Good afternoon, everybody. Thank you for joining us, and there are still people being admitted to the webinar. We're going to get going. I'm Grant Howard, President of The Howard Group, and we are also shareholders of CEMATRIX. Going to get into a fairly detailed Q1 webinar here. I would just like tell everybody that at the bottom of your screen, if you want to submit questions, there's a Q&A button, so enter them there. We're going to get into this very quickly. I will introduce Jeff Kendrick, who's the President and CEO of CEMATRIX, and Randy Boomhour, who is the Chief Financial Officer. With that, gentlemen, I am going to turn over to Jeff first, who's going to get into a number of matters and update, and then Randy's going to kick in with the Q1 results. Gentlemen.
Good afternoon, everyone. I'm just gonna share my screen right now. First thing I wanted to do, and Randy and I wanted to thank everyone for coming today, but also thank Grant and The Howard Group for setting up our first webinar. This is first of many to come, and part of the new era for CEMATRIX as we turn a new leaf at CEMATRIX, post-COVID relief. I will start with a general overview of the company and the unique position that we're in this year, talk about management perspectives, and then Randy will follow up with a report on the first quarter results, and then both Randy and I will be around for questions at the end of the presentation. Disclaimer first. There we go.
My part of the presentation, I wanna cover sort of highlights and prospects for 2023, talk about the unique position that we're in this current year as compared to others. Part of that unique position, of course, is the large North Carolina project that we landed a few years back and hasn't started because of COVID delays. I'm gonna talk about the record-breaking sales that we've been achieving. I'm also going to be talking about our backlog. Not only that it is going into the ground, but it's also growing as well. We wanna go over sort of what our 2023 IR plan is going to be and for the future. Part of that plan is going to be introducing our investor audience to what we do and how we do it.
I'll go over a little bit about not only a project that, a video that gives you a good overview of what we, our setup is in particular projects and how we place projects. It also talks about a couple of the million-dollar projects that we've already completed. I'll pass it on to Randy again to cover the first quarter introduction. Highlights and prospects. First, we're in a very unique position in 2023 with 11 large projects, over CAD 1 million, of course, many under CAD 1 million as well. One of those projects is the North Carolina project. It's CAD 21.2 million in total. It will start to go into the ground this year, and I'll talk a little bit about that. Talk about the record sales, as mentioned.
I'll talk about the margin rebound and the strong growing background and a return to profitability. I also mentioned right now that there is still unexpected limited cement supply issue in select regions across North America, particularly areas like the Chicago-Detroit area, where they actually are closing down the Chicago River and dredging it this year. So getting a supply of cement up into that region is going to be difficult. First before I move on, I'll talk about the margins and why we ended up in the margin situation we did last year. Really it started pre-COVID, on the supply of cement, or when COVID started, I should say. When COVID started in Europe, they started to close down plants. In North America, 30% of the cement used to come from foreign markets.
When COVID hit, they stopped bringing in cement, and even if they did bring it in, it was a significantly higher cost, not only because of the cost of cement, but also the cost of shipping went up significantly. The unfortunate thing happened was, which was good for cement companies, was that 2020 and 2021 sales were the best cement sales ever. In order to meet the demand, they had to keep their plants running full-time, you know, 24 hours a day for 12 months a year. And that happened throughout 2020 and 2021. By the time they got to 2022, they were all out of inventory. They hadn't brought any cement in from overseas.
All of those plants, not all of them, but let's say a majority of those plants, started to crash in the winter and into the mid-year. It wasn't until June of last year that we found out that we were gonna have a cement supply issue. Since most of our sales were coming in the second half, that was gonna seriously affect our business. Although we are protected for the most part on our cement supply, meaning the price, because we sign contracts or enter into arrangements when we land the contracts, those companies or cement suppliers that we had made arrangements with actually ran out of cement. We had to buy it from others at 30%-40% higher prices. Now, that wasn't the only issue, of course.
We have, of course, faced, like everyone, inflationary pressures right across the board, and that affected our margins. We'll talk about the margins in a second. We do expect that they will continue to improve this year, as we've already seen in the first quarter. This unique position, we have 11 projects over CAD 1 million for a total of CAD 24.3 million to go into the ground this year. Now, the contracts are actually higher. In fact, we could contract over CAD 50 million this year to date, but only CAD 24.3 million of those larger contracts will be going in place. This compares to seven projects last year for a total of CAD 15.5 million. The balance of last year's CAD 29 million sales were made out of small projects under CAD 1 million.
This year, not only do we have the CAD 24.3 million, but we have CAD 11.7 million contracted or contracts in process to date, bringing our total to CAD 36 million already this year compared to our total sales for last year of CAD 29 million. Trending in a very good and strong direction. We've already talked about these margins, but what's making the margins better is we're getting, our suppliers are providing us with a better cement supply situation, and that's already been proven out in the first quarter, and we expect that that will continue for the balance of the year, but there will be pockets of issues, as mentioned. We've protected ourselves on a contract side. All new contracts have protected us from sales price increase.
Our general contractors that we work for actually got caught in the same situation last year where they couldn't get cement for their projects, the part that they were doing, so building bridges and things like that. We were both in the same position. Nowadays, not only do our GCs, but we're in a similar position where you have contracts that the any price increases are passed on to the eventual or the owner of those projects. Of course, we expect to, because of strong sales and, of course, stronger margins, we expect to return to profitability this year. Under normal margin conditions, we would generally break even in the CAD 25 million-CAD 29 million range, depending on what the makeup of sales is.
That didn't happen, of course, this past year because of the margin issues related to not only inflation, but mainly the cement supply issue. We do expect that our margins will start to return to what we expect to be normal margins by the end of the year. Because of that, we should start breaking even in the range that we have talked about in the before. Since we're gonna be significantly above CAD 30 million in sales, that we should be generating profits and cash flow in EBITDA as well. The key projects, this was mentioned in a or listed in a recent press release on our management perspective for the year. You all can go back or go through this. I'll go on to the next slide to really show you where a lot of these projects are.
They're really right across North America. They involve numerous applications from tunnel grouting to a runway base to a backfill of overpass abutments that are either with or without MSE panels to a large basement backfill protecting geothermal installations within that basement to a underlay for a walking path to pipe bedding and many other applications as well. One of those projects, or the 11 we call them, the famous 11 projects, is the North Carolina project. This is a new freeway corridor that's being built in North Carolina, and it involves several phases. The first phase is includes five new overpasses. These will be backfilled using our cellular concrete through our Chicago office mix on-site. This total project is CAD 21.2 million. Of course, it was originally slated to start in 2020.
Because of COVID delays, it is finally going into the. Well, it has started, the project itself, but our part of it will finally start to go into the ground this year. Ironically, even though we're seeing a huge or significant increase in sales, only CAD 4 million of that relates to this project. The balance will all be completed next year, which makes it great for next year. We're not losing the sale. It just makes, it gives us very strong base going forward for 2024. The other thing that's very interesting about this project is that, as mentioned, it's the first phase. Well, the second phase has just recently been awarded to the contractor that is doing the first phase. Our general contractor typically would carry the same subcontractors on to the next phase.
If that is the case, that second phase may be even larger or than the first or smaller, but still a very big project for us, and that would continue or is expected to start in the next two to three years. Record-breaking sales. Again, as mentioned, we did CAD 29 million last year versus CAD 22 million in 2021. We had record sales in the first quarter that Randy's gonna speak to at the balance of my or the end of my presentation. Since July 1 last year, we've had CAD 27.1 million in sales for those three quarters ended March 31st through 2023. If you add on CAD 10 million for the second quarter, which we hope to do, then we're going to have a very good year.
We're gonna get up into very significant growth of sales as really underlaid by the discussion on the sales that we've talked about already. Backlog, you know, is being realized and going into the ground as I'd mentioned. We've had record sales since July 1 of last year. The funny part is the backlog continues to grow as well. This is all organic growth. Even after sales up to the end of March, this has grown to CAD 93.2 million. The backlog at the end of December was CAD 79 million. Before discounting sales put in the ground since January 1, our backlog has grown by 28% organically, and we expect this to continue not only this year, but the foreseeable future.
The reason for that is it's still very early stage in a lot of our markets, even in the U.S., which is about 10 years ahead of the Canadian market. In our eastern Canadian market, we've barely scratched the surface yet, there's huge growth opportunities there. We see that coming to fruition in the next year or two. Our achievements, as mentioned, CAD 27.1 million in sales we've generated since August of this past year. We have landed a record number of contracts of CAD 42.5 million in sales, some of which have already gone into the ground this year, and the balance will go into the ground this year or into next.
Our backlog, as mentioned, is up to CAD 93.2 million in sales, and this comes from a pipeline that is over CAD 430 million and continues to grow. What's even more important for us as senior managers of CEMATRIX is that despite all the work that we're doing across North America, for all of these contracts, completing projects from abandonments to pipelines to airport runways, our staff continues to remain safe and committed to our future. That's a testament to our great people in Canada and the United States. We want to thank them for that and continue to thank them for everything that we've been achieving to date.
Our IR plan for now and the future. We've tried to do this in the past, but we wanna do a better job, and that is to enable our investors to really follow us through the success for 2023 and beyond. We wanna educate our investors so they understand better not only what we are doing, but also what our backlog means and what the opportunity is in CEMATRIX. We'll continue with quarterly earnings updates as we're doing with this particular update. We'll continue with webcasts a couple of times a year. We'll also be restarted a digital marketing campaign that we started last year and continue to do one-on-one virtual updates that are arranged by our IR teams.
In fact, recently just completed, you know, on a virtual roadshow with up to 16 of our key investors and institutions that are either invested in CEMATRIX or are considering investing in CEMATRIX in the near future. As part of this plan to educate our investor audience, I'm gonna show you a short video. This is on a major infrastructure project in southern Manitoba. It's an overpass that's going over a perimeter highway there. In this particular project, we're completing the bridge abutments on both sides of the highway. The reason they're using cellular concrete is that it is very weak and unstable soils in that area. Hence, what our product does is provide a floating base for this infrastructure that is going along this highway.
If you actually watch the video, that goes quite quickly, you can actually see the conditions in the soil that we're dealing with. As you can see, with this project, this shows the setting up of our equipment. This particular trailer unit that you see there is a completely full, fully automated computerized batch processing system that is fully automated such that we can plug in the density that we require, and it pumps out at the other end of the hose within very close tolerances. This is one of the advantages of our technology.
Not only that they pour very lightweight with strength in high volume, but in very low densities that are required for these very unique bridge abutment and road type projects that require a low density to go over a weak and unstable soil. This is the east abutment being built, and you can see it's built in various lifts. That's how we set it up, so we can pour a certain section each day and move it up. The only restrictions we have is weather. In this particular project, we actually faced a lot of weather issues. You can see the soil conditions there. The conditions are basically there's no bottom to the soil. They're very weak. Hence you need a very lightweight structure to build a lightweight base to build the infrastructure on top of it.
That's what our problem is in this particular application. All right, I'll just move on to the first of one of we call the CAD 11 million-plus projects that have been covered in our recent management perspectives press release. This is a tunnel that's been completed in the West Coast in January and early February. It's not a large tunnel, but it's 11-meter tunnel constructed to carry new water lines while meeting a very current and stringent seismic and other standards that have to be met. The project, again, was to grout and protect three new water lines that placed within this tunnel. Usually, there's just one carrier pipe, but in this case, you have three, and that makes it a very difficult project.
You have to be very careful not to float the pipe, and which becomes even more difficult if there's a lot of water being generated in the tunnel, and in this case it is. Two pictures on the left actually show the setup of our equipment and the preparation for the job. On the bottom right shows us setting up and pumping the grout into the tunnel from inside the pipe. This is a very tricky thing where we may be placing hose up to 5-10 miles long, and then having a return hose as well to carry fluid out, to clean out the hoses at the end of the day.
Each of our operators and our Headermen in this project have to manage the product such that it's balanced on each side of the pipe when it's being placed so as not to deform the pipe or cause a floating pipe issue, which is significant issue for not only this tunnel, but other tunnels as well. This is the second of those large projects that we've completed before the end of the first quarter. This is a wharf expansion project in, along the Gulf Coast. It was a very tricky project. It was poured over 19 days, included 24,000 cubic yards of material. Required really strict specification with a very... a density, a dry density, so not even wet density, but a dry density that had to be within a very specific range of.
which is very difficult to do because these are very humid conditions down there. In Calgary, where it's very dry, we can get down to a dry density that's very low. In areas like along the coast where it's very wet and very humid, you have to consider the humidity in the air and how much that product is going to dry out. This project went very successfully, and we expect numerous other projects of similar nature to be done over the coming years that is very similar to this project. That's really the end of my part of the presentation.
I wanted to give you a good overview of not only the unique position that we are in right now and how our sales, our record sales continue to grow and our backlog continues to grow, which bodes well for our future. I wanted to give you an introduction to some of the projects that we're talking about completing this year so you get a better idea of what we're doing and what our backlog means and how it will be going into the ground. It's important to note that the backlog is typically a two-year backlog, tunnels maybe three years. With a 90-year backlog, you can basically get a good idea of where our sales are going over the next couple of years.
With that, I'll pass it on to Randy to go over the financial results for the first quarter of 2023. Thank you, Randy.
Thank you, Jeff. Here you can see our financial statements. I'm not gonna go over these line by line 'cause that would obviously take quite a while, and they're hard to see. If we flip to the next slide, what I will do is just kinda hit the highlights from the Q1 financial statements. Jeff, could you forward to the next slide for me, please? The highlights we'd wanna cover, and Jeff has already mentioned most of these, is the revenue in the first quarter was up 41% to CAD 7.2 million, versus CAD 5.1 million in the first quarter of last year. Gross margins were also improved to positive CAD 700,000 or 10%, versus negative CAD 100,000 or negative 1% versus last year.
Our operating loss decreased by 33% in this quarter versus last quarter of last year, CAD 1.2 million loss versus CAD 1.8 million loss last year. Adjusted EBITDA improved by 53% to CAD -700,000 versus CAD -1.5 million. Cash flow from operations improved by 63% to, from a use of cash of CAD 300,000 versus a use of cash in Q1 last year of CAD 800,000. Cash on hand at the end of March was CAD 9.6 million. If we go to the next slide, Jeff.
A couple of trends that we've already chatted about is one trend that is quite obvious, and Jeff spoke about it quite in quite detail at the beginning of the presentation, is our revenue each quarter continues to grow versus the previous year. That's a really great sign for the health of our business. The other factor that we're really quite proud of here is we set a strategic goal to simplify and delever our balance sheet. You can see in the chart here in the upper right corner the amount of debt or borrowings or financings that we had at the end of 2020 versus our pro forma number here at the end of Q3 or end of Q2 for 2023.
A very significant decrease in deleveraging of our balance sheet, which really helps us in two ways. A, it really increases the long-term viability of our business, but also actually significantly decreases the cash interest cost that the company was having to pay out each year. Along with the delevering of the balance sheet here, you can also see the simplification of our capital structure that's happened in the recent past year as our convertible debentures were repaid in Q2, and all the existing warrants from all the previous financings have now expired. Our capital structure went from a fully diluted position of about 179 million shares, give or take, to now at the end of Q2 to a fully diluted share position potentially of 140 million. Significant overhang has been removed from the company.
The balance sheet really has been cleaned up and well positioned for the future. When you kind of couple that with all the success we're having on the revenue side, the company really is in a great spot financially. With that, I will just stop my kind of quick review of the financials and hand the mic over, so to speak, to Grant, who will lead us through the Q&A section.
Thank you, gentlemen. As I stated at the beginning of that, any of you that do have questions, please submit them through the Q&A button at the bottom of the screen. While we're waiting here, Jeff, maybe just might wanna talk a bit about we get back to, I guess, you know, a more encompassing communication plan, to keep shareholders apprised of what's going on. How you're looking at providing updates on these major projects and some of the things you would wanna cover to really keep people in the loop and to show that progress is being made on all of these things.
Thanks, Grant, and yes, you're exactly right. We're gonna be presenting essentially a lot of the projects to our investor audience through the year. Not only presenting the start to them, but also during the projects, particularly if they're long projects that are going over a period of time. We're gonna give you an idea of what the start looks like, but also as it, as we progress through the projects. This will come by way of press releases, it'll become by way of digital media, but it'll also be covered in each one of our quarterly earnings reports. We'll give an update on every quarter as to how the projects are progressing and going into the ground.
Randy, we don't have the presentation up at the moment, but just going to that bar chart that you had up there and de-leveraging. You're bringing your interest costs down or interest servicing costs down. Can you give us some idea of, you know, how that looks? The, I guess, the pressure that that will take off the balance sheet?
Yeah. If you're to look at interest costs, for example, in 2020, Grant, our interest costs were about CAD 1.5 million, and that's interest from all sources. Includes our bank operating line, included our financing leases, included our debt, include interest on convertibles. If we were to kind of forecast that out for 2024, we would expect that number to be in the neighborhood of CAD 300,000. We've, you know, essentially reduced cash interest costs by about CAD 1.2 million. Obviously, that's, you know, contingent upon where interest rates go and what happens to interest rates, but it's in that order of magnitude. It's a very significant cost savings for the company, annually.
That is a good number. You're talking CAD 1.2 million in savings.
Absolutely.
By 2024. Okay, we've got some questions coming in, and we'll go to those first. Okay. Starts out pretty much like I expected. Any idea or do you want to comment about what you expect for EBITDA in 2023?
Well, as mentioned, we're not going to give guidance, you know, we will return to profitability this year and to cash flow and EBITDA. The strength of that will be somewhat constrained by if there are continued supply issues. We still should make money even with those supply issues, which we are being told will be reduced significantly by our suppliers. Because there's no guarantee in life, we're not gonna give any guidance, just that our investors should be quite pleased by the end of the year with those results.
How does a CAD 430 million pipeline compare to a year ago? Does your conversion rate from pipeline to backlog vary much? What's the current trend?
Good question. The pipeline is up from last year, early in the year, it probably would've been in the high CAD 300,000s range, and then by mid-year last year, it got up over CAD 420,000. We expect the backlog or the pipeline to continue to grow this year to higher. It's kinda during the period where it's at its lowest level and continues to grow. Our experience on landing projects in Canada is significantly high, getting up towards 50% of those projects that we actually bid on. Again, the market is still early stage in Canada and there's less competition.
In the U.S., there's significantly more competition, because of some changes we've made and some equipment we've built, we've become very competitive in a lot of markets where we weren't competitive before, that being our regional expansion in the southern and the eastern markets. That has enabled us to land a higher % of projects than we have in the past, and to do projects that we would typically do with a wet mix unit done by a much higher cost in the past. Lots of good things happening in the marketplace, and again, our success rate continues to grow and continues to be strong in Canada.
Reflecting on projects, about how many projects are currently scheduled for the company to work on in this calendar year?
I honestly can't answer that question. I don't know whether Randy, but I can pass it over to Randy if you do. I know it's building, right? It's probably up close to 100 projects that we will do this year, and probably more than that, but I honestly don't know the number.
Yeah, my guess, Grant, would be we're over 200 projects that we completed last year. We would be probably above that number this year as well. It really does depend on the mix. If we have more larger projects that are making up the bulk of our revenue number, the number of projects may actually decline. We're seeing significant success in smaller size and mid-size projects, in part because of our change in strategy and our investment in equipment recently.
My question, I just thought of this right now sitting here, we're talking about the number of projects. I didn't realize that there were so many that were completed. Do you see getting to the point of where you start to turn down those smaller ones because it's not worth your while?
From my perspective, no. It doesn't mean we may not change our strategy in the future. The small to medium sized projects are generally higher in margin than the larger projects because generally there's less competition in those areas. Generally it's because of the products we replace too as well. We're able to charge higher margins with respect to those particular applications. They fill in and keep our people utilized, and that's the key, is that when you only have a few large projects to do, you've got to maintain your staff. They might as well be outpouring projects as well, right? Small to medium sized projects throughout the year. That helps increase the profitability of the company.
What is the current sales capacity of both equipment and people? Are any capital investments needed this year?
No capital investments are planned except for replacement units. Our current capacity with an addition of two new dry mix units last year, one is delivered already, the other one will be delivered mid-year this year, is over $200,000 in seasonally adjusted capacity. That's our equipment capacity. Our people capacity is probably somewhat less than that, but still strong because we're able to divide our current operating crews into two or three groups by taking operators and QC people and then splitting them up between two or three projects and hiring additional labor, or using the labor of the contractors that we work with to expand our capabilities.
Yeah, if I heard correctly, you said two or 200,000. I think you meant 200 million, didn't you, on equipment capacity?
Yeah. Sorry, yeah. CAD 200 million, yes.
Okay.
You're exactly right, and thank you for correcting me.
Okay. There are one, two, three, four questions on Glavel about what has happened with that investment or what has happened with Glavel. Perhaps before you answer the question directly, or the four questions directly, maybe just remind people who wouldn't be familiar with Glavel what it is first.
Okay. Glavel is a company that is engaged in the manufacture of foam glass. Foam glass is a lightweight aggregate that's used in the infrastructure and the building construction market as a replacement for other types of rigid insulation, lightweight aggregates, and mainly EPS block in the infrastructure applications. Now, foam glass is 100% green essentially. It's made from recycled glass using clean energy, and so it's a very green product. Glavel is a private company, and we own only 20% of that company. We can't disclose a lot of what's happening there. I can tell you that they have faced supply chain issues that we have. Their first kiln has been up and running since last spring, and it's producing regularly.
With only one kiln, it's difficult for them to sell into the larger growing infrastructure market. That second kiln is on order. Currently they're selling into the building construction markets are more floor underlays for flooring systems, insulated flooring system, roof decks, and things like small infrastructure projects. They can manage those with their current capacity. That has been growing better than expected. Until that second kiln is purchased and put in place and they're able to produce more product, they're gonna be unable to build a significant volume up in order to, you know, meet the larger infrastructure sales. They expect to be able to get to that position within the next year or two.
Can you please talk about your competition and maybe we'll just focus mostly on the U.S. since that's where the bulk of the competition is. The major competition would be down there and what's your competitive advantage?
The competition again is stronger in the U.S. We have significant competitive advantages over our competition that range from firstly being the, you know, probably the most significant technical company in the world. In fact, we're probably the only company in North America that has an engineering team that's backing up what we're doing. Okay? Most of the companies that we compete with don't have that capability to be able to assist the engineers in the design and to make their projects better by using cellular concrete. We're also developing significant material mix designs. We have foaming agents that are proprietary. We have proprietary processing equipment that enables us, for the most part, to produce a material that's lighter and stronger than our competition.
Lighter and stronger is the best characteristics to have in most of the applications that we deal with. It isn't that there isn't other competitors that have some technology or comparable technology, but for the most part, we're the leaders in this field, and there's very few competitors in our space. There are a couple in the U.S., or two to three in the U.S.
On acquisitions, if you have any plans. If you did, you probably wouldn't be able to say so right now anyways.
It's a good question, honestly, Grant, because we actually curtailed our acquisition plan. It's not that we don't continue to look for them, or we haven't identified a couple of strong possibilities. It's just that because of the way the market was going and the issue that we had with the supply chain last year with respect to cement, we decided that we did not want to go out and buy companies with a share price that was trading at CAD 0.20, particularly that we, when we knew that we were gonna have a very good 2023, and that was gonna continue on for the foreseeable future. I mean, there's no guarantee in the stock market, you know, what the price may go to.
If we achieve what we have in place, not only this year but for the next year and the years following, the share price should rebound to where it should be. That will enable us to be able to go out and buy companies again and grow our market that way as well.
What are the biggest factors increasing operating costs at this time? Are there internal efficiencies that the company is looking into, additionally to external factors that you expect would contribute to profitability?
Utilization is a big thing of not only our equipment or our people. I'm gonna pass this one onto Randy 'cause he does a lot of work on the cost side of it, and he can give us, you know, a good summary of what we're doing from a cost perspective in improving what we're going to be doing for our future.
Yeah, I think Jeff really hit the nail on the head. It's really about utilization. The higher we can get in terms of utilization of our equipment and our crews, that is gonna really contribute to profitability. When you look at our fixed costs, they're really driven by head count. At this time, you know, we don't really see any significant or really any opportunities on the head count side in terms of cost savings. I will say we are also, we are still experiencing inflationary pressures. You know, Jeff kind of referred to the cost of cement. The cost of everything across our business has gone up, and some of those increases are on the leading edge of those inflationary pressures. We've seen those materialize mostly last year.
We're also seeing inflationary pressures on some things that are on the lagging edge of inflation, things like salaries and wages. We still do expect some cost increases to come through. Really what we're focused on is utilization and the top line to grow revenue in order for our company to become profitable.
Yeah. Can I add to that, Grant? Just so that utilization, just so you know, like we carried a lot of people during the slow times, being COVID, because they were key people to us. You know, when Randy talks about head count, our head count didn't change during COVID because the people that we carried were important to our future. Now the great thing is those people are here, and they're with us. Now as the sales grow, we already have the people in place to do those sales. Those people are people that are operators and QC people and technical people that we've trained and cross-trained. We're in a very good position going forward. Prior and during COVID, our utilization of not only people and equipment was less than 50%.
You, if you get that utilization up to a nominal level of, say, 65% - 75%, those costs are spread over a larger number of sales. Of course, the profitability on those sales becomes quite a bit stronger.
Seasonality, are you seeing less of it in the volume of business?
Sorry, Grant, I missed that.
Is there less seasonality in the business period?
No. We hope to reduce the seasonality of the business, but right now we're located in, you know, Canada, across Canada in various cities, and we're located in Bellingham, Washington, and Chicago. To go into the southern states, we have to travel a bit. Our plan from a regional expansion perspective was build two new units to enable us to move further into the U.S. and reduce the effect of seasonality of the business. That's what we've done. You saw as one of the large projects that I previously discussed was a, you know, a wharf expansion project on the Gulf Coast. More projects like that will help reduce our seasonality, but we will also have a seasonality part of our business.
Randy, this will be one for you. Do you have enough funds to execute for the year? I think that's a pretty easy answer.
Yeah, absolutely. Keep the softballs coming, Grant. The answer to that, honestly, is yes. Absolutely.
They asked it. I didn't. 'Cause I think it's, what, about CAD 9.5 million was on the balance sheet?
At the end of Q1, but in Q2 we did have to make a pretty significant cash payment to repay the convertible debentures of CAD 3.6 million plus some accrued interest. Call it CAD 3.8 million. You know, the cash balance will drop in Q2, but that's also part of delevering the balance sheet and the long-term plan to reduce interest costs. Even after making that payment, we're very confident that we're gonna be cash flow positive this year. If we're cash flow positive, we have more than enough cash to fund our operations this year and going forward.
You commented in the past, engineers were not aware of your product or maybe not enough of them. Are you seeing greater understanding of the value add of your product amongst the engineering companies?
Absolutely, Grant, it's always a good question. In the U.S. where the market is 10 years ahead of the Canadian market, they're really quite different. Our salespeople can't keep up with the projects that are coming out for tender every day. That's a testament to the continued organic growth in that market. We don't have to educate engineers as much anymore, but it still happens. Okay? Part of the negative part about having so many projects come out to tender is your salespeople in the U.S. can't go out and do business development. They don't have time to do it. Hence last year, and I think you may have seen.
everyone who saw a press release where we added to our sales group throughout North America in order to not only keep up with the sales growth, but also to grow our business development side. In Canada, because we're about 10 years behind, and I'll even split Canada in half. In Western Canada, it's more accepted. You know, this is where we started. The market has been growing dramatically. In Eastern Canada, it's been very slow to get acceptance, We do see signs that that's starting to turn around now and expect to hopefully see some strong growth in the eastern markets in the very near future, but it takes time, and this is what makes it difficult for others to come into the market.
They actually have to get products approvals in those provinces, just like we had to get product approvals in those provinces and get product approval in the states that we sell into. You know, it's not easy to get into the cellular concrete business. It's not like going and buying a piece of equipment online and hoping that you will be in the business tomorrow. You'll be able to do some smaller projects, but you won't be able to bid into the state infrastructure markets through the Department of Transportation or the provincial markets through the Department of Transportation. Again, it is getting easier. Engineers are learning more and more about the product every day, and acceptance is growing every day, but we still have to do that business development, and more so in Canada than in the United States.
We could talk all day about the differences between Eastern and Western Canada and attitude, but if we get into that, then we'll really light up the social media. They'll be all over it. We'll stay away from that topic. How many people work at CEMATRIX, and will you be hiring this year?
Randy, do you wanna take that one on?
There's about just over 60 people that work in total at CEMATRIX, Grant, in Canada and the U.S. We don't really foresee any permanent hiring on the horizon. There could be some short-term seasonal hiring as we hit our real peak periods, and as Jeff stated, where we might look for an additional labor or two. Essentially, we would expect our headcount to remain pretty stable at that level.
Our last question, do you have any current analyst coverage? I'll take a shot at that. The answer is no. There were two analysts that were covering CEMATRIX. Like every industry and sector, people move on to other pastures. I think that's part of the question, unless you want to embellish that at all, Jeff.
No, That's the right answer, Grant. We do have a number of analysts that are looking at us right now, and I expect that we'll probably get coverage maybe before the end of the year based on the great year that we intend to have and, of course, the education process. We'll go through working with yourselves and Bristol throughout the year to educate our investor public and hopefully bring on more institutions in the very near future.
One more just popped up. Thank you. From Andre Uddin, that I was one of the analysts. Still hold the name. Thank you for that, Andre.
Thank you, Andre Uddin.
You made everybody's day. Okay, that is the end of it. Jeff, Randy, thank you for that. Appreciate all those that submitted questions. A lot of very good questions. I even learned something else today, even after all these years of working together. We will be back and see you on a quarterly basis. In between, there will be a number of project updates. Any closing comments, gentlemen?
Well, I'll let Randy go first. You wanna go first, Randy?
I would just say we really appreciate the opportunity, Grant, that you provided us with connecting with our investors. You know, I think we're both really optimistic about the future of CEMATRIX. We hope that we're able to convey that to investors.
I will concur with Randy's comments and just add that, as Grant mentioned, just to keep an eye out for releases coming out on a regular basis. It's gonna be a great year. Please follow us through the year and see what we do and see the backlog going into the ground, and let's all relish in this success by the end of the year, not only for our company, but hopefully the market turns around as well.
Thank you to our participants. Again, Jeff, Randy, thank you, and we will talk soon.
Thanks, Grant.