Q1 2025 Mattr Corp Earnings Call
Okay.
Speaker Change: Good day and thank you for standing by welcome to the matter of first quarter 2025 results conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone and wait for your name to be announced.
Speaker Change: You will also hear an automated message advising that your hand was weight raised to withdraw your question. Please press star. One again, please be advised that today's conference is being recorded I would now like to hand, the conference over to your first speaker today, Megan Mcgath Curran VP of Investor Relations and external communications you may begin.
Speaker Change: Good morning, before we begin this morning's conference call I would like to take a moment to remind all listeners that today's call includes forward looking statements that involve estimates judgments risks and uncertainties that may cause actual results to differ materially from those projected.
Speaker Change: The complete text of matters statement on forward looking information is included in section four of the first quarter 2025 earnings press release in the MD&A that is available on SEDAR and on the company's website at matter Dot com for.
Speaker Change: For those joining via webcast you may follow the visual presentation that accompanies this call I'll now turn it over to matters, President and CEO, Mike Reed.
Speaker Change: Good morning.
Speaker Change: Thank you for attending our first quarter conference call today, Megan and I are joined by a senior Vice President of finance and CFO from Huawei.
Speaker Change: The first quarter of 2025, the amount of leverage its unique product portfolio to deliver strong business performance. Despite geopolitically driven uncertainties across many end markets with.
With customer adoption of recently released technologies accelerating robust performance from Ammar cable in its first quarter as a mix of brands and our newly established manufacturing facilities operating at improved levels of efficiency Q1 saw continuing operations revenue and adjusted EBITDA rise by 52% and 80% respectively.
Speaker Change: Year over year.
Speaker Change: Massa benefited modestly during the first quarter from acceleration of purchasing decisions by some customers ahead of early April U S tariff announcements.
Speaker Change: While mattress own U S. MCA compliant products were not directly impacted by these announcements the uncertain outlook for global trade and macroeconomic conditions has undoubtedly impacted customer confidence across much of the critical infrastructure landscape.
Speaker Change: Consequently, the company currently expects demand for its products during the second quarter of 2025 and likely beyond will be unfavorably impacted.
Speaker Change: Although the full year business impact remains unclear. We currently anticipate the second quarter of 2025, we'll see matches reported continuing operations revenue and adjusted EBITDA move lower sequentially.
Speaker Change: While the company cannot control the business environment within which it operates in recent history. The talented teams across our organization have proven nimble resilient and cost conscious in the face of challenging conditions.
Speaker Change: As demonstrated by our first quarter performance Memphis technology, driven products differentiated positioning in key markets strong customer value proposition and rebalanced modernized manufacturing footprint create the opportunity for market outperformance.
Speaker Change: Lots of prevailing conditions.
Speaker Change: Our hardware and balance sheet strength enables masses to navigate market uncertainties with confidence remaining committed to technology development to enhancing cost and operational efficiencies across the organization to extracting commercial synergies from our newly expanded wire and cable portfolio and to creating long term value.
Speaker Change: For our shareholders, including by additional accretive acquisitions and the continued repurchase of shares under our in CIB.
Speaker Change: Looking at each of our segments.
Speaker Change: Connection technologies set new segment revenue and adjusted EBITDA Records in Q1.
Speaker Change: Growing sales by over 100% and adjusted EBITDA by over 70% versus the prior year.
Speaker Change: These results benefited from the early quarter addition of <unk> cable and continued share gains by DSG Colusa, Although segment margins were tempered by nearly $3 million of non capitalized.
Speaker Change: Costs during the quarter.
Speaker Change: Market share gains in the segments DSG Colusa premium heat shrink tubing business were achieved in both industrial and automotive markets. Despite declining global vehicle production as original equipment manufacturers, particularly in North America.
Speaker Change: Again to curtail activity in response to tariff announcements.
Speaker Change: While the quarter benefited from stable deliveries into industrial markets.
Speaker Change: Later in the quarter the business began to observe some slowing in customer orders in response to the macroeconomic uncertainty.
Speaker Change: As expected <unk> revenue in 2025, it's frontloaded.
Speaker Change: The business delivered a strong first quarter supported by significant deliveries into specific mining projects, which are not expected to recur in the coming quarters.
Speaker Change: Baseline demand for Ameren cable products entering Q2 remains stable.
Speaker Change: While Amor cables U S made products are predominantly sold domestically some products are exported to countries, such as Canada, Chile and China.
Speaker Change: Consequently, the business has the potential to be impacted by import duties levied by these countries in response to U S tourists.
Speaker Change: Has observed some order delays from overseas customers, which will likely impact the second half of 2025.
Speaker Change: Sure sure Flex business started 2025 with strong sales into nuclear applications and based on order backlog continues to expect nuclear sales. This year will grow by low double digit percent versus 2024 before rising further in the years to come.
Speaker Change: I'll speak more about this particular market sector later.
Speaker Change: In parallel the business also continued to experience robust demand for stock industrial products. During Q1, primarily driven by Canadian distributor customers, who have gradually been replenishing their inventory levels.
Speaker Change: As anticipated the sales of destock products were at below average margins, resulting in overall margins within the business remaining at the lower end of the typical range for the quarter.
Speaker Change: Progress continued on the segments final remaining MTO projects during Q1.
Speaker Change: With production equipment installation occurring on time and on budget within the New show Flex, Ontario, and DSG Colusa, Ohio sites.
Speaker Change: Both locations are already producing and all planned equipment installation will be completed by the end of Q2.
Speaker Change: At that time, the recognition of non capitalized expenditures will cease.
Speaker Change: The timing of invoices related to these final activities caused any O spend in the first quarter of 2025 to be modestly lower than previously anticipated.
Speaker Change: Consequently, mbo spend recognition is expected to be higher in the second quarter of 2025 impacting reported segment margins in the quarter.
Speaker Change: Our outlook for electrification driven demand across the segment remains favorable and with the acquisition of AMT cable, we are even better positioned to fulfill our customers' needs.
Speaker Change: The first 90 days of Ammar cable Onboarding has solidified our view of longer term cross selling and growth opportunities between Shaw flex Enamor cable.
Speaker Change: Including meaningful growth potential for ammo cable in North American medium voltage markets.
Speaker Change: Looking more closely at the nuclear industry.
Speaker Change: Across the globe, we observed demand for lower emissions and energy security and a consequent Renaissance in nuclear power generation.
Speaker Change: Our <unk> business has long been considered a provider of choice for highly engineered wire cable and assembly solutions in can do reactors, which are primarily located in Canada.
Speaker Change: The safety critical nature of Shaw Flexes unique 10, new product portfolio showcases the depth of technical capability within the business.
Nuclear refurbishment projects are long cycle events with low risk of delay arising from economic changes.
Speaker Change: While this end market currently represents a modest percentage it matches revenue stream.
Speaker Change: Predictability is underpinned strong nuclear revenue growth within our wire and cable business over the last five years.
Speaker Change: With 16 can do refurbishment projects expected over the next 10 years matter is well positioned to continue this growth trend.
Speaker Change: Beyond can do.
Speaker Change: The Canadian nuclear sector is experiencing a broader resurgence with planned investments in both large scale and small modular reactor projects in the coming decade.
Speaker Change: Major projects include Ontario power Generation's proposed new builds at their worst legal site and recently approved small modular reactor construction at the Darlington site.
Speaker Change: As well as launch scale reactors planned at Bruce Power site C project.
Speaker Change: The <unk> project would be the first large scale nuclear build in Canada and over three decades.
Speaker Change: Each refurbishment or Newbuild project presents the opportunity for <unk> to capture up to $15 million of premium sure flex product revenue.
Speaker Change: Sure Flex and its subsidiary announcer electronic services limited are proudly, Ontario based manufacturers with over 90 years of combined nuclear experience.
Speaker Change: In partnership with Atkins reality, and with Westinghouse show Flex remains committed to advancing Canadian nuclear technology and strengthening our role in both domestic and international nuclear supply chains.
Speaker Change: Elements of reactor technology type.
Speaker Change: We continue to invest in the development and qualification of highly engineered products suitable for non can do reactor designs.
Speaker Change: Over the mid and longer term, we believe demand for our nuclear products will be a meaningful driver of growth and margin expansion.
Speaker Change: We stand ready to serve as a trusted partner to utilities.
Speaker Change: Engineering contractors and technology developments.
Speaker Change: Driving value through local expertise in nuclear great innovation.
Speaker Change: Turning to the composite technology segment.
Speaker Change: First quarter revenue increased by 11% year over year.
Speaker Change: Driven primarily by increased demand for <unk> fuel storage and water management products and.
Speaker Change: And higher sales of flex byproducts into the U S market.
Speaker Change: <unk> benefited from a modest degree of order acceleration from some U S customers.
Speaker Change: Got to Derisk potential early April tariff introductions.
Speaker Change: Segment, adjusted EBITDA rose by 40% year over year as the burden of prior year MTO cost recognition was eliminated.
Speaker Change: Newly established production facilities continued to deliver progressively improved efficiency.
Speaker Change: Within this our cheese business first quarter revenue increased substantially versus the prior year, despite normal seasonal weather effects.
Speaker Change: Retail fuel customers continue to demonstrate a strong appetite for investment in new convenience stores.
Speaker Change: We are successfully navigating the permitting challenges, which so heavily impacted late 2023 in early 2024.
Speaker Change: The first quarter also saw sales of hydrogen and storm water management products more than doubled versus the prior year quarter and continued strong demand for very large diameter water storage and backup fuel tanks used in mission critical applications, such as the U S data center market with.
Speaker Change: With the segment expanding its backlog and its production capacity for these products.
Speaker Change: During the quarter the business incurred elevated freight expense as customers requested accelerated shipments of Canadian made tanks across the border ahead of potential tariff announcements.
Speaker Change: Xerxes products are not currently subject to any U S tariffs.
Speaker Change: Consequently, we expect business activity will generally follow a normal seasonal pattern in 2025 with a sequential rise in revenue expected in Q2.
Speaker Change: Q1 saw flex by continued to capture new customers and gain market share in North American onshore oilfield markets, primarily through ongoing large diameter product adoption in the U S.
Speaker Change: Total flex pipe revenue was modestly below the first quarter of 2024, which benefited from a large international order.
Speaker Change: However, Q1, 2025, so flex might deliver a new record for U S revenue as the business once again significantly outperformed the U S well completions, count, which fell approximately 7% year over year.
Speaker Change: Entering the second quarter, we have observed crude oil prices move down into a range that likely triggers further deceleration of north American onshore well completions.
Speaker Change: Our full year outlook now anticipates year over year activity declines of approximately 15%.
Speaker Change: This compares to our prior outlook of approximately 10%.
Speaker Change: We continue to anticipate further market share gains in the second quarter, but the combination of additional activity reductions and modest pull forward of revenue into Q1 yields an expectation that second quarter flex by business performance will be modestly lower than the first quarter.
Composite technologies first quarter results reinforce our confidence that substantial recent investments and flex type technology and in domestic operational infrastructure for both business lines have position. This segment for strong future performance.
Speaker Change: We remain on track to introduce additional launch diameter flex type products towards the end of 2025, which are expected to add 50% or more to the business lines global addressable market.
Speaker Change: With the segments physical footprint transformation completed and new site productivity rising we remain well positioned to serve the north American market with our composite solutions in the years to come.
Speaker Change: Our <unk> business reported as discontinued operations delivered another strong quarter with revenue of $23 million and adjusted EBITDA margins of 32%.
Speaker Change: Late last year, we announced a definitive agreement to sell the <unk> business to <unk> and we continue to expect this transaction will close around the middle of the year.
Speaker Change: Tom will now walk through the company's first quarter financial highlights.
Mike Reed: Mike The first quarter's revenue from continuing operations of $321 million was 52% higher than the first quarter of 2024, reflecting an increase of $96 5 million in our connection technologies segment as we report our first quarter of results with <unk> cable included along with <unk>.
Speaker Change: $5 million in the comp as the technologies segment.
Speaker Change: Total consolidated adjusted EBITDA from operations, which includes discontinued operations was $54 million.
Speaker Change: While adjusted EBITDA from continuing operations was $46 6 million.
Speaker Change: An 80% increase from the comparative period in the prior year, primarily attributed to an uptick in gross profit related to the revenue increases in both segments.
Speaker Change: And changes in product and customer mix slightly offset by the impact of expenses tied to repositioning of finished goods inventory in advance of possible tariff implementation.
Speaker Change: We also recorded $2 $7 million related to our growth activities during the quarter with $1 4 million included in selling general and administrative costs and $1 3 million and gross margin.
Speaker Change: While these costs are slightly below our expected spend rate the lower expense represents deferred spending from the first quarter, which will be deployed in the second quarter of 2025.
Speaker Change: All remaining EMEA projects continue to remain on time and on budget.
Speaker Change: In the first quarter of 2025, the company incurred $5 $3 million of costs related to the acquisition of <unk> payroll and an acquisition related inventory adjustment, which decreased gross profit by $4 2 million.
Speaker Change: These costs were offset by a $2 $2 million reduction in long term share based incentive accruals due to share price movements.
Speaker Change: All of these items were added back to adjusted EBITDA and are included in our reconciliation of non-GAAP measures.
Speaker Change: Turning to segment results. The connection technologies segment delivered a new first quarter revenue record of $187 3 million, which was 106% higher than the first quarter of 2024, primarily driven by the inclusion of the newly acquired <unk> cable business.
Segment, adjusted EBITDA was $12 $9 million higher than the prior year first quarter, primarily as a consequence of Emma Cable's results being included into the segments reported numbers.
Speaker Change: The increase in segment revenue was slightly offset by a decrease in sales into the north American infrastructure markets or the software business.
Speaker Change: The first quarter of 2025 segment. Adjusted EBITDA also includes the previously mentioned non capitalized <unk> costs.
Speaker Change: Cost.
Speaker Change: The segment did not record any <unk> costs in the first quarter of 2024.
Speaker Change: The composite technology segment revenue was $132 8 million.
Speaker Change: An 11% increase compared to the first quarter of 2024, and adjusted EBITDA increased by 40% over the same time period.
Speaker Change: This increase was primarily attributable to increased sales of FRP tanks into retail fuel applications slightly offset by a reduction in composite pipe sales into the international markets in the first quarter of 2025 compared to the same period in 2024.
Speaker Change: Contributing to the adjusted EBITDA margin improvement. This segment did not record any EMEA cost in the first quarter of 2025.
Speaker Change: Whereas adjusted EBITDA in the comparable period of 2024 included $2 3 million and non capitalized will EMEA all costs within the segments reported selling general and administrative expenses.
Speaker Change: Turning to cash flow cash used in operating activities from continuing operations in the first quarter was $5 9 million.
Speaker Change: Primarily a result of increased investment in working capital during the quarter as the company implemented strategic initiatives in preparation of potential tariffs in the U S, which were partially offset by a better operational results, including the positive impact of results from the recently acquired <unk> cable business.
Speaker Change: Cash used in investing activities in the first quarter was $406 $9 million, primarily reflecting the purchase consideration for the acquisition of <unk> cable together with a capital spend outflow of $24 $1 million on property plant and equipment, primarily EMEA projects.
Speaker Change: This cash outflow for capital spend includes announced previously accrued that were paid in the first quarter of 2025.
Speaker Change: During the first quarter cash used in financing activities was $39 $8 million, primarily driven by a $21 $6 million net repayment on the Companys credit facility.
Speaker Change: Purchases of nearly 1 million shares under the company's normal course, issuer bid and lease liability payments.
Speaker Change: Subsequent to the quarter. The company remained active on the NCI and expect to exhaust the current program capacity before the program is eligible for renewal in late June at which point, we expect to renew the program and remain active moving forward.
Speaker Change: As of March 31, 2025, we had a cash balance of $52 7 million net.
Speaker Change: Net debt of 562 $8 million and $27 $7 million of standard letters of credit.
Speaker Change: As of the end of the quarter the company's net debt to adjusted EBITDA ratio was three six times, including lease liabilities.
Speaker Change: This reflects the additional debt raised to fund the acquisition of the cable business.
Speaker Change: Adjusting for the Ameren cables transaction earnings and the anticipated sale of Therma site on a pro forma basis, our trailing 12 month net debt to adjusted EBITDA ratio at March 31, 2025 would have been just under three times are closer to two times if lease liabilities were excluded.
Speaker Change: As discussed previously we remain committed to returning to our normal course ratio of two times or below.
Speaker Change: Lease liabilities increased slightly to $165 9 million in the first quarter of 2025, due primarily to the inclusion of Ameren cables leases.
Speaker Change: Matt or retain financial flexibility and expect capital allocation priorities will continue to emphasize debt repayment complete existing growth investments and continued share repurchases under our in CIB.
Speaker Change: We also continue to cultivate our pipeline of acquisition opportunities primarily focused on further enhancements of our connection technologies segment.
Speaker Change: Capital expenditures in the quarter were $11 $6 million with $24 1 million of cash deployed including $14 2 million of capital expenditures previously accrued in 2024.
Speaker Change: Of the capital expenditures $8 6 million was related to growth expenditures.
Speaker Change: These were primarily related to new product and EMEA projects, which are intended to increase production capacity and efficiency within both segments.
Speaker Change: As Mike mentioned EMEA projects for composite technologies, and DSG canoes within connection technologies are now online and ramping up production, while a relocation of the soft flex production footprint continues towards expected completion by mid 2025.
Speaker Change: All projects remain on time and on budget in Q2 should be the final quarter that we expect to record EMEA our expenses.
Tom: Thank you Tom.
Tom: With our business portfolio rationalization effectively complete.
Tom: North American production network modernization expansion and optimization activities concluding in Q2.
Tom: And greater exposure to global electrification trends achieved via the acquisition of armor cable matter as a transformed business.
Tom: The changes of the last three years have fundamentally enhanced our ability to efficiently develop and deliver highly differentiated critical infrastructure products from an optimized footprint that limits, our direct exposure to ongoing trade friction.
Tom: Normal seasonal and market cycles will continue to drive some variation in quarterly activity levels and.
Tom: And we remain vigilant for more meaningful tariff driven changes in near and midterm economic conditions.
Tom: However, we believe the underlying long term trends for each of matters primary businesses are favorable.
Tom: And to remain so for several years.
Tom: While we expect market uncertainty will cause some near term slowing in customer buying patterns.
Tom: The compelling need remains for investments into North American critical infrastructure renewal and expansion.
Tom: And underlying demand for our core products is expected to persist.
Tom: We continue to take steps designed to minimize our risk related to rising international trade friction.
Tom: Including further reductions in our already low exposure to Chinese source materials.
Tom: The Companys North American made products are all U S. MCA compliant and thus not currently subject to tariffs and we remain well positioned to mitigate potential future tariff impacts on our supply chain.
Tom: In parallel we continue to exercise tight cost controls across the organization adjusting our cost base as needed to appropriately reflect activity levels.
Tom: As previously noted given our current view of likely market conditions and customer behavior. We expect on reported business performance in the second quarter of the year, including the impact of our final remaining MTO costs will be lower in the first quarter of 2025.
Tom: It is difficult to predict how tariff impacts will ultimately unfold as we move through 2025, but.
Tom: But we pride ourselves on our ability to embrace change to be nimble and act swiftly when opportunities or challenges arise.
Tom: We remain confident that the actions taken to enhance our production footprint and diversify our supply chain better positioning the company to navigate today's unpredictable geopolitical environment.
Tom: We will continue to remain disciplined in capital deployment with a sustained focus on lowering debt incremental technology investments and continuing to return capital to shareholders through our NCI.
Tom: We firmly believe the company remains well positioned to deliver on its longer term growth profitability and cash flow objectives.
Tom: I'll now turn the call over to the operator and open it up for any questions. You may have for myself, Tom or Megan.
Thank you as a reminder to ask a question you will need to press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby, while we compile the Q&A roster.
Speaker Change: And our first question will be coming from David Ocampo of core Mark Securities. Your line is open.
David Ocampo: Hi, Thanks, Good morning, everyone. Good morning.
Speaker Change: Tom maybe we can start with.
Speaker Change: Just the pull forward demand that you saw from the composite Division I was wondering if you can quantify what the impact was from from a sales and EBITDA perspective.
Speaker Change: Yeah. Thanks, David.
Speaker Change: So if we think about the quarter the pull forward impact on the bottom line. So EBITDA was around $4 million for the total corporation. Most of that was on the composite segment. There was a little bit in the connection segment as well as we saw some movements but.
Speaker Change: On the total $4 million, so maybe I'll take this opportunity to kind of walk you through how we're thinking about Q2.
Speaker Change: Because I think it all ties together so if you said.
Speaker Change: Q2.
Speaker Change: Had about $4 million of EBITDA included in it and you normalize sorry, Q1 included $4 million.
Speaker Change: Pull forward.
Speaker Change: And you normalize our Q2 results for that and then you added back <unk>.
Speaker Change: <unk>.
Speaker Change: The impact on Q2 quarter over quarter.
Speaker Change: From Q1, Q2's, a single digit percentage, it's relatively small so just to give you a little bit of quantification there.
Dot impact did have that pull forward did have an impact on our Q2 and and we will see what the outcome for the year as we obviously didn't give further guidance on that as the market is very uncertain.
Speaker Change: At this point in time, so I hope that helps a little bit.
Speaker Change: Okay that sounds good I guess I'll refrain from asking the full year question, but maybe.
Speaker Change: Maybe maybe one for Mike.
Speaker Change: Do you have an update on the 7% to eight inch line that youre launching later this year and if you can comment on any initial initial customer interest from a new product.
Speaker Change: Yes, so definitely strong customer interest they recognize that we won't be in a position to begin to supply until late in the year.
Speaker Change: Key milestones between now and that really are the establishment.
Speaker Change: Design and our Rockwall facility, just sounds like Dallas, So the vast majority of the equipment necessary to do that is on the ground. It's being commissioned and we are on schedule and on budget. So at the moment I fully expect that we will get to the tail end of this year capable of producing initially small volumes of seven engineered product and working.
Speaker Change: Through initial field trials with those products and the 2026 will be the first year, where we have.
Speaker Change: Effectively a full year of commercial availability for those product lines.
Speaker Change: Okay, and then maybe just last one for me if I turn the line over.
Speaker Change: Maybe Tom can answer your composite facilities.
Speaker Change: At least that's the connection facilities that youre launching later this year.
Speaker Change: Compare that to composite facilities.
Speaker Change: Facilities that you launched last year. It did have some fixed cost absorption issues on those first launch do you expect the connections business to be a little bit different just because third.
Speaker Change: Essentially replacement facilities with just a little bit more square footage and more modernization.
Speaker Change: Just curious on the margin pressure that that could be coming in the back half of the year.
Speaker Change: Yes.
Speaker Change: I would say that as we've baked in our best expectation.
Speaker Change: We've talked about publicly.
Speaker Change: We do not expect connection technologies to see the exact same impacts because to your point, it's largely a move up facilities rather than opening a completely new facilities. The Ohio facility I think we've talked about it before it's had some some labor startup issues, which is normal at facilities like this.
Speaker Change: The sharp flex facility, however, as a complete move at the same workforce to the new production facility and Thats on track, we don't anticipate any real issues with that one at all so.
Speaker Change: The short answer is some minor issues in Ohio, but nothing major and nothing at all in the southwest.
Speaker Change: And is the expectation still to get to that 20% EBITDA margin for that.
Speaker Change: R R.
Speaker Change: Is that going to take the market actually turning for the better.
Speaker Change: No I think the expectation is still to get to that 20% not this year just to be clear but.
Speaker Change: But definitely we see a path if the market turns and I think we get there faster, but I don't think it impacts our view of the margin profile.
Speaker Change: Okay, perfect I'll handle it over thanks guys.
Speaker Change: Thank you.
Speaker Change: Thank you and our next question will be coming from Zachary Eversheds.
Speaker Change: Of National Bank Financial your line is open Zachary.
Good morning, everyone congrats on the quarter.
Speaker Change: Good morning, Thank you.
Speaker Change: So on the medium voltage commercial synergies you guys indicated that there is interest.
Speaker Change: But could you could you give us something tangible in terms of how that can be translated into orders, especially given all the commentary were seeing about customers being in Marvel wait and see mode.
Speaker Change: Yes, so our cable is.
Speaker Change: Great example of it I think.
Speaker Change: First of all when you have to.
Speaker Change: <unk> ready to to move nimbly and take advantage of some of the opportunity for the created in it.
Speaker Change: Rapidly will be marketplace.
Speaker Change: Without giving.
Speaker Change: Blissett.
Speaker Change: Items.
Speaker Change: Okay.
Speaker Change: Thanks.
Speaker Change: Sure.
Speaker Change: Okay.
Speaker Change: And the consequences.
Speaker Change: Resulting uncertainty here our view of the overall EBITDA.
Speaker Change: Contribution coming from him or cable in 2025.
Speaker Change: We've certainly seen some expected orders.
Speaker Change: Debatable.
Speaker Change: As customers try to figure out what their cost basis.
Speaker Change: At the same time.
Speaker Change: The medium voltage for industrial applications.
Speaker Change: So.
Speaker Change: Big picture I would tell you that the tariff uncertainty probably put the.
Speaker Change: We absolutely can.
Speaker Change: 25.
Speaker Change: Change our expectations for business performance.
Speaker Change: Specifically when it comes to medium voltage.
Speaker Change: Okay.
Speaker Change: And our cable historically.
Speaker Change: We're not in a position to serve as much of the industry.
And we would have liked.
Speaker Change: Okay.
Speaker Change: We're bumping right up against production capacity in their site in Arkansas.
Speaker Change: It's a little bit of slowdown in mining.
Speaker Change: This created some and we've already seen.
Speaker Change: Place consumed by sales into it.
Speaker Change: Hey, guys.
Speaker Change: It's a mix.
Speaker Change: In other similar types of patients.
Speaker Change: Markets.
Speaker Change: That business is capable of serving.
Speaker Change: For them to grow into a mature market share in that space.
Speaker Change: This will require incremental.
Speaker Change: Production capabilities.
Speaker Change: Lead time equipment.
Speaker Change: Yes.
Speaker Change: Now about 12 months, so what we're doing in <unk>.
Speaker Change: Existing capacity.
Speaker Change: <unk> sales channels or do you listen to the geophysics helps.
Speaker Change: Of industrial sales.
Speaker Change: And as we roll into 2000.
Speaker Change: We'll see benefits of some modest investments this year.
Speaker Change: Sure.
Speaker Change: We will continue to see growth.
Speaker Change: Medium voltage sales in the U S and provided.
Speaker Change: Put into place.
Speaker Change: Similar opportunities.
Speaker Change: Alright, okay. Thanks.
Speaker Change: And then if we look back to last quarter, you indicated that certainly expecting to show revenue growth.
Speaker Change: You guys had said.
Speaker Change: Percentage.
Speaker Change: Full year 2000.
Speaker Change: Fuel mandate in the backlog.
Speaker Change: The backlog for water.
Speaker Change: Thank you Brian.
Speaker Change: Does that still.
Speaker Change: Sure perfect.
Speaker Change: Are you seeing a big pickup in that data center.
Speaker Change: Are there.
Speaker Change: I would tell you that.
Speaker Change: Our cable businesses.
Speaker Change: But the market gyrations that we see.
Speaker Change: Really not changed our outlook for 2025.
Speaker Change: The backlogs for both of those businesses.
Speaker Change: Effectively.
Speaker Change: Yes.
Speaker Change: <unk>.
Speaker Change: At this time.
Speaker Change: And demand for both fuel and wood products and success continues to be strong.
Speaker Change: So Q1, historically slowest quarter.
Speaker Change: Because of ground conditions in Chile.
Speaker Change: We are installing on demand products.
Speaker Change: Yeah.
Speaker Change: EBIT <unk> seen the beginnings of this update in shipments and installations.
Speaker Change: Our position with our customers is strong.
Speaker Change: We're able to produce incremental revenue.
Speaker Change: New sites in South Carolina.
Speaker Change: And as I mentioned on the prepared remarks.
Speaker Change: During Q1, we did add to us.
Speaker Change: <unk> capabilities.
Speaker Change: Carolina, there will be at around.
Speaker Change: Around mid year.
Speaker Change: We continue to expand our ability to.
Speaker Change: In previous quarters.
Speaker Change: Our logistics and support.
Speaker Change: Data centers over the water and fuel cells.
Speaker Change: We have a very positive view of <unk>.
Speaker Change: Despite the broader.
Speaker Change: Disruption from Arris.
Speaker Change: And it's certainly a point of focus for US we remain confident that 25.
Speaker Change: Considerably better.
Speaker Change: In 2012.
Speaker Change: Thank you very much.
Speaker Change: As a reminder to ask a question. Please press star one on your telephone Lake for your named P&L.
Speaker Change: Our next question will be coming from Ian Gillies with Stifel. Your line is open.
Speaker Change: Good morning, everyone.
Speaker Change: Good morning.
Speaker Change: As you think about.
Speaker Change: The full year.
Speaker Change: Do you think EBITDA from continuing ops is one in Q2.
Speaker Change: <unk> 25 is the high watermark.
Speaker Change: I know theres a lot of uncertainty, but just trying to think about the cadence through the remainder of the year.
Speaker Change: I don't know that we are in a position to say with certainty whether it is or it isn't I think.
Speaker Change: And I appreciate that's a non answer but unfortunately, it's the reality I think Q1 was a strong quarter. Obviously, we were very pleased with it and as we mentioned it did include some pull forward. It would not have been a strong had there not been this concern around potential tariff implementation.
Speaker Change: But I do think that it was a demonstration of what our business is capable of doing something approaching a normal quarter, even a seasonally slower quarter.
Speaker Change: If we can navigate through this next couple of months and the markets broadly get confidence that there is not going to be.
Speaker Change: Tariffs implemented.
Speaker Change: The prospects, whether they are for our products or any other products. Then I think there is absolutely the opportunity for the second half to be stronger than the first quite significantly, but if we continue to live in a world where people haven't the faintest idea what tomorrow is going to bring I think we will continue to see.
Speaker Change: <unk>.
Speaker Change: Very slow decision, making on meaningful capital projects and the consequence is going to be declining backlog and ultimately.
Speaker Change: Lower sales than we would have expected coming into the year and unfortunately, I haven't really don't know which of those scenarios. We are going to face as I said earlier, I think ammo cable and xerxes prevail regardless.
Speaker Change: The other three business lines will likely be impacted if we're in.
Speaker Change: Certain environment for an extended period of time.
Speaker Change: Understood and I think that's a completely fair answer.
Speaker Change: Okay on the nuclear side, if I think it was second quarter 'twenty three we got a nice surprise from a nuclear related order you spent some time talking about that.
Speaker Change: Youre absolutely updated nuclear views in the prepared remarks do you think you receive one of those orders this year or.
Speaker Change: Does it come a bit later I mean, there's just been so many announcements around refurbishments.
Speaker Change: I certainly hope so.
Speaker Change: As a reminder, we already have.
Speaker Change: Pretty good line of sight on the refurbishment activity that's happening in the Bruce power facility.
Speaker Change: Which will continue for the rest of the decade and into the early 2013. So that that is a fairly meaningful source of revenue for us and we would expect it will continue to be so.
Speaker Change: And beyond.
Speaker Change: The reason that we highlighted nuclear at this point in time is that we are now finally, starting to see words into action when it comes to light resurgence in nuclear investment.
Speaker Change: So whether it is the LPG recently announced funding and committed.
Speaker Change: <unk> four <unk> <unk> developments in Ontario.
Speaker Change: Further <unk>.
Speaker Change: Refurbishments in Darlington and now the potential Newbuild Pickering.
Speaker Change: Pickering et cetera.
Speaker Change: It feels very much like we're on the cusp of an exciting period of time for us in the nuclear space and I think it's quite likely that we may have some awards made later this year probably late this year, but I wouldn't expect to see a meaningful step in revenue generation until we get into two.
Speaker Change: Six of 27.
Speaker Change: But I think if we can secure into backlog some orders late this year early next year.
Speaker Change: Confidence.
Speaker Change: But I certainly think we have a pathway to take nuclear revenue from roughly 10 ish percent of the Shaw flex business to something several multiples higher than that and obviously that will make a big difference to the margin profile of the business over the coming years.
Speaker Change: Got it that's very helpful. If I could sneak in one last one and then around connection technologies and margin progression through the remainder of the year.
Speaker Change: Obviously.
Speaker Change: Stock products issue that.
Speaker Change: That manifests in the latter half of last year, we probably still see some of that through the first half of this year.
Speaker Change: I'm wondering how we should think about that in the context of the new language provided around copper price volatility and how this all kind of intertwined together.
Speaker Change: Yes, certainly a few moving pieces and it's worth remembering that.
Speaker Change: At least allegedly the U S.
Speaker Change: Administration's going to announce their position on potential tariffs. The copper early in Q3. So that there is a shoe that might fall there may not be assured all of its hard to tell.
Speaker Change: Let's roll that out for one moment I think what we're seeing generally is that copper prices have inch their way up.
Speaker Change: As you will recall we.
Speaker Change: Neither.
Speaker Change: Fixed selling prices, where we pre purchased copper to ensure we don't have a copper price risk we have floating prices with our customers that are locked at the time that we actually produce the product so broadly speaking.
Speaker Change: We're relatively immune to margin dollars loss.
Speaker Change: The price movement.
Speaker Change: But as copper prices move up we would expect.
Speaker Change: C revenue be inflated by that with margin dollars not inflated some margin percentage would certainly be negatively impacted.
Speaker Change: From a mix perspective, as we sit here today I think we're probably going to see a relatively steady state for the stock industrial product demand as we go through the rest of the year I don't see that rising as a percentage of revenue.
Speaker Change: And Theres a number of opportunities there to.
Speaker Change: Gain in non stock industrial and other.
Speaker Change: Patients. So the opportunity is certainly there for us to move the short flex.
Speaker Change: Margin profile further up into let's say the midpoint or beyond with its normal range.
Speaker Change: First half of the year, we're going to continue to see EMEA costs of 62 will be the last quarter that we see that so the reported numbers in Q2 will be impacted by that $5 million to $7 million of EMEA cost with.
Speaker Change: But second half of the year I think we've got an opportunity to move margins. The question will be how much demand will there be and that goes back to my previous comment on the tariff uncertainty.
Speaker Change: Again, Unfortunately, a lot of uncertainty there but opportunities without them.
Speaker Change: Understood. That's helpful. Thank you very much I'll turn the call back over.
Yes.
Speaker Change: And our next question will be coming from Tim Monticello of ATB capital markets. Your line is open.
Tim Monticello: Hey, good morning good.
Speaker Change: Good morning.
Speaker Change: Can you kind of question one you expect to have most Austria.
Speaker Change: Certified for.
Speaker Change: And heavy water reactors.
Speaker Change: Yes so.
Speaker Change: Obviously today, our product suite serves the candy reactor technology, we've been working for multiple years to develop and enhance.
Speaker Change: Portfolio to address heavy water whitewater and MLR technology. So I think we are in a position where we can.
Speaker Change: Complete development and will move through certification and qualification.
Speaker Change: On a time horizon that is consistent with the project time horizons that have been announced so I think over the course of the next two to three years, we will start to have more.
Speaker Change: Meaningful portfolio of products certified for use in different these different applications, which aligns with the timeline that we think quarters likely will be placed.
Speaker Change: So I don't while obviously, we have to work harder we have to continue to execute well we have done so over the last two or three years in this domain. So I have confidence that you'll see us secure wins outside the <unk> reactor domain over the next couple of years.
Speaker Change: Okay.
Speaker Change: Thanks for that.
Speaker Change: I'm wondering if maybe you could help quantify.
Speaker Change: How much cost under absorption we had in Q1.
Speaker Change: How that compares to Q4, where do you expect to be by mid.
Speaker Change: Midyear, yes.
Speaker Change: Specifically for <unk>.
Speaker Change: Probably the most impactful on the composite side.
Speaker Change: Yes, yes so.
Speaker Change: Just a reminder of the way we think about that so the incremental under absorption is effectively to get to our target margins.
Speaker Change: So for the first quarter it definitely moderated.
Speaker Change: I think in the fourth quarter it was around.
Speaker Change: In the first quarter, it was closer to that $2 million to $3 million range.
Speaker Change: So it's definitely coming down and it is virtually all in the composite segment.
Speaker Change: By the mid part of the year I think we'll be through that efficiency cycle.
Speaker Change: Anything thats, there is going to be minimal beyond that.
Speaker Change: Okay and will there be.
Speaker Change: Additional costs under absorption layered on when you add lines in place.
Speaker Change: And as far as the line and rock club now.
Speaker Change: So.
Speaker Change: We at the moment there is only one more line planned to go into place with this year that is this additional 12 foot capacity, a very large tank capacity.
Speaker Change: Im not expecting that that has a material impact on under absorption at the <unk>.
Speaker Change: There is.
Speaker Change: Gaming and proficiency.
Speaker Change: Spanning the team over the course of Q2.
Speaker Change: We'll be prepared to have that line running and generating absorption as soon as its commission so I'm not concerned about that.
Speaker Change: Rocco the facility currently only has one single line in it.
Speaker Change: <unk> is being operated at about its operating about 50% to 60% of its total ultimate potential capacity.
Speaker Change: Because we've chosen to staff to operate that level and at that level. It is capable of coming very close to fully absorbing the facility. So when we think about the path forward and rockall, whether it is increased demand for the current product and the need to go to a higher level of <unk>.
Speaker Change: Localization line, whether it is the operation of the second line, which will produce seven inch and eight inch products. Starting late this year I would expect that that facility crosses into fully absorbed territory as we get to yearend and likely is more favorable than that as we roll through 2026.
Speaker Change: Okay.
Speaker Change: Helpful.
Speaker Change: And then it sounds like you had a little bit more international orders for slots titles one legislated.
Speaker Change: In Q4.
Speaker Change: Unless I'm getting that comparison, but.
Speaker Change: How is the outlook for international order flow in our bid pipeline.
Speaker Change: Yes, So I'd say international revenue in Q4, and Q1 were.
Speaker Change: Really quite similar to each other non material.
Speaker Change: Not a huge percentage of our total revenue now I should just clarify.
Speaker Change: When we talk international for Us that means things outside the U S and outside Canada. There are some others in our space that we will use the international terminology to include anything outside the U S. So they capture Canada in their numbers.
Speaker Change: For us its outside North America.
Speaker Change: I think this is a year, where we're going to see.
Speaker Change: A limited number of larger tenders get awarded internationally, just the cycle time, particularly in the Middle East is such that 25 is not a year, where I think youll see large awards in March single deliveries I think.
Speaker Change: Our international revenue stream will be made up of.
Speaker Change: Relatively small or mid size orders and again there'll be a little bit of lumpiness at the moment I would think the second half will be the stronger of the two halves of the year for international revenue generation from flashlight.
Speaker Change: Okay.
Speaker Change: That is helpful.
Speaker Change: I'll turn it off thanks very much.
Speaker Change: Yes.
Speaker Change: Thanks, Andrew.
Speaker Change: Our next question will be coming from Yuri Lynk of Canaccord Genuity. Your line is open.
Yuri Lynk: Hey, good morning, and thanks for taking my question.
Speaker Change: Good morning.
Speaker Change: Maybe just an update on Xerxes if you don't mind.
Speaker Change: If you could give us a flavor for the percent of <unk> now comes from storm water management, and how that business has grown over over the last year.
Speaker Change: Yes, certainly varies a little quarter by quarter more than anything because the volume of fuel revenue.
Speaker Change: As is seasonally impacted by ground conditions.
Speaker Change: The way I would encourage you to think about it on a on a.
Speaker Change: On a full year basis.
Speaker Change: Somewhere in the 20% to 25% coming from water at this point.
Speaker Change: But that's that's been roughly where we've been for the last year or so we made some good progress driving that number up from single digits.
Speaker Change: Three years ago.
Speaker Change: Got to where we are about 12 months ago, and then had to pause for a moment quite frankly, because we have been.
Speaker Change: Really bumping up against our production capacity for water tanks, particularly large water tanks and haven't been able to take on incremental growth there for the last 12 months or so.
Speaker Change: And we needed to get our new hydro chain production facility online, which it now is so I think with the addition of the large water tube production.
Speaker Change: <unk> capabilities in the organization, which will be further enhanced around mid year and now having our in house production.
Speaker Change: Okay.
Speaker Change: I would expect that we will see this percentage creep upwards as we work our way through the year I think obviously the next milestone is to get to 30% on a consistent basis, which probably is.
Speaker Change: Late to 25 into the early part of 'twenty six type timeframe.
Speaker Change: But broadly speaking I think we're now positioned.
Speaker Change: Water revenue growth at a faster pace than fuel revenue growth and overtime.
Speaker Change: See water become a far more meaningful percentage of total revenue.
Speaker Change: Okay.
Speaker Change: And then also in terms of the data centers.
Speaker Change: Xerxes.
Speaker Change: What is that still a single digit percent of <unk> revenue and.
Speaker Change: Are you playing.
Speaker Change: Just a roll on.
Speaker Change: Fuel storage at the data centers or are you also on the <unk>.
Speaker Change: Thermal energy management.
Speaker Change: Systems I'm not sure if those are exclusively steel.
Speaker Change: There is some composite opportunities there no.
Speaker Change: I would say that our revenue tied directly to data centers is probably still single digits, but.
Speaker Change: Certainly a revenue stream that I think will be one of the fastest growing as we roll through this year with the addition of our production capacity. So we fully expect its into the double digits as we get into the second half of the year.
Speaker Change: Generally what happens in a data center site is that the decision will be made to store liquids above ground or below ground and that will be driven by space availability.
Speaker Change: Byron mental conditions potential for high risk events flooding tornadoes things of that nature. When the decision is made to store liquids underground. It gives us the opportunity to participate in all of that liquid storage. So whether it is about.
Speaker Change: Hi.
Speaker Change: Or the cooling water.
Speaker Change: Evens fire suppression liquids, we participate in all of those things.
Speaker Change: And I would tell you that in most cases, the larger of the opportunities in a single data center site is for the underground storage of cooling water. The sheer volume really outranks. The volume of fuels that will be kept on location. So the more sites. We can win the more tanks were able to produce.
Speaker Change: The more I think you will see margins expand but also water as a percentage of revenue move up.
Speaker Change: Okay.
Speaker Change: Okay. That's all I've got thanks, Thank you.
Sam: Thank you and our next question will be a follow up from Tim Monticello of ATB capital markets. Your line is open Sam.
Tim Monticello: Thanks, just one follow up.
Speaker Change: Just curious if steel price inflation around tariffs and what's driving any incremental demand comps.
Speaker Change: Internet for flex type or is there he is.
Tim Monticello: Okay.
Speaker Change: Sir second 50% decreasing I guess topline for flex type.
Tim Monticello: Yes, Great question has been pretty volatile and thanks for your change to replacing Sir yes steel tariffs might be one of the more certain aspects of.
Tim Monticello: The current background.
Tim Monticello: Yes, we share your view I don't think were likely to see movement in the steel tariff situation and as you would expect when all.
Tim Monticello: Imported steel solutions are tariffs of 25%.
Tim Monticello: <unk> U S sources of steel have increased in price by about 24, 5%. So that is definitely a favorable factor from our vantage point, both both for flex by <unk>.
Tim Monticello: I think we continue to see that.
Tim Monticello: Customer base for underground tanks, and flexible suitable products have the desire to.
Tim Monticello: Move away from steel and towards composites everywhere, they possibly can so I think over the course of this year and next we would expect that higher prices for steel continue to drive that enthusiastic migration.
Tim Monticello: And obviously, we have to be positioning ourselves to ensure we capture that migration ourselves and have the productive capacity to serve it.
Tim Monticello: Generally favorable at this point I think we would expect that we're not going to see tower supplied to our own products.
Tim Monticello: We are working on the assumption that products that meet U S. MCA compliance will remain tariff free.
Tim Monticello: Obviously, if that changes then it will change the dynamic but for now it is not built into our outlook.
Tim Monticello: VCA that.
Tim Monticello: And in the numbers yet in the backlog.
Tim Monticello: So or is that just something that you're expecting.
Tim Monticello: Late in Pac HCR in 2016 going forward.
Speaker Change: I am sorry impact of what.
Speaker Change: So I think just like stronger order flow anybody any customers.
Tim Monticello: It would've been ordering steel products that are moving process.
Tim Monticello: We've certainly seen a robust build in the backlog for the <unk> business.
Tim Monticello: And it has been a more aggressive build that we saw at this point last year.
Tim Monticello: So I think that is a combination of just continued strong enthusiasm to build new convenience stores. It's it's I think a reflection of the fact that our customers generally have the permits in hand for their full year of activity. So theyre confident placing orders.
Tim Monticello: Thank those who have.
Tim Monticello: Dedicated a portion of their spend to steel are we thinking that based on costs. So it's a combination of factors, but I would say that the backlog <unk> is looking very strong for 'twenty five.
Tim Monticello: For Flexpath.
Tim Monticello: Really a backlog driven business our backlog there tends to be relatively modest the time between order placement and delivery can be.
Tim Monticello: Choice as long as a few months.
Tim Monticello: I think.
Tim Monticello: To the degree that there is.
Tim Monticello: Customer migration from steel to composite at the moment it is somewhat being masked by a gradual slowing in total well completion activity.
Tim Monticello: Oil price remains fairly low.
Tim Monticello: But it's certainly favorable so I think reflects well.
Tim Monticello: It's hard to know with certainty we've seen over the last 18 months that that business has managed to eke out modest gains in EBITDA generation. Despite an underlying market that's fallen by more than 20% in that timeframe and thats entire.
Tim Monticello: Perfect.
Tim Monticello: Particularly with our large diameter products and in many cases.
Tim Monticello: <unk> gained from steel so I think that will continue.
Tim Monticello: Okay. Thank you very much thanks.
Speaker Change: And I'm showing no further questions at this time I would now like to turn the call back to Mike Rice for closing remarks.
Speaker Change: Thank you for joining us. This morning, we appreciate your interest in Manta.
Tim Monticello: After a strong Q1, obviously outlook has adjusted slightly for the second half of the year, but we remain confident in our ability to navigate whatever the world may throw at us and we look forward to sharing with you. The Q2 results. When we reconvene next quarter have a great day everybody.
Tim Monticello: And thank you for your participation in today's conference. This does conclude today's program you may now disconnect.
Tim Monticello: Okay.
Tim Monticello: [music].
Tim Monticello: Yes.
Tim Monticello: [music].