Mattr Corp. (MATR) Earnings Call Transcript

Hello, and thanks for being with us today. Welcome to the webcast and conference call covering Mattr's results for the second quarter of 2026. Right now, everyone is in a listen-only mode. Once the speakers have finished their presentation, we'll hold a question-and-answer session. If you'd like to ask something during that session, press *1 on your phone. You'll then hear an automated message letting you know your hand is raised. Should you want to take your question back, just press *1 once more. Please note that this conference is being recorded today. I'll now hand the conference over to today's speaker, Meghan MacEachern. Please go ahead.

Good morning, everyone. Before we get started on today's conference call, I'd like to remind our listeners that this call contains forward-looking statements. These 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 second quarter 2026 earnings press release, and also in the MD&A, which is available on SEDAR+ as well as on the company's website at mattr.com. If you're joining via webcast, you can follow along with the visual presentation that accompanies this call. I'll now hand things over to Mattr's President and CEO, Mike Reeves.

Good morning, and thanks for joining us on our conference call for the second quarter. Meghan is here with me today, along with Tom Holloway, our Senior Vice President of Finance and CFO. For Mattr, the second quarter was a meaningful move forward. We set a new record for revenue and adjusted EBITDA, as our global team once again executed well on our strategic and operational priorities. In Connection Technologies, our wire and cable businesses drew on operational efficiency improvements and especially strong global mining markets to post considerable sequential growth. More broadly, the segment performed well against a favorable mix of demand from mining, oil and gas, and data centers, while picking up further share gains in North American utility and infrastructure markets. In Composite Technologies, Xerxes achieved new records for manufacturing efficiency and output, which drove new quarterly revenue records in both fuel and water products, enabling year-over-year revenue growth of more than 15% during the first half of 2026. Accelerating order capture across the Xerxes portfolio, including rising data center opportunities, where we secured additional customer commitments during the quarter, ensured a stable quarter-end backlog at near-record levels. Our Flexpipe team took full advantage of seasonally stronger North American activity levels and modest late-quarter project acceleration by select customers, while also delivering against a growing international backlog.

At the same time, Flexpipe brought in its first commercial revenue from the 8-inch technology it launched recently, and it booked added orders that push our backlog into Q4 for this key growth driver. Throughout Mattr, our attention stays on running operations well, advancing technology, and allocating capital with discipline. What we've done across the last several years to upgrade our manufacturing footprint and sharpen the portfolio toward highly attractive end markets is now showing up as stronger financial results. I couldn't be prouder of the Mattr team members whose hard work, creativity, and dedication make this happen. Finally, we were glad to obtain a GICS code reclassification late in Q2. Mattr now sits in the Industrials sector, which in our view better reflects the critical infrastructure markets we serve and over time should make comparisons with a wider set of industrial peers easier. Tom will now take us through a few more financial details.

Thanks, Mike. Compared with both the same period a year earlier and the first quarter, revenue for the second quarter of 2026 rose substantially, which reflects solid commercial execution across several businesses, greater production volumes, and ongoing gains in operational efficiency. Adjusted EBITDA likewise climbed considerably relative to the prior-year quarter, powered by better operational performance, favorable order capture and delivery in a number of key end markets, and a favorable product mix. Connection Technologies posted robust year-over-year growth in revenue and in adjusted EBITDA alike, mainly credited to its wire and cable businesses. That performance drew support from strong mining activity, continuing growth in data center application sales, and further share gains in utility and infrastructure markets. Composite Technologies turned in another strong quarter, with revenue and adjusted EBITDA up meaningfully on the back of record production levels, strong fuel and water demand, and ongoing manufacturing improvements. Greater production throughput and better manufacturing performance also let Xerxes secure additional orders and set new records for shipments and for revenue within its water business. On the whole, Mattr posted record revenue and adjusted EBITDA in the second quarter. We could not be prouder of the teams who have worked so hard over the years to reshape this organization and make results like these possible.

Now on cash flow: in the second quarter, operating cash flow came in slightly negative, since the working capital investments we needed offset our strong operational results. Sales were strong late in the quarter, which pushed the accounts receivable balance up, and inventories also rose as we get the business positioned for a robust second half of the year. Cash used in investing activities was mainly capital spending on property, plant, and equipment, totaling $6.3 million in Q2. That cash outflow includes roughly $1.6 million that had been accrued earlier and was then paid during the second quarter of 2026. We still expect capital spending for the full year to land in the $35 to $45 million range. During the quarter, our strengthened outlook brought down the net debt to adjusted EBITDA ratio and put the company in position to resume share repurchases under our NCIB at the end of Q2. On the recently renewed NCIB, we expect to stay active and opportunistic for the foreseeable future, though at modest levels, while debt repayment remains a priority. Even though Q2 required modest incremental borrowings to support rapid growth and the working capital needs that come with it, stronger earnings and rising cash generation should drive continued deleveraging as the company moves through the second half of 2026.

Mike, the floor is yours again.

Thank you, Tom. When we examine our main end markets, the demand picture is broadly positive. Conditions across mining, power generation and distribution, retail fuel, water management, and data centers are solid, and we anticipate they will stay that way. Mattr's data center exposure is something I'll cover on the following slide. In domestic oilfield markets, customer activity picked up in the second quarter, though it was still under the level of the prior-year quarter. Going forward, we presently anticipate that well completion activity in North America will rise modestly once more in Q3. Although worldwide inventories of oil and refined products suggest production growth needs to continue, recent swings in underlying commodity prices will probably mean that any increases in activity happen gradually. At present, we expect the usual late-year slowdown in North American activity as capital budgets run out, though there is still potential for certain clients to bring incremental capital forward into 2026, which would provide some upside to our present outlook. At the same time, we keep seeing encouraging customer engagement and quoting activity in select international markets, and our backlog has been strengthened by the large committed order we landed in early Q2. With a growing product portfolio and greater production capacity behind it, Flexpipe is well positioned to go after international opportunities as they arise.

Conditions in automotive markets are still weak, and the outlook for global production keeps coming under pressure, especially in Europe. Even so, the average electronic content in newly introduced vehicle platforms is still rising, which gives Mattr ongoing chances to keep posting auto-related revenue growth on a year-over-year basis. We watch trade, commodity, and geopolitical developments on a continuous basis, and we have not seen any meaningful disruption lately when it comes to raw material availability. Although future trade policy is still uncertain—especially after the US tariff announcements early in Q3—Mattr has strong mitigation protocols in place to cap the business impact across all scenarios we can reasonably foresee. No matter what happens externally, our priorities stay the same: executing for our customers, boosting operational efficiency, pushing technology development forward, and growing in markets where demand looks sustainable and returns look attractive. These efforts keep making the business stronger and were significant contributors to our strong second quarter performance. Looking briefly at the data center sector, demand keeps trending positively across several business lines, among them Xerxes, Americable, Shawflex, and DSG-Canusa. Applications tied to data centers are playing a growing role in Mattr's near- and mid-term growth, and sales for the current year are expected to more than double compared with 2025 and are likely to account for roughly 5% of consolidated revenue this year.

Data centers should serve as a key growth engine for both segments over the next several years, though our aim in this area—just as in every end market—is growth that is profitable rather than merely capturing more share. We focus on data center opportunities that capitalize on our technical differentiation and produce sustainable margins, and we'll keep leveraging our broad end-market exposure so that Mattr does not become too dependent on any single source of demand. Now to our outlook: since the last earnings release, the company's expectations for full-year revenue and adjusted EBITDA have risen again, which reflects both second quarter results that beat expectations and better visibility for the remainder of the year. At present, we expect third quarter business performance to resemble the second quarter, before the usual seasonal slowdown kicks in during Q4. Taken together, this produces a current outlook for second half adjusted EBITDA that is comparable to the first half. We expect ordinary fluctuations to give Connection Technologies revenue in Q3 a less favorable mix than Q2, with fewer deliveries into mining projects and more deliveries into data center applications. By contrast, we expect Composite Technologies performance to improve sequentially in Q3, powered by growing shipments of Xerxes fuel and water products, stronger Flexpipe activity both domestically and internationally, and additional operational efficiency gains.

Looking past Q3, our demand outlook remains positive across every primary market in both segments. On the Connections side, we see mining, utility, nuclear, data center, and other infrastructure markets as sitting in the early innings of upcycles that will run for multiple years. Over in Composites, Xerxes fuel and water customers are pushing their planning horizons out further than ever before, and we now hold firm orders in backlog for delivery all the way through 2027. Flexpipe's addressable market keeps growing substantially thanks to the investments we're making to develop and launch new products — among them the 8-inch product we recently brought to market, where customer order capture is speeding up and backlog keeps building. Those demand drivers, taken together with our strong conviction in the value our differentiated technologies deliver to customers and the considerable remaining room to boost operational efficiency, support our confidence that Mattr is well positioned to achieve meaningful growth and EBITDA margin expansion in the years ahead. With that, I'll hand the call to the operator and open the floor for any questions you might have for me, Tom, or Meghan.