Mattr Corp. (MATR) Earnings Call Transcript & Summary

At this point, I'd like to turn the call over to Meghan MacEachern from Investor Relations. Meghan, please go ahead.

Good morning, everyone. Before we get started on today's conference call, I want to remind those listening that this call contains forward-looking statements. Those statements involve estimates, judgments, risks, and uncertainties, and they could cause actual results to differ materially from what is projected. The full text of Mattr's statement on forward-looking information appears in Section 4.0 of the first quarter 2026 earnings press release, and it is also in the MD&A, which you can find on SEDAR+ and on the company's website at mattr.com. If you are joining by webcast, you can follow the visual presentation that goes along with this call. I will now hand things over to Mattr's President and CEO, Mike Reeves.

Good morning, and thanks for joining us on our first-quarter conference call. Meghan is here with me today, along with Tom Holloway, our Senior Vice President of Finance and CFO. In Q1, Mattr's talented teams achieved sequential growth in both revenue and adjusted EBITDA. The usual seasonal softness we see early in the year was mostly offset by robust wire and cable sales for mining and utility applications, underground tank sales into retail fuel and water management markets, and better operational efficiency on a sequential basis throughout Mattr's newly modernized North American manufacturing network. I was especially happy with the sequential margin improvement our Composite Technologies segment delivered, where Xerxes achieved a new first-quarter record. At Mattr overall, we stay focused on what is within our control: execution of operations, development of technology, and disciplined allocation of capital, all of which enhance the quality and durability of our earnings. We keep building momentum in mining, data center, and utility wire and cable markets, where our distinctive products, speed of delivery, and technical support turn into accretive margins and defensible share gains. Throughout our manufacturing footprint, the startup inefficiencies and one-time modernization costs that have weighed on results in recent years are largely behind us, and as volumes rise, mix improves, and cost absorption increases, we expect progressively stronger margins over time.

I should point out that recent outside developments have affected our company only to a small degree. Because we moved in 2025 toward a supply chain that is mostly local, Mattr is set up to handle the newly revised US copper tariff regulations without any added impact on our wire and cable operations, and we have run into no problems obtaining raw materials connected to the Middle East conflict. Although we have seen costs climb, especially for resins, we are usually able to pass those increases along. Tom will now take us through a few more financial specifics.

Thanks, Mike. First-quarter 2026 revenue rose modestly both year over year and sequentially, driven mainly by robust output and sales of Xerxes fuel and water products in the Composite Technologies segment. Adjusted EBITDA landed below the prior-year period, largely because of weaker margins in the Connection Technologies segment. Measured against the fourth quarter of 2025, adjusted EBITDA gained on the strength of Composite Technologies' results. Connection Technologies segment revenue in Q1 of 2026 was about flat against the prior-year quarter, as segment adjusted EBITDA fell 20% compared with that same period. That profitability drop was anticipated and stemmed chiefly from a less favorable product mix — most notably, the lack of certain project-driven mining and energy-related revenues that had produced particularly strong results in our wire and cable businesses during the prior-year quarter. Share gains in utility and data center end markets partly offset this. Furthermore, higher average copper prices modestly inflated Q1 wire and cable revenue, with minimal matching benefit to adjusted EBITDA. Composite Technologies segment revenue for the quarter edged up slightly against the prior-year quarter, while adjusted EBITDA climbed 15%. Growth in revenue and profitability year over year came mainly from greater productive output and better operational efficiency in the Xerxes business, which softened typical seasonal softness as demand for fuel and water tanks stayed robust.

Now on cash flow — the first quarter is usually when we put the most working capital to work, and this year followed that same pattern as we backed operational scaling and a late-quarter pickup in revenue. Receivables rose thanks to a strong close to the quarter, and inventories went up as we readied the business for the seasonally stronger middle quarters. Cash used in investing activities consisted mainly of capital spending on property, plant, and equipment, totaling $9 million in Q1. That outflow includes roughly $7 million that had been accrued earlier and was then paid during the first quarter of 2026. Our expectation for full-year capital spending remains in the $35 to $45 million range. In the quarter, the company added $10 million in net borrowings on the revolving credit facility. As of quarter-end, net debt to adjusted EBITDA stood at 3.7 times, or 2.6 times when lease liabilities are excluded. That ratio reflects a larger first quarter of 2025 — which included a strong result in our Brazilian pipe coating business, now divested — being replaced by a slightly smaller first quarter of 2026. We expect the ratio to decline over the rest of the year, and we remain committed to debt reduction activities.

With our improved outlook—now that we have a better read on the probable risks and effects of US tariffs—the company is set up to restart buybacks under its NCIB this quarter and to keep doing so for the foreseeable future. After this quarter closed, the company extended its credit facility through October 2030. That extension gives us stable funding and more flexibility to keep expanding the business while seizing suitable high-return opportunities when they come up. We appreciate the ongoing backing and partnership of our banks. I'll now hand things back to Mike.

Thank you, Tom. Looking at the market, things are pretty much in line with what we told you on the fourth quarter call. Demand is strong and climbing for products that serve retail and backup fuel, water management, power generation, utility, and data center end markets. We've also seen some encouraging movement in mining, especially in Canada and a few international markets. In our Connection Technologies segment, mining stood out as the biggest single end market by revenue in the first quarter of 2026, and I'll get into that in more detail later. On the oilfield side, customers are still cautious even though oil prices have risen structurally. We haven't yet observed any meaningful shift in US onshore customer spending, and right now we expect US activity levels to stay fairly flat through the second quarter. That said, we think the first half of 2026 marks the cyclic low for North American drilling and completion activity, and we expect a gradual upward trend starting in the second half of 2026. At the same time, we've seen some promising demand signals in certain international markets. With a growing product portfolio and more production capacity, Flexpipe is well-positioned to benefit from these increasingly favorable market conditions. In automotive, we've seen modest downward revisions to global production expectations, with particular pressure in Europe.

Even so, the average electronic content in newly introduced vehicle platforms keeps climbing, which gives Mattr a continuing chance to expand its market share. We are monitoring the Middle East conflict intently, and as I noted before, costs for raw materials derived from petroleum are rising, although supply has remained available. That said, the longer this conflict goes on, the greater the possibility of wider economic consequences. Outside circumstances stay fluid, and we have suitable contingency plans prepared should they be required. Still, we are concentrating squarely on what is within our control: commercial execution, operational efficiency, technology development, and targeted growth in end markets where demand is durable and returns are attractive — all of which helped produce sequential margin expansion in Q1. Taking a closer look at our mining-related business, in the surface and underground mining sector that we serve through premium wire and cable products, our exposure covers a range of subsectors and geographies. We gain from a fairly steady baseline of maintenance and repair demand at existing mine sites across all geographies, which is frequently supplemented by revenue from specific projects, usually linked to mine extensions or the start-up of new mines in Canada and other international locations. This project-driven revenue generally shows less consistency from quarter to quarter.

Right now, our exposure is weighted toward the US and Canadian markets, though we've had a long-established presence outside North America for quite some time, and last year we invested to strengthen our international commercial presence. At every mine site, Mattr's cables — rugged, waterproof, and resistant to crushing and wear — are used to reliably deliver electrical power to heavy equipment, ranging from massive mobile shovels at surface mines to high-speed conveyors in underground settings. Our products function as heavy-duty extension cords for some of the largest and most demanding machines anywhere in the world, and they're critical to keeping production running. With demand rising for copper, precious metals, critical minerals, metallurgical coal, and other mined commodities, and with regulatory environments for new mine permitting in North America slowly improving, we believe Mattr stands to benefit from a multi-decade mining upcycle — one of the reasons we're investing over the next 18 months to increase productive capacity and efficiency at AmerCable's US manufacturing facility. Our teams performed well in Q1, and our outlook continues to strengthen. The pace of operational efficiency improvement was consistent with our expectations, and strong commercial execution — particularly within Xerxes and the mining and utility sectors of our wire and cable businesses — helped partially offset typical early-year seasonal slowness. As we move through the year, we expect adjusted EBITDA in Q2 to improve from Q1, supported by continued commercial success, further operational efficiency gains, and seasonally favorable patterns that typically make Q2 and Q3 our strongest quarters.

Those items, together with a significant international Flexpipe order that came in after the quarter closed and a rising backlog for our new 8-inch Flexpipe products, underpin our positive view of the second half of 2026. Taken together, our full-year 2026 adjusted EBITDA outlook has been raised and is now projected to be comparable to last year once roughly $10 million of 2025 MEO expense is added back. Over the longer term, we strongly believe that sustained solid execution in areas within our own control is the key to further widening Mattr's EBITDA margins. Continued operational efficiency optimization, along with greater volumes and a revenue mix that keeps improving thanks to persistent commercial execution in higher-margin end markets, could move the company toward our 20% EBITDA margin aspiration, and only limited assistance from external factors would be needed to reach this milestone over time. We remain highly confident that our differentiated technologies, which enable greater generation, movement, and use of electrical power, and the continuing shift toward composite materials in fuel and water management applications, give Mattr considerable long-term growth opportunities. I'll now hand the call to the operator and open the lines for any questions you may have for myself, Tom, or Meghan.

Thank you. Just a quick reminder that if you'd like to ask a question, pressing *11 on your phone is what you'll need to do. Should you want to drop out of the queue, pressing *11 once more will do that. Please hold while we put together the Q&A roster. Our first question is from Arthur Nagorny at RBC. Arthur, your line is open.

Morning, everyone. I’d like to begin with the Section 232 tariffs. It doesn’t appear that you have any direct exposure, but I’m curious whether the tariff update improves your competitive position in any way.

Morning, Arthur. The tariff news that came out recently really hasn't brought any fresh negative effects for our company, and that's partly why our confidence in the full-year outlook has ticked up a bit. The latest announcements on US tariffs tied to copper specifically signaled that only a limited number of new products would be added to the tariff list going forward, so we feel quite confident that the goods we manufacture in Canada and sell into the US that contain copper will likely remain tariff-free. In that sense, I'd say those announcements worked in our favor. Of course, we need to stay nimble, and we have all the right contingency plans ready should anything change, but as things stand, I think our level of concern has come down.

Understood — that's useful. So I suppose my next question concerns your Canadian operations. Has there been any pickup in orders tied to some of the government announcements around Build Canada and similar initiatives, or would you say it remains too soon to say as of now?

From where we sit, it's a bit soon to tell. Progress is clearly happening, and my hope is that demand for our products in Canada will begin to show some effect at some point across the next several quarters — but right now it's a little early for that demand to appear in our order book.

Okay, that helps. Now, for the full-year 2026 outlook, particularly in Connection Technologies, I believe you mentioned some gains in the utility and data center markets. I'm just curious whether you're seeing substantial growth in those business lines right now.

We feel quite good about what has been achieved so far this year. Inside that segment, a handful of developments have shifted somewhat favorably since our previous discussion. Activity in Canadian mining has come in a bit stronger than anticipated, and it appears likely to keep going. The money we've directed toward international commercial mining efforts has started producing some small but encouraging early wins. That has been a plus. Operational efficiency keeps improving quite nicely throughout Connection Technologies, especially at the newer locations — the DSG site in Ohio and the ShawFlex site in Toronto. Then, as you noted, in utility and data center, the ShawFlex brand within our wire and cable business has concentrated hard on expanding its footprint across both Canadian and US utility markets and took a very encouraging step in that direction during the first quarter. Demand from data centers remains robust. As I've said previously, we are deliberate about how much data center wire and cable business we accept, since its margin profile isn't quite as attractive as what mining and oilfield and certain other applications deliver, so we strike a balance there, though demand is undoubtedly strong.

Understood. Then this is my final question, and I just want to briefly address the facility transitions. From your press release, it seems you indicated that you're now largely beyond the majority of the difficulties faced over the last couple of years. I'm curious about what the road ahead looks like from this point, and could you additionally give us an update regarding tariff exposure at DSG Canusa, including that Ohio site?

On the whole, I'd say every one of the new operating facilities we brought online during the past two years is trending favorably. The majority have reached what I'd call a sort of normal performance level and are adding value to the company. The facility still getting there is DSG in Fairfield, though it's progressing toward that mark quite rapidly and should arrive later this year. By and large, the disruption caused by bringing new facilities up to speed now sits behind us; what remains is simply continuing to mature those sites and generating ongoing gains in overall efficiency across both new and old facilities, something we accomplished quite effectively during Q1. The DSG business in North America keeps importing product manufactured outside North America, so there is some tariff exposure, yet with the IEEPA portion of those tariffs eliminated, the burden from tariffs is substantially reduced. In my view, DSG stands in a stronger position today than it did 90 days ago.

Perfect, that covers everything on my end. Thanks.

Happy to have you with us.

Thanks. We’ll take our next question from Nathan Poe at National Bank Capital Markets. Nathan, your line is open.

Morning to you. Appreciate you taking the time to answer my question.

Morning to you, Nathan.

Geopolitically and on the macro front, there's still plenty of volatility, generally speaking. Even though we're not quite at the midpoint of the year, what makes you confident enough to raise EBITDA guidance by roughly 6%?

You're definitely right that the environment we're operating in remains unpredictable. We've been saying for a number of quarters now that this is a company where we think we can generate growth, expand margins, and expand free cash flow largely through our own internal efforts, and Q1 reflected exactly that: substantial ongoing gains in operational efficiency throughout our production network, which came in at our expectations for Q1 and gives us confidence that we'll keep meeting those expectations as the year progresses. We're primarily an organization focused on North America. Although the situation in the Middle East does affect input costs for some raw materials, it hasn't affected our raw material availability, and so far it hasn't affected demand from our customers for our products. We consider that favorable. As I said earlier, several tariff adjustments made over the last 90 days have by and large been positive for the company. We do need to stay nimble, and we definitely have contingency plans ready to put into action should something happen on the geopolitical front, but I believe our ongoing emphasis on operational efficiency, technology development, and capturing market share in key target markets, mainly in North America, will be the wellspring of strength for this organization as we move through 2026 and beyond, and that is what gives us the confidence to share our outlook with the market, which is somewhat more favorable today than it was 90 days ago.

Thanks for that extra detail. And then, regarding the NCIB remark, given where your leverage stands right now, how large a use of it are you expecting?

On the previous call, I believe I mentioned that bringing it back at the same levels as before wasn't something we anticipated—so you shouldn't count on $10 million per quarter. What I'd suggest is that mid-single-digit millions is likely the range where you'd see us. In our view, that fits comfortably within the debt levels.

Understood, thanks. Moving over to composites: how confident are you that this large international order will ship during the second half, and what risks surround possible cancellations or delays?

Extremely confident. Nobody asked me to do this, but I figure some of you are curious, so let me share whatever I can at this point. This is a Flexpipe order headed to an international client that we have served in the past. On the revenue side, our expectation is that it lands above $20 million, and we anticipate that all or nearly all of that money gets recognized during the second half of the year. Unfortunately, I can't go into greater specificity than that, since we have to protect certain competitive information. A firm commitment has been made by this customer. I have zero worry that this order will be canceled. The delivery terms allow us to recognize revenue once production is complete, so the shipping piece doesn't concern me. Sure, the world is somewhat chaotic these days, but the route between us and this customer does not pass through the Strait of Hormuz, so from that angle, I'd say the risk is low.

Thanks a lot. Just one final question: in what way does that order shift how big we should expect the revenue contribution from the 7- to 8-inch products to be in 2026, and effectively, what does the mix look like?

Our outlook for revenue contribution from 7- and 8-inch products stays the same. Clearly, the total revenue for the Flexpipe business goes higher, so as a percentage, 7- and 8-inch revenue will represent a smaller share than it would have otherwise, but I can tell you that the order book for 7- and 8-inch keeps filling up. I anticipate the first revenue around midyear. We remain very positive about the 7- and 8-inch product line, and since the last update, our expectations for those contributions in 2026 are unchanged.

Much appreciated. I'll hand things over now.

Thanks. The next person to ask a question is Tim Monachello, who is with ATB Cormark Capital Markets. Tim, you have the floor.

Thank you. My question really concerned that project overseas, but to follow up, could you give me additional details about the region where it will be located?