Q1 2026 5N Plus Inc Earnings Call

May 7, 2026

Speaker #1: Après la présentation, il y aura une période de questions et réponses. Pour poser une question, appuyez sur étoile et le 1 de votre clavier téléphonique.

Speaker #1: Si vous avez besoin d'assistance, veuillez appuyer sur étoile 0. Good morning, ladies and gentlemen. Thank you for standing by. And welcome to the 5M Plus in first quarter 2026 results conference call.

[Translator]: Good morning, ladies and gentlemen. Thank you for standing by and welcome to the 5N Plus Inc. Q1 2026 results conference call. At this time, note that all participants are in listen only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, please press star 1 on your telephone keypad. If you require assistance for the operator, please press star 0.

Speaker #1: At this time, note that all participants are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. You may ask a question during the session.

Speaker #1: Please press star the one on your telephone keypad. And if you require me to assistance for the operator, please press star 0. Je vais maintenant céder la parole à Richard Perron, président, and I would like to turn the conference over to your speaker today, Richard Perron, president.

Operator: Je vais maintenant céder la parole à Richard Perron, Président.

Operator: [Foreign language]

[Translator]: I would like to turn the conference over to your speaker today, Richard Perron, President. Please go ahead, sir.

Speaker #1: Please go ahead, sir. Bonjour à toutes et à tous. Good morning, everyone, and thank you for joining us for our Q1 2026 results conference call and webcast.

Richard Perron: [Foreign language]. Good morning, everyone, and thank you for joining us for our Q1 2026 Results Conference Call and Webcast. We will begin with a short presentation, followed by a question period with financial analysts. Joining me this morning is Gervais Jacques, our CEO. We issued our financial results yesterday and posted a short presentation on the investors section of our website. I would like to draw your attention to slide 2 of this presentation. Information in this presentation and remarks made by the speakers today will contain statements about expected future events and financial results that are forward-looking and therefore subject to risk and uncertainties. A detailed description of the risk factors that may affect future results is contained in our Management's Discussion and Analysis of 2025, dated 24 February 2026, available on our website and in our public filings.

Speaker #1: We will begin with a short presentation followed by a question period with financial analysts. Joining me this morning is Java Jacques, our CEO. We issued our financial results yesterday and posted a short presentation on the investor section of our website.

Speaker #1: I would like to draw your attention to slide 2 of this presentation. The information in this presentation and remarks made by the speakers today will contain statements about expected future events and financial results that are forward-looking.

Speaker #1: And therefore, subject to risks and uncertainties. A detailed description of the risk factors that may affect future results is contained in our Management Discussion and Analysis of 2025, dated February 24, 2026, available on our website and in our public files.

Speaker #1: In the analysis of our quarterly results, you will note that we use and discuss certain non-IFRS measures, which definitions may differ from those used by other companies.

Richard Perron: In the analysis of our quarterly results, you will note that we use and discuss certain non-IFRS measures which definitions may differ from those used by other companies. For information, please refer to our management's discussion and analysis. I will now turn the conference call over to Gervais.

Speaker #1: For further information, please refer to our management's discussion and analysis. I will now turn the conference call over to Javert. Thank you, Richard. Bonjour.

Gervais Jacques: Thank you, Richard. Bonjour. Good morning, everyone, and thank you for joining us today. Before we begin, I would like to say a few words. As you know, I'm transitioning to the role of Executive Chair, so this is my last earnings call as Chief Executive Officer of 5N Plus. It has been a privilege and an honor to serve as CEO, and I would like to thank our shareholders and the broader investment community for their continued support. I look forward to contributing in my new capacity to the company's strategic direction and long-term development, and I have great confidence in Richard as he steps into the CEO role. Richard has been instrumental in our success, and he is well-positioned to continue executing on our strategy and take 5N Plus to the next level. Now, turning to the quarter.

Gervais Jacques: Thank you, Richard. [Foreign language]. Good morning, everyone, and thank you for joining us today. Before we begin, I would like to say a few words. As you know, I'm transitioning to the role of Executive Chair, so this is my last earnings call as Chief Executive Officer of 5N Plus. It has been a privilege and an honor to serve as CEO, and I would like to thank our shareholders and the broader investment community for their continued support. I look forward to contributing in my new capacity to the company's strategic direction and long-term development, and I have great confidence in Richard as he steps into the CEO role. Richard has been instrumental in our success, and he is well-positioned to continue executing on our strategy and take 5N Plus to the next level. Now, turning to the quarter.

Speaker #1: Good morning, everyone, and thank you for joining us today. Before we begin, I would like to say a few words as you know, I'm transitioning to the role of executive chair so this is my last earnings call as chief executive officer of 5N Plus.

Speaker #1: It has been a privilege and an honor to serve as CEO, and I would like to thank our shareholders and the broader investment community for their continued support.

Speaker #1: I look forward to contributing in my new capacity to the company's strategic direction and long-term development. And I have great confidence in Richard as he steps into the CEO role.

Speaker #1: Richard has been instrumental in our success, and he is well-positioned to continue executing on our strategy and take 5N Plus to the next level.

Speaker #1: And now, turning to the quarter Q1 2026 reflects a powerful start to the year. With strong momentum across our core and markets, above expectations.

Gervais Jacques: Q1 2026 reflects a powerful start to the year, with strong momentum across our core end markets above expectations. Performance was driven by sustained demand in Specialty Semiconductors as well as favorable pricing conditions in Performance Materials. In Specialty Semiconductors, demand remains strong across our strategic sectors, with backlog continuing to provide excellent visibility, supported by ongoing strength in terrestrial renewable energy and space solar power. Bookings are now extending even beyond 2028. Segment performance in the quarter was driven by demand in terrestrial renewable energy, in large part reflecting our expanded agreement with our strategic US-based customer in this sector. As you will recall, under this agreement, volumes increased by 33% for the year of 2026 and will increase by a further 25% for the subsequent term through 2028.

Speaker #1: Performance was driven by sustained demand and specialty semiconductors, as well as favorable pricing conditions and performance materials. In specialty semiconductors, demand remained strong across our strategic sectors, with backlog continuing to provide excellent visibility.

Speaker #1: Supported by ongoing strength in terrestrial renewable energy and space solar power, bookings are now extending even beyond 2028. Segment performance in the quarter was driven by demand in terrestrial renewable energy and large part reflecting strategic US-based customer in this sector.

Speaker #1: As you will recall, under this agreement, volumes increased by 33% for the year of 2526. And we'll increase by a further 25% for the subsequent term to 2028.

Speaker #1: In performance materials, the favorable pricing conditions we benefited from in 2025 persisted longer than anticipated, and contributed positively to results. Once again, reflecting the agility of our global sourcing platform.

Gervais Jacques: In Performance Materials, the favorable pricing conditions we benefited from in 2025 persisted longer than anticipated and contributed positively to results, once again, reflecting the agility of our global sourcing platform. Across the business, we remain focused on disciplined execution, productivity initiatives, and capacity expansion plans. At our AZUR facility in Heilbronn, Germany, we initiated work on our latest and previously announced capacity expansion project. This follows the 30% increase in solar cell production capacity achieved in 2025. We have begun our work and are now progressing toward an additional 25% increase, which is expected to come online by H2 2026 in line with customer demand. As a reminder, this capacity expansion requires targeted investment because much of the equipment is already in place. Overall, our Q1 performance reflects disciplined strategic execution.

Speaker #1: Across the business, we remain focused on disciplined execution, productivity initiatives, and capacity expansion plans. At our Azure facility in Heilbronn, Germany, we initiated work on our latest and previously announced capacity expansion project.

Speaker #1: This follows the 30% increase in solar cell production capacity achieved in 2025. We have begun our work and are now progressing toward an additional 25% increase which is expected to come online by the second half of 2026.

Speaker #1: In line with customer demand. As a reminder, this capacity expansion requires targeted investment because much of the equipment is already in place. Overall, our first quarter performance reflects disciplined strategic execution.

Speaker #1: We remain focused on the right value-added products and the right end markets supported by agile operations and sourcing as well as strong customer relationships.

Gervais Jacques: We remain focused on the right value-added products in the right end markets, supported by agile operations and sourcing as well as strong customer relationships. At the same time, we are fully engaged to mitigate the best we can the pressure resulting from the uncertain economic environment. Before turning the call over, I would also like to mention that our new Chief Financial Officer, Alban Fournier, joined the company just a few days ago. We are very pleased to welcome him to the leadership team, and we look forward to introducing him to the investment community ahead of our next call. With that, I will now turn it over to Richard.

Speaker #1: At the same time, we are fully engaged to mitigate the best we can the pressure resulting from the uncertain economic environment. Before turning the call over, I would also like to mention that our new chief financial officer, Alban Fournier, joined the company just a few days ago.

Speaker #1: We are very pleased to welcome him to the leadership team and we look forward to introducing him to the investment community ahead of our next call.

Speaker #1: With that, I will now turn it over to Richard. Thank you, Javert, and good morning, everyone. Before turning to the financials, I, too, would like to acknowledge Javert for his leadership and contributions to 5N Plus.

Richard Perron: Thank you, Gervais, and good morning, everyone. Before turning to the financials, I too would like to acknowledge Gervais for his leadership and contributions to 5N Plus. Gervais and I established a strong working relationship over the years, and we will continue to cooperate closely in his capacity as executive chair. I look forward to building on a strategy we developed and deployed with success as a team. I also look forward to working closely with our new CFO, Alban, who is quite quickly setting up to speed on all aspects of the business and the rest of our leadership team. As we move into our next phase of growth, our focus remains on disciplined execution, scaling our position in high growth end markets, thanks to our value-added expertise, and driving operational efficiency. All of this is being pursued with a view to delivering long-term sustainable value to our stakeholders.

Speaker #1: Javert and I establish a strong working relationship over the years, and we will continue to cooperate closely in his capacity as executive chair. I look forward to building on a strategy we developed and deployed with success as a team.

Speaker #1: I also look forward to working closely with our new CFO, Alban, who is quite quickly getting up to speed on all aspects of the business, and the rest of our leadership team.

Speaker #1: As we move into our next phase of growth, our focus remains on disciplined execution, scaling our position in high growth and markets, thanks to our value-added expertise and driving operational efficiency.

Speaker #1: All of this is being pursued with a view to delivering long-term sustainable value to our stakeholders. Turning now to our financial performance for the first quarter, revenue for Q1 2026 was $117.9 million, an increase of 33% compared to $88.9 million in Q1 of last year.

Richard Perron: Turning now to our financial performance for Q1. Revenue for Q1 2026 was CAD 117.9 million, an increase of 33% compared to CAD 88.9 million in Q1 of last year, primarily driven by higher volumes in Specialty Semiconductors and stronger pricing in Performance Materials, all of which reflects a favorable product mix. Adjusted gross margin increased by 36% to CAD 41.4 million, representing 35.1% of sales, compared to 34.2% in the prior year, reflecting a favorable product mix and pricing above input costs. Adjusted EBITDA reached CAD 29.2 million, up 41% year-over-year compared to Q1 last year. Net earnings were CAD 17.8 million, or CAD 0.20 per share, compared to CAD 9.6 million or CAD 0.11 per share in Q1 last year.

Speaker #1: Primarily driven by higher volumes and specialty semiconductors, and stronger pricing and performance materials. All of which reflects a favorable product mix. Adjusted gross margin increased by 36% to $41.4 million, representing 35.1% of sales compared to 34.2% in the prior year.

Speaker #1: Reflecting a favorable product mix and pricing above input costs. Adjusted EBITDA reached $29.2 million, up 41% year over year compared to Q1 last year.

Speaker #1: Net earnings were $17.8 million, or 20 cents per share, compared to $9.6 million, or 11 cents per share in Q1 last year. And specialty semiconductors revenue increased to $86.2 million up 37% year over year, primarily driven by higher volumes in terrestrial renewable energy.

Richard Perron: In Specialty Semiconductors, revenue increased to CAD 86.2 million, up 37% year over year, primarily driven by our volumes in terrestrial renewable energy. Adjusted EBITDA increased by 42% to CAD 25.1 million, reflecting higher demand in terrestrial renewable energy and improved unit costs from economies of scale. Adjusted gross margin remaining strong at CAD 34.4 million of sales compared to 35% in Q1 last year. The decrease reflects less favorable metal input costs, partially mitigated by economies of scale. Backlog remains effectively maxed out at 365 days, providing continued visibility into future demand. In Performance Materials, revenue increased to CAD 31.7 million, up 21% year over year. Adjusted EBITDA increased by 67% to CAD 10.1 million, supported by favorable pricing and product mix.

Speaker #1: Adjusted EBITDA increased by 42% to $25.1 million, reflecting higher demand in terrestrial renewable energy and improved unit costs from economies of scale. Adjusted gross margin remaining strong at 34.4 million of sales compared to 35% in Q1 last year.

Speaker #1: The decrease reflects less favorable middle input costs, partially mitigated by economies of scale. Backlog remains effectively maxed out at 365 days, providing continued visibility into future demand.

Speaker #1: In performance materials, revenue increased to $31.7 million, up 21% year over year. Adjusted EBITDA increased by 67% to $10.1 million, supported by favorable pricing and product mix.

Speaker #1: Adjusted gross margin expanded to an impressive 37.8% of sales compared to 32.9% of sales in Q1 last year. The improvement also reflects favorable pricing and product mix, partly offset by less favorable middle input costs.

Richard Perron: Adjusted gross margin expanded to an impressive 37.8% of sales compared to 32.9% of sales in Q1 last year. The improvement also reflects favorable pricing and product mix, partly offset by less favorable metal input costs. Backlog represented 130 days of annualized revenue, reflecting contract timing and renewals. Cash used in operating activities was CAD 13.5 million in Q1 compared to cash generated in the prior year, primarily reflecting our working capital requirements to support increased volumes and sustained demand. Net debt stood at CAD 74.7 million at 31 March 2026, compared to CAD 50.3 million at the end of 2025, reflecting the working capital investment in the quarter. Despite this increase, our net debt to EBITDA ratio remains low at 0.71x, highlighting the strength of our financial position.

Speaker #1: Backlog represented $130 days of analyzed revenue, reflecting contract timing and renewals. Cash used in operating activities was $13.5 million in Q1 compared to cash generated in the prior year, primarily reflecting higher working capital requirements to support increased volumes and sustained demand.

Speaker #1: Net debt stood at $74.7 million at March 31st, June 2026, compared to $50.3 million at the end of '25, reflecting the working capital investment in the quarter.

Speaker #1: Despite this increase, our net debt to EBITDA ratio remains low at 0.71 times, highlighting the strength of our financial position. Turning to the outlook, in specialty semiconductors, structural growth across our core end markets continues to support demand, particularly in terrestrial renewable energy and space solar power.

Richard Perron: Turning to the outlook, in specialty semiconductors, structural growth across our core end markets continues to support demand, particularly in terrestrial renewable energy and space solar power. Long-term customer agreements and FT backlog also provide strong visibility. In performance materials, favorable pricing conditions extended into Q1, longer than we had anticipated. That said, we continue to expect a gradual normalization over the remainder of the year. More broadly, we continue to operate in a dynamic environment with anticipated cost volatility and inflationary pressures due to the current geopolitical context. While we delivered strong performance in Q1, we continue to expect higher input and operating costs to exert some pressure on margins over the course of the year.

Speaker #1: Long-term customer agreements and FT backlog also provide strong visibility. In performance materials, favorable pricing condition extended into the first quarter, longer than we had anticipated.

Speaker #1: That said, we continue to expect a gradual normalization over the remainder of the year. More broadly, we continue to operate in a dynamic environment with anticipated cost volatility and inflationary pressures due to the current geopolitical context.

Speaker #1: While we delivered strong performance in the first quarter, we continue to expect higher input and operating costs to exert some pressure on margins over the course of the year.

Speaker #1: In this context, we remain focused on the elements within our control: disciplined execution, including on productivity initiatives, and capacity expansion plans to support long-term growth and drive economies of scale.

Richard Perron: In this context, we remain focused on the elements within our control, disciplined execution, including on productivity initiatives and capacity expansion plans to support long-term growth and drive economies of scale. Taking these factors into account, along with our strong Q1 performance, we're maintaining our full-year adjusted EBITDA guidance of CAD 100 million to CAD 105 million. We expect a more balanced contribution across the year compared to our prior expectations. We also continue to actively evaluate external growth opportunities to further strengthen our leadership in advanced materials across our key markets. Overall, we are confident in the underlying growth fundamentals of our end markets, our competitive positioning within those markets, and our ability to execute on our strategy to deliver sustained, profitable growth. That concludes our formal remarks. I will now turn the call back over to the operator for the Q&A with our financial analysts.

Speaker #1: Taking these factors into account, along with our strong first quarter performance, we're maintaining our full-year adjusted EBITDA guidance of $100 million to $105 million, we expect the more balanced contribution across the year compared to our prior expectations.

Speaker #1: We also continue to actively evaluate external growth opportunities to further strengthen our leadership and advance materials across our key markets. Overall, we are confident in the underlying growth fundamentals of our end markets, our competitive positioning within those markets, and our ability to execute on our strategy to deliver sustained, profitable growth.

Speaker #1: So that concludes our formal remarks. I will now turn the call back over to the operator. For the Q&A, with our financial analyst. Thank you.

Operator: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press star followed by the one on your touch tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. Your first question comes from Baltej Sidhu with National Bank of Canada. Your line is now open.

Speaker #1: Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press star, followed by the one on your touch-tone phone.

Speaker #1: You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star, followed by the two.

Speaker #1: If you are using a speakerphone, please lift the handset before pressing any keys. Your first question comes from Baltaz Sidou with National Bank of Canada.

Speaker #1: Your line is now open.

Speaker #2: Hi. Good morning. And congratulations once again to Ray and Richard on the transition. Just a few questions from me. So on the adjusted EBITDA margins in the SS segment, they reached a record high, partly driven by economies of scale.

Baltej Sidhu: Hi, good morning, and congratulations once again, Gervais Jacques and Richard, on the transition.

Richard Perron: Thanks.

Baltej Sidhu: Just a few questions from me. On the adjusted EBITDA margins in the SS segment, they reached a record high, partly driven by economies of scale. Thinking, looking forward, how sustainable are these margin levels going forward, just given the strong underlying demand? Is that a fair run rate assumption to consider going forward?

Speaker #2: Just thinking, looking forward, how sustainable are these margin levels going forward, just given the strong underlying demand? And is that a fair run-rate assumption to consider going forward?

Richard Perron: On a consolidated basis, yes. If we have any variations from a gross margin expressed as a percentage of sales, it's gonna be quite limited. It's gonna be quite reasonable. Nothing drastic. The current margins we have is what we are expecting for the remainder of the year, for the most part of the year now. If anything, if there's any variation from 1 quarter to another, it will be most likely due to the product mix rather than the fundamentals of our business.

Speaker #3: On a calculated basis, yes. If we have any variations from a gross margin expressed as a percentage of sales, it's going to be quite limited.

Speaker #3: It's going to be quite reasonable. Nothing drastic. The current margins we have is what we were expecting, just a reminder of the year for the most part of the year now.

Speaker #3: If anything, if there's any variation from one quarter to another, it will be most likely due to the product mix rather than the fundamentals of our business.

Speaker #2: That's great. And then could you share an update on your pipeline in the space segment? And are there any changes in the competitive landscape that you're seeing right now, whether that's capacity?

Baltej Sidhu: That's great. Could you share an update on your pipeline in the space segment? Are there any changes in the competitive landscape that you're seeing right now, whether that's capacity? It seems like pricing has continued to stay above inflation. There's any commentary that you have around AZUR SPACE?

Speaker #2: And it seems like pricing has continued to stay above inflation. Does any commentary that you have around Azure Space?

Richard Perron: The market is essentially. There's essentially no newcomers, and we have two competitors essentially, and all three of us are all very busy. Like we often say in the, let's say, the history of the satellite industry, for the actual products that we're supplying to that industry, the space solar cells, we expect pricing to continue to be very, extremely interesting, and capacity to be maxed out. That's why we continue to. Again, earlier this year, we announced a further expansion of our production capacity and going forward, we expect similar announcements will come as well.

Speaker #3: The market is essentially there's essentially no newcomers. And we have two competitors, essentially. And all three of us are all very busy. And like we often say in the, let's say, the history of the satellite industry, for the actual products that we're supplying to that industry, the space solar cells, we expect pricing to continue to be very extremely interesting.

Speaker #3: And capacity to be maxed out. That's why we continue to, again, earlier this year, we announced a further expansion of our production capacity. And going forward, we expect similar announcements will come as well.

Speaker #2: Perfect. And just one more here, just more on the terrestrial solar side. So in your CSR report last month, you highlighted a promise guide precursors.

Baltej Sidhu: Perfect. Just one more here, just more on the terrestrial solar side. In your CSR report last month, you highlighted perovskite precursors. Could you comment on the broader opportunity that you're seeing here and the path forward towards commerciality?

Speaker #2: Could you comment on the broader opportunity that you're seeing here and the path forward towards commerciality?

Richard Perron: Sorry, I missed the beginning of your question.

Speaker #3: Sorry, I missed the beginning of your question.

Speaker #2: In the CSR report, you highlighted promise guide precursors for terrestrial solar. Just if you can comment on the broader opportunity and path towards commerciality.

Baltej Sidhu: In the CSR report, you highlighted perovskite precursors for terrestrial solar. Just if you can comment on the broader opportunity and path towards commerciality.

Speaker #3: Well, as you know, we've been working in our customers in the entire industry is working to develop perovskite. Perovskite, it's quite promising. But this is something that still requires the development in order to make sure that the efficiency could last a long period of time.

Gervais Jacques: Well, as you know, you know, we've been working and our customers and the entire industry is working to develop perovskite. Perovskite is quite promising, but this is something that still requires the development in order to make sure that the efficiency could last with a long period of time. We know that perovskite could produce energy for a short period of time, few months, but could it last for 15 years? That remains to be seen. This is why the different companies are working on that.

Speaker #3: We know that perovskite could produce energy for a short period of time, a few months, but could it last for 15 years? That remains to be seen.

Speaker #3: Then this is why the different companies are working on that.

Speaker #2: So it's still under a prerogative drop in space. And then we'll follow qualification before full enter stratization in time. That's great. I'll turn the line.

Richard Perron: It's still under a product development phase, and then we'll follow qualification before a full industrialization time.

Baltej Sidhu: That's great. I'll turn the line. Thank you.

Speaker #2: Thank you.

Speaker #3: Thank you.

Richard Perron: Thank you.

Speaker #1: Your next question comes from Nick Boychuk with ATB Coremark. Your line is now open.

Operator: Your next question comes from Nicholas Boychuk with ATB Cormark. Your line is now open.

Speaker #4: Thanks, good morning, guys. Coming back to Baltaz's question on the consolidated gross margin, profile specifically for SS, and your comments in the MD&A about the ongoing year's efficiency program, I'm curious, how much of that is tied to either incremental capacity expansion within the existing four walls of terrestrial solar or zero space versus the optimization of margins?

Nicholas Boychuk: Thanks. Good morning, guys. Coming back to Baltej Sidhu's question on the consolidated gross margin profile specifically for SS, and your comments in the MD&A about the ongoing years efficiency program. I am curious how much of that is tied to either incremental capacity expansion within the existing four walls of terrestrial solar or AZUR SPACE versus the optimization of margins, and how much each could increase? Like, if we are seeing, you know, your US customer on the terrestrial solar side expanding in the US further, speaking about adding more capacity, would you be able to address that? Is that part of your ongoing program, or is everything right now focused on margin enhancement?

Speaker #4: And how much each could increase? If we are seeing your US customer on the terrestrial solar side expanding in the US further, speaking about adding more capacity, would you be able to address that?

Speaker #4: Is that part of your ongoing program, or is everything right now focused on margin enhancement?

Speaker #2: Okay. Well, specific to the space industry, the combination of capacity expansion, the high demand, independent of the positions of our competitors, from a margin perspective, we expect that it will continue to be good forward as the pressure on the actual on the volume that is required from a solar cell perspective continues to increase and is in its sourcing to be the case for many years to come.

Richard Perron: Okay. Well, specific to the space industry, the combination of capacity expansion, the high demand, independent of the positions of our competitors from a margin perspective, we expect that it will continue to be good forward, as the pressure on the actual volume that is required from a solar cell perspective continues to increase and it's foreseen to be the case for many years to come.

Speaker #2: So yeah.

Speaker #1: Your next question comes from Michael Glenn with Raymond James. Your line is now open.

Operator: Your next question comes from Michael Glen with Raymond James. Your line is now open.

Speaker #4: Hey, good morning. And yes, congrats Gervais on everything achieved during your tenure at 5N. And Richard, congratulations too, as you transitioned to your new role.

Michael Glen: Hey, good morning, and yes, congrats, Gervais, on everything achieved during your tenure at 5N. Richard, congratulations too as you transition to your new role.

Speaker #3: Thanks, Michael.

Gervais Jacques: Thanks, Michael.

Michael Glen: Just Richard, you're talking about the metal input costs. Like, can you give some insight into how those maybe trend in both segments through the rest of this year in both the Specialty Semiconductors and the Performance Materials?

Speaker #4: Just Richard, you're talking about the metal input costs. Can you give some insight into how those maybe trend in both segments through the rest of this year in both the specialty semiconductor and the performance materials?

Richard Perron: Okay. We typically don't speculate on where quotations will go forward, just in our last year, for all metals that we're using to make our products, there's been some substantial increase in quotations.

Speaker #2: Okay. We typically don't speculate on where notations will go forward. But just in the last year, for all metals that we're using to make our products, there's been some substantial increase in notations.

Michael Glen: Okay. Okay. Would you be able to comment at all regarding how there will be some pricing mechanisms with your customers in the various segments?

Speaker #2: Okay?

Speaker #4: Okay. And would you be able to comment at all regarding how there would be some pricing mechanisms with your customers in the various segments?

Speaker #2: Yeah. Well, in each segment, and sectors within the segments that we serve, there are all contracts at their own behavior. But typically, within a certain range, it's a fixed price.

Richard Perron: Well, in each segments, and sectors within the segments that we serve, they're all contracts have their own behavior. Typically, within a certain range, it's a fixed price, and after that comes a formula. In other contracts that are more long term, we have special clauses where adjustments are made in time based on the most recent quotations. In other parts of our business, it's particularly a formula that is apply, a premium that is apply on top of the quotations. It varies from one product to another. We're always exposed, much less exposed than ever in the history of the company. Look, we're making products out of metal, there's always a little exposure. Quite minimal today versus what we experienced many years ago.

Speaker #2: And after that comes a formula. In other contracts that are more long-term, we have special clauses where adjustments are made in time based on the most recent notation.

Speaker #2: In other parts of our business, it's typically a formula that is applied, a premium that is applied on top of the notation. So it varies from one product to another.

Speaker #2: We're always exposed, but much, much less exposed than ever in the history of the company. But look, we're making products out of metal. So there's always a little exposure.

Speaker #2: But quite minimal to day versus what we experience in many years ago. The key is obviously the quality of our product portfolio today essentially being made of value-added products.

Richard Perron: The key is obviously the quality of our product portfolio today, essentially being made of value-added products. There could be a lag. A lag could happen, but it will not, definitely not hurt our margins like in other industries, relying much less on the patience than in the past and other industries.

Speaker #2: But there could be a lag. So a lag could happen, but it will definitely not hurt our margins like in other industries. We're relying much less on the notations than in the past and in other industries.

Speaker #3: And the sales gains you saw, you highlight the scale gains. Now, does the scale gains that you expect from top-line and revenue through the rest of the year, do you see that as being enough to offset the notation?

Michael Glen: The sales gains you saw, you highlight the scale gains. Does the scale gains that you expect from top line and revenue through the rest of the year, do you see that as being enough to offset the notation inflation that's been seen?

Speaker #3: Inflation that's been seen?

Speaker #2: That's what is foreseen, yes.

Richard Perron: That's what is foreseen, yes.

Speaker #3: Okay, and then finally, just one clarification for me. So, maybe I missed the first four minutes of the conference call, but in the MD&A, you talk about Azure expanding by 30% of capacity.

Michael Glen: Okay. Just one clarification for me. Maybe I missed the first four minutes of the conference call, but in the MD&A, you talk about AZUR SPACE expanding by 30% of capacity. Is that a tick higher than the 25% that was indicated?

Speaker #3: Is that a tick higher than the 25% that was indicated?

Richard Perron: The 30% is the capacity increase realized last year, out of which we'll get the benefits this year. Earlier this year, we made another announcement at 25%, out of which we'll get the benefits next year, yeah, in 2027.

Speaker #2: Yeah. The 30% is the capacity increase realized last year out of which we'll get the benefits this year. And earlier this year, we made another announcement at 25% out of which we'll get the benefits next year.

Speaker #2: In 2027.

Michael Glen: Oh. Oh, okay. I see. Okay. Thank you for that. I'll leave it there.

Speaker #4: Oh, oh, okay. I see. Okay. Thank you for that. I'll leave it there.

Speaker #1: Your next question comes from Frédéric Tremblay with Desjardins. Your line is now open.

Operator: Your next question comes from Frédéric Tremblay with Desjardins. Your line is now open.

Speaker #5: Thanks. Good morning. I'm trying to start with performance materials and the pricing there. You mentioned that it's been more favorable or favorable for longer than initially expected.

Frédéric Tremblay: Thanks. Good morning. Wanted to start with Performance Materials and the pricing there. You mentioned that it's been more favorable or favorable for longer than initially expected. Can you just remind us what's behind your view that this favorable pricing will eventually reverse?

Frederic Tremblay: Thanks. Good morning. Wanted to start with Performance Materials and the pricing there. You mentioned that it's been more favorable or favorable for longer than initially expected. Can you just remind us what's behind your view that this favorable pricing will eventually reverse?

Speaker #5: Can you just remind us what's behind your view that this favorable pricing will eventually reverse?

Speaker #2: Well, it's essentially the continuation of last year where security of supply is the number one priority these days under current geopolitical the current geopolitical context.

Richard Perron: It's essentially the continuation of last year, where security of supply is the number one priority these days on the current geopolitical context. We're able to supply our clients with quality products on time without any interruptions due to our footprint relations and processes in place. That's what's behind this. Essentially a continuity of last year's theme, which is security of supply.

Speaker #2: And we're able to supply our clients with quality products on time without any interruptions due to our footprint relations. And processes in place. So that's what's behind.

Speaker #2: It's essentially a continuity of last year's theme, which is security of supply.

Speaker #5: Okay. And then just on for solar, the add good comments on US bookings and manufacturing utilization in the Q1 results recently. Can you share anything about the volume trends that you're seeing there relative to the contracted volumes that you have with them?

Frédéric Tremblay: Okay. Just on First Solar, you know, they had good comments on US bookings and manufacturing utilization their Q1 results recently. Can you share anything about, you know, the volume trends that you're seeing there relative to the contracted volumes that you have with them? I know in the past you talked about, you know, selling spot volumes to them. Maybe general thoughts on the volumes that you're seeing now and expecting for the next couple of years with them.

Frederic Tremblay: Okay. Just on First Solar, you know, they had good comments on US bookings and manufacturing utilization their Q1 results recently. Can you share anything about, you know, the volume trends that you're seeing there relative to the contracted volumes that you have with them? I know in the past you talked about, you know, selling spot volumes to them. Maybe general thoughts on the volumes that you're seeing now and expecting for the next couple of years with them.

Speaker #5: Are you I know in the past, you talked about selling spot volumes to them. Maybe general thoughts on the volumes that you're seeing now and expecting for the next couple of years with them?

Speaker #2: The volume is essentially as per the contract—no changes to that. If anything, every volume of material that we're producing needs to be expedited to First Solar in the US.

Richard Perron: The volume is essentially as per the contract, no changes to that. If anything, every volume of material that we're producing needs to be expedited to First Solar in the US. The contract is essentially a take or pay commitment, and they're in desperate need for the product. There's definitely no changes to the volume other than that every volume produced needs to be expedited to First Solar rapidly.

Speaker #2: So the contract is essentially a take or pay a commitment. And they're in desperate need for the product. So there's definitely no changes to the volume other than every volume produced needs to be expedited to first solar rapidly.

Speaker #5: Okay. I'll get back. Thank you. Thanks for taking the questions.

Frédéric Tremblay: Okay. I'll get back. Thank you. Thanks for taking the questions.

Frederic Tremblay: Okay. I'll get back. Thank you. Thanks for taking the questions.

Speaker #1: Your next question comes from Nick Voitchak with ATB Coremark. Your line is now open.

Operator: Your next question comes from Nicholas Boychuk with ATB Cormark. Your line is now open.

Speaker #4: Thanks. Sorry, guys. I was cut off from the question before. I just want to come back to that gross margin dynamic specifically on the specialty semiconductor.

Nicholas Boychuk: Thanks. Sorry, guys, I was cut off from the questioning before. I just wanna come back to that gross margin dynamic, specifically on the Specialty Semiconductor. I wanna understand the new run rate that we're talking about here, the 34% plus. Does that factor in all of the efficiency improvements and gains that you're seeing from the improved economies of scale and cost per ton? Could we actually see a further benefit into the year as things continue to progress?

Speaker #4: I want to understand the new run rate that we're talking about here, the 34% plus. Does that factor in all of the efficiency improvements and gains that you're seeing from the improved economies of scale and cost per ton?

Speaker #4: Or could we actually see a further benefit into the year as things continue to progress?

Richard Perron: The current margins that we are realizing is on the back of favorable market conditions and economies of scale. Going forward, we're applying ourselves to introduce various productivity initiatives and else that, on top of additional capacity and further economies of scale, is gonna bring additional benefits to the margins. That, to some extent, will obviously improve, but will mitigate any negative impacts if any other factors were to increase in time due to inflation and else.

Speaker #2: The current margins that we are realizing is on the back of favorable market conditions and economies of scale. Going forward, we're applying ourselves to introduce various productivity initiatives and else that on top of additional capacity and further economies of scale is going to bring additional benefits to the margins.

Speaker #2: That to some extent will obviously improve, but will mitigate any negative impact if any other factors were to increase. In time due to inflation and else.

Speaker #4: Okay, that makes sense. Thank you. And then, tying that into the unchanged guidance for the full year, what would have to happen over the next three quarters for either the guidance not to be met, or for things to be exceeded?

Nicholas Boychuk: Okay. That makes sense. Thank you. Tying that into the unchanged guidance for the full year, what would have to happen over the next 3 quarters for either guidance not to be met or for things to be exceeded? On this new margin profile, assuming the top line persists and given the visibility you have there, it feels as if we're set up for a materially larger year. I'm curious if you can help me understand that.

Speaker #4: Because on this new margin profile, assuming the top line persists and given the visibility you have there, it feels as if we're set up for a materially larger year.

Speaker #4: I'm curious if you can help me understand that.

Speaker #2: Okay. Well, like we often bring I mean, in our business and any other businesses, you have typically three main risks. Commercially, as you know, a large portion of our business is under contract.

Richard Perron: Okay. Well, like we often, I mean in our, in our business and many other businesses, you have the typically three main risks commercially. As you know, a large portion of our business is under contract. We have a pretty good idea of where it's gonna land at year-end and the type of mix we're gonna have, both products and clients. What we don't know is the exact distribution per quarter. Technology-wise this year, we're gonna be essentially doing more of the same, that's also well under control. What we're left with is the operational risk, okay?

Speaker #2: So we have a pretty good idea of where it's going to land at year-end and the type of mix we're going to have, both products and clients.

Speaker #2: What we don't know is the exact distribution per quarter. Technology-wise, this year, we're going to be essentially doing more of the same. So that's also well under control.

Speaker #2: So what we're left with is the operational risk, okay? Which out of which to which we also include inflation and else. So look, if we have a stellar year in terms of energy consumables, reliable equipment and else, yes, the likelihood to be the guidance is very good.

Richard Perron: We also include inflation and else. Look, if we have a stellar year in terms of energy consumables, reliable equipment and else, yes, the likelihood to beat the guidance is very good. Otherwise, we still believe no matter which what kind of headwinds we're gonna have from those factors, we still believe the guidance we have on hand is a valid guidance.

Speaker #2: Otherwise, we still believe no matter which what kind of headwinds we're going to have from those factors, we're still believe the guidance we have on hand is a valid guidance.

Speaker #4: Okay. That's all right. Is there material energy exposure risk to some of your European assets?

Nicholas Boychuk: Okay. That's fair. Is there material energy exposure risk to some of your European assets?

Speaker #2: Yeah, mostly. Mostly. But I mean, obviously, we have different measures in place, also, to limit our risk. But look, we cannot control everything, as you can imagine, in today's complex environment.

Richard Perron: Yeah, mostly.

Nicholas Boychuk: Okay.

Richard Perron: That, I mean, obviously, we have different measures in place also to limit our risk, but we cannot control everything, as you can imagine, in today's complex environment.

Speaker #4: Okay. Understood. Congrats on the new roles, guys. All the best.

Nicholas Boychuk: Okay. Understood. Congrats on the new roles, guys. All the best.

Speaker #2: Good.

Richard Perron: Good.

Speaker #1: Your next question comes from Eurolink with Canaccord. Your line is now open.

Operator: Your next question comes from Yuri Lynk with Canaccord. Your line is now open.

Speaker #6: Hey, good morning, guys.

Yuri Lynk: Hey, good morning, guys.

Speaker #2: Good morning.

Richard Perron: Morning.

Speaker #6: Yeah. I want to come back to the guidance question in maybe I'll attack it a different way. I mean, really strong start to the year.

Yuri Lynk: Yeah, I wanna come back to the, to the guidance question, and maybe I'll attack it a different way. I mean, really strong start to the year. you're pointing to, you know, sustainable with some upside margins in Specialty Semiconductors. To, you know, to stay within the full year guidance, I mean, you're essentially downgrading the H2 view versus what you might have had previously. Is that all within Performance Materials, or am I misreading the, the implied guidance there? Just some detail on how your H2 of 2026 outlook might have changed since we last spoke.

Speaker #6: You're pointing to upside margins in specialty semiconductors. But to stay within the full-year guidance, I mean, you're essentially downgrading the back half view versus what you might have had previously.

Speaker #6: So is that all within performance materials, or am I misreading the implied guidance there? Just some detail on how your back half of 2026 outlook might have changed since we last spoke.

Richard Perron: When, before starting the year, what we anticipated was a stronger H2. Now, we expect the whole, the H1 and the H2 to be more and more aligned with similar level. Okay. So that's what we're seeing. Reason behind it is we expect some normalization of the margins under Performance Materials.

Speaker #2: When before starting the year, what we anticipated was a stronger second half. Now we expect the first six months and the last six months to be more and more aligned with similar level, okay?

Speaker #2: So that's what we're seeing. And reason behind it is we expect some normalization of the margins on their performance materials.

Speaker #6: But that was the expectation previously, right? We would say.

Yuri Lynk: that was the expectation previously, right? That we would see.

Speaker #2: Yeah. We expected that right from Q1. And as we've said, Q1 is a nice surprise from that standpoint.

Richard Perron: We expected that right from Q1. As we've said, Q1 is a nice surprise from that standpoint.

Speaker #6: Okay. So no real change to your specialty semiconductor outlook.

Yuri Lynk: Okay. no real change to your semi, Specialty Semiconductors outlook for the year?

Richard Perron: This is now Specialty Semi out of our two segments because we have long-term contracts, have a pretty good idea of the mix and the releases. No, it was originally, again, it was all essentially based on our expectations that Performance Materials will normalize earlier in the year. We had an incredible Q1, but we continue to be prudent and believe that it will be normalized over the coming quarters.

Speaker #2: Now, specialty semi out of our two segments because we have long-term contracts have a pretty good idea of the mix. And the releases, no, it was originally, again, it was all essentially based on our expectations that performance materials will normalize earlier in the year.

Speaker #2: And we had an incredible Q1. But we continue to be prudent and believe that it will be normalized over the coming quarters.

Speaker #6: Okay. And.

Yuri Lynk: Okay.

Speaker #2: But still, it will still be an incredible superb business, obviously. Everything is relative here.

Richard Perron: Definitely, it will still be an incredible, superb business, obviously. Everything is relative here.

Speaker #6: Yes, of course. I mean, we're more than a month into Q2. I mean, have you started to see that normalization, or has those positive trends continued into Q2?

Yuri Lynk: Yes, of course. I mean, we're more than a month into Q2. I mean, have you started to see that normalization or has those positive trends continued into Q2?

Richard Perron: It's still positive.

Speaker #2: It's still positive.

Yuri Lynk: Okay.

Speaker #6: Okay. So you'd say the outlook is fairly conservative for the year, the guidance? That's what it sounds like.

Richard Perron: Yeah.

Yuri Lynk: You'd say the outlook is fairly conservative for the year, the guidance? That's what it sounds like.

Speaker #2: Yeah. No, exactly. As I've said from an operational perspective, we remain prudent as to any inflation operational challenges in the current complex environment and else.

Richard Perron: Yeah. Yeah. No, exactly. As I've said, from an operational perspective, we remain prudent as to any inflation, operational challenges in the current complex environment and else, so we remain prudent. It's only 1 quarter out of 4. Years go by quickly, but at the same time, it's a little marathon that we have to go through.

Speaker #2: So we remain prudent. It's only one quarter, okay, out of four. So years go by quickly, but at the same time, it's a little marathon that we have to go through.

Speaker #6: Yeah. I get it. Okay. That's all I had. Thanks.

Yuri Lynk: Yeah, I get it. Okay. That's all I had. Thanks.

Speaker #2: Yeah. Thanks.

Richard Perron: Yeah, thanks.

Operator: Ladies and gentlemen, as a reminder, should you have a question, please press star one. Your next question comes from Michael Glen with Raymond James. Your line is now open.

Speaker #1: Ladies and gentlemen, as a reminder, should you have a question, please press star one. Your next question comes from Michael Glenn with Raymond James.

Speaker #1: Your line is now open.

Speaker #7: Hey, just a follow-up on the working capital. You had the AR and the inventory build and the quarter maybe how should we think about those trending?

Michael Glen: Hey, just a follow-up on the working capital. You had the AR and the inventory build in the Q1. Maybe, how should we think about those trending over the next few quarters?

Speaker #7: In the over the next few quarters?

Richard Perron: As, as is, as it is often the case, in H1 of the year, we typically carry a bit more net working cap than usual. That being said, year-over-year, because of the growth, the important growth under both, especially under renewable energy and space power, there'll be an increase in the net working cap by year-end. Again, in H1, a bit more pronounced than in H2. On a full year basis, you'll have a little increase in net working cap aligned with the business.

Speaker #2: That is often the case. In the first half of the year, we typically carry a bit more networking cap than usual. But that being said, year over year, because of the growth, the important growth under both, especially under renewable energy and space power, there'll be an increase in the networking cap by year-end.

Speaker #2: But again, in the first half, a bit more pronounced than in the second half. But on a full-year basis, you'll have a little increase of networking cap aligned with the growth.

Speaker #7: Okay. And any notable updates you guys can share with progress on M&A targets?

Michael Glen: Okay. Any notable updates that you guys can share with progress on M&A targets?

Speaker #2: Nothing specific other than as we often see, we're highly motivated to complete a transaction. We're looking at many different files. With an internal team dedicated to it and the help of external resources.

Richard Perron: Nothing specific other than, as we often say, we're highly motivated to complete a transaction. We're looking at many different files with an internal team dedicated to it and the help of external resources. We're spending a fair bit of time looking at various files, so we're very serious about it.

Speaker #2: So we're spending a fair bit of time looking at various files. So we're very serious about it.

Speaker #7: Okay. Thank you.

Michael Glen: Okay. Thank you.

Operator: There are no further questions at this time. I will now turn the call over to Richard for closing remarks.

Speaker #1: Yeah. No further questions at this time. I will now turn the call over to Richard for closing remarks.

Speaker #2: Okay. Well, we'd like to thank you all for joining us this morning. And we wish you all a good day. Thank you.

Richard Perron: Okay. Well, we'd like to thank you all for joining us this morning, and we wish you all a good day. Thank you.

Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, please disconnect your lines.

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Q1 2026 5N Plus Inc Earnings Call

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Q1 2026 5N Plus Inc Earnings Call

Thursday, May 7th, 2026 at 12:00 PM

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