CEMATRIX Corporation (CEMX) Earnings Call Transcript

[Audio Gap] Ended September 30, 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. [Operator Instructions] Before we begin, I'd like to remind everyone that today's call and the accompanying presentation contains forward-looking information within the meaning of 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 in 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 the 2025 management discussion and analysis and other filings available on SEDAR. The company undertakes no obligation to update these statements, except as required by law. Today's discussion will also include certain non-GAAP measures, which are defined and reconciled in the company's MD&A. With that, I'll turn the call over to Randy. Randy, please go ahead.

Thank you, Glen. We're really appreciative of the opportunity to talk to shareholders about our Q3 results. We know there are some questions, and we're looking forward to providing you guys with some answers. So with that sort of quick introduction, I'll turn it over to Jordan who will go through a little bit about CEMATRIX before we get into the numbers.

Hello, everybody. So to talk about some of CEMATRIX's key investor highlights. I'd say that CEMATRIX is a special -- a leading specialty contractor providing lightweight cost-effective cellular concrete solutions for structure infrastructure projects throughout North America. Our customers typically turned off to solve challenging geotechnical problems where conventional materials or construction methods may not be practical or cost-effective. We provide ourselves in delivering these solutions safely, on schedule and within budget. Now looking at our financial performance, we've established a pretty strong track record of growth with a compound annual revenue growth rate of approximately 25% since 2017. Through our first 9 months of 2026, we've generated $37.9 million in revenue. And on a trailing 12-month basis, revenue has reached $50.5 million. We're also maintaining a healthy gross margin of approximately 30%, while generating $8.3 million in adjusted EBITDA over that same trailing 12-month period. Our balance sheet remains strong with over $20 million in cash providing us with significant financial flexibility. Looking ahead, we believe the combination of increased infrastructure investment, growing awareness of cellular concrete and our established market positions provides us a substantial opportunity for continued growth. Next slide, please. Thank you, MJ. Now this slide represents our team and corporate time line. It's mostly data. I won't go through this too much at length, but it will capture the highlights, and I can assure you that our CEMATRIX benefits from an experienced leadership team and Board of Directors with a broad range of operational, financial and industry experience. One worth highlighting is that we have a significant owner inside ownership, representing approximately 11% of the company. We believe that the level of ownership provides a strong alignment between management, Board and our shareholders. As you can see from the time line, CEMATRIX has evolved considerably since its founding in 1999. Over the years, we've expanded our operations, strengthened our market presence through strategic acquisition and successfully navigated several challenging economic environments. And today, we're a much larger, more established organization with experience, resources and financial strength to pursue increasingly complex infrastructure projects. Next slide, please, MJ. All right. So for those who may be less familiar with cellular concrete, I'd like to briefly explain the product and why it provides such an effective solution for our customers. Cellular concrete is produced by combining cement, water and a preformed foam creating a lightweight engineered material that can be designed to meet specific project requirements. One of its greatest advantages is its versatility. It's significantly higher than conventional concrete, highly flowable, self compacting and can put pumped over considerable distances. The properties make it particularly well suited for projects where access is limited weight restrictions exist or traditional film materials would be difficult or expensive to install. Some of our most common applications include lightweight engineered fill, retaining wall backfill, road construction, pipe, tunnel abandonment and foundation related applications. Ultimately, what makes cellular concrete attractive is its ability to solve difficult construction challenges while often reducing cost, construction time and overall project complexity. And that ability to provide practical cost-effective solutions is what continues to drive demand for our products and services. And with that, I'll pass it back to Randy.

Thank you, Jordan. So we're going to skip these 2 slides here about the customers and the opportunity because it's really about our Q3 results. But we always think it's really important to help our investors understand the business because there are elements of our business that are fantastic and investors like in their elements that some investors don't like and we'd rather just be upfront and honest about those. So I'm going to start on the right-hand side of this slide and just talk about some of the keys to understanding of our business. So revenue growth will be lumpy. It will not be a staircase. Our financial results will be variable based on the timing of when large projects start and stop. And this year, in 2026, we're on track for our best year ever. But we've really seen direct evidence of this variability where Q2 was extremely strong and higher than any second quarter we've ever had. And Q3 was a little bit smaller than last year. And so we've seen some of that variability. And we've also provided some guidance around Q4 that Q4 is going to be one of our best quarters ever. It's a seasonal business, which we've talked a little bit about. So our revenues are going to be higher in the warmer months. So our average revenue over the last 5 years in Q1 has been 18%, Q2 17%, Q3 34% and Q4 31%. No, there's been a lot of variability in each of those quarters, but those are the averages. If you want to see the actual numbers, you can see them in our MD&A. We are a specialty contractor. So that means the margins tend to be higher than general contractors, but we have bench time or fixed costs that we've got to cover. So when we don't have work or we're less busy, our margins are going to get depressed because of covering the bench time or fixed costs. Project size matters. Larger projects always attract more competition because the mobilization cost becomes a much smaller component of the overall bill. And so it attracts more competition than a result, we will have lower margins. And then we do have excess capacity, which enables us to do significantly more revenue with existing equipment and staffing levels. Jordan already touched on it, but 2025 was a record year for us. Our EBITDA was higher than the previous 20 years combined. Our adjusted EBITDA of $8.3 million was higher than our 2 best years before that. And we passed the rule of 40, which is really hard for traditional bricks-and-mortar construction company to do. Top line growth, positive bottom line, generating cash healthy balance sheet with lower leverage. We came into this year with just under $12 million in cash. We've exited Q3 with over $20 million in cash. and we continue to be profitable. So I'm going to pass over now to MJ is going to go through some Q3 specific figures with our investor group here.

Thank you, Randy. We've put this slide, I won't go through it, so it's a good snapshot for you in a reference if you want to access it. Now we also post these financials on our website. And since we're publicly traded, it's also on SEDAR. If you're interested in having more information. As Randy mentioned, I will briefly walk you through our financial results for Q3 and year-to-date. Our revenue was a bit lower, as Randy mentioned, at 11.9%, still solid. I think that's our third highest Q3 revenue in the history of the company, but still a bit lower than last year at $15.3 million. a record $37.9 million year-to-date compared to $32.6 million last year. That's a 16% increase. Our margins are lower for both the quarter and year-to-date. One of the main drivers for this is a key contract structure that Randy will touch based on briefly in a moment. And then we do have a proportion of large projects that sometimes have lower margins. And then a good news still for us is our SG&A despite the year-to-date increase in revenue, we were still able to decrease our SG&A. So for the quarter, we decreased SG&A at -- by 300,000 to 2.1compared to 2.4 last year. And year-to-date, we had a $600,000 improvement at $6.3 million compared to $6.9 million last year. That leads us to an operating income of $0.7 million in Q3 compared to $2.8 million last year and $3.7 million year-to-date compared to $3.9 million last year. Adjusted EBITDA was positive for both the quarter and the year at $1.4 million for Q3 and year-to-date, $5.9 million, which is similar or exactly the same as we did last year. We are generating cash from operations. We had $1.5 million in Q3 compared to $3.2 million last year in Q3. And then when you look at year-to-date, it's a bit higher by 100,000 and 5.7 million compared to 5.6 million year-to-date last year. When you include working capital, we had positive cash flow of $4.6 million in -- that's a $2.8 million increase compared to $1.8 million last year and $10.3 million year-to-date, which is a $9.4 million increase compared to the $0.9 million we did year-to-date last year. As Randy already mentioned, we have $20.5 million in our coffers at the end of September 30. This slide puts the quarter in a long-term perspective. Randy touched base on a bit of the lumpiness. So you can see that in this graph, but the growth line is still trending in an upward position. In orange, this is a year-to-date number, the rest until our full year. So you can see that year-to-date, we like third -- it's the third highest revenue we've ever had, and we haven't even finished the year yet. When you look at our backlog, it remains strong. We ended the quarter at $65.6 million in backlog. At Q2, it was around 61.5%. So it went up. So we announced $43.2 million of awards year-to-date. And our book-to-bill ratio is 1.14, which is keep expanding our backlog. Our backlog supports our future revenues and then our largest project is in backlog is on the way. When you look at our margins, I think 30% is a good target for you to keep in mind moving forward. And if you're interested about the dip in the middle of the graph in 2022, that's because of the pandemic, we have supply chain issues in semesters. So I'm going to pass it to Randy to touch base on the key contract structure.

Yes. Thanks, MJ. This chart here is right out of our MD&A, but we think it's just important because it provides investors with a better reference point than our reported gross margins because that contract structure really helped our gross margins in 2025. And we -- and as a result, [ Micra ] unreasonably expectations in terms of what to expect going forward. So I really do think 30% is the right number. We're obviously always working to get that better, but at a certain point, you just -- you can't. There's no more improvement. We're obviously trending a little bit below that right now. We expect Q4 will raise up I don't know if we'll get all the way to 30% on the year, but that remains our target, and we should be able to get pretty close.

Thanks, Randy. Since January 1, 2025, we have outperformed the TSX composite index. Our current share price, if you look October 21, it was 48.5%. That's 87% higher than our December 31, 2024, when it was at $0.26. And when you look at our low of March 14, 2025, when it was at $0.16, it's 194% higher. We have no plans to raise capital or issue shares, and we repurchased 2 million common shares under our NCIB since the inception of the program in 2025. When you look at our debt and interest, it has dramatically decrease when you look at [indiscernible], and it helps us to support and give us like a solid foundation for our future. I'm not going to go through the key ratios. Again, it's just a good visual for you to see that they are all trending in the right direction, obviously, as we are becoming more profitable. So that's a small quick snapshot of our financials, and I'm going to turn it back to Randy.

Thank you, MJ. One more, please. Yes. So we always like to end on this is it really just is kind of the key message we want people to kind of walk away with is why invest? Well, we're an industry leader. We are really well positioned to capitalize on the large opportunity in the growing infrastructure construction segment. There's lots of tailwinds in that segment to support our business and really driving our growth. that really leads into the second point here is we are a growth company. So we're growing revenue. We have positive adjusted EBITDA, positive cash flow from operations and a really strong balance sheet. We do believe that we continue to be undervalued based on traditional valuation metrics, but the gap is closing. Whether you -- whatever valuation metric you want to use, whether it's a multiple of forward revenue, forward EBITDA, forward EPS, we believe there's still room there and we're not properly valued. There's also no new capital raises that are required to fund the burn rate. MJ touched on that already. The only new capital should be in support of a large accretive acquisition, and we have capital to deploy right now. So we're actively looking for opportunities to grow organically by growing our sales or sales support team or via acquisition. And if we do an acquisition, we're pretty sure the first 1 would be 100% accretive to shareholders, depending on the size. So we're in a really good spot. We say it every quarter, but the 3 of us have never felt better about the company and the opportunities in front of us, extremely optimistic about the future of our company. and couldn't be happier to be in the spot that we're in. Investor Relations on the retail side, you can send it to CEMATRIX directly, and we'll respond. On the institutional side, please go through Glen at Bristol. And then we still have our 1 analyst covering us as Russell Stanley from Beacon Securities who were very thankful for their support and to have us lot on the call with us today. So with that, I think we'll pause. I'll turn it over to Glenn, and we'll go through some questions.

The first question we're going to pull in is Russell Stanley from Beacon Securities and then we'll take the rest of the questions through the question-and-answer portal.

Maybe first, Randy, wondering if you can even roughly quantify the revenue impact of the projects that were delayed in Q3 and perhaps elaborate on the causes of those delays, so people can better understand the dynamics of the business and how these things are quite normal?

Yes. So like what caused the delays is just what's happening on site in these various projects. And what we do find sometimes in the summer as projects, especially if they haven't started, can get delayed because of vacations and holidays. And it's actually quite common in the construction industry for projects to experience a delay. Once the project starts, we have a much tighter idea when our scope of work is going to start. It can still shift a little bit. But once the contractors on site, we have a much better idea. And so all that really happened that impacted the Q3 revenue, in particular, was that a bunch of these projects that we had are on the schedule to start in middle of August, they pushed and started in the middle of September. So there's -- as we said in the MD&A, no impact on our overall health of our business. No impact on the year at all, but had a pretty dramatic impact on our Q3 reporting results. So if you're a private company, we wouldn't have even batted an eyelash over this change, or as a public company and with the scrutiny that happens comparing quarter-over-quarter, we knew that some of our investors would express some concern, which is why we decided it would be a good idea to provide some information around what Q4 would look like to help give investors confidence.

And I guess further to that, given the Q4 guidance, it sounds like all the projects that were delayed have now started and underway. So you have that visibility. Are there any projects for which you are still awaiting the start in order to hit that guidance? Or is everything occurring now as it needs to in order to hit that top line range?

I'd say all the large projects to hit that guidance have started, Russell, but there are always projects that are like 1 or 2 days and duration that will start in November or start in December and finish in the same day or same week. So there's still other work that has to go on to meet that number. But the largest items in it have started, and we expect them to be finished in the fourth quarter.

That's great. And maybe on SG&A, congrats to you continue to run a pretty lean ship there. I know there's a component in there, I believe that's insurance related that varies up and down with the revenue level. But outside of that, is there still scope for additional improvement from here, additional cost savings? Or do you envision having to expand this number in dollar terms going forward?