete forward-looking statement disclaimer is set out on the slide now displayed and the presentation is also available on our website at cematrix.com. For a full description of the associated risks and assumptions, please refer to our 2025 management's discussion and analysis and other filings available on SEDAR. We undertake no obligation to update these statements, except as required by law. Today's discussion also includes certain non-GAAP measures, which are defined and reconciled in our MD&A. With that, I'll turn over the call to Randy. Randy, please go ahead.

Thank you, Glen. Very much appreciate the introduction there. We're going to go through our entire deck. The first part of the deck is designed for potential shareholders or potential investors. Obviously, I think most of the people on the call here are already shareholders. So we're going to go through that part relatively quickly, then we'll get into the quarter. Then we actually have a short video to play after the presentation to give our investors a glimpse of what we're doing at North Carolina, and then we'll get into the question and answers as Glen talked about. So I'm going to turn the first part over to Jordan. Jordan, over to you.

Thanks, Randy. So cellular concrete, we're a specialty contractor. We're a leading provider of lightweight, cost-effective and durable cellular concrete for infrastructure projects. We provide solutions to customers' geotechnical challenges using cellular concrete, and we do this on time, on budget and with extreme quality. Customers choose cellular concrete because one or more of its physical properties as well as its competitive cost advantage, and we have a strong competitive advantage in the market. Our financial strength and overall growth trends have been positive. Our compounding annual growth rate has been 25% since 2017. The last 3 years, we've had very consistent positive financial results. We've had a record 2025 in almost all of our KPIs, a record adjusted EBITDA, cash flow from ops, operations and earnings per share. 2026 is also forecasted to be another great year. You can see some of our financial metrics on the right there in the chart. I won't go into that, but I will just remind you guys that Cematrix is an industry leader. The global cellular concrete market is significant and is expected to continue to grow. Increased infrastructure spending in Canada and U.S. provides very healthy tailwinds. So I will say that our team and corporate timeline hasn't changed. So our management there and Board of Directors is still the same as last year. I won't go through that nor the company timeline, but I will just touch briefly on the insider ownership status. Our shares outstanding are 149.7 million shares, fully diluted, 157.8 shares approximately, of which we have insider ownership at around 11% or 16 million shares, with the bulk of that being between Randy and I at roughly 14 million shares. Next slide, please. So just to give you a quick product description, I'm sure many of you are familiar with this, but cellular concrete is made by mixing cement, water and a foaming agent. That foaming agent is basically injected into a slurry and waits for the cement to harden around it, leaving inside of it air pockets that make it lightweight and also provide plenty of strength for the customer. Our key properties include cost effectiveness, low density or lightweight, a high bearing capacity. It's extremely pumpable, highly flowable and self-leveling. Self-compacting has thermal insulating properties is durable and highly excavatable. Our primary applications include a lightweight engineered fill, MSE walls or retaining wall backfills, flowable self-compacting fills, pipe and culvert abandonments, tunnel and annular gout and shallow utility and foundation installation to name just a few.

So we're going to skip the next couple of slides here, MJ. Yes.

I'll take it over then.

Thanks.

Thanks, Jordan. So before we get into the quarter, let's review some previous financial highlights. So as Jordan mentioned, we had a record year in 2025. Our EBITDA was higher than previous 20 years combined at $8.3 million. So if you even add up 2023 and 2024, we are exceeding that. And if you think about the Rule of 40 for great investment, our year-over-year growth was 27% plus our EBITDA margin of 18%. So we are exceeding that as well. Our revenue is growing. As Jordan mentioned, we have a positive bottom line. We're generating cash. We talked about CAGR already, the adjusted EBITDA being a record in 2025 of $8.3 million. Our cash flow from ops was $8.2 million in 2025 and EPS $0.027. So we had $16 million in our bank as of June 30. That's more than what we had at the end of December earnings as well as our good collections. So if you're new to Cematrix in the construction industry and you're joining us today on the call, there are some keys to understand in our business. So revenue growth will be lumpy. It will not be a fair case. Financial results will be variable based on the timing of when large projects and stops. Construction is a seasonal business with higher revenue in warmer months. So on average for us, for the last 5 years, we have 18% in Q1, 17% in Q2, 34% in Q3 and 31% in Q4. We are a specialty construction contractor. So our margins tend to be higher than GCs, but we do have more idle time and more fixed cost. Project size impacts margins. So larger projects have more competition and as a result, lower margins. We have excess capacity that enables us to do significantly more revenue with existing equipment and staffing levels. So we'll review some of our Q2 financial results and some of the highlights. I will not go through this slide, but just as FYI in good reference, you can see that in our presentation. We'll post our presentation on our website. And as you know, our financials are also available on SEDAR+. All right. So let's briefly walk you through the financial result for the quarter. So we did have a few records for adjusted EBITDA and revenue to name a couple. So revenue in the quarter was $18.7 million. That's a 76% increase from last year. And when you look at year-to-date, we did $26 million. So that's a 50% increase over the $17.3 million we did in 2025. When you look at gross margins on a dollar per basis, we are above what we did last year, but our percent is a bit lower. So I'll encourage you to go through our MD&A. We have a discussion on our key contract structure that we've had in 2025 that benefited our margins. So if you were to normalize these margins for the quarter, we would be 1 point above and for year-to-date, a couple of points below. But we are on track to the 3% that we mentioned in Q1. That's a reasonable target. The change in our cost structures for SG&A have given us $200,000 for the quarter an improvement and for the year, $300,000 in improvement. And that's also despite record revenues as well. So that leads us to operating income of $4.3 million in Q2. That's a $2.5 million increase from last year and $3.1 million year-to-date, which is a $2 million increase from last year. And we have record adjusted EBITDA this quarter at $5 million. That's a $2.6 million increase from the $2.4 million last year and $4.4 million year-to-date, which is a $2 million increase from last year. We also have positive cash flow from operations before and after including working capital changes, $4.8 million in Q2 compared to $2.4 million last year and $4.2 million year-to-date. It's a $1.9 million increase from last year. And as I mentioned, also positive including working capital, so $1.1 million in Q2, compared to $2.8 million last year, and we have a $6.6 million increase in cash flow from ops just year-to-date at $5.7 million. I talked about cash already. So we have $16 million in the bank as of the end of the quarter. So this is a good slide. It puts the quarter in a long-term perspective. So as you can see, our revenue growth line is trending up. That's a good visual. Again, in orange, this is year-to-date numbers compared to until full year value. So you can see at $26 million, we are above what we've accomplished in some of our previous year in our history of the company. And we already talked about gross margins. So again, the trend line is growing. We're at 28% for the quarter. Having said that, we're close to 3% we've mentioned previously on our call. It's a good target moving forward. Our debt and interest has dramatically been reduced since 2017. So the only debt we have right now is our equipment finance loan. And finally, for backlog, our backlog remains strong despite our record sales. We announced $26 million since the beginning of the year, and our backlog at June 30 was $61.5 million. And we have our -- the largest project on our backlog underway. Looking at our share price. So our achievements are getting recognized in the market. Since 2025, we've outperformed the TSX Composite Index. When you look at our share price at July 24 of $0.51, it increased 96% since end of the year 2024 when it was at $26. And if you look at our low of March 14 at $0.16, it's an increase of 209%. So we have no plans to raise capital or issue new shares. Our share outstanding as of today is $149.7 million. We have 4.9 million options outstanding and 3.1 million RSUs. It's good to note that since we implemented our NCIB program, we repurchased 2 million common shares already this year. We've put some key financial ratios for you. You can see that they are all trending up. Obviously, as we make more money, these are all going to trend in the right direction, but we thought it would be a good point of reference for you to look at. So, I'm going to turn the call to Randy.

Just as a point of clarification, MJ, the NCIB of $2 million is since we started the program. So some of that actually happened last year.

That's correct.

It wasn't all this year.

Yes.

Perfect. Yes. Next slide, please, MJ. So we always kind of like to end with this slide that just says, why should you invest in Cematrix? And we really kind of summarize it into these 5 bullet points. One is we're an industry leader. That industry leadership positions us well to capitalize on the large opportunity in the growing infrastructure construction segment space. We are a growth company. We've had growing revenue, positive adjusted EBITDA, positive cash flow from operations and a strong balance sheet. We still believe that we're currently undervalued based on traditional valuation metrics, whatever you want to use as that metric, a multiple for revenue, multiple of EBITDA, and EPS multiple, but the gap is closing. So we've been telling investors about this for 1.5 years now. More and more people are catching on to the new reality at Cematrix and the gap is closing, but we still believe there is more to go. As MJ mentioned, we don't have any capital raises required or planned to fund the burn rate. The only new capital should be in support of an accretive acquisition. And further that, we also have capital to deploy. So, we're looking to continue to grow organically and via acquisition. And so we believe that the first acquisition we do should be done 100% with our balance sheet, which means it's 100% accretive to shareholders, and that's what we're working on. On the right-hand side here is our Investor Relations contacts, retail, send it directly to Cematrix at the information there. Institutional, please send it to Bristol, attention to Glen. And as Glen mentioned, our company is covered right now by Beacon Securities, who Russell Stanley is going to join us on the call. And that's in summary, the -- a great quarter. So we're going to go now to play this short video we have of our project at North Carolina, just to give investors a sense of what we're doing there and the scope and scale of it. Generally speaking, we don't like to share videos of projects that are ongoing, but this one we've talked about a lot. It's the largest project up going on in the industry. So all of our competitors know about it. So we thought the investors might appreciate a chance to take a look at what we're doing. [Presentation]

Thank you, MJ. So we'll turn it over to Glen to kind of organize and run our Q&A, and we'll answer any questions that investors may have.

Super. Thanks, guys. Again, to our covering analysts, please raise your hand, which we have. So we'll pull Russell into the queue now to ask a question. Russell, you are live.

Hello? Can you hear me?

Yes.

Excellent. Congrats on the quarter. It looks like a firing on all cylinders quarter for you. And the release indicates we should probably be expecting Q3 of this year to look a lot like Q3 of last year. So that implies a bit of a dip sequentially in revenue, which is a little counter seasonal. I'm wondering if you can talk to what's behind that? Did you have some work in Q2 that was kind of pulled forward from Q3? Or is there anything else that might explain that dip given it coming down off of an excellent quarter?

Yes, it's a really good question, Russell, and I appreciate you pointing that out. And it really gets to one of these core tenets that we are trying to educate investors on all the time, which is our revenue is really highly dependent on when large projects or large scopes of work start and stop. So, we really benefited in this second quarter from having a really large tunnel routing job start and finish in the quarter. And so that's really the difference. If you had taken that job out and it landed more in our traditional kind of busier time, you would have seen that normal sort of lower Q2, higher Q3 format. But as we've spoken about many times, we don't really worry too much about when projects start and stop. We don't worry too much about when -- what that means for the financial cutoffs. We worry about running a good business that makes money. That's the most important thing that we pursue and follow and track.

That's great color. And maybe on profitability on SG&A, MJ mentioned, you came in at $2.2 million in the quarter, a bit better than what we had penciled in. I know you've worked to take cost out where possible, but is this current level more or less sustainable? Or were there any other kind of tailwinds in the quarter? Or is this kind of level we should probably expect more or less going forward?

Yes. It's also another really good question, Russell. And I'm always a little hesitant to say that this will be the new normal. It's hard because there are some sort of one-offs in SG&A, things like legal expenses can be -- can go up or down depending on what projects. I would say that we do expect overall SG&A for the year to be lower than last year. That's kind of what we're trending. But we're not necessarily taking every dollar saved in SG&A and putting it in our pocket, so to speak. We're also going to reallocate some of those savings to continue to beef up and expand our sales and sales support team. So I would say, overall, you should expect SG&A to be lower, but how much lower is still to be determined, I would say, Russell.

That's great. Maybe one more strictly financial question. Just on cash flow, receivables increased quarter-over-quarter in dollar terms, but day sales actually came down a fair bit by my math to about 65 days, kind of well below prior norms, which obviously helps on cash flow. Wondering what you're doing very differently. You were very busy on the top line, but to see it converting to cash, it's particularly impressive here.

Yes, it's funny, right, because whenever financial results improve, the impression always is that we've done something different or better. But the reality is we always do the same thing. We're always following the same process. But sometimes we work with customers that pay quick and sometimes we work with customers that don't pay quick. We are lucky enough to -- in Q1 to collect some receivables related to an account that had been outstanding a while that kind of really helped. And then in Q2, we were lucky enough to be working with a couple of customers that pay really quick. And so that helped. So nothing new is being done. We're always doing the same things. It's just, I think we got lucky in terms of quality of customers that we're dealing with in terms of payment terms.

Got it. That's great. Maybe my last question for now is just on M&A. I always ask this, but can you talk about what you're seeing? You talked about plan A being competing cellular concrete producers, Plan B, kind of adjacent lightweight construction materials. So just wondering what you're seeing on that front, where your level of optimism is and how receptive people are to talking.

Yes. I appreciate you bringing this up, Russell. Obviously, we're the type of people who kind of like to do things and then show that we've done them as opposed to talk about what we might do. I will say we recognize the importance of M&A. We recognize the importance of growing the top line. So we're in conversations with a lot of people. I would say the vast majority of them don't have an interest in transacting. Some of the ones that do have an interest in transaction are frankly, out to lunch on valuation. And so we have to find that sweet spot between what's a good valuation and what's a good fit for our company. And as I said many times, we will never do a transaction just to do a transaction. I won't do a transaction just to grow top line. I will only do it if I think it's accretive to our bottom line and it's going to add value. So we are not overly focused on revenue. We're overly focused on making money, and that's our primary driver. So long-winded answer to say we're working on it, but I don't have any indications to say whether something is going to happen in the next 6 months or even next 2 years, just that we're working on it, and we understand the importance of it.

So, if you have more questions, please pick your hands up again. We will now go to our questions through the webinar portal. First question. It's a 2-part question. So the first part is, what sort of personnel and equipment utilization does a quarter like this represent to grow from here, assuming you can win the work? Do you need to hire more people or buy more equipment? And then the second part is following up on that is on operating margins. Is there any more juice from higher utilization rates?

There's a lot of questions there, Glen. That's going to be tough.

I'm not going to repeat any of it if you like.