Thank you to all of those who are attending today. My name is Grant Howard, President of The Howard Group Inc. With me today is Randy Boomhour, who's the CEO of CEMATRIX Corporation, Marie-Josée Cantin, who is the CFO, and from the big city of Chicago, we have Jordan Wolfe, who's the President of MixOnSite USA, a division of CEMATRIX. First, congratulations on the record second quarter, best ever. Purchase of another 700,000 shares under the normal course issuer bid, which is great to see. I know you have a lot to talk about. With that, I'm going to turn it over to Randy, MJ, and Jordan.
Thank you, Grant. Appreciate the introduction. Thank you, everybody, for attending our webinar on an earnings call. Really proud of our Q2, as we stated in our news release. Just a quick forward-looking disclaimer. We will sometimes make forward-looking statements, and you can see what those mean here and what they could mean in the future. Every time we do these presentations, we're always conflicted in whether we try to make it something new and snazzy or we repeat the story. Unfortunately, not much changes quarter to quarter in terms of what we're doing in the overall strategy. It is going to be a bit of a repeat for those of you who have been on past earnings calls. We think it's important to cover these things so people understand the company and the opportunity. From an investor, the key highlights are we're an innovative cellular concrete solutions company.
We're a leading provider of lightweight, cost-effective, durable cellular concrete for infrastructure projects. We have a strong competitive advantage that I'll discuss later. We work primarily as a subcontractor for major North American general contractors. We are in a position of overall financial strength. We've also demonstrated an overall growth trend that I think sometimes can get missed when people are looking at just the last year or quarter to quarter. If you look at our 2024 revenue, it was $35 million. We had adjusted EBITDA of $3.3 million for the year. Our 2024 cash flow from operations was almost $5 million. At the end of June 30 this year, we have $8.6 million in cash and no long-term debt. We've been saying this for a while, but we're forecasting a record year in 2025. We have a significant market opportunity in front of us.
We're an industry leader in Canada and the U.S. for the North American market. The overall global cellular concrete market is estimated somewhere between $4 billion to $27 billion with steady growth. That number, of course, is for all applications across all countries in the world. Obviously, the markets that we operate in, the opportunity size is going to be smaller than that. Nonetheless, it's a big opportunity in front of us. Lastly, increased infrastructure spending in both Canada and the U.S. provides a very strong tailwind for our business and for the opportunity. In terms of the team and the corporate timeline, the three key executive members of the team are here on the calls, myself as CEO and President, Jordan as the President of MixOnSite USA, our biggest business and where we have our biggest growth opportunities, and Marie-Josée Cantin as our CFO.
On the board, we have Menaz, Patrick, Steve, Anna, and John, a very strong board. Insider ownership, we have about 150 million shares outstanding. Fully diluted, it's 167 million shares. That's options, RSUs, and warrants. Insider ownership is 15.4 million shares, or roughly 10% of the company. The two largest insiders are Jordan and myself. I always like to show this company timeline. Some people say I shouldn't show it because it shows we haven't had success. Success isn't instant. It's not overnight. Success is an accumulation of a lot of hard work and a lot of effort that's put in over time, and then you reach an inflection point. In 2023, we reached that inflection point when we went from a startup company that needed to raise capital to survive to a company now that's growing and is consistently profitable and consistently generating cash.
For those of you who don't know much about cellular concrete, cellular concrete is made by mixing cement, water, and a foaming agent together. The foaming agent creates bubbles in the mixture, which results in a cellular structure, hence the name cellular concrete, when the concrete sets. This mixture has some key properties, including being cost-effective. It's low density and lightweight, has a high bearing capacity, is extremely pumpable, it's highly flowable and self-leveling, it's self-compacting, it has some thermal insulating properties, it's durable, but it's also excavatable. All these properties actually lend it to multiple applications in the construction industry, especially geotechnical. The primary applications that we pursue commercially are lightweight engineered fill, MSE or retaining wall fill, a lightweight insulating road subbase, flowable or self-compacting fill, pipe or culvert abandonments, tunnel or annular grout, and shallow utility and foundation insulation.
In terms of our customers and our competitive advantage, our customers are almost always a sub, we're almost always a subcontractor to a general contractor. Very occasionally, we'll work directly with an owner, usually on smaller scopes of work. We have worked with many, if not all, of the largest general contractors in North America. I won't go through the list of names there, but you can see those are many of the bigger names in North America. From a competitive advantage point of view, we believe it's our reputation. We have been successfully delivering cellular concrete solutions on time and on budget for over 25 years. We have our team and expertise, over 200 years of in-the-field experience, which just can't be replicated. Our equipment, we have a large fleet of mobile, technically advanced equipment for producing cellular concrete with lots of capacity to grow.
Our size and scale, we have multiple locations from coast to coast in the U.S. and Canada. We believe we are more sustainable generally and generally more environmentally friendly than the legacy products that we replace. I have talked about this already in terms of customers and market opportunity. We have tried to get some third-party data on how big the overall market size is. You can see we have as low as $4 billion from Market Research Future to as high as $27 billion. They all agree that the market for cellular concrete is large and growing. The market for lightweight fill, which includes competitive products, is a multiple of this size larger. Infrastructure spending in general is increasing as the infrastructure in Canada and the U.S. is aging. Infrastructure needs to be replaced and repaired.
Populations continue to grow, which requires new infrastructure and places additional loads on existing infrastructure. As a result, we see spending on infrastructure is expected to grow and continue to grow into the future. MJ is going to get into the specifics of our record quarter, but there are some overall financial concepts that we think are important for shareholders and our stakeholders in general to understand, regardless of what may happen in a quarter or the year to date. One of the ones that's really important is we have a top-line growth trend. Despite the step back in 2024 overall revenue, the overall trend line is one of growth. We had revenue of $22.6 million in 2021 and $35.6 million in 2024. We are forecasting this year to be a record year. We have a positive bottom line, and we are generating cash. In 2024, EBITDA was $3.3 million.
We had positive cash flow from operations of $4.9 million in 2024. MJ will talk about our results in 2025. We have a healthy balance sheet with low leverage. We have $8.6 million in cash, and we have no long-term debt as at Q2 of 2025. Some key points to understanding our business are really important because whenever I talk to investors or stakeholders, all they want to see is a staircase of growth where growth grows by 10% a quarter. We're not a system-as-a-service type business. Our revenue doesn't grow like that. It's going to be lumpy, and it's going to be lumpy based on when large projects start and stop. Construction is also a seasonal business, and we're going to have higher revenues in warmer months.
Our average revenue over the last five years has been 18% in Q1, 18% in Q2, 36% in Q3, and 28% in Q4. You can see we're heavily weighted through the second half of the year in terms of our revenue. We're a specialty contractor, so margins are going to tend to be higher than general contractors. We have more bench time and more fixed costs because we spend a lot of time to train our operators and our supervisors, and we can't afford to lose those. We have to keep those people on site even if we don't have the work for them at that time. Project size definitely impacts margins. Larger projects have more competition, and as a result, the margins are going to be lower in those projects.
We have excess capacity, which will enable us to do significantly more revenue with our equipment and our staffing levels. We have more capacity in equipment than staffing levels, but we can basically significantly ramp up revenue on both. With this, I believe I'm going to turn it over to MJ, who's going to go through our 2025 Q2 results.
Thank you, Randy. As you've heard, we have a record Q2 and a first six months revenue. Revenue for the quarter was $10.6 million versus $6.4 million in 2024. That represents a 66% increase. For the first six months of the year, we had revenue of $17.3 million compared to $14.9 million in 2024, a 16% increase. Gross margin as a percent of revenue was 39% during the quarter compared to 17% in 2024. That's a 22% gross margin increase. Year to date, we had 32% gross margin compared to 24% in 2024. That's an 8% gross margin increase. We have positive operating income for the quarter and the year at $1.8 million for Q2 compared to a loss of $1.1 million last year. That's a $2.9 million increase. For the first six months, we had $1.1 million compared to a loss of $0.8 million in 2024.
That's a $1.9 million increase. Adjusted EBITDA is also positive for both the quarter and the year. $2.4 million in Q2 compared to a loss of $0.5 million in 2024, a $2.9 million increase, and $2.4 million year to date compared to $0.5 million in 2024, a $1.9 million increase. Cash flow from operations, also positive. This is cash flow before non-cash working capital changes. For the quarter, we had $2.4 million generated compared to an investment of $0.5 million last year. That's a $2.9 million increase. For the first six months, $2.3 million compared to $0.4 million in 2024. That's a $1.9 million increase. Randy talked about the cash balance. We had $8.6 million of cash at June 30th. Last year, the same period, we had $5.5 million. Looking at the graph, Randy talked about the trend line trending as a growth.
You can see that from 2017, our compound annual growth rate is about 24%. In orange is the year-to-date revenue, and detailed boxes are all full-year revenue. You can see the $17.3 million for this year is almost as much as we did for a full year in 2018. Pretty pleased with that progress. On the right-hand side, you have our gross margin, 32% year to date for this year, definitely tied to our increase in revenue. The dip that you're seeing, as we mentioned in past presentations, is due to COVID, supply chain issues, cement shortages. Year to date, 32%. On the left-hand side for the debt and interest, we have come a long way since 2017. The only debt we have right now is our equipment finance loan. On the right-hand side, you have the share structure.
As Grant mentioned at the beginning of the webinar, we've repurchased for the first time in the history of the company some shares. We reduced our count. We purchased just over 700,000 shares. At the end of the quarter, we had 150.2 million shares outstanding, 6.1 million options outstanding, RSUs of 2.5 million, warrants of 8.2 million. That tally is up to a total of 167 million instruments outstanding. Now we can talk about our backlog. Our backlog went up despite our record revenues. It continued to grow with sales success. Since the beginning of the year, we announced $31.7 million in new project awards. That's for various applications for our product. Backlog at the end of Q2 was $76.4 million, compared to $69.6 million at the end of the year. I'm now going to pass it on to Randy for some closing remarks.
Thank you, MJ. We just always want to end on this last slide, which is just why invest. It's really just a chance to recap the highlights. As one, we are an industry leader. We're well positioned to capitalize on the large opportunity in front of us in the growing infrastructure construction segment market. We are a growth company. Revenue is growing. We have positive adjusted EBITDA, positive cash flow from operations, and a strong balance sheet. In fact, the other day, I went looking for a company that has a market cap of under $50 million, revenue of over $50 million with positive cash flow and positive adjusted EBITDA. I could only find one in Canada. It's CEMATRIX. As a result, we believe that we're currently undervalued based on traditional valuation metrics.
Whether you want to take a forward multiple of revenue or a forward multiple of EBITDA, we believe that we're undervalued. We don't need any new capital raises to fund a burn rate. The only new capital should be in support of an accretive acquisition. We shouldn't be diluting shareholders again. We have capital to deploy. As MJ mentioned, we have $8.6 million in our balance sheet. We're looking for an opportunity to deploy that capital to help grow our company in the future. On the right-hand side is our investor relation contacts, The Howard Group Inc. for the retail side, the Bristol Group on the institutional side, and of course, we have one analyst following the company, which is Russell Stanley at Beacon Securities. That's, in a nutshell, why to invest. Just before we get into Q&A here, I'll just remind our audience that we don't provide guidance.
If there's questions about what the revenue is going to be next quarter or the next year, we don't answer those questions. The only guidance that we'll provide is the general guidance that we expect to have a record year this year. With that, I'll turn it over to Grant, who will help moderate our question and answer period.
Thank you, Randy and MJ. Just a reminder that at the bottom of your screen, there's a Q&A button. Submit your questions through there, please. As we move through the Q&A session, if you happen to ask a specific question, I may not read it because at times I will aggregate similar questions just to get to one answer. Randy mentioned Russell Stanley, the analyst at Beacon Securities. We're going to start with Russell, who has a series of questions. His first one is, congratulations on the Q2 results. Understanding that scale economies on a higher revenue base contributed to strong gross margins, can you elaborate on the role of revenue mix in the quarter, for example, large projects versus small, and how you expect second-half revenue mix to compare?
Yeah, that's a really good question, Russell. As a basic answer, we are trying to get across more often. The key concept there is that small to mid-sized projects, we can generally achieve a higher margin because there's less competition, because sometimes the mobilization fees to move into an area can prohibit some competitors from going in. On a larger project, the mobilization fees are a much smaller % of their all costs. Competitors can come from all over the place, basically chase those projects. The margins and the competition tend to be much higher on the higher revenue projects. When we think about Q1 or first half and second half, we do expect the second half to have more of our revenue made up by larger projects. As a result, we expect to see our margins drop a little bit.
That'll be offset by we'll have higher revenue, which means we'll be over our fixed cost hurdle quicker, and we should have more of that project margin falling to the bottom line. Even though our project margin and gross margin may drop a little bit, we expect our EBITDA margin to increase.
Russell's next question is on contract wins year to date. How would you describe the overall demand relative to a year ago? Understanding you have little to direct tariff exposure, are related macro headwinds impacting decisions by customers and project owners?
Yeah, I think overall, we are seeing the market continue to grow. I think it's growing for a number of reasons. One, because infrastructure spending is growing. I think it's also growing because the awareness and understanding and acceptance of cellular concrete is growing. That's growing in part because of our efforts, but it's also growing in part because of the efforts of other players in the marketplace. The entrance of new competitors in the marketplace I view as positive because it's just more people helping to grow the overall market. I expect that to continue. The second half of the question, Grant, sorry, I forgot it. Is it?
Sorry, it just disappeared on me.
That's OK. I'm sure if I...
It was in regards to tariffs, yes. Whether or not that's impacting decisions on your customers, speeding them up, slowing down projects, whatever it may be.
Yeah, it's a really good question. Again, we don't have a lot of direct tariff exposure. Very little of what we do crosses the U.S. border. There's a little bit of purchasing from vendors that might be in Canada or in the U.S., and we're crossing the border, but very, very little. What we are seeing on a macroeconomic basis, if a project's been green-lighted or underway, we haven't seen tariffs stopping those projects from proceeding. I do think it's adding some overall uncertainty to the market. If there are projects maybe in the planning stage, you might see that project go a little bit slower as they try to wait for some more uncertainty on the tariff side. I think generally, people view the tariffs less as a policy decision by the Trump administration and more as a negotiating tactic.
I think wherever we end up in tariffs in the end, it won't be prohibitive to doing business. In general, the infrastructure requirements are going to have to move forward regardless of tariffs.
Russell's next question is in relation to a couple of projects, large ones. The first is on North Carolina. Has the work proceeded as planned since the start? How about the large tunnel grouting project in the Midwest that was started back in June?
I think for the North Carolina project, it has more or less gone as planned at the start. There are always hiccups when you first start a project, especially a large one. That's sort of normal. I don't think it's really fair to evaluate success or status kind of early on. You usually look at back in the end. All the signs indicate that that's going to be a very successful project for us. Most importantly, our customer is happy with their progress, and they're happy with the work we're doing. At the end of the day, our company's success is founded on our customer being happy. That has to be where everything starts. In terms of the grouting project we're doing there in the Midwest, that project's going very well and is on track.
Again, our customer is very happy with the work we're doing there and the progress we've been making.
As a comment, it says, congrats on the stock's recovery. In fact, I'm just going to have a quick look at that. Obviously, the result's been well received, well through half a million shares already. The stock's moved up a few pennies to $0.33. Current market cap's about $46 million. Everything's positive. The bids are strong. The bids have been building very nicely based on these results. We'll get to the rest of Russell's question. How does the M&A environment look in terms of attractive targets and willing sellers?
Yeah, another good question here, Russell, for sure, is there's definitely attractive targets out there. The ones that would be top of our list would be the large cellular concrete players in the U.S. market. Whether they're willing sellers, that's a different question. We're starting to begin conversations with those to see if they're willing targets. If they're not, we have a plan B in terms of where we'd go next. That would be some kind of complementary business, like maybe a chemical grouting or some other type of grouting in a market that we're interested in, maybe Florida, maybe Texas, maybe California. I think there's lots of ways for us to try to find an accretive acquisition that will add value to the company and our shareholders.
Questions from some other individuals. What drove the year-to-date increase in gross margins?
Yeah, whenever we chat about this question, I think people always want to drill down into margins on specific projects. We just don't talk about that for competitive reasons. It really just boils down to what's the mix of projects that we're going and how many of them are small to mid-sized versus large. At the end of the day, we have to have enough revenue to clear our fixed cost hurdle. Once we do that, the gross margin tends to go up. It's a bit of volume, and it's a bit of project mix.
Questions on warrants, what they are priced at. Obviously, this comes from the slide with the cap table.
Yeah, Marie-Josée, I think I know the answer, but I'm guessing you know the exact answers. Could you answer?
It's $0.45 and $0.60. It's also part of our [NOSAR financial] statements, if you want to go have a peek there.
Yeah, I think there's about $800,000, Marie-Josée, that are at $0.45, and then the rest are at $0.60.
That's right.
Would you happen to have the expiry date on those handy?
Yes, it's July 29 of next year, so just under a year to go.
No problem. Next question. Could you describe the top of the funnel or, you know, the pipeline, the sales funnel, I presume he's referring to in regards to new business now versus a year ago?
Yeah, we kind of chatted about this already. Overall, I think the overall funnel is growing. That's because the cellular concrete market is growing. That's because the overall construction market is growing. There's also aging infrastructure and new infrastructure. We're doing a better job as an industry and as a company in terms of getting the word out where cellular concrete can be used and the applications it can be used for.
CEMATRIX involved in the Calgary Green Line project, the LRT project?
Yeah, we don't comment on specific projects, unfortunately.
Does being branded CEMATRIX in Canada, MixOnSite USA in the U.S. dilute or change the perception of the size and capabilities of the company? Would being a single branded company open up more opportunities?
The short answer is no. It doesn't change the perception or the size of the company. In fact, in this environment where there's a lot of nationalism going on, having separate brands is actually helpful. Many people perceive CEMATRIX as a Canadian brand, and MixOnSite USA and Pacific International Grout are perceived as U.S. brands. That actually helps in terms of when we run into a buyer that has some nationalistic concerns or style. We actually think that the multiple brands is helping us right now.
That's the fact that MixOnSite USA is a well-known name and has been around for many, many years. I think it might get a little confusing if you suddenly change it to CEMATRIX. Jordan might have something to say about that.
Yeah, there are pros and cons, right? I can understand the argument for going under one brand, but we've chosen to have multiple brands for the reasons I described.
Yeah. The Carolina Highway project has finally started. Is it a lengthy one? How will revenue be booked as the project progresses over the months?
This is a really good question, actually. I'm glad that David asked this because I do read the chat boards every now and then. There's lots of misinformation in those chat boards about this project. The way we record revenue is as we place product in the ground. This project's going to stretch out over at least 12 months, and that revenue is going to be recorded over the next 12 months as we put product in the ground. You don't do a $15 million project and record all the revenue in the first month. That's just not how it works.
In the past, you talked about specification challenges being an issue in Canada. Do you have any updates on spec progress in Canada?
Yeah, I think that's just referring to the different qualifications or permits you have to get to use the product on, in particular, usually transportation-related projects in different provinces or states. We continue to make progress with the provinces or states that we're active in. We don't really see that as a hurdle right now. So much work has been done in the past to get those qualifications in place. When we see a new opportunity where that makes sense, we pursue that. Because of all the work that's been done in the past and all the other players in the market, that's becoming less and less of a challenge.
How much bigger than your next largest competitor are you? It could be a little difficult because I think all of them are private.
Yeah, Grant, it's no fair if you answer the questions for me. You're absolutely right. It's a good question by Paul. I would love to know the answer to that, but I truly don't because they're all private. My best guess is the next biggest one is probably similar in size to us. The others would be a fraction of our size, maybe half or to a third. It's truly hard to tell.
I think there's several questions on this next one. First, congratulations on the great results. Are you expecting to win more projects from North Carolina? That's the first one.
Yes, absolutely. Like I say, when we successfully do a project for our customers and we deliver it on quality, on time, and on budget, it creates a success loop because the next time we talk to that customer, they know about us. They've seen us do our work in the field, and they know that we can do what we say. Absolutely, when we successfully deliver the North Carolina project, I do expect it will generate more business for us. Will it be as big as that project? Probably not, but it will definitely generate more business for us in the future. There's no doubt.
Second question within the body of this is, what is your all-in cost per quarter? I'm not quite sure what that's referring to.
I'm not sure either. It's not information that we disclose unless it's already in our financial statements. I think we just pass on that one, Grant.
Next one is the size of the current bid pipeline.
Yeah, that's a number that we've also stopped disclosing because it's a very hard number to track and get right. We basically fine-tuned our disclosure to be numbers that we can track and get right consistently. I will say, though, the overall bidding pipeline is bigger than what it's been in the past for the reasons I've already talked about.
Gentleman, the question was directed towards Russell Stanley. He said, Russell, your target price was $0.45 based on Q2 revenues of $6.8 million. Now that the company beat that quite handsomely, will you raise the target price higher, which we think is too low? Thank you. I'm not sure Russell wants to answer that. If he does, it'll show up in a note that he'll send through.
Yeah, I would just say, Grant, Russell's not going to answer that question, right? That's not the purpose of this call.
Backlog $76 million as of June 30.
Yes.
From Kia at Centurion One Capital, congrats to the team on a great quarter. Please talk about your capital allocation strategy in more detail, M&A and organic growth, and share buybacks.
Yeah, I mean, we're a small company, right? Our capital allocation is more general than specific. We're actively looking for an M&A opportunity. If it doesn't present itself, we're not going to do it just to do it. The capital allocation strategy could be we could sit on that money until we find the right opportunity. In terms of share buybacks, we're likely done the share buyback for 2025, and we're going to relook at that share buyback again in 2026. I personally am supportive and a fan of the share buyback. I think it's important to not dilute shareholders and to find a way to basically grow shareholder value.
Are you in LOI, letter of intent, or due diligence on any targets? Is there a pipeline that you can put some share light on?
I mean, if we were, I wouldn't be able to tell you. I can tell you right now that we're not. We just can't comment on that. There is a pipeline, and I've kind of talked about it generically. Our first set of targets would be large cellular concrete players in the U.S. It's going to be companies that are one step out in key markets that we like. Those are really the targets that we're looking at.
What's the status of the Glavel investment?
The Glavel investment, you know, foam glass aggregate is a great product. It has a space in the marketplace, and it will continue to grow. Glavel itself is a private company, so we're not really in a position to comment on how they're doing other than my sense is that they're doing well. They're growing their business. They've got some issues like all companies they're trying to work through. It has been a lot of progress for them over the last year. We are a minority shareholder in that company. The path to us becoming a majority shareholder, I think, is closed, at least for the foreseeable future. I'm still hopeful that at some point in the future, we're able to exit that investment and make some money on it.
There were some questions on the normal course issuer bid, which we've deleted because they've already been answered. Any comments on cellular concrete being ripe for a private equity roll-up?
I don't know if ripe is the word I would use. There's always opportunity for private equity roll-up. I've been surprised at the number of industries where that's occurred, where I didn't think it would be possible. Things like veterinarian hospitals, automobile dealerships, dentist office. There's always opportunities for roll-ups. I would say we actually hope to be the person doing those roll-ups, right? That would be part of our strategy to get to our ultimate end goals, as we want to be the player that's rolling those up.
At this point, the last question. What benefits the company more: working one $5 million contract or five $1 million contracts?
Yeah, it's an interesting question. I would say the answer is it really depends. You know, people hate when I use that answer, but the specific matters, right? The advantage of one $5 million contract is you could probably do that with one crew and one piece of equipment over a period of time, and that has some benefits. As I mentioned before, the larger the contract, the more intense the competition is. The margins on a larger contract like that are probably going to be smaller. Five $1 million contracts are probably going to have a higher margin profile because mobilization costs in a $1 million contract are more material. It really depends. To do five contracts, depending on when they're spaced out, if they're all at the same time, you could in theory need five crews and five pieces of equipment to do it. It really depends.
What I would go back to is what I said earlier in the highlights of the company: we have capacity. What I'd say to that person is I'll do both things. I'll do the $5 million one and I'll do the five $1 million ones.
I have no further questions. With that, Randy, MJ, any closing comments?
Yeah, Jordan, do you have any final thoughts before we sign off?
No, I don't. I think you guys handled it very well. Thank you.
MJ?
I'm good, thank you, Randy.
I'd just say lastly, Grant, when things go well, people tend to give us too much credit. When things go bad, they tend to give us too much blame. I think kind of being more even-keeled about our results is really important. We're on track for a record year. We're really proud of our Q2 results, and we're just really focused on running a good company. That's the most important thing for us.
Thank you very much. Thank you to the participants. With that, we are going to conclude this webinar. We'll speak to you next quarter. Thank you.
Thank you.
Thanks, Grant.
Thanks, everybody.