Right, we're going to get started. As the participants are entering the webinar, I'm Grant Howard, very pleased to be hosting this webinar with the CEMATRIX team on their Q1 great record results. I'm going to start with the fairest one of the group. That's Marie-Josée Cantin and MJ She is the CFO. Jeff Kendrick, the CEO, and Randy Boomhour, the COO. With that team, I'm going to turn it over to you, and again, congratulations.
Thank you, Grant. And thank you, everyone, for being here today. Randy, MJ, and I wanted to welcome you to our Q1 webcast and talk about another record quarter for CEMATRIX. Of course, it's good morning to you people in the West, and it's good afternoon to you individuals joining us from the East. So welcome to you all. We won't talk about the disclaimer. We'll move on to what we're going to be talking about today. First, I want to show you a little project video on a project we completed in the Brooklyn Bridge in New York City. I'm going to talk a little bit about what CEMATRIX does, for those of you who are new to the story, and also just a refresher for those who have heard this story before. Talk a bit about our record Q1.
The record three quarters in succession that we've just achieved. Talk about 2024 and strong results we expect to continue. Why this growth trend will continue. Why are we able to position to move forward, including the capacity for continued strong growth, the fact that we continue to strengthen our team. And that we have a backlog and sales pipeline in place in order to achieve that growth. So first of all, before I start the video, this is, I always like this video because it's a rehab project that we're completing at the Brooklyn Bridge in New York City. And someone once saying, someone once saying a long time ago, if you can make it here, you can make it anywhere. And, and CEMATRIX is pouring a lot of product in New York City.
So let me play this video for you, give you an idea of what we do. No, I will stop it there. But it's important to note that the reason we're growing is that not only are we pouring in New York City. But we're pouring projects. Last year in Philadelphia, we did a runway taxi project, a large one there. We did a big wharf backfill project in Houston. We did several tunnel projects in St. Louis, San Antonio, Texas. British Columbia, Toronto. And we did some overpass backfill projects in Bellingham, Chicago, and some other areas as well. And we also did a sports field underlay project in Calgary, so a wide range of projects, and of course, everywhere in between too, as well. So what are we? What are we doing? We produce a product that's called cellular concrete on site for infrastructure construction applications.
Cellular concrete is like ready mix. It's cement based. But we take the sand and gravel out, and we replace it with a microscopic air bubble system. By doing that, we create a lightweight material that's insulating, and it has some structural properties as well. This tremendous benefits over the legacy products, that we replace. Not the least of which is its lowering cost. Usually, if you have something that's better than the alternative, it always costs more. But in our case, the installed cost is generally quite lower. Not only is it quite lower, but generally we can complete the project significantly faster than the alternative. And the product itself is generally more environmentally friendly than the products to replace. It's important to note that we don't replace regular concrete. We replace things like unstable soils, EPS blocks, which are large Styrofoam blocks.
We replace rigid insulations, lightweight aggregates, and heavy grouts in some cases, and other materials, too, but those are the main ones. What we replace them to do, and the five main applications are tunnels: using tunnels to put infrastructure under cities like new water lines and sewer lines. We use it to backfill overpasses, bridges, and the big concrete panels you see along freeways called MSE panels. We use it to replace or to underlay roads, highways, and runways that cross weak and unstable, seismic-prone or frost-prone soils. We use it as a to fill abandoned water lines and sewer lines and pipelines and culverts, and that's a big business across Canada and the US Also as an insulating subbase for all infrastructure like buildings and industrial facilities. Those are the main applications.
And because we don't replace regular concrete, the cement companies actually love us, because every time we pour a cubic meter of our material, it's a new market for their cement. Who would have thought that you would be using cement to insulate pipes and things like that? It's just not a normal application for the cement, and we use a lot of cement in our applications. So record Q1 again. This is the result of carryover sales from 2023 and good weather. And these, of course, were higher margin projects, as you can see by the results for the year. I won't speak to the results yet, because MJ is going to be covering that as she goes through the financial results.
Of course, this is off-season for CEMATRIX, and you know, there's a misnomer that it might mean that we're not doing anything, but it actually is one of their busiest times of year, because not only were you doing projects, but we're, you know, servicing, maintaining, and sometimes rebuilding the equipment that we have for the upcoming years. Of course, it's we're in the middle of our sales season. So, landing and bidding and designing projects you know is a daily process for us. Of course, from an accounting perspective, we're busy as well. Of course, we're busy collecting cash from all the sales we sold in the Q3 and Q4 of 2023 as well, and because it's the main project design and sales season, we've executed another CAD 18 million new contracts this year already, and that will continue for the foreseeable future.
Also wanted to highlight the fact that this is the third record quarter in succession. So Q1, we did CAD 8.4 million in sales versus our previous record in 2023 of CAD 7.2 million. We had a record Q4 of CAD 19.6 million versus our record in 2023 or 22 of CAD 8.3 million. And same thing with the Q3, record of CAD 20.4 million versus our previous record of CAD 11.6 million also in 2022. And the important thing is that they were profitable sales. And so we are each of those years or periods where profitable was positive EBITDA as well. What does the future look like? Well, 2024 is going to be strong as expected. Now we saw our sales grow by 84% last year.
They won't grow by 84% this year, and a lot of last year's sales were make up because of all the delays related to COVID and the cement crisis, the supply crisis that we had in 2022. So that was an unusual year. Do we expect strong growth for their foreseeable future? Absolutely. And we'll probably average 30% for the next, you know, over the next five years, but some years will be lower. And we expect 2024 will be probably lower than the 30%, but no guarantees of that yet, either. We also continue to bid on, continue to build that backlog in both the US and Canada, and to keep up with this demand. We've actually hired additional sales staff. So this will help us to continue to increase our sales, not only in 2024, but for the future as well.
So why is this growth trend expected to continue? And again, we stated this last webcast too because the overall market size continues to grow, and it's because it's still early stage for many applications in many states and in many provinces. So in the US, it's about 10-15 years ahead of the Canadian market, but it's still in the early growth stage, even though it's growing dramatically. And a large part of this is because the product continues to perform. It's been in the ground for over 20 and 30 years now. So this has built confidence in the design engineering teams in the ministries of transportation, municipalities and governments that specify these materials for these projects. And as a result, the overall market continues to grow dramatically. It's important to note here that this does not include the replacement infrastructure, that.
the billions of dollars that have been approved in the US and the trillions of dollars that actually has to be spent on replacement infrastructure over the next 10 years. So again, this hasn't hit the ground for us yet. But because it relates to bridges and highways and roads and tunnels. It's going to affect our market and make it stronger. Why are we able to grow? Of course, we're we have the capacity to grow, and that's why we saw our sales grow from CAD 29 million to CAD 53 million in 2023. It's because we have a tremendous amount of capacity in our equipment and our people. We have over $200 million in seasonally adjusted production capacity. So that's one shift part of the year. We could double the shifts and increase that capacity.
We have 11 dry mix processors and 8 wet mix processors that basically go across the country on a daily process basis to pour projects. We also have a strong cross-trained operational staff that we didn't lay off during COVID, and we keep employed by, again, maintaining and servicing our equipment in the Q1 when we're usually the slowest. We also, in order to reduce the amount of labor that we do carry, our operating staff that we do carry. We take advantage of trained operating staff from our general contractors as well. This helps keep our staff lower, and because labor is really, and the operation staff is a fixed cost to CEMATRIX. We also continue to strengthen our team. Our overhead is fairly set, but there are areas where we still need to strengthen.
First and foremost, of course, as on the sales side, as mentioned earlier, we just added a new salesperson in Chicago and a new project manager in order to manage the growth that's happening in the US market. As mentioned in the previous webcast, Mr. Boomhour is with us today. He was promoted from CFO to COO effective January 1, and we added Ms. Cantin as our CFO effective February 3, 2024. Both have been great additions to CEMATRIX, and will continue to enable us to grow for the foreseeable future. We've also added a few new operations staff, because as the sales numbers continue to grow, we're gonna have to continue to add people to our operations staff and train them to prepare them for the upcoming growth. We also have the backlog and sales pipeline in place.
So, you know, although our backlog was diminished a little bit by a change in scope and one of the tunnel projects we had landed earlier. We still have an extremely strong backlog. So the reduction in scope of that project will affect us a little bit in 2024, but not much. Because the project was scheduled to start at the end of the year. But it's mostly scheduled for next year, and we expect to replace all of those sales, well, hopefully, all of those sales next year, and expect our growth to continue for the foreseeable future. Also, our backlog or our pipeline continues to remain strong at over $400 million. These are the projects that we bid on, and again, that continues to remain strong.
I want to highlight the two pictures on here, because this is the extreme. This is why they use cellular concrete in this project. This is actually a project that was done in England a number of years ago. It's a Canary Wharf project. I don't know if you can remember the Canary Wharf, but it was an expansion of the office areas in the London area, and it was built on weak and unstable soils. And so they built the highway first, and it's actually in between these two on the left-hand picture, in between the 2 formworks on the left and right-hand side. And they had to put all of their waterlines, sewer lines, and everything electrical, WiFi, everything; all everything had to go in here. And then the only material to use was cellular concrete, and it was actually produced.
On the Thames River on a barge and then pumped into place. This is an extreme. But this is why cellular concrete is being used right across North America for various applications. It is the right solution for these applications where the other products were only being used because they were only products available at the time. So that is it for me. I'm going to pass it on to MJ to go over our Q1 financial highlights. Then we'll pass it back to Grant, who will monitor it, and the question period. So, MJ.
Thank you, Jeff. Good afternoon, or good morning, everyone, depending on where you're sitting. As a reminder, if you wish to get more information, our documents are located on our website or on SEDAR+. So let's go through our Q1 2024 financial highlights. As Jeff mentioned, traditionally, Q1.
Q1 is our slowest quarter due to cold weather in Canada and Northern United States. However, we had our third record quarter in the history of the company, which is great. So revenue for the quarter was CAD 8.4 million in Q1 versus CAD 7.2 million in 2023, a CAD 1.2 million increase as we executed work on large tunnel backfill and grout projects. Gross margins were up at CAD 2.6 million, or 30% in Q1 versus CAD 0.7 million or 10% in 2023. This is up CAD 1.9 million. The margins were positively impacted by our project mix and good levels of revenue to cover our fixed cost. Operating income, which is gross margins minus SG&A, was CAD 0.3 million in Q1 versus a loss of CAD 1.2 million in 2023. That's up CAD 1.5 million. It's a great improvement for us. Adjusted EBITDA, also positive at CAD 1 million in Q1.
Versus a negative cad 0.7 million in 2023 was up CAD 1.7 million. Also, a first in our history as results of record Q1 revenue and improved margins. Cash flow from operations before non-cash working capital changes is up CAD 1.6 million to CAD 0.9 million in Q1 compared to an investment of CAD 0.7 million in 2023. We're really proud of it. Finally, cash, we had CAD 7.9 million of cash on hand at 31 March. It went up CAD 4.6 million from year end, as expected, as we collected on our Q4 record revenue and Q1. So if we can move on to the next slide. Thanks, Jeff. So on the upper left corner, you can see our seasonality of our business with our revenue split by quarter. Generally, revenue in the first half of the year is about 34%. Q3, 38%, and Q4, 28%.
You can also appreciate our organic growth in the last few quarters. On the right-hand side, you see our borrowings by quarter. It has been significantly reduced over the last 4 years, and for the last 4 quarters we are about CAD 4.2 million in debt, mostly because of two loans we have with the BDC and some leases. We've added a graph this year, about our gross margins % by quarter, so you can see they're improving. And when you look at the graph 2021 and 2022, it was impacted by supply chain and pandemic challenges. And we are now showing strong and improved margins supported by our revenue growth and project mix. This covers our financial highlights. Q1 is a great start of the year for us.
Thank you, MJ. So that's it for CEMATRIX for our presentation today, and we'll go to our question period with Grant monitoring it.
Alright, thank you. We've got a few questions in already. Just as a reminder to the participants, the Q and A button at the bottom of the screen. Please submit your questions through there. So the first one is, can we expect a TSX upgrade? Or is that off the table for this year?
Do you want to handle that, Randy, or are you on board still?
Yeah, no, I'm here, Jeff. I think probably best for you to field that one.
Okay. We are considering that, and we haven't set a date yet for when that's going to happen. But certainly our plan was to move to the big board in the foreseeable future.
What percentage of the sales pipeline usually converts to backlog? Usually converts from backlog, I guess it should be.
That's a good question, Grant, and it varies, right? So in Canada, where we have lower competition. Generally, we're converting a lot of those projects that we see in our pipeline to backlog. And the Canadian pipeline percentage average around 30% to 40% of that total backlog, let's say, maybe a little bit lower. In the US, there's some competition that we face in the US So although the number of projects that are landed as a group from the cellular concrete producers in the US is going up significantly, and so is ours. Along with that. We don't land all of it. So, for us, it's probably 20% to 30%. Which is actually converting to projects for ourselves in the US Along the same line, the other question was about backlog.
If this one is about bids. Same idea. What sort of percentage success rate on average do you see on your bids?
It's kind of the same question in total. So in Canada, because we're the only supplier for cellular concrete, we generally, you know, have a higher percentage success rate for ourselves. So again, we're at the, you know, the 40% success rate, let's say, in Canada. But the numbers of projects, of course, are quite lower than the numbers in the US In the US, where there's a bit more competition, there's various applications of various sizes of projects down there. And so, you know, the larger projects we tend to, I, you know, I would say that our success rate is probably in the 10% to 20% range, and maybe overall it's around 25%.
Congratulations on the solid quarter. Can you elaborate on the extent of the reduction of backlog? In 2024 and 2025 sales, or the impact on it. Do you expect to make up for the lost backlog? In 2025 and resume growth.
Yeah, the net change in the backlog was a decrease of CAD 17 million, and it was due to they changed the tunnel boring machine that they used for the project that we originally bid on. And unfortunately didn't tell us about it. So, they went from a much larger tunnel boring machine which would have required, you know, 150,000 cubic yards of grout to a smaller boring machine, which again, with the same size pipe inside. Resulted in a reduction down to 58,000 cubic yards. Thereabouts in volume. So, it did change the size of the project.
And fortunately, you know, we're able to renegotiate at this time, too, from a contract perspective, and hopefully we'll achieve better margins, too, for the smaller project, which is the plan. But the good question is, will you be able to replace that? It's a large project. Will we be able to replace all of the projects? Eventually we will, and hopefully we will do it. You know, either before or during 2025 and make up everything that we lost.
What percentage of your sales budget for this year is baked into the backlog, the current backlog?
What percentage of our sales is in the backlog already? I'm just gonna do a quick calculation. I know the numbers. Well, you know. As I think about it, that would be giving guidance, and we don't give guidance. So I'm sorry. I'm not gonna answer that question.
Yeah, well, we'll skip to another question here, and I think it's in line with what you mentioned about the target being on an annual basis of a 30% growth in the top line, and gross margins. Would fit into a better bottom line. So the question is, is 30% your new normal?
No, what I did say was that it would average 30%, so we could see it years that could go as high as 84% again. We could also see years that may be down to 10%, and it just depends on the year. But we will. What we expect is continued strong growth. And we expect it to average 30%. But that is an expectation, and it's not a guidance.
How big is the sales team now? And are they structured by geography or target markets?
Randy, can you answer the numbers on the sales side?
Yeah, I don't think we want to disclose exactly how big our sales team is, Grant, but we are organized by geography. And the sales team's members in those various geographies would target all the different opportunities that are available.
Skip off CEMATRIX input from a question here about Glavel. Have they received their second kiln, and how much of an increase in revenue potential does a second kiln constitute? And perhaps for the folks who aren't familiar with Glavel. Just a quick education on why CEMATRIX invested in Glavel.
So Glavel is a business that's in the manufacturing production of foam glass, which is a lightweight aggregate that is made from recycled glass.
We invested in that company a year and a half ago and assisted them in buying their first kiln and producing or providing some working capital for developing the business and to participate in the second kiln as well. So because of the COVID situation and the delays in the development of that market and the manufacture of the equipment, including the second kiln, it did not get delivered on a timely basis. So they are still operating with one kiln, and they expect to hopefully have that second kiln in place sometime this year that would double their capacity from a sales perspective. But because it's a private business, I'm not able to disclose publicly information related to that company, other than we're invested in it, and we continue to support it.
Are you addressing this in the presentation? But. Chance to reiterate, maybe expand upon. Are you continuing to see a greater acceptance of cellular concrete in the industry, and are more jurisdictions approving its use?
Absolutely. I'm you know, particularly in the US But you know it, and it's important to note here. It's hard to say everything during a short presentation, but I try to tell the audience that it is growing dramatically, but in most cases none of our applications in any market have reached that tipping point where it is the product that is always selected for the product of choice for these particular applications. The geotechnical engineering world is still using legacy products in many cases. So although it's accepted generally, it hasn't been accepted entirely yet. And so there's a tremendous amount of growth even in the States like Illinois and New York that use a lot of it, or even California.
And there's many states that don't use it that much at all. You know. So it's relatively young in their markets. And then of Canada, of course, we're 10-15 years behind the US market. So we're in the really early development stages, particularly in Eastern Canada.
Easy one here. It's a yes or no, I think. Are you currently bidding on any $10+ million dollar contracts?
Yes.
Okay. Have you started to see any business based on money that's flowing through the US infrastructure bill?
No, I'd mentioned that earlier. We have not seen it hit the ground yet. So. We expect it to happen within the next couple of years, but it's really the early stages on this.
Hopefully not totally tied to the elections in November as to the availability of that money. Yeah.
Well, what's good, Grant, is that all of this growth that we're seeing is all just normal infrastructure. So we consider that a bonus. Right? So normal infrastructure will continue to grow for us, because. Again, we're we're stealing markets from legacy products. So there's still lots of room to growth, even without that additional opportunity.
Regarding competition. If you don't win a contract. Generally, what do the competitors look like, and why would they win a deal, and you don't?.
Generally, they would win it on price. Okay, in the US And the second reason that they're in a geography that's closer to where the application is. So where our main offices are in Chicago and in Bellingham, Washington, and of course in Canada. But you know, in order for us to go do a project in California, if it's a small project, it's just difficult for us to bid on it and win it, because we have the transportation cost. So generally those small to medium-sized projects that are closer to those competitors, they would win.
Phrase the last question here that's currently been submitted. It has to do with what CEMATRIX is doing to continue to promote itself in the capital markets and with investors. And maybe just want to provide a little overview on that.
That's a good question. And then the one I always like to answer is that, you know, we evaluate the market every year, and and the what's the best thing to do for CEMATRIX. And of course we get advice from our IR groups and investment bankers out there.
And since COVID we've determined that there's certain things that we can do that give us the best opportunity to get in front of the audiences, and we tend not to attend in-person conferences or investor conferences anymore. We attend the odd one, particularly those that are supporting CEMATRIX elsewhere. But generally how we get to our audience is through first public company announcements on contracts and things like that. We also do regular webcasts four times with you and Bristol, our other IR group. We also do two other webcasts through the year to talk more about what we're doing from an operational perspective in business like we did in this past January. We also do a lot of virtual presentations to significant investors and new investors, mainly on the institutional side.
Got a lot of institutions following us right now, and significant retail investors too, as well. And we also do digital media through one of our IR firms, that being The Howard Group. And so that is what we're focused on right now. And for this year, we do have a couple of investor conferences that we are attending, one we already have, which is the Centurion Conference in Toronto that was in March. And we're attending another conference in September with Small Cap Discoveries group at this time, and. At this point, that is what our plan is for 2024.
Same person had asked about advertising, and just so folks know when we did run a digital program. Online program targeting retail investors last year for a few months.
We had over 2,000 people register, and that means not just saw something, but in fact, they took the time to give us their information and their contact information. And of course they're getting things the same as everyone, but another 2,000 people. And we know. If you look back 6 months or so ago, and where the stock was 6 months ago and where it is now, you know you're up about 150, 60%. So I don't think it's all bad. Certainly. You've played critical role, obviously, by delivering the tremendous results you have over the past few quarters. Our job is to create an audience. Your job is to create the results, and you're doing a heck of a job there. So keep that up. We have no more questions. And with that, any closing comments from the team.
Well, as Randy would tell me, the best way to get attention in the marketplace is great results, and that's what we're doing, and that's what you just mentioned. So that is the best thing we can do. And I think we've mentioned in a previous webcast that our strategy right now is execution. Grow the market, grow the backlog, put the sales in place, and make money. And that's the best thing that we can do for our shareholders at this time, and hopefully within a reasonable amount of time. The capital markets in Canada, particularly the microcap markets, will start to turn around. And we see that happening already.
It's definitely, if you look even just at the Venture Index over the past few months, it's finally on a continuous uptrend, which we haven't seen for over three years now. So hopefully that holds anyways. With that, thank you to all the participants. Thank you to the CEMATRIX team. And we'll see you in the next quarter. Thank you.
Thank you, Grant. Thanks, Randy. Thanks, MJ.