Q1 2026 Stella-Jones Inc Earnings Call

May 6, 2026

Speaker #1: Good morning and thank you for standing by. Welcome to Stella-Jones' first quarter 2026 earnings call. At this time, all participants are in a listen-only mode.

Operator: Good morning, thank you for standing by. Welcome to Stella-Jones Q1 2026 Earnings Call. At this time, all participants are in a listen-only mode. Following the presentation, we will hold a question-and-answer session. To queue up for questions by phone, please press star one. If anyone experience any difficulties for today's conference, please press star zero for the operator for assistance. I would like to remind everyone that this conference is being recorded on Wednesday, 6 May 2026. I'll now turn it over to David Galison, Vice President, Investor Relations of Stella-Jones.

Speaker #1: Following the presentation, we will hold a question-and-answer session. To queue up for questions by phone, please press star 1. If anyone experiences any difficulties with today's conference, please press star 0 to reach the operator for assistance.

Speaker #1: I would like to remind everyone that this conference is being recorded on Wednesday, May 6, 2026. I'll now turn it over to David Galison Vice President Investor Relations of Stella-Jones.

Speaker #2: Thank you, Vincent, and good morning, everyone. Earlier this morning, we issued a press release recording of results for the first quarter of 2026, along with our MD&A that can be found in the Investor Relations section of our website at www.stella-jones.com, as well as on Cedar Plus.

David Galison: Thank you, Vincent, and good morning, everyone. Earlier this morning, we issued our press release reporting our results for Q1 2026, along with our MD&A that can be found in the investor relations section of our website at www.stella-jones.com, as well as on SEDAR+. As a reminder, all figures expressed on today's call are in Canadian dollars, unless otherwise stated. Please note that the comments made on today's call may contain forward-looking information, and this information, by its nature, is subject to risks and uncertainties. Actual results may differ materially from the views expressed today. For further information on these risks and uncertainties, please consult the company's relevant filings on SEDAR+. These documents are also available in the investor relations section of Stella-Jones' website at www.stella-jones.com.

Speaker #2: As a reminder, all figures expressed on today's call are in Canadian dollars unless otherwise stated. Please note that the comments made on today's call may contain forward-looking information, and this information by its nature is subject to risks and uncertainties.

Speaker #2: Actual results may differ materially from the views expressed today. For further information on these risks and uncertainties, please consult the company's relevant filings on Cedar Plus.

Speaker #2: These documents are also available in the Investor Relations section of Stella-Jones' website at www.stella-jones.com. Additionally, during this conference call, the company may refer to non-GAAP measures which have no standardized meaning under GAAP and are not likely to be comparable to similar measures presented by other issuers.

David Galison: Additionally, during this conference call, the company may refer to non-GAAP measures, which have no standardized meaning under GAAP and are not likely to be comparable to similar measures presented by other issuers. For more information, please refer to the company's latest MD&A available on Stella-Jones' website and on SEDAR+. Lastly, we have prepared a corresponding presentation, which we encourage you to follow along with during this call. I'll now hand the call over to Éric Vachon, President and Chief Executive Officer of Stella-Jones, for a strategic business update, followed by Silvana Travaglini, Senior Vice-President and Chief Financial Officer of Stella-Jones, who will provide a more detailed financial overview. Éric, over to you.

Speaker #2: For more information, please refer to the company's latest MD&A available on Stella-Jones' website and on Cedar Plus. Lastly, we have prepared a corresponding presentation which we encourage you to follow along with during this call.

Speaker #2: I'll now hand the call over to Eric Vachon, President and Chief Executive Officer of Stella-Jones for Strategic Business Update. Followed by Silvana Travaglini, Senior Vice President and Chief Financial Officer of Stella-Jones, who will provide a more detailed financial overview.

Speaker #2: Eric, over to you.

Speaker #3: Thank you, David. Good morning, everyone, and thank you for joining us today. 2026 is off to a solid start with results that highlight both the fundamental resilience of our business and our progress on key strategic priorities.

Éric Vachon: Thank you, David. Good morning, everyone, thank you for joining us today. 2026 is off to a solid start with results that highlight both the fundamental resilience of our business and our progress on key strategic priorities. The market dynamics we outlined in our Q4 call remains largely unchanged, our Q1 performance is consistent with those expectations. Our utility products business continues to be the primary growth driver, delivering over 10% growth. This was fueled by strong demand for wood utility poles and the profitable contribution of our steel structures and crossarms businesses. Meanwhile, our railway ties division demonstrated notable stability this quarter, effectively navigating a complex competitive landscape.

Speaker #3: The market dynamics we outlined in our Q4 call remain largely unchanged and our first quarter performance is consistent with those expectations. Our utility products business continues to be the primary growth driver, delivering over 10% growth.

Speaker #3: This was fueled by strong demand for wood utility poles and a profitable contribution from our steel structures and cross-arms businesses. Meanwhile, our railway ties division demonstrated notable stability this quarter, effectively navigating a complex competitive landscape.

Speaker #3: While railway ties continue to deliver profitable sales, we're taking actions to further strengthen this business by optimizing our production network and aligning capacity with demand to ensure railway ties remain a cornerstone of our success.

Éric Vachon: While railway ties continue to deliver profitable sales, we're taking actions to further strengthen this business by optimizing our production network and aligning capacity with demand to ensure railway ties remains a cornerstone of our success. We are also advancing our growth initiatives with good momentum. The acquisition of Locweld has provided us with an immediate platform for growth. Our expected capacity expansion in Canada is well on its way to be fully allocated until the end of 2027. Our investments to double steel structure production capacity remains on schedule for completion by mid-2026, with a full ramp-up expected in H2 of the year. In the US, we have taken a significant step forward in building our manufacturing footprint for steel lattice towers by selecting Fayetteville, Tennessee as a site for our new facility.

Speaker #3: We are also advancing our growth initiatives with good momentum. The acquisition of Lockwell has provided us with an immediate platform for growth, and our expected capacity expansion in Canada is well on its way to be fully allocated until the end of 2027.

Speaker #3: Our investments to double steel structure production capacity remain on schedule for completion by mid-2026, with a full ramp-up expected in the second half of the year.

Speaker #3: In the U.S., we have taken a significant step forward in building our manufacturing footprint for steel lattice towers by selecting Fayetteville, Tennessee, as the site for our new facility.

Speaker #3: This site has an existing newly constructed building that is suitable for our operations, which will help mitigate project risk. Its strategic location also offers access to a skilled labor pool and favorable proximity to key galvanizing partners.

Éric Vachon: This site has an existing newly constructed building that is suitable for our operations, which will help mitigate project risk. Its strategic location also offers access to a skilled labor pool and favorable proximity to key galvanizing partners. This approximately $500 million US dollar investment will add roughly 20,000 tons to our total production capacity. We continue to expect commissioning by late 2027, with a full production capacity by the end of 2028. Let's turn to a performance overview of our main product categories. Starting with utility products, we are encouraged by the business's continued strength, which remains a cornerstone of our growth. The purchasing momentum that began in Q3 of last year carried into Q1 of 2026, supporting double-digit volume growth for wood utility poles.

Speaker #3: This approximately 500 million U.S. dollar investment will add roughly 20,000 tons to our total production capacity. We continue to expect commissioning by late 2027, with a full production capacity by the end of 2028.

Speaker #3: Let's turn to a performance overview of our main product categories. Starting with utility products, we are encouraged by the business's continued strength, which remains a cornerstone of our growth.

Speaker #3: The purchasing momentum that began in the third quarter of last year carried into the first quarter of 2026, supporting double-digit volume growth for wood utility poles.

Speaker #3: Importantly, growth continued to be anchored in our contract-based business, which we have deliberately strengthened by partnering with customers who value long-term supply security. In terms of pricing, it was tempered this quarter by product mix fluctuations and continued pressures in the spot market.

Éric Vachon: Importantly, growth continued to be anchored in our contract-based business, which we have deliberately strengthened by partnering with customers who value long-term supply security. In terms of pricing, it was tempered this quarter by product mix fluctuations and continued pressures in the spot market. While spot pricing was below the levels realized in Q1 2025, it remained broadly in line with pricing realized in H2 2025. Competition in the spot market remains intense. We expect that dynamic to continue as additional capacity comes online later this year. Despite lower pricing, the strength of our volume performance help offset these near-term pricing pressures while we maintain our focus on long-term profitability. Turning to railway ties, results in the quarter were broadly in line with the market conditions we expected.

Speaker #3: While spot pricing was below the levels realized in the first quarter of 2025, it remained broadly in line with pricing realized in the second half of 2025.

Speaker #3: Competition in the spot market remains intense and we expect that dynamic to continue as additional capacity comes online later this year. Despite lower pricing, the strength of our volume performance helped offset these near-term pricing pressures while we maintain our focus on long-term profitability.

Speaker #3: Turning to railway ties, results in the quarter were broadly in line with the market conditions we expected. While Class 1 volumes remain under pressure from industry consolidation and a more competitive landscape, we maintain relatively stable sales by growing our commercial business.

Éric Vachon: While Class I volumes remain under pressure from industry consolidation and a more competitive landscape, we maintain relatively stable sales by growing our commercial business. Combined with disciplined execution, this allowed us to preserve margins. At the same time, as part of our continuous improvement strategy, we're consolidating our production footprint by idling a treating plant and a procurement yard and reallocating volumes to our most efficient facilities, ensuring our network remains aligned with the evolving needs of our customers. This strategic review work is ongoing, and we continue to evaluate network performance to optimize returns and position the railway tie business as a high-performing contributor to our infrastructure platform for years to come. In parallel with the network optimization work, we remain focused on growth. Through Class I contract renewals, we see meaningful potential to strengthen our position and expand higher-value offerings such as bridge, crossing, and preplate products.

Speaker #3: Combined with disciplined execution, this allowed us to preserve margins. At the same time, as part of our continuous improvement strategy, we're consolidating our production footprint by idling a treating plant and a procurement yard, and reallocating volume to our most efficient facilities, ensuring our network remains aligned with the evolving needs of our customers.

Speaker #3: This strategic review work is ongoing and we continue to evaluate network performance to optimize returns and position the railway tie business as a high-performing contributor to our infrastructure platform for years to come.

Speaker #3: In parallel with the network optimization work, we remain focused on growth. Through Class 1 contract renewals, we see meaningful potential to strengthen our position and expand higher-value offerings such as bridge, crossings, and preplate products.

Speaker #3: Additional discussions with Class 1s are opening opportunities to offer treating services. Beyond Class 1s, we continue to pursue growth in the commercial market with encouraging project opportunities ahead.

Éric Vachon: Additional discussions with Class Is are opening opportunities to offer treating services. Beyond Class Is, we continue to pursue growth in the commercial market with encouraging project opportunities ahead. Consistent with our long-term approach, we will also continue to evaluate selective organic and M&A opportunities that can further strengthen our network and reinforce our role as a trusted partner to the North American rail industry. Overall, our priority in railway ties is clear: to reposition the business for stronger returns. Turning to residential lumber, the business faced softer demand this quarter. Despite this near-term backdrop, our confidence in the business and its long-term strategy remains unchanged. We continue to manage the business with discipline, leveraging our national distribution network and value-added capabilities to maintain strong service levels for our customers.

Speaker #3: Consistent with our long-term approach, we will also continue to evaluate select organic and M&A opportunities that can further strengthen our network and reinforce our role as a trusted partner to the North American rail industry.

Speaker #3: Overall, our priority in railway ties is clear: to reposition the business for stronger returns. Turning to residential lumber, the business faced softer demand this quarter.

Speaker #3: Despite this near-term backdrop, our confidence in the business and its long-term strategy remains unchanged. We continue to manage the business with discipline, leveraging our national distribution network and value-added capabilities to maintain strong service levels for our customers.

Speaker #3: We remain confident that residential lumber's value-added business model will continue to be a meaningful contributor to our profitability across market cycles. Overall, our first quarter performance reflects the strength of our infrastructure platform.

Éric Vachon: We remain confident that residential lumber's value-added business model will continue to be a meaningful contributor to our profitability across market cycles. Overall, our Q1 performance reflects the strength of our infrastructure platform. Utility products continue to drive growth, railway ties remain resilient as we undertake our optimization initiatives, and residential lumber continued to be managed with discipline through a softer market. Across our businesses, we remain focused on execution, customer service, and profitability. With that, I will now ask Silvana to provide a more detailed overview of our Q1 financial results.

Speaker #3: Utility products continue to drive growth. Railway ties remain resilient as we undertake our optimization initiatives, and residential lumber continues to be managed with discipline through a softer market.

Speaker #3: Across our businesses, we remain focused on execution, customer service, and profitability. With that, I will now ask Silvana to provide a more detailed overview of our first quarter financial results.

Speaker #2: Thank you, Eric, and good morning, everyone. Sales for the first quarter increased by $18 million to $791 million, supported by higher volumes in wood utility poles and a full quarter contribution from our recent acquisition.

Silvana Travaglini: Thank you, Eric, and good morning, everyone. Sales for Q1 increased by CAD 18 million to CAD 791 million, supported by higher volumes in wood utility poles and the full quarter contribution from our recent acquisitions. On an organic basis, sales increased 1% as the strength in utility products was largely offset by lower residential lumber sales, while railway tie sales remained relatively stable. Utility product sales were CAD 469 million in the quarter, up 12% from the CAD 419 million in the same period last year. This increase reflected the contribution from our 2025 acquisitions, Locweld and Brooks, as well as organic sales growth of 6%. This growth was entirely volume-driven, with volumes up 12% compared to the same quarter last year.

Speaker #2: On an organic basis, sales increased 1% as the strength in utility products was largely offset by lower residential lumber sales, while railway tie sales remained relatively stable.

Speaker #2: Utility product sales were 469 million dollars in the quarter, up 12% from the 419 million dollars in the same period last year. This increase reflected the contribution from our 2025 acquisitions Lochwell and Brooks, as well as organic sales growth of 6%.

Speaker #2: This growth was entirely volume-driven, with volumes up 12% compared to the same quarter last year. Volume gains were partially offset by lower pricing, which was down 6%, largely due to a less favorable product mix.

Silvana Travaglini: Volume gains were partially offset by lower pricing, which was down 6%, largely due to a less favorable product mix. Railway tie sales were CAD 198 million, down 5% or CAD 10 million from the prior year period, largely due to foreign exchange. Excluding the currency impact, railway tie sales were relatively stable as lower Class I volumes were largely offset by stronger commercial demand. As Eric noted, we have identified and initiated targeted actions within the railway tie business as part of our focus on continuous improvement. These initiatives are expected to generate approximately CAD 10 million to CAD 15 million in annualized cost savings starting in 2027. To implement these actions, we expect to incur one-time restructuring charges, the vast majority of which will be non-cash and recorded by the end of Q2.

Speaker #2: Railway tie sales were 198 million dollars, down 5% or 10 million dollars from the prior year period, largely due to foreign exchange. Excluding the currency impact, railway tie sales were relatively stable as lower Class 1 volumes were largely offset by stronger commercial demand.

Speaker #2: As Eric noted, we have identified and initiated targeted actions within the railway tie business as part of our focus on continuous improvement. These initiatives are expected to generate approximately 10 to 15 million dollars in annualized cost savings starting in 2027.

Speaker #2: To implement these actions, we expect to incur one-time restructuring charges the vast majority of which will be non-cash and recorded by the end of the second quarter.

Speaker #2: By consolidating activity into our most efficient facilities, we are lowering our cost base, improving network efficiency, and positioning the business to better protect margins through volume fluctuations.

Silvana Travaglini: By consolidating activity into our most efficient facilities, we are lowering our cost base, improving network efficiency, and positioning the business to better protect margins through volume fluctuation. Residential lumber sales were CAD 76 million in Q1, down 14% from CAD 88 million in Q1 of last year. Volumes were negatively impacted by softer demand, and pricing was also lower year over year as inventory costs averaged down throughout 2025. Before turning to profitability, I'd like to take a moment to discuss our approach to reporting. Starting this quarter, we are introducing adjusted EBITDA and adjusted EPS as part of our financial disclosures. As we execute strategic initiatives, GAAP results may include non-routine items that do not reflect our ongoing day-to-day business.

Speaker #2: Residential lumber sales were 76 million dollars in the quarter in the first quarter, down 14% from 88 million dollars in the first quarter of last year.

Speaker #2: Volumes were negatively impacted by softer demand and pricing was also lower year over year, as inventory costs averaged down throughout 2025. Before turning to profitability, I'd like to take a moment to discuss our approach to reporting.

Speaker #2: Starting this quarter, we are introducing adjusted EBITDA and adjusted EPS as part of our financial disclosures. As we execute strategic initiatives, gap results may include non-routine items that do not reflect our ongoing day-to-day business.

Speaker #2: This framework also allows for a more comparable year-over-year analysis by adjusting for the insurance settlement that impacted our 2025 results. It is important to note that for the current quarter, there were no adjustments to our EBITDA.

Silvana Travaglini: This framework also allows for a more comparable year-over-year analysis by adjusting for the insurance settlement that impacted our 2025 results. It is important to note that for the current quarter, there were no adjustments to our EBITDA. A full reconciliation of these adjustments has been provided in our financial filings. For the quarter, adjusted EBITDA was CAD 136 million, reflecting a margin of 17.2% compared to CAD 141 million and a margin of 8.2% in Q1 2025. The decline was primarily attributable to 2 factors. First, we had a less favorable product mix for our wood utility poles. Q1 last year benefited from a greater proportion of higher-priced wrapped pole sales.

Speaker #2: A full reconciliation of these adjustments has been provided in our financial filings. For the quarter, adjusted EBITDA was $136 million, reflecting a margin of 17.2%, compared to $141 million and a margin of 18.2% in the first quarter of 2025.

Speaker #2: The decline was primarily attributable to two factors. First, we had a less favorable product mix for our utility wood utility poles. Q1 last year benefited from a greater proportion of higher-priced wrapped pole sales.

Speaker #2: Second, we recorded a 5 million dollar mark-to-market adjustment on our stock-based compensation expense, resulting from the appreciation of the company's share price. While these factors impacted our quarterly margin profile, our cost discipline and operating execution remained solid.

Silvana Travaglini: Second, we recorded a CAD 5 million mark-to-market adjustment on our stock-based compensation expense resulting from the appreciation of the company's share price. While these factors impacted our quarterly margin profile, our cost discipline and operating execution remained solid. When viewed in the context of the seasonal nature of our business, our Q1 margin remained well within our expected levels as we head into our peak demand season. Moving on to cash flows. During the quarter, we generated CAD 47 million of cash from operations, a significant improvement over the CAD 16 million used in the Q1 of last year. This is a direct result of our disciplined working capital management. The strength of our operating cash flow was underscored by the stability of our balance sheet.

Speaker #2: When viewed in the context of the seasonal nature of our business, our Q1 margin remained well within our expected levels as we head into our peak demand season.

Speaker #2: Moving on to cash flows. During the quarter, we generated $47 million of cash from operations, a significant improvement over the $16 million used in the first quarter of last year.

Speaker #2: This is a direct result of our disciplined working capital management. The strength of our operating cash flow was underscored by the stability of our balance sheet.

Speaker #2: Despite the typical seasonal increase in working capital in the first quarter, our net debt was unchanged since the start of the quarter. We ended Q1 with 646 million dollars in available liquidity and a net debt-to-adjusted EBITDA ratio of 2.6 times.

Silvana Travaglini: Despite the typical seasonal increase in working capital in Q1, our net debt was unchanged since the start of Q1. We ended Q1 with CAD 646 million in available liquidity and a net debt to adjusted EBITDA ratio of 2.6x. At 2.6, our leverage ratio remains in line with our capital allocation strategy, which provides flexibility to fund seasonal working capital needs. In summary, our Q1 results underscore the strength of our cash generation and balance sheet. Solid operating cash flow, stable leverage, and ample liquidity give us the flexibility to support the needs of the business, fund strategic investments, and evaluate growth opportunities from a position of strength. With that, I will turn the call back to Éric.

Speaker #2: At 2.6, our leverage ratio remained in line with our capital allocation strategy, which provides flexibility to fund seasonal working capital needs. In summary, our first quarter results underscore the strength of our cash generation and balance sheet.

Speaker #2: Solid operating cash flow, stable leverage, and ample liquidity give us the flexibility to support the needs of the business, fund strategic investment, and evaluate growth opportunities from a position of strength.

Speaker #2: With that, I will turn the call back to Eric.

Speaker #1: Thank you, Silvana. To close, we are encouraged by our Start to 2026 and by the progress we are making against our strategic priorities. We continue to build momentum in utility products, advance our steel growth initiatives, and optimize our railway tie business.

Éric Vachon: Thank you, Silvana. To close, we are encouraged by our start to 2026 and by the progress we are making against our strategic priorities. We continue to build momentum in utility products, advance our steel growth initiatives, and optimize our railway tie business. Combined with disciplined management in residential lumber, these actions keep us on track to strengthen returns and create long-term value. I want to thank our employees for their dedication and hard work, and our shareholders for their continued trust. We look forward to welcoming them at our annual general meeting later this morning. This concludes our prepared remarks, and we will now open the line for questions.

Speaker #1: Combined with disciplined management in residential lumber, these actions keep us on track to strengthen returns and create long-term value. I want to thank our employees for their dedication and hard work, and our shareholders for their continued trust.

Speaker #1: We look forward to welcoming them at our annual general meeting this later this morning. This concludes our prepared remarks, and we will now open the line for questions.

Speaker #3: Thank you, Eric. As a reminder, to queue up for questions by phone, please press star. Then the number one. Our first question is from Amir Patel.

Operator: Thank you, Eric. As a reminder, to queue up for questions by phone, please press star, then the number one. Our first question is from Hamir Patel from CIBC Capital Markets. Please go ahead.

Speaker #3: From CIBC Capital Markets, please go ahead.

Hamir Patel: Hi, good morning. Eric, on the railway tie side, are you still expecting flat sales there overall for the full year? I know last quarter you mentioned you had 4 Class I contracts renewing this year. Have any of those been renewed yet?

Speaker #4: Hi. Good morning. Eric on the railway tie side, are you still expecting flat sales there overall for the full year? And I know last quarter you mentioned you had four Class 1 contracts renewing this year.

Speaker #4: Have any of those been renewed yet?

Speaker #1: So our views for the year are still flat sales year over year for 2026. And obviously, we hold our guidance for that low single-digit growth over the three-year guidance period.

Éric Vachon: Our views for the year are still flat sales year over year for 2026. Obviously, we hold our guidance for that low single-digit growth over the three-year guidance period. With regards to contract, there's still ongoing discussions. You know, very positive on discussions with several of our customers. As I mentioned in my prepared notes, we're also entertaining discussions about moving to some treating services. That could impact top line maybe more in 2027 than in 2026, but we know we'll provide more color when that time comes around. Ultimately, the profitability, you know, and margin remains the same.

Speaker #1: With regards to contract, they're still ongoing discussions. Very positive on discussions with several of our customers. As I mentioned in my prepared notes, we're also entertaining discussions about moving to some treating services.

Speaker #1: So that could impact top line, maybe more in '27 than in '26, but we know we'll provide more color when that time comes around.

Speaker #1: But ultimately, the profitability in same.

Speaker #4: Okay. Great. Thanks. And Silvani, I think you referenced a 10 to 15 million of cost savings by early '27. When's the earliest we'll start to see that the benefits there start to show up?

Hamir Patel: Great. Thanks. Silvana, I think you referenced CAD 10 to 15 million of cost savings by early 2027. When's the earliest we'll start to see that, the benefits there start to show up?

Speaker #5: Yeah. So we don't expect any benefits this year. Most of the benefits will only start in 2027, so when we talk about the 10 to 15 million dollars, that would be annualized starting in 2027.

Silvana Travaglini: Yeah. We don't expect any benefits this year. Most of the benefits will only start in 2027. When we talk about the CAD 10 to 15 million, that would be annualized, you know, starting in 2027.

Hamir Patel: Okay, great. Just the last question I had. On the res lumber side, Silvana, how much of the 11% decline was weaker volumes versus softer pricing? How is your key customer there thinking about spring demand?

Speaker #4: Okay. Great. Just the last question I had on the res lumber side, Silvana, how much of the 11% decline was weaker volumes versus softer pricing?

Speaker #4: And how is your key customer there thinking about spring demand?

Silvana Travaglini: In terms of the percentage decrease, it's pretty much 50/50 in terms of volumes and pricing. I think we're starting to see a nice pickup in demand. You know, obviously the season was a little bit late to start this year, but I think we're starting to see some positive signs. I'll let Éric chime in.

Speaker #5: So in terms of the percentage decrease, it's pretty much 50/50 in terms of volume to end and pricing. And I think we're starting to see a nice pickup in demand.

Speaker #5: So, obviously, the season was a little bit late to start this year, but I think we're starting to see some positive signs. I'll let Eric chime in.

Speaker #1: Yeah. Just additional comment, Amir. So our key customer remains bullish on the year with some growth or market share gains. We're for a strong season, as Silvana said, a bit of a later start with a later spring starting.

Éric Vachon: Just an additional comment, Eric. Our key customer remains bullish on the year with some growth or market share gains. You know, we're prepared for a strong season. As Silvana said, a bit of a later start with the later spring starting. You know, the last few weeks have been actually very good on volume shipments. You know, we'll see if we can catch it up by the end of the year, but the guidance still remains, you know, that CAD 600 to 660 million.

Speaker #1: But the last few weeks have been actually very good on volume shipments. So we'll see if we can catch up by the end of the year, but the guidance still remains in that 600 to 650 million dollars.

Speaker #4: Okay. Great. Thanks, I'll turn it over.

Hamir Patel: Great. Thanks. I'll turn it over.

Speaker #1: Thanks, Amir.

Éric Vachon: Thanks, Eric.

Speaker #3: Thank you. Our following question is from James Magaro from RBC Capital Markets. Please go ahead.

Operator: Thank you. Our following question is from James MacArdle from RBC Capital Markets. Please go ahead.

Speaker #1: Hey, good morning. Thanks for having me on. This is on the utility pool. Hey, Eric. Just on your utility pool, can you help us frame the cadence of the contract to backlog through the balance of '26?

James MacArdle: Hey. Good morning, and thanks for having me on.

James McGarragle: Hey. Good morning, and thanks for having me on.

Éric Vachon: Pleasure.

James MacArdle: Just on the utility pole, Hey, Eric. Just on your utility poles, can you help us frame the cadence of the contracted backlog through the balance of 2026? You know, specifically, you know, do you have a line of sight to maintaining that strong volume growth that we saw in Q1 into Q2 and Q3? You know, just and then maybe if you can comment on how you expect the pricing backdrop there to evolve in the back half as some of this new capacity comes on.

James McGarragle: Just on the utility pole, Hey, Eric. Just on your utility poles, can you help us frame the cadence of the contracted backlog through the balance of 2026? You know, specifically, you know, do you have a line of sight to maintaining that strong volume growth that we saw in Q1 into Q2 and Q3? You know, just and then maybe if you can comment on how you expect the pricing backdrop there to evolve in the back half as some of this new capacity comes on.

Speaker #1: Specifically, do you have line of sight to maintaining that strong volume growth that we saw in Q1 into Q2 and Q3? And then maybe if you can comment on how you expect the pricing backdrop there to evolve and the back half as some of this new capacity comes on.

Éric Vachon: Thank you, James. A quick reminder. You know, H1 of last year, if you remember, we had some softer volumes in utility poles. In H2, we actually saw some better performance. Definitely I would say the comp is easier the H1 of the year. Obviously as you're seeing the 12% volume growth, which, you know, I don't think it'll carry through into the Q3 and Q4 periods that are upcoming. However, we still believe that, you know, we'll hit that mid-single-digit net for the business and that would incorporate that pricing headwind.

Speaker #6: Thank you, James. So a quick reminder, first half of last year, if you remember, we had some softer volumes in utility pools. And the second half, we actually saw some better performance.

Speaker #6: So definitely I would say the comp is easier in the first half of the year. So obviously, you're seeing the 12% volume growth, which I don't think it'll carry through into the Q3 and Q4 periods for that are upcoming.

Speaker #6: However, we still believe that we'll hit that mid-single-digit net for the business, and that would incorporate that pricing headwind. We think it'll remain relatively stable for now compared to what we saw here in Q1.

Éric Vachon: We think it'll remain relatively stable for now compared to what, you know, we saw here in Q1, and hopefully it holds that level, if you want, of pricing on the spot pricing market. You know, net we believe it'll be a mid-single digit as we have in our three-year guidance.

Speaker #6: And hopefully, it holds that level, if you want, of pricing on the spot pricing market. But net, we believe it'll be a mid-single-digit as we have in our three-year guidance.

James MacArdle: Then in terms of margins, I know there was, you know, some impact from a mix this year and, you know, margins were down year-over-year. Should we be thinking about the cadence of margin improvement for the or margin deterioration for the full year, kind of in line with what we saw in Q1 or anything we should be thinking about in Q2, Q3, Q4 that would, you know, change the trajectory of margins versus what we saw in the quarter?

Speaker #1: And then in terms of margins, I know there was some impact from mix this year, and margins were down year over year. So, should we be thinking about the cadence of margin improvement or margin deterioration for the full year kind of in line with what we saw in Q1?

James McGarragle: Then in terms of margins, I know there was, you know, some impact from a mix this year and, you know, margins were down year-over-year. Should we be thinking about the cadence of margin improvement for the or margin deterioration for the full year, kind of in line with what we saw in Q1 or anything we should be thinking about in Q2, Q3, Q4 that would, you know, change the trajectory of margins versus what we saw in the quarter?

Speaker #1: Or anything we should be thinking about in Q2, Q3, Q4 that would change the trajectory of margins versus what we saw in the quarter?

Speaker #6: Yeah. So Q1 and Q4 of every year are the lowest volume quarters. So I'm not surprised to see the level of profitability we had this quarter.

Éric Vachon: Yeah. Q1 and Q4 of every year are the lowest volume quarters. You know, I'm not surprised to see, you know, the level of profitability we had this quarter. I think it's pretty much in line with our expectations. You could expect better margins for Q2 and Q3, as obviously the volume helps us leverage better our network and we're more efficient and there's also more demand. Definitely believe that we're, we will be within our guidance range for the year. I, you know, I think it's a bit of a normalization we're seeing this quarter. As Silvana pointed out, we had some, you know, product mix essentially being some higher wrap pole volumes in Q1 2025, which sort of uplifted the margin profile for the quarter.

Speaker #6: I think it's pretty much in line with our expectations. You could expect better margins for Q2 and Q3 as obviously the volume helps us leverage better our network, and we're more efficient, and there's also more demand.

Speaker #6: Definitely believe that we will be within our guidance range for the year. I think it's a bit of a normalization we're seeing this quarter, as Silvana pointed out.

Speaker #6: We had some product picks essentially being some higher raft hole volumes in Q1 '25, which sort of uplifted the margin profile for the quarter.

Speaker #6: But other than that, apart from the course, I think we'll be within our guidance range for the year.

Éric Vachon: You know, other than that, par for the course, I think we'll be within our guidance range for the year.

James MacArdle: Appreciate it. I'll turn the line over. Thank you.

Speaker #1: I appreciate it. And I'll turn the line over. Thank you.

James McGarragle: Appreciate it. I'll turn the line over. Thank you.

Speaker #6: Thank you.

Éric Vachon: Thank you.

Operator: Thank you. Our following question is from Benoit Poirier from Desjardins Capital Markets. Please go ahead.

Speaker #3: Thank you. Our following question is from Benoit Poirier. From the Jardine Capital Markets, please go ahead.

Speaker #7: Yes. Good morning, Eric. Good morning, Silvana. You talked a little bit about the optimization of the railway ties production network. You gave great color about the initiatives, the opportunities, the benefits.

Benoit Poirier: Yes. Good morning, Éric. Good morning, Silvana. You talked a little bit about the optimization of the railway ties production network. You gave great color about the initiatives, the opportunities, the benefits. Do you see an opportunity to do the same for utility poles and residential lumber?

Speaker #7: Do you see an opportunity to do the same for utility poles and residential lumber?

Éric Vachon: Great question, Benoit. You know, you know, it's been a year now that we've have added a COO to the organization and he's got, you know, strategic improvements initiatives going on in the business and continuous improvement. Obviously, there'll be different impacts. If I think about our utility pole business, it's been a growth business now for several years. We're using capacity very well and increasing capacity. I don't think, you know, for example, restructuring in capacity downward capacity adjustment would be something we will see in utility poles, but it doesn't mean that we are not working on other efficiency initiatives within the division. I would say same for residential lumber.

Speaker #1: So great question, Benoit. It's been a year now that we've added a CEO to the organization, and he's got strategic improvements initiatives going on in the business and continuous improvement.

Speaker #1: So it's definitely something that we are deploying throughout the organization. Obviously, there'll be different impacts. If I think about our utility pole business, it's been a growth business now for several years.

Speaker #1: We're using capacity very well and increasing capacity. So I don't think, for example, restructuring in capacity downward capacity adjustment would be something we will see in utility poles, but it doesn't mean that we're not working on other efficiency initiatives within the division.

Speaker #1: And I would say same for residential lumber. We're pretty happy with our footprint and our capacity usage there. But not to say that we're not looking for other opportunities to improve our bottom line.

Éric Vachon: We're pretty happy with our footprint and our capacity usage there, but not to say that, you know, we're not looking for other opportunities to improve our bottom line.

Speaker #7: Okay. And when I look at the organic growth for railway ties, was just the slight thing it is, but how should we be thinking about Q2?

Benoit Poirier: Okay. When I look at the organic growth for railway ties was just the slight thing it is, but how should we be thinking about Q2? It looks like that you're gonna still be facing a tough compare versus a year ago. Just wondering whether we could still see the railway ties organic growth in the negative territory.

Speaker #7: It looks like that you're going to still be facing a tough compare versus a year ago. So just wondering whether we could still see the railway ties organic growth in the negative territory.

Speaker #1: So obviously, I want to call out FX because it was, as you can see in our NDA, a big impact this quarter. So if we exclude FX, we still see it flattish, Benoit.

Éric Vachon: Obviously, I wanna call out FX because it was a, as you can see in our MD&A, a big impact this quarter. If we exclude FX, we still see it flattish, Benoit. It is a very dynamic market and as I mentioned, our team is adjusting very well, getting some extra business in the spot market or the commercial market. There's lots of great opportunities there. That's how we sort of navigated Q1. We compensated, you know, with that spot market. Not to say that as we're negotiating contracts with Class I, we might see certain things switch, but I don't think it'll be in Q2, it'll be probably a bit later in the year.

Speaker #1: It is a very dynamic market. And as I mentioned, our team is adjusting very well, getting some extra business in the spot market or the commercial market.

Speaker #1: There's lots of great opportunities there that's how we sort of navigated Q1. We compensated with that spot market. Not to say that as we're negotiating contracts with class ones, we might see certain things switch, but I don't think it'll be in Q2.

Speaker #1: It'll be probably a bit later in the year. But for now, my thoughts are what I expressed earlier, it should be flat through the year.

Éric Vachon: You know, for now, my thoughts are, you know, what I expressed earlier, should be flat through the year.

Speaker #7: Okay. Perfect. And free cash flow, as Silvana very strong performance in Q1 is in what is typically a seasonal week quarter. Any explanation? I see less working capital build.

Benoit Poirier: Okay, perfect. Free cash flow at Silvana, very strong performance in Q1 in what is a typically a seasonal weak quarter. Any explanation? I see less working capital build. Was it a call on the residential lumber inventory? Is it impact from network optimization? Any color behind the strong free cash flow performance in Q1?

Speaker #7: Was it a call on the residential lumber inventory? Is it impact from network optimization? So any color behind the strong free cash flow performance in Q1?

Speaker #8: Yeah. So most of the favorable impact in the first quarter was us right-sizing some of the inventory, particularly in ties. As we're looking to potentially, as Eric mentioned, opportunities for maybe TSO volumes, which is less capital intensive.

Silvana Travaglini: Yeah. Most of the favorable impact in Q1 was us rightsizing some of the inventory, particularly in ties, you know, as we're as we're looking to you know, potentially, as Éric mentioned, opportunities for maybe TSO volumes, which is less capital-intensive. You know, we did make an effort already starting in Q1 to to you know, to right-size that that inventory. That was most of the impact. The build of residential lumber, obviously, you know, with a bit of a later season, you know, was actually going the other way and we definitely have, you know, holes in line with what we what we typically see in the in the Q1, right?

Speaker #8: We did make an effort already starting in Q1 to right-size that inventory. So that was most of the impact. The build of residential lumber, obviously, with a bit of a delayed season was actually going the other way.

Speaker #8: And we definitely have poles in line with what we typically see in the first quarter, right? Also using the tools that we have, with SAP a lot more visibility into inventory management.

Silvana Travaglini: Also using the tools that we have with SAP, a lot more visibility into inventory management. Definitely, that is also helping out as part of that optimization and being efficient with our working capital.

Speaker #8: So definitely that is also helping out as part of the optimization of and being efficient with our working capital.

Speaker #7: Okay. And maybe last one for me. Could you maybe provide an update on the Brooks Automation and the potential for selling cross-arm in Canada and maybe also with respect to the new location in Tennessee for steel lattice?

Benoit Poirier: Okay. Maybe last one for me, could you maybe provide an update on the Brooks automation and the potential for selling crossarm in Canada? Maybe also with respect to the new location in Tennessee for steel lattice, was curious to know how much of the upcoming capacity has been already sold? Thank you.

Speaker #7: I was curious to know how much of the upcoming capacity has been already sold. Thank you.

Speaker #1: So thank you, Benoit. So the first part of your question with regards to Brooks, very happy with the progress in the integration. I would say probably fully integrated by now, other than probably the IT systems that will be completed by the end of the year.

Éric Vachon: Thank you, Benoit. First part of your question with regards to Brooks, very happy with the progress in the integration. I would say probably fully integrated by now other than probably the IT systems that'll be completed by the end of the year. We've opened the door to a lot of new customer contacts to the Brooks team, including Canadian customers. Can't divulge too much into the weeds, but yes, we're making inroads with Canadian utilities, so we're very happy with the progress there. The second part of your question was, I believe, was with regards to our selection of a Tennessee location for our steel lattice business. That is also progressing very well. Obviously we've selected the site.

Speaker #1: We've opened the door to a lot of new customer contacts to the Brooks team, including Canadian customers. Can't divulge too much into the weeds, but yes, we're making inroads with Canadian utilities.

Speaker #1: So we're very happy with the progress there. And the second part of your question was, I believe, was with regards to our selection of our Tennessee location for our steel lattice business.

Speaker #1: That is also progressing very well. So obviously, we're we've selected the site. It has a building, as I mentioned. So it sort of de-risks a lot of the project.

Éric Vachon: It has a building, as I mentioned, so it sort of de-risks a lot of the project. We're already done and probably in the coming weeks we'll be, you know, finalizing the purchase of all the equipment to be delivered in about a year from now. We're on track to be to commission the facility at the end of 2027. Things are working well. We've aligned our resources internally to be able to support that project. Obviously again, under our CEO, we've developed an engineering team. Now we have actually employees that are well-versed in this type of project and are dedicated to it.

Speaker #1: We're already done and probably in the coming weeks, we'll be finalizing the purchase of all the equipment to be delivered in about a year from now.

Speaker #1: So we're on track to be to commission the facility at the end of '27. But things are working well. We've aligned our resources internally to be able to support that project.

Speaker #1: Obviously, again, under our CEO, we've developed an engineering team. So now we have actually employees that are well-versed in this type of project. And our dedicated to it.

Speaker #1: So like my VP of sales likes to say, we have someone that goes to bed and wakes up in the morning thinking about these projects.

Éric Vachon: Like my VP of Sales likes to say, we have someone that goes to bed and wakes up in the morning thinking about these projects. We're, you know, really focused on the success of the project, looking forward to commission it. I also think you were inquiring about having some purchase orders there. No firm purchase orders. A lot of discussions with customers, a lot of increased visits in our Canadian facility from US customers to understand our quality control, our processes to certify the facility. You know, ultimately, once we have a US facility fully functional, the opportunity will be, of course, servicing US customers. We'll be able to move some production from Canada into the US, freeing up some capacity in Canada for Canadian projects.

Speaker #1: So we're really focused on the success of the project. Looking forward to commission it. And I also think you were inquiring about having some purchase orders there.

Speaker #1: So no firm purchase orders. A lot of discussions with customers. A lot of increased visits in our Canadian facility from US customers to understand our quality control, our processes, to certify the facility.

Speaker #1: And ultimately, once we have a US facility fully functional, the opportunity will be, of course, servicing US customers. We'll be able to move some production from Canada into the US, freeing up some capacity in Canada for Canadian projects.

Speaker #1: We have a lot of Canadian utilities that are looking to source Canadian content and we will be very well positioned to answer their requirements.

Éric Vachon: We have a lot of Canadian utilities that are looking to source Canadian content, and we will be very well positioned to answer their requirements. All in all, very, very positive and updated on my part on what's going on there.

Speaker #1: So all in all, very positive and upbeat on my part on what's going on there.

Speaker #7: That's great. Great callers. Thank you.

Benoit Poirier: That's great. Great color. Thank you.

Speaker #1: Thank you, Benoit.

Éric Vachon: Thank you, Benoit.

Speaker #9: Thank you. As a reminder, if you would like to ask questions by phone, please press star one. Our following question is from Michael Tufum.

Operator: Thank you. As a reminder, if you would like to ask question by the phone, please press star one. Our following question is from Michael Tupholme from TD. Please go ahead.

Speaker #9: From TD, please go ahead.

Speaker #1: Thank you. Good morning.

Michael Tupholme: Thank you. Good morning.

Speaker #10: Good morning, Michael.

Éric Vachon: Good morning, Michael.

Speaker #1: Good morning, Eric, Silvana. Question on the restructuring within the ties business. You mentioned two sites that are going to be idled. Is it specifically those two that get you to this 10 to 15 million of savings, or are there additional opportunities or additional restructuring options contemplated as well?

Michael Tupholme: Good morning, Eric, Silvana. Question on the restructuring within the ties business. You mentioned two sites that are going to be idled. Is it specifically those two that get you to this CAD 10 million to CAD 15 million of savings or are there additional opportunities or additional, you know, restructuring options contemplated as well?

Éric Vachon: The savings Silvana mentioned, the 10 to 15, is associated to those two facilities. A treating plant and a finished good or a raw material green tie consolidation yard. As I also mentioned in my remarks, it's an ongoing process. We're evaluating other opportunities, but for the time being, you know, this is the adjustment we deem necessary. We have enough depth in our network to be able to accommodate the production or even the spike in demand if that would come in the coming years. We've seen the industry, you know, go up to 24 million ties, and today it's maybe sitting around, I wanna say, the high 19s.

Speaker #10: So the savings Silvana mentioned, the 10 to 15 is associated to those two facilities. So a treating plant and a finished good or sorry, a raw material green tie consolidation yard.

Speaker #10: As I also mentioned in my remarks, it's an ongoing process. We're evaluating other opportunities. But for the time being, this is the adjustment we deem necessary.

Speaker #10: We have enough depth in our network to be able to accommodate the production or even the spike in demand if that would come in the coming years.

Speaker #10: We've seen the industry go up to 24 million ties. And today, it's maybe sitting around, I want to say, the high 19s. But if there would be a spike at one point in the future, we definitely have the capacity even though we're idling these facilities within our network to be able to address the demand.

Éric Vachon: If there would be a spike at one point in the future, we definitely have the capacity, even though we're idling these facilities within our network to be able to address the demand. Obviously, with that information, you can understand that it's not an easy decision to make, obviously, 'cause it impacts our employees and it impacts, you know, people that work for us. From an operational and financial perspective, it made a lot of sense.

Speaker #10: So obviously, with that information, you can understand that it was it's not an easy decision to make, obviously, because it impacts our employees. It impacts people that work for us.

Speaker #10: But from an operational and financial perspective, it made a lot of sense.

Speaker #1: No, that makes sense. Thank you. And then just as far as the restructuring charge, I realize it's largely non-cash, but sorry, did you quantify what we should expect that to be in the second quarter, Silvana?

Michael Tupholme: Yep, that makes sense. Thank you. Just as far as the restructuring charge, I realize it's largely non-cash, but did you quantify what we should expect that to be in Q2, Silvana?

Silvana Travaglini: No. We're still working on those numbers. You know, obviously there's that, you know, when we talk about the non-cash, the write down of the assets, so we're just trying to figure out which assets basically we can reuse in the network. There's still some work to be done there.

Speaker #11: No, we have or still working on those numbers. We're obviously there's when we talk about the non-cash, it's really the write-down of the assets.

Speaker #11: So we're just trying to figure out which assets basically we can reuse in the network. So there's still some work to be done there.

Speaker #1: Okay. Got it. As far as the pricing headwind in the Poles business, you mentioned it was largely mixed. Can you what happens as far as the prior comp from a mixed perspective as we move into Q2 and then through the balance of the year?

Michael Tupholme: Okay, got it. As far as the pricing headwind in the poles business, you mentioned it was largely mix. What happens as far as the prior comp from a mix perspective as we move into Q2 and then through the balance of the year? Is that dynamic still at play from a mix perspective or is it more just the industry headwinds on the pricing side? Just trying to understand how we think about pricing and the composition of pricing, particularly or inclusive of the year-over-year comp, as we move through the year.

Speaker #1: Is that dynamic still at play from a mixed perspective, or is it more just the industry headwinds on the pricing side? Just trying to understand how we think about pricing and the composition of pricing particularly or inclusive of the year-over-year comp as we move through the year.

Speaker #10: So for Q1, '25, it was a very unique situation. With a unusual revenue stream for utility wrap Poles. That does not come into play following Q1.

Éric Vachon: For Q1 of 2025, it was a very unique situation with a, you know, unusual revenue stream for utility wrap poles. That does not come into play following Q1, so it is back to a normal comparison. We would have that mixed effect to explain it, the delta between profitability year over year for the balance of the year.

Speaker #10: So it's back to a normal comparison. So there's we would have that mixed effect to explain the delta between profitability year over year for the balance of the year.

Speaker #1: Okay. I guess so as we move through the year, though. So that goes away, that part of the headwind. But at the same time, you mentioned that from a volume perspective, the comps get tougher.

Michael Tupholme: Okay. I guess though as we move through the year though, so that goes away, that part of the headwind, but at the same time you mentioned that from a volume perspective, the comps get tougher. There's sort of an offset there.

Speaker #1: So there's sort of an offset there.

Speaker #10: Yes. Exactly.

Éric Vachon: Yes. Exactly.

Speaker #1: Okay. Also, wondering if you can just I don't think it's been asked yet. Just talk a little bit about M&A opportunities. Obviously, you've got a lot on your plate with the LockWeld expansion, the US lattice expansion, closing facilities in ties.

Michael Tupholme: Okay. Also wondering if you can just, I don't think it's been asked yet, just talk a little bit about M&A opportunities. Obviously, you've got a lot on your plate with the Locweld expansion, the US lattice expansion, closing facilities in ties. Just, you know, are you still focused on potential M&A opportunities? What does the landscape look like? Is there anything that we should be thinking about on that front?

Speaker #1: But just are you still focused on potential M&A opportunities? What does the landscape look like? Is there anything that we should be thinking about on that front?

Speaker #10: Well, thank you for recognizing that we've got a lot of a lot going on. And we do. But fortunately, we also have a vice president of business development.

Éric Vachon: Well, thank you for recognizing that we've got a lot going on, and we do. Fortunately, you know, we also have a vice president of business development, so he is dedicated to the pursuit of M&A and, you know, finding new opportunities. We still have a lot of interest. We have a, I would say, healthy pipeline of projects ahead of us, in our traditional wood treating railway ties and utility poles, and as well in on the steel transmission side. I would qualify it in that broader market, which if you remember at our investor day, we had talked about an addressable market of a total of CAD 5 billion annual.

Speaker #10: So he is dedicated to the pursuit of M&A and finding new opportunities. So we still have a lot of interest. We have a I would say healthy pipeline of projects ahead of us.

Speaker #10: In our traditional wood treating, railway ties, and utility poles, and as well in on the steel transmission side, I would qualify it in that broader market, which if you remember at our investor day, we had talked about an addressable market of a total of $5 billion Canadian annual.

Éric Vachon: Definitely that's part of our strategic priorities as we were discussing here earlier in our prepared remarks. Definitely, our VP of business development has all of those 3 in a line of sight and working on some projects. Obviously can't promise the timing on those. Each project has its own cadence, but, I would be, you know, very, very happy if we could, you know, execute on some of these in the next 12 months.

Speaker #10: So definitely that's part of our strategic priorities as we were discussing here earlier in our prepared remarks. So definitely our VP of business development has all of those three in a line of sight and working on some projects and then obviously can't promise the timing on those.

Speaker #10: They have each project has its own cadence. But I would be very, very happy if we could execute on some of these in the next 12 months.

Speaker #1: All right. Thank you. I will leave it there.

Michael Tupholme: All right, thank you. I will leave it there.

Speaker #10: Thank you, Michael.

Éric Vachon: Thank you, Michael.

Speaker #12: Thank you. Our following question is from Maxim Sitchev from National Bank of Canada. Please go ahead.

Operator: Thank you. Our following question is from Maxim Sytchev from National Bank of Canada. Please go ahead.

Maxim Sytchev: Hi, good morning. Éric, I was wondering if it's possible to get a bit more color on the state of the lattice market in the US, and I guess any incremental data points you can even point to and if it's still the case that sort of all the end product is coming offshore still. Thank you very much.

Speaker #13: Hi. Good morning. Eric, I was wondering if it's possible to get a bit more color on the state of the lattice market in the US and I guess any incremental data points you can even point to and if it's still the case that sort of all the end product is coming offshore still.

Speaker #13: Thank you very much.

Éric Vachon: A lot of articles have been, you know, published, and they keep, you know, on a regular basis about the, I wanna say the effervescence in the electrical grid in North America. I think you know, from our standpoint, we still see that market being very dynamic. We keep having discussions with our customers that are looking to invest and execute on large CapEx projects. A lot of transmission projects in there. I was mentioning earlier, in another question, we have seen an increase in visits or certification visits from customers at our facility here in Quebec. A lot of interest from North American utilities to buy a bit more, well, Canadian for Canada, but on the continent for our US customers.

Speaker #10: A lot of articles have been published, and they keep on a regular basis about the I want to say the effervescence in the electrical grid in North America.

Speaker #10: So I think from our standpoint, we still see that market being very dynamic. We keep having discussions with our customers that are looking to invest and execute on large CapEx projects.

Speaker #10: A lot of transmission projects in there. I was mentioning earlier in another question we have seen an increase in visits or certification visits from customers at our facility here in Quebec.

Speaker #10: A lot of interest from North American utilities to buy a bit more well, Canadian for Canada, but on the continent for our US customers.

Speaker #10: A lot of interest for our US facility that's getting built as well. So I think that is also prompting the interest in how we're operating.

Éric Vachon: A lot of interest for our US system that's getting built as well. I think that is also prompting the interest in how we're operating. To your point, you were asking about the offshore, they remain in play. We know the players. We keep having discussions with them. We share some notes to make sure we understand what they're up to. I think they appreciate that we have a bit of a unique service proposal, product offering in North America, having a footprint closer to the projects, and that's what our customers appreciate. I guess that's about, you know, our thoughts at this point, Maxim Sytchev.

Speaker #10: And to your point, you were asking about the offshore. They remain in play. We know the players. We keep having discussions with them. We share some notes to make sure we understand what we understand what they're up to.

Speaker #10: And I think they appreciate that we have a bit of a unique service proposal, product offering in North America having a footprint closer to the projects.

Speaker #10: And that's what our customers appreciate. I guess that's about our thoughts at this point, Maxim.

Speaker #12: Okay, no, that's super helpful. And then one quick clarification: is there any pinch point around preservatives, given sort of all the geopolitical issues and input costs, or is it just immaterial, do you think?

Maxim Sytchev: Okay. No, that's super helpful. Then one quick clarification. Is there any pinch point around preservatives given sort of all the geopolitical issues on kind of input costs, or it's just immaterial? Thank you.

Speaker #10: I don't see not necessarily pinch point. The only thing I guess I want to point to since you're bringing it up is there could be a bit of headwinds because of fuel cost increases.

Éric Vachon: I don't see not necessarily a pinch point. The only thing I guess I wanna point to since you're bringing it up, is there could be a bit of headwinds because of fuel cost increases. Obviously our oil-borne preservative would have a bit of an impact and also on the fuel could impact our carrying costs or our distribution costs. Nothing material for now. All built into pass-throughs we have in our contracts with our customers. Nothing of great concern at this point. Obviously, we're monitoring the oil price situation, well, in North America 'cause it's closer to home, but it's a global impact, I guess. Yeah, that would be my thoughts there on your question.

Speaker #10: So obviously, our oil-borne preservative would have a bit of an impact. And also on fuel could impact our carrying costs, our distribution costs. Nothing material for now.

Speaker #10: All built-in to pass-throughs we have in our contracts with our customers. So nothing of great concern at this point. But obviously, we're monitoring the oil price situation in North America because it's closer to home, but it's a global impact, I guess.

Speaker #10: But yeah, that would be my thoughts there on your question.

Speaker #12: Okay. That's great. Thank you for clarifying. That's good for me.

Maxim Sytchev: Okay. That's great. Thank you for clarifying. That's it for me.

Speaker #10: Thank you, Maxim.

Éric Vachon: Thank you, Maxim.

Speaker #12: Thank you. Our following question is from Jonathan Goldman from Scotiabank. Please go ahead.

Operator: Thank you. Our following question is from Jonathan Goldman from Scotiabank. Please go ahead.

Speaker #1: Hey, good morning, team. Thanks for taking my questions. Just a few qualifying ones on my end. I think you called out the mark-to-market item on stock-based compensation this quarter being a $5 million headwind.

Jonathan Goldman: Hey, good morning, team. Thanks for taking my questions. Just a few qualifying ones on my end. I think you called out the mark-to-market, item on stock-based compensation this quarter being a CAD 5 million headwind. I just wanna know what was it last year, and just to be sure you're not adjusting either of those amounts out of adjusted EBITDA.

Speaker #1: I just want to know what was it last year and just to be sure you're not adjusting either of those amounts out of adjusted EBITDA.

Éric Vachon: I'll thank you for the question, Jonathan. I'll let Silvana answer the question.

Speaker #10: I'll thank you for the question, Jonathan. I'll let Silvana answer the question.

Speaker #11: Yes. So to the second part of your question, Jonathan, no, we are not adjusting any of the mark-to-market items. And last year, it was actually a small negative amount, under $1 million.

Silvana Travaglini: Yes. That's to on the second part of your question, Jonathan, is that, no, we are not adjusting any of the mark-to-market items. Last year it was actually a small negative amount, under CAD 1 million.

Speaker #1: Okay. So 5 million this year, 1 million-ish last year.

Jonathan Goldman: Okay. CAD 5 million this year, CAD 1 million-ish last year.

Speaker #11: Going the other way.

Silvana Travaglini: Going the other way, yeah.

Jonathan Goldman: My second question. Sorry?

Speaker #1: My second question sorry?

Speaker #11: The Q1 last year was a net negative.

Silvana Travaglini: The Q1 last year was a net negative.

Speaker #1: Yep, exactly. And then another one ought to be the dead horse here on the pricing decline in poles. But of that 6%, how much of it was due to mix versus competitive dynamics?

Jonathan Goldman: Yeah, exactly. Then another one, not to beat a dead horse here on the pricing decline in poles, but of that 6%, how much of it was due to mix versus competitive dynamics? If we're thinking about pricing for the rest of the year, if we back into the competitive element in Q1, is it the expectation that that's gonna accelerate and get worse through the balance of the year as more capacity comes online?

Speaker #1: And if we're thinking about pricing for the rest of the year, if we back into the competitive element, the Q1, is it the expectation that that's going to accelerate and get worse through the balance of the year as small capacity comes online?

Speaker #10: So the Q1 impact is almost or probably all not probably. It is all mixed. So no, excluding that factor, I think we see the pricing pressures being relatively stable year over year.

Éric Vachon: The Q1 impact is almost or probably all, not probably, it is all mix. No, excluding that factor, I think we see the pricing pressures being relatively stable year over year. Maybe, there will be some headwinds for sure, a couple of percentage points, but no more than that, and not as significant as the Q1.

Speaker #10: So maybe there will be some headwinds for sure a couple of percentage points, but no more than that. Not a significant as the first quarter.

Speaker #1: Okay. That's good color. And then maybe one more for you, Silvana. I think you talked about it earlier in the call on working cap, but it was specific to Q1.

Jonathan Goldman: Okay. That's good color. Maybe one more for you, Silvana. I think you talked about it earlier, the call on working cap, but it was specific to Q1. For the full year, how should we think about investment in working capital?

Speaker #1: But for the full year, how should we think about investment in working capital?

Silvana Travaglini: Yeah. You know, I've said in the past kind of, you know, our rule of thumb is always that, you know, for every incremental sales dollar, you know, we need to invest CAD 0.40 on that dollar to support those sales. You know, that said, you know, as I mentioned, you know, with perhaps more opportunities to do TSO, you know, that might be lower because obviously that is less capital intensive. You know, for the year, I still think there will be a net investment, but probably less than CAD 50 million.

Speaker #11: Yeah. So I've said in the past kind of our rule of thumb is always that for every incremental sales dollar, we need to invest 40 cents on that dollar to support those sales.

Speaker #11: That said, as I mentioned, with perhaps more opportunities to do TS. So that might be lower because obviously, that is less capital-intensive. So for the year, I still think there would be a net investment, but probably less than 50 million dollars.

Speaker #1: Okay. Thank you for the color. I'll get back in queue.

Jonathan Goldman: Okay. Thank you for the color. I will get back in queue.

Speaker #10: Thank you.

Éric Vachon: Thank you.

Speaker #12: We have no further questions in the Q. Thank you.

Operator: We have no further questions in the queue. Thank you.

Speaker #10: Thank you, Vincent. And thank you, everyone, for joining us today. We look forward to updating you when we release a second-quarter results. Until then, have a safe and enjoyable summer.

Éric Vachon: Thank you, Vincent. Thank you everyone for joining us today. We look forward to updating you when we release our Q2 results. Until then, have a safe and enjoyable summer.

Operator: Ladies and gentlemen, this concludes today's call. Thank you for participating. You may now disconnect your lines.