Hello everyone. [Non-English content ]. Welcome to Charbone's Q2 2026 results and corporate update. I'm Trevor Brucato with RBMG, Charbone's U.S.-based investor relations firm. Charbone is listed in Canada on the TSX Venture Exchange under the symbol CH and in the U.S. on the OTCQB under the symbol CHHYF. With me today is Charbone's CFO and Corporate Secretary, Benoit Veilleux, and Chair and CEO, Dave Gagnon. On the agenda for today, Benoit will be providing a brief overview of the company's Q2 2026 results, recent achievements, and upcoming milestones. We'll then open up to Q&A, which we'll try to spend more time on today. If you have any questions that have not already been submitted during registration, you may use the Q&A module here. We'll do our best to get through all of them. Otherwise, management will do its best to address them in future announcements and presentations.
Please note this presentation is being recorded today, August 31st, 2026, and will be made available on the company's website at charbone.com. In the meantime, the company's updated full presentation and fact sheet are currently available in the investors section. Lastly, RBMG is not a registered investment advisor or broker-dealer. For more information on us, including our disclaimer, please visit rbmilestone.com. It is now my pleasure to hand it over to Charbone's CFO and Corporate Secretary, Benoit Veilleux. Benoit, the stage is yours.
Thank you, Trevor. Hi, everyone. While I'm showing our disclaimer slide for your information, the slides we're presenting today are an extract of our full Q2 and corporate presentation available on our website, www.charbone.com. [Non-English content] . Here are the key takeaways from our second quarter 2026 results and recent activities. Gas income increased 155% quarter-over-quarter, reaching CAD 0.5 million in Q2, compared with CAD 0.2 million in Q1. For the first half, gas income reached CAD 0.6 million versus nil of the first half of 2025. We also increased property, plant, and equipment by CAD 3.5 million since year-end as we continue investing in our industrial gases platform, mainly in the Sorel-Tracy Phase 1B build-out and distribution infrastructure.
We drew the first CAD 3 million tranche of our new CAD 10 million convertible loan facility to support Phase 1B and broader expansion. Operationally, recurring revenue expanded with new hydrogen, helium, and oxygen customers. Our helium fleet grew from one to five trailers with 22 new Quebec customers and supply sourcing commitments secured through 2028. At Sorel-Tracy, the electrolyzer is on site, and fall 2026 commissioning remains on track. Finally, the company is now Charbone Corporation, and its registered address has moved to Varennes in Quebec province in Canada, nearer to our Sorel-Tracy plant. Here are the updated main corporate milestones, which remains the same as presented in previous calls. More details will be given during the Q&A period. Thank you.
Thank you, Benoit. We will kick off the Q&A portion here. If you have any questions, you can submit them in the Q&A module. We will begin with the questions submitted during registration, and we will try to work in any submitted live. If we do not have any time to address certain questions, management, as I mentioned before, will do its best to address them in future announcements or presentations. To kick off with the first question here, and we will try to categorize these as much as possible given the various aspects of this business. The first question is: Q2 gas income grew 155% sequentially while operating expenses remained relatively comparable. Should investors expect similar operating leverage in Q3 and Q4?
Let me answer this. Q2 was an important proof point on what operating leverage looks like for Charbone as revenue scale. Gas income grew 155% quarter-over-quarter, like I said, while our cost structure remained relatively stable. This is a dynamic we have been building forward. As Phase 1B adds production capacity and our commercial platform continues to expand, we expect that fixed cost leverage to continue improving. Although we are not providing specific Q3 or Q4 guidance, the direction is clear. As revenues grow, the fixed cost base becomes a smaller portion of each CAD earned.
Thank you, Ben. For further clarity with the connection on the webinar, Ben, perhaps you can stop sharing your screen. Next question here. With operating expenses still at about breakeven with the gas revenues, can you comment on what the operating expenses in Q2 consisted of? How much percent of these expenses were one-off expenses?
Our operating expenses in Q2 consisted primarily of cost of sales and distribution costs, including purchases, direct labor, and other operating expenses. As we are ramping up sales and because of fixed and semi-fixed in nature expenses, we expect meaningful operating leverage as gas income continues to grow.
A follow-up on the financials front. What would quarterly revenues need to be in order for Charbone to achieve positive operating cash flow?
It is a good question. We are targeting positive operating cash flow, when we reach approximately or past CAD 5 million in annualized gas income, which corresponds to phase one at full capacity at Sorel-Tracy. The current Phase 1B is a critical step toward that milestone. Revenues from our regional supply hubs that store and distribute our own hydrogen, along with other industrial gases like helium and oxygen sourced from our partners, supports reaching that level faster than our hydrogen production alone would. We are not providing a specific calendar date, but Phase 1B commissioning this fall puts us on a clearer path. That said, we are still actively launching new hydrogen production plants and supply hubs, which requires continued investment that is properly structured. Positive operating cash flow is an important milestone, and we remain focused on building the full platform to create long-term shareholder value.
Thank you, Ben. Of the approximately half a million CAD in Q2 gas income, what percentage came from hydrogen, helium, and oxygen respectfully?
Okay. Like many industrial gas players, Charbone does not provide a breakdown of revenue split by molecule, as it is industry standard and allows us to maintain a strong competitive position while we continue to grow our disruptive decentralized model. What I can say is that all three gases, hydrogen, helium, and oxygen, contributed to Q2 results, and we are seeing volume growth across all of them.
Another question for you, Benoit. I think this one came from repeat customers versus newly acquired customers. How many active paying customers did Charbone serve in Q2 versus Q1?
We are seeing a healthy and growing mix of both. Recurring customers are building their predictable revenue base we are targeting, and the multi-year supply agreements we have in place are a key part of that. At the same time, we added new customers across all three molecules in Q2, including 22 new helium customers in Quebec alone, following the global supply disruption.
Continuing on with these molecules, might be something that Dave can elaborate a little bit more on. The question is: Is Charbone seeing stronger demand growth from hydrogen, helium, or oxygen today? What are the primary industries and the use cases being served?
Very good question. But before, I would like to say good morning, everybody. I am answering from the command center here at Varennes HQ. What I can say, helium is seeing the most acute demand acceleration right now, driven directly by the global supply disruption from the Strait of Hormuz situation and the impact of Qatar's Ras Laffan complex. Given the increased demand we are seeing, we expand our helium fleet from one to five trailers based on the access to helium we have today to 2028. On hydrogen demand, it is steady and growing. We decided to push forward with the Phase 1B to meet this growing demand, given that Phase 1A is at capacity.
We have partially leveraged independent distribution partners to maintain continuous flow of hydrogen deliveries to our customers and clients. Once Phase 1B is launched this fall, we expect to serve end user more directly. Concerning the oxygen, it is the third pillar at Charbone and continues to grow as well. Primary industries across the whole gases include advanced manufacturing, laboratories, technical services, and distribution partners in both Canada and U.S. That said, the industrial gases we are focusing are also suitable for semiconductor fab, data centers, pharmaceuticals, aerospace, and advanced defense technologies, all of which we continue to explore opportunities to expand in.
Gentlemen, some questions are coming through here live, which relate to U.S. administration, the trade discussions, and relationship between the U.S. and Canada. Any thoughts on tariffs or issues related to, you guys are North American focused, and you have that diversification, but perhaps you can discuss high level if there is any effect that you see or have seen. I will put the ball in your court.
As our shareholders know, we are a cross-border company. We are running four entities in U.S. I already mentioned before. We are very careful about that subject now. For the moment, we are okay. And again, the plan of the company, as anyone know, we decided for a long time to invest also, in Michigan, in Wisconsin, and we are actually running a hub at Albany. So we are careful and we are confident, and that is the answer for today.
I can add, industrial gases is not part of tariffs or any sorts, or the cross-border cells right now are not impacted. And we continue to have, in our local decentralized model, that is a natural mitigation towards any conflicts between countries.
Thanks, gentlemen. Next question. With the expansion of your fleet to five helium trailers, how many trucks of helium are you now delivering a month? What are the revenues and gross margins for each truck? Are you leasing your new helium trailers?
While we do not disclose per unit matrix, what I can say is each trailer generates recurring revenue on a multi delivery cadence and contributes positively to our gas income growth. At this stage, our trailers are mainly leased on a long-term basis. Our original supplier model is designed to be asset light where possible, and we evaluate own versus leased equipment on a case-by-case basis based on economics and flexibility.
Are the approximate 50% margins previously mentioned in your materials being released at Phase 1 today, or are those targets for later phases?
Margins vary between clients ranging 30%-70% across all revenue streams. We do not segment out specific revenue figures on production and distribution, and instead disclose revenues on a consolidated basis, which is normal within the industrial gases sector. The approximate 50% margin profile is a Phase 1 at scale target, not a current realized margin. We are still in production ramp-up phase, and our cost base includes fixed operating expenses that will be distributed over a larger revenue base as volumes increase through Phase 1B. We are working toward that margin profile as utilization improves. We will provide more color on realized margins as this business matures.
What percentage of Phase 1B capacity is already backed by identifiable customer demand, and what specific milestones should investors watch for next on Phase 1B?
I will answer. We have identifiable demand for customers who are specifically waiting for Phase 1B. This is one of the primary reasons we are advancing and now rate that waiting. The demand signal is clear, and it drove the decision to accelerate our milestones now that the electrolyzers are being delivered to Certarus, received per our August 18 announcement. The next steps are installation, mechanical and electrical integration, testing, and then commissioning this fall, which remain on track. First production follows commissioning, and that is the milestone investors should watch for.
Thank you, Dave.
Yeah.
Thanks. Ben, might be a question for you here. In previous presentations, you forecasted CAD 5.7 million revenue, might be a bit off, from Phase 1 at full capacity, implying approximately CAD 16 per kilogram selling price. Is this in the range of current pricing, or has it been adjusted?
Firstly, our projected revenue annual run rate for Phase 1 at full capacity, that is Phase 1A and 1B, is CAD 5.1 million in our presentation. To keep our negotiating position strong, we have refrained from disclosing specific per kilogram pricing publicly. Phase 1 revenue assumptions were based on conservative pricing, and we remain comfortable with that figure.
Next question here. What is the realistic timeline for Sorel-Tracy transitioning from Phase 1 to Phase 2, and what are the key gating factors?
Phase 2 planning is not premature, given Phase 1B is now actively advancing. The primary gating factors are Phase 1B commissioning performance and demonstrated revenue ramp, securing financing for the Phase 2 equipment, and continued demand growth that justifies the next increment of capacity. We are executing in a disciplined, demand-driven way, rather than building speculatively, which is where the centralized mega plants have run into challenges. While our focus is on completing Sorel-Tracy Phase 1 at the moment, we are looking forward to providing update on the advancement around our Michigan, Wisconsin, and Malaysian hydrogen production plants and expansion in our regional supply hubs I mentioned before.
Thank you, Dave. This might be another question for you. What is the current status of the offtake relationship with Superior? Has Superior subsidiary, Certarus, actually been purchasing your hydrogen?
Our relationship with Certarus, which is a subsidiary of Superior Plus now, remains active. Superior's acquisition of Certarus involved an integration process that took time and affected the pace of commercial activities under our agreement. We maintain a good relationship and remain confident in its long-term value. As we advance Phase 1B and our U.S. project, particularly in Michigan, which is close in proximity of Superior networks, that relationship becomes increasingly strategically relevant. We will update investors as the commercial activities under the agreement develop.
Thanks, Dave. Question here on Vema and other aspects. How much of Charbone's long-term revenue do you expect from owned production versus third-party distribution, such as Vema?
Our long-term model is to own production wherever the economics are strongest. That is the core of our vertically integrated platform. Third-party distribution relationships, like Vema, extend our commercial reach efficiently without requiring us to build additional capital infrastructure in every market. We see them as complementary rather than competing, and over time, we expect own production to be the dominant revenue contributor, with distribution partnerships accelerating geographic reach and gas type coverage beyond what we produce directly today.
Thanks, Ben. Got another question here on the capital market side. How should investors think about capital needs over the next 12-18 months and potential dilution risk?
Over the next 12- 18 months, our capital allocation is predominantly geared towards Phase 1B completion, U.S. project development in Michigan and Wisconsin, and ongoing hub expansion. We are always evaluating the best capital structure to support our growth for the benefit of our stakeholders, which includes ourselves. Charbone is funded for Phase 1B through our existing cash position and the CAD 10 million convertible loan facility, of which CAD 3 million has been drawn down, with additional draw down capacity available during the term. Revenue is growing, and operating leverage is improving each quarter. As I mentioned, we are still in a build-out phase, which requires capital to execute Phase 2 in our U.S. projects. Minimizing dilution is always our priority. We look first at non-dilutive and low dilution structures, including project level financing, equipment financing, and strategic partnerships that are designed to accelerate our growth.
We will be transparent with shareholders as those decisions are made.
What are management's expectations for end of year 2026 in terms of gas income across hydrogen, helium, and oxygen?
We expect continued volume growth across all three molecules through the balance of 2026. The helium market, in particular, has seen significant demand acceleration driven by global supply constraints. Our expanded five trailer fleet position us to capture that demand. Phase 1B commissioning this fall will add meaningful hydrogen production capacity. We are focused on building a growing, diversified gas income base, and we are excited about our growth path heading into the second half of the year.
Got a question here on timeline. Probably one again for you, Ben. Is there an estimated timeline for all five phases at Sorel-Tracy?
Our build-out model is demand driven and modular, meaning we scale each phase in response to demonstrated customer demand to reassure that revenues exist on the other side of completing development. At Sorel-Tracy, Phase 1A is producing, Phase 1B is advancing with commissioning targeted for this fall, and Phase 2 planning is underway. Each phase is designed to be quickly deployed within 6-12 months once the decision to proceed is made. We anticipate expanding in different regions to spread our footprint where there's demand today and scale up in a similar manner like Sorel-Tracy while deploying our decentralized model near to customers. We plan on continuing with our transparent communications to our shareholders and look forward to providing updates as material decisions are made.
Thanks, Ben. We've got a good amount of questions here, which we'll touch on, additional questions related to the clean UHP, hydrogen production side, and then we'll go into a little bit more on the regional supply hubs, along with some other questions. We'll try to continue on here in a quick manner. What is the expected timeline for first production out of Detroit, Michigan?
Detroit is advancing through site selection and permitting, which is scaling Phase 1 in half 2026. Michigan is strategically important as it positions us in the Great Lakes semiconductor and advanced manufacturing corridor, which is one of the fastest growing clean hydrogen demand cluster in North America. It strengthens our geographic relationship with Superior Certarus networks. While each continue to advance, we anticipate announcing more material update as they surface.
Gentlemen, a live question here, and if you can answer this, I will just ask it here. What is the lifespan of an electrolyzer, and how much does one cost? What is the annual cost to maintain an electrolyzer, and who makes them?
Okay. Sorry, I thought there was a few more questions.
You want me to repeat that?
No, no, it is okay.
Okay.
An electrolyzer can be good for more than 20 years. We have, let's say, it's gated about 5% of the time to do some normal maintenance to maintain its good conditions along that timeframe.
With regards to who makes them, where they're coming from, any thoughts on cost, if you can comment on that?
Yeah. Cost, let's say, there's no significant cost to be involved during the lifetime. We may, let's say, invest in some spare parts to be there, let's say, in case. Normally, the lifespan it's on a long-term period, like I said.
You've reserved electrolyzers in the past, putting down payments to reassure accessibility to electrolyzers and to support scalability. Is that correct?
Correct. Our model, which is a multi-phases approach, give us redundancy. You will have two electrolyzer running. That is also a way of continuing producing and being reliable for our customers.
Benoit, here is a question for you, Dave, I think, would be appropriate for you to answer on the hubs. Can you provide more clarity on planned hub locations and what defines a validated hub versus an exploratory one?
We are developing hubs in Ontario, Quebec, Nova Scotia and New York. I said before with a target of six to eight hubs across North America. An exploratory hub is one where we have identified demand and are building the commercial and logistics foundations. Validated hubs mean active customer relationships, logistics infrastructure in place, and recurring deliveries underway. Our Quebec operations surrounding our Sorel-Tracy project represent our most mature hub today with hydrogen, helium, and oxygen hub being delivered commercially. Ontario and New York State are also seeing active deliveries, through our deployed tube trailer fleet. We have identified demand for the Nova Scotia hub and are building the commercial and logistics foundation. This is a capital light and partnership driven expansion strategy, that enables us to strengthen our footprint in the new regions, where demand for industrial gases is growing without requiring a significant upfront infrastructure investment.
Thank you, Dave. Also on the hubs, what is the typical delivery radius from a hub, and how does that influence where new hydrogen production plants are built?
Our model is designed to be hyper local, enabling us to serve customers within a tight delivery radius that makes us meaningful, more efficient. Our exact hub radius varies by molecule and customer density, but the principle is consistent. We sit hubs and production plants close to end users, and that proximity is a core competitive advantage, and it directly informs where we build. We follow demonstrated demand rather than speculative geography.
Thank you, Benoit. A live question here, and we'll try to wrap this up. There's a question on the risks and, the alternative, the de-escalation, if you will, of geopolitical risk. The Strait of Hormuz in Qatar, obviously a very strong hub for the helium side. That has sparked interest in sourcing local industrial gases like helium. Would you say, as it remains possibly that issue, sure, you might be put in a more positive position. But let's say that de-escalation, would that maintain a positive position for Charbone, or do you think this is more temporary? How should investors look at this?
You mean the de-escalation of the situation of Hormuz?
That's correct.
I have a very simple answer about that. We already been entering that market now with our customers. The thing I can say, we creating a loyalty with the different customers had a problem before with other suppliers. I am pretty sure we are there to stay in the market.
Mm-hmm. I can add that, let's say impacts are for years. It is not a short term, even though
Totally.
Let's say the situation is improving, it is not a dating of regetting, let's say the production online. There is repairs to be done. There is rebuild to be done. Every customers and supply chain is moving right now. As we focus also on well deserving our customers, starting with them, it is for sure a start of a long-term relationship.
If I may add, also we already mentioned, Ben and I, also a couple times, we have a synergy between helium and hydrogen for our equipments, for the customers, for our routes. It is a natural for us to continue that business and to be request from our customers to continue to deliver that molecule in the market.
Thanks, gentlemen. We'll take this last question. How has headcount evolved over the past 12 months, and where is Charbone prioritizing hiring as it scales?
We have grown our team selectively over the past year by adding capacity in operations, logistics, technical roles, and business development in line with our commercial build-out. We're prioritizing hires that directly support Phase 1B execution and the expansion of our supply hub network. The relocation of Charbone's headquarters to Varennes was strategic as it's closer to our Sorel-Tracy project and supports the growth of our operational team, which we've been adding to.
Well, I'd like to wrap it up there. Today's webinar recording will be sent to all registrants and will also be made available in the Investor section on the company's website at charbone.com, where the full presentation and fact sheet also reside. If you have any additional questions that have not been addressed, please email us at ir@charbone.com. Again, that's ir@charbone.com. Thanks again. That concludes today's event. Hope you all have a great rest of your day. Merci beaucoup.
Thank you.