CEMATRIX Corporation (TSXV: CVX), a leader in the production of cellular concrete for infrastructure, has reported a record-breaking financial performance for the fourth quarter and full year of 2023. The company's Q4 sales more than doubled market expectations, and they secured $80 million in new contracts.
Over the entire year, CEMATRIX achieved record sales, operating income, adjusted EBITDA, and cash flow, along with $57.1 million in new contracts. Their financial success is attributed to their preparedness for growth, the early-stage market, strong product performance, and an expanding sales pipeline. With an improved financial position, reduced debt, and simplified capital structure, CEMATRIX is poised for future growth.
Key Takeaways
- CEMATRIX's Q4 sales exceeded projections, with a 136% increase from the previous quarter, and annual sales up 84%.
- The company reported $19.6 million in Q4 revenue and $53.3 million for the full year.
- Gross margins improved significantly, with $5.4 million reported for the quarter.
- Positive cash flow from operations was noted for both the quarter and the full year, ending with $3.3 million in cash.
- CEMATRIX expects a strong backlog with continued growth and does not plan to issue specific guidance for 2024 but anticipates revenue and EPS growth.
- The company is considering an up-listing to a major stock exchange and expects lower interest costs in 2024.
- A conservative debt-to-equity mix will be maintained, with plans to pay off approximately $1.9 million in debt over the next few years.
Company Outlook
- CEMATRIX projects the sales backlog to remain robust due to favorable economic conditions and government support.
- Efforts are being made to reduce the impact of seasonality and to expand into the southern US market.
- No specific revenue guidance for 2024 was provided, but continued growth in revenue and earnings per share is expected.
Bearish Highlights
- The company's market development in Canada has been slower due to lack of competition compared to the US.
- Beacon, the current analyst, has taken a more conservative stance due to capital market conditions.
Bullish Highlights
- The company has completed 16 projects over $1 million in the previous year and expects a similar number this year.
- CEMATRIX's product is gaining acceptance, with more ministries of transportation specifying its use.
- The company's backlog is approximately two to two and a half years, indicating sustained demand.
Misses
- CEMATRIX did not provide exact earnings guidance or cents per share predictions for future quarters.
Q&A Highlights
- Jeff Kendrick discussed the positive impact of competition on market growth in the US and the potential for acquisitions once the company's debt is fully paid.
- The company believes it is undervalued and did not comment on specific target prices.
- CEMATRIX expects continued growth and profitability, with plans to maintain a conservative debt-to-equity mix.
In summary, CEMATRIX has delivered a strong financial year, marked by significant growth in sales and gross margins. The company is strategically positioned to capitalize on market opportunities and is actively working to expand its market presence. With a focus on execution and financial prudence, CEMATRIX is optimistic about its future prospects and its ability to deliver value to its shareholders. The recording of the earnings call will be available the following day, providing stakeholders with further insights into the company's performance and outlook.
Full transcript - None (CTXXF) Q4 2023:
Jeff Walker: All right, we'll get started. Well, welcome, everybody, and thank you for joining us on the spectacular Year-End Results Webinar for CEMATRIX in 2023 with record Q4 and a record year. We've got CEO, Jeff Kendrick, on the call; COO, Randy Boomhour, and new CFO, MJ Cantin, who will be answering financial questions towards the end of the webinar. Please note that if you want to answer or ask any questions, just type them in and we'll get to those at the end of the presentation. So with that, congratulations, all of you on a spectacular 2023, it's been a climb and things just getting better from here. So very happy to share this with everybody. And I'll sign off screen here.
Jeff Kendrick: Thank you, Jeff. I'll just slide down into the next slides here. Just want to say good morning and good afternoon to everyone here that is joining us today to talk about our 2023 year, our breakout year, the regular year that we had, and of course that we continue to expect the same sort of results for the future. So welcome this morning. I just want to go over what I'll talk about today. For those of you who are new to the story, we'll tell you about a little bit about what we do. I want to talk about fourth quarter and how we viewed expectations, the 2023 results for the year-to-date, and how we beat expectations, why this was a breakout year, why we expect this trend to continue and part of it is having the capacity to grow, and that we continue to strengthen our team and we have the backlog and sales pipeline in place in order to accomplish that. At the end, once I'm done, I will pass it over to MJ who will go over the financial results for the fourth quarter. So I won't talk about the details during the presentation. Once that's over, I'll pass it back to Jeff and he will manage and control the question-and-answer session. Again, welcome and thank you for joining us today. So let's talk about what CEMATRIX does first. And essentially, we produce cellular concrete onsite for numerous infrastructure construction applications. Cellular concrete is like a ready-mix where you take all the sand and gravel out of it, replace it with a carefully constituted air bubble system. By doing that, you create a lightweight material that's insulating and has some structural properties. It also has tremendous benefits over the legacy products that we replaced, not the least of which includes lowering costs. Usually, when you have something that's better than the alternative, it always costs more. But in our case, the in-place cost is generally less than all of the alternatives. Not only is it less cost, but you also get significant time savings in construction, sometimes over 100 times. And it's also generally more environmentally friendly than most of the products that we replace. It's important to note that cellular concrete does not replace regular concrete. The cement companies actually love us, because every time we borrow a cubic meter of cellular concrete or cubic yard in the U.S., it's a new market for their cement. So what does cellular concrete replace? We replace weaken unstable soils like peat moss or glacial soils and things like that. We replace EPS blocks, which are large Styrofoam blocks, usually a meter by a meter, we replace other rigid installations, four by eight sheets are inserted into rigid installations as they're used in infrastructure applications. We replaced lightweight aggregates and heavy grouts as well at times. What are our main applications? Essentially tunnel grouting, backfilling of MSC panels, overpasses and bridge abutments as an underlay under roads that cross weaken unstable soils or frost prone or seismic prone soils. We replace heavy grouts and a filling of abandonment and annular and in tunnel grouting and we also do numerous other annular fills and backfill applications throughout North America. Fourth quarter, the market expectations, I think, the generally lays out we're going to do around $9.5 million in sales and we had a great quarter, did double that over double that. Fourth quarter is generally our second best quarter, but it's always the shortest because we have though, winter season coming on and of course the Christmas season as well. Fortunately, this fall the weather was great in a lot of the regions and great weather combined with numerous projects that were scheduled resulted in another record quarter for CEMATRIX. And even with that we also executed another $80 million in new contracts. 2023, again record at the end of third quarter, add another record quarter and you get a record all year long. This meant record sales, operating income, adjusted EBITDA, return of margins, profits and cash flow, and on top of that, we announced another $57.1 million in new contracts. And that's important because a lot of those are actually going to be completed in the current year. So why was it a breakout year? We call it when preparation that opportunity. And that CEMATRIX was completely prepared for this inevitable growth. We knew it was coming. COVID and supply chain issues of 2022 just basically delayed it. So we collectively have spent years not only developing the markets throughout U.S. and Canada, but preparing ourselves for this inevitable growth. Even during COVID and the cement crisis, we continue to build the market and build our capability. We also retained our staff during COVID and built additional production capacity. And most other companies basically laid people off, we retained all the skill. Essentially, how we summit is we really - we don't talk about what we were going to do or might do, like a lot of other microcap companies, we just get it done, basically. Why this growth trend is expected to continue? Essentially, the overall market is still early stage, particularly in Canada and a lot of states in the U.S. or many of the applications are really in their very early stages of growth. Also, the product continues to perform as specified in all of the projects that have been placed. And this is building columns in the product within the design teams and engineering teams that are out there. And, of course, the ministries and departments of transportation across Canada and the U.S. that are specifying in this product for their projects or specifying this product for their projects. As a result, the overall market and overall this business itself continues to grow. We continue to win work as well based on our reputation as an experienced specialty contractor that delivers on time, on budget and on quality. And we also are able to offer our customers something that our competitors cannot and there's a lot of different things there. So I won't talk about that in detail. It's important to note that you can't grow without the capacity to grow. And I've mentioned in previous webcasts that we had over USD 175 million and seasonally adjusted production capacity that was now up over USD 200 million with the addition of two new dry mix units over the past 1.5 year. And that is basically one shift, six days a week, part of the year. So we take into account all of the seasonality of our business. And it's important to note that we have 11 dry mix processors, and eight wet mix processors, some of which can produce 250 cubic metres to 300 cubic metres an hour. We also have a strong cross-trained operating staff that enabled significant growth in 2023. We basically almost doubled our sales with hourly adding another operations, I think we added a couple of part time laborers for the year. We also take advantage of trained contractor supplied labor whenever we can. So our general contractors will provide us with skilled labor. And that of course helps us keep our fixed costs down because essentially, our labor is fixed cost to the company. And finally, even though we don't need to grow a lot from a people perspective, we continue to strengthen our team. We have particularly in the sales side added new sales and sales support staff over the past year, and we'll continue that this year. That is to meet the continued growing demand. I had mentioned earlier and other webcasts that our sales teams can't even keep up right now with the number of projects that are coming up to bid on a regular basis. And we're continually trying to develop the market even further on the side as well. Because of this growth, we promoted our CFO Mr. Boomhour with tremendous entrepreneurial spirits to CFO -- COO effective January 1 of this year, and that's been a great change for the company. Of course, Randy will be even managing the operational side of the business for the foreseeable future. And because of this and Randy's promotion, we've added a new CFO, Ms. Cantin MJ, and she brings a tremendous amount of senior accounting and finance experience where she gained from working for one of the largest infrastructure construction companies in Canada and she joined us on February 5 2024, so again, another great addition to CEMATRIX team. And of course, we have them, will continue to add additional seasonal operation staff as required to meet the sales demand. And finally, you can't grow sales without sales backlog and a sales pipeline and bad place to draw on that backlog. It's amazing that we put $53 million in the ground this year, and we still have a backlog that's over $100 million. And this continues to grow and build or rebuild each day and each month, as our sales team continues to sell some more projects on a daily basis. Of note, our backlog grew by 86% last year before deducting sales. The prior year was 36%. And why this is important is that backlog is really future sales to CEMATRIX versus CEMATRIX shareholders. And that backlog comes from a strong sales pipeline and the sales pipeline are projects that engineers and designers and ministries of transportation are coming out to market with that we're either in the design or estimate and quoting stage, and they are real projects, many of which are now going to sell your concrete versus the alternative of products. So that's essentially the year in a nutshell. I'm going to pass it over to MJ to go over the financial results for the quarter, and then we'll pass it back to Jeff. And he'll basically manage the question-and-answer session for us. So thank you, and welcome, MJ.
MJ Cantin: Thank you. Thank you, Jeff, for the nice introduction. It's been a great two months already, and I'm happy to be part of the CEMATRIX team. As a reminder, you can access our financial documents on SEDAR and in our website, if you'd like more information. So this slide summarizes our key highlights. You'll notice that all our financial KPIs have improved for 2023. Our revenue for the quarter was $19.6 million, up $11.3 million or 136% from the $8.3 million in Q4 of 2022. Revenue for the year was $53.3 million, up $24.3 million or 84% from the $29 million last year, as we had more projects completed this year across all our businesses and markets. Gross margins for the quarter was $5.4 million, 27%, a $5 million improvement from $0.4 million in the last quarter of the last year. Gross margins for the year was $11.9 million, 22%, a $9.4 million improvement from $2.5 million in 2022. Our gross margins have improved significantly. Operating income, which is gross margins less SG&A was $2.4 million in Q4 versus a $1.3 million loss in the same period of last year. This is a $3.7 million improvement. Operating income for the year was $2.7 million and -- versus $4.7 million loss in 2022, which is a $7.4 million improvement. Going on the right-hand of the slide, adjusted EBITDA, which is also important to us, is up to for the quarter at $2.9 million versus $0.8 million in 2022, a $3.7 million improvement. For the year, adjusted EBITDA out was $4.9 million versus the loss of $2.7 million, a $7.6 million improvement. Cash flow from operations, which is cash flow before working capital changes, was also positive for both the quarter and the year. We're very proud of that. In Q4, $2.9 million generated versus a cash investment of $0.7 million. This represents a $3.6 million improvement. In 2023, we generated $4.9 million from operations versus a $2.6 million investment in 2022, again, a $7.5 million improvement. Lastly, we had $3.3 million in cash on hand at the end of 2023, up $1.4 million from the previous quarter in Q3, 2023, as we are generating positive adjusted EBITDA and collecting for the work done in the last part of the year. Overall, a great quarter and a remarkable year. Moving on to the next slide, on the left corner, we'd like to show you our seasonality. As a specialty construction contractor, our business is subject to the seasonality of the overall construction industry, especially in Canada and Northern United States as winter and cold weather can have a significant impact on the activities of our customers, and as a direct result our revenue. You can see at a glance of the first half of the year, we do approximately on average 25% of revenue. The back half is usually more significant, but roughly 40% on average for Q3 and about 25% of our revenue is executed in Q4. The graph shows the trend in the previous four years and you can also notice our organic growth as well. On the right hand side of the slide you can appreciate how much we have reduced our debt over the last four years. It is currently at about $3.5 million, which has been consistent over the last four quarters. And last year capital structure is at the bottom, it has come a long way and is much more simpler. We have $135 million of shares outstanding, and we have stock options and RSUs outstanding associated with the equity program. To sum things up in 2023, we had a solid year and the great financial successes. We have a solid foundation and we are ready for growth. And that completes our financial highlights for the year. Jeff?
Jeff Kendrick: Thank you, MJ. That was excellent. And I’ll now pass it over to Jeff. I'll just sum up by saying, thank you again for attending. This has been a great year for CEMATRIX, and we're happy to share this with you and look forward to your questions.
A - Jeff Walker: [Operator Instructions] We will start with a comment and then a question. Wonderful and spectacular year. Do you expect the backlog to continue and stay strong, and perhaps grow with further economic strength and favorable government conditions, both in Canada and the U.S.?
Jeff Kendrick: And the answer to that is yes. We expect the backlog to continue to grow and to remain strong. It will go up and down though. This is a young business that is just starting to take off. And there's projects are getting larger and larger as well. So again, the backlog will continue and we expect to see continued growth for the next foreseeable future. It's important to note as well, that that does not include any replacement infrastructure. All of our growth has been based on just the normal construction environment within Canada and the U.S.. That is replacement infrastructure, which will be in the billions eventually, as yet to really hit the market.
Jeff Walker: Thank you. And a question on fourth quarter earnings per share, if you'd like to answer that, please. Q4 earnings per share…
Jeff Kendrick: Is that what you're looking for the Q4 earnings per share?
Jeff Walker: Yes, please.
Jeff Kendrick: Do you have that? Or Randy?
Randy Boomhour: Jeff, I'm not sure I have the Q4 earnings per share, handy, but the full year earnings per share is just under $0.01. But that can be found in our financial statements right on the income statement. So I’ll look that up and kind of post it in the Q&A.
Jeff Kendrick: Okay, Thank you.
Jeff Walker: And then a question, does a cap slide show the most recently granted RSU options and stock grants?
Jeff Kendrick: It does not.
Jeff Walker: Those were announced yesterday. Andrew Hood past analyst on the CEMATRIX wanted to comment. He's been following the company for over five years. The best two quarters he can recall in a row. Tremendous job from everyone at CEMATRIX and congratulations.
Jeff Kendrick: Thank you, Andrew.
Jeff Walker: And then he has a question as well. Could you please discuss any activities that may have been undertaken to reduce seasonality a bit? Also, could you talk about Glavel and how it is doing?
Jeff Kendrick: Yes. So we continue to expand into the southern U.S., that’s part of the reason that we've expanded our salesforce in the U.S. in particular. So we are selling basically projects right across North America, including the new regions of the southern U.S., where seasonality is less of an issue. But it will never go away. A lot of our products, projects are in the northern half of the U.S. and in Canada, where seasonality is an issue. Glavel is continuing to run his business and grow its sales. And it's still a young business and growing business like we were way back many years ago and facing some of the challenges of growth. Because it's a private business, I won't talk a lot about it, other than that we continue to support what we’re doing.
Jeff Walker: Thank you. There's been questions in the past and another one here today about your up-listing and what exchange you might be looking to uplisted?
Jeff Kendrick: We've got – we're always considering uploading first to the main bar. I don't know whether that will happen this year. But we certainly will consider it. One of the things we had to do is achieve a profitable year, which we did in 2023. So now we're in a position to be able to do that. As to the timing, I will not talk about that at this particular point in time. And there is a potential again in the future that we can look into U.S. offering or like something like the NASDAQ in the future. It's always been considered, but there's no set timetable for that as well.
Jeff Walker: Thank you for the congratulations on your success and costs there. I guess a question regarding your interest costs were 522,000 in 2023. Will the interest decrease in 2024?
Randy Boomhour: Yeah.
Jeff Kendrick: Yes. It will. Sorry, go ahead. Randy, you want to take that?
Randy Boomhour: Yeah. Sure. So definitely the interest will decrease in 2024. Because we have less debt outstanding, right? So we actually expect interest rates to drop a little bit in the last half of the year. So we expect to have less interest costs.
Jeff Walker: Thank you. Are you seeing an increase in repeat business?
Jeff Kendrick: Yeah. So a lot of our projects are with repeat customers. They are, again, we're a one-off project type business. But that doesn't mean we don't do a lot of work with specific customers and large customers. So the answer is generally, we get repeat business all the time.
Jeff Walker: Do you expect to issue guidance on 2024?
Jeff Kendrick: We do not. It is, again, a very volatile market, as it is -- and a young market. And it's going to continue to grow. Now, we will say that, over the next five years, we will see strong growth probably in excess of 30%, on average. But that maybe some years may be lower, and some years maybe much higher, like this past year. And a lot of it is even though the market is growing, we don't have control of when the projects are done. But what we are seeing is that the market is getting large enough, that changes in project timing, don't affect us as much. And we'll see that continue in the future as it continues to grow.
Jeff Walker: Thank you. And in the comments you do not give specific guidance, but do you expect revenue growth and earnings per share, growth in 2024 relative to 2023?
Jeff Kendrick: We expect it. Yes.
Jeff Walker: Has the big $20 million plus project started yet? If so, how far along is it? Or if not, when will it be starting?
Jeff Kendrick: No. This is quite difficult, because I like to expand my answer to this question and because it helps explain 2023 in the overall market and growth that we actually achieved. In -- at the start of 2023, that North Carolina project actually represented $8 to $10 million of our forecast. In February of last year, we found out that that project was being delayed further to 2024. So not only did we replace that $8 to $10 in sales, but we also added another $10 to $11 million in sales over what we expected. So it was an extremely good year from our forecast perspective. So that North Carolina project is underway. We haven't poured a cubic yard there yet. It was now scheduled to start in August. And they expect it for a little less than half a bit before the end of the year. But they're also inquiring of whether we can speed up production by adding more than one unit there as well. So again, it is scheduled for August. And they are well underway in this construction project. So it's not that it hasn't started yet. So we do expect that it should start in August of this year.
Jeff Walker: You got a comment from Kia Besharat from Centurion One. One of your largest shareholders, vision and execution congrats on the record year due to the whole CEMATRIX team.
Jeff Kendrick: Thank you, Kia and Centurion One.
Jeff Walker: Can you speak to the labour situation? As your backlog grows, you're able to feel the necessary crews to meet the demand. What is the learning curve and timeline to train new workers?
Jeff Kendrick: No, that's good. And as mentioned earlier in the presentation, you know, we spend a lot of time preparing for what was going to inevitably happen, which started, of course, this previous year. It actually started in 29 [ph] when we had record sales as well. And part of that was retaining all of our key staff during COVID that are really cross-trained. So a typical crew can be four to five people, which we can then split down into two crews to basically enable us to grow even faster. And then as we bring new people on, when we find really good people, we will keep them on full time. And so this enables us to continue to manage our growth cost effectively and to grow the team on a methodical basis. And so the labor market, of course, as we know, is very tight out there. But we commend ourselves for having a great group. And basically, we've had very little turnover since the inception of our company back in 2000. So the only people that really have left this company are the people that really didn't belong anymore or belong somewhere else. So anyways, although, the market remains tight, meaning the labor market, we don't expect to have any issues filling the positions that we will need for the foreseeable future.
Jeff Walker: Thank you. I'm going to combine a couple of questions here about your debt. Are you expecting to clean off all the debt or will there be asset to debt mixture? Will you maintain that kind of debt flexibility?
Jeff Kendrick: We will maintain that asset to debt. Right now, okay, on our strategic plan, our focus is on basically execution of our backlog and the business that we continue to grow. So when you're doing that, you really don't need to borrow any money. So over the next little while, our debt, I think it's just about US$1.9 million of actual term debt related to previous acquisitions will be paid off over the next couple of years. And since we don't plan to get into the acquisition game until sometime next year, we don't plan to add any significant debt on before then. But we will look at a very good, but conservative debt-to-equity mix in the future as we grow the company.
Jeff Walker: Thank you. The question of the momentum in 2024, is it continuing? Are you able to provide any general comments or perspectives on how 2024 is going so far?
Jeff Kendrick: It looks very good, and we're not giving any guidance. But we don't expect any major changes from the previous year, and we expect to grow somewhat, the extent of which we don't know yet. Keep in mind that 2023 was an unusual year. Not only did we have a catch-up of sales from the COVID days, but we also had even some 2024 projects move into the fall of 2023, which is highly unusual. So it's hard to gauge where we're going to be for the balance of the year, but based on what we have in place to-date, it looks like a very good year.
Jeff Walker: Thank you. You've stated you're getting larger and larger projects. Is that because you're getting a bigger piece of the pie on these projects, replacing more legacy-type work, or are you just working on larger and larger projects?
Jeff Kendrick: It's what we've mentioned before, that the product is being accepted more and more. It's been successful. It's been in the ground for 10 to 20 years now. So it's proven itself out. So, now more and more ministries of transportation are starting to specify the project into all kinds of projects, which means very large projects as well. And because our product is good for those larger applications like bridge abutment backfills or big tunnel projects, you will continue to see the number of those projects continue to grow for the foreseeable future. And I should say, and it's -- that growth is replacing the legacy products that we replace.
Jeff Walker: Can we talk about a number of larger deals, the ones over a $1 million and maybe update on larger projects.
Jeff Kendrick: Well, last year, if I can remember we had about -- by the end of the year that we've done 16 projects over a $1 million I think the largest last year was about CAD 9 million. This year, we have about the same number of projects our larger projects already in place to do that over a $1 million. But it's important to talk about all the small to mid size projects as well, because that makes up a significant portion of our business. And those small to mid sized projects enable us to generate higher margins than on the bigger projects, especially in the US where we have more competition. So yes, there's a significant number of large projects that we have to do this year. But there's also a growing significant number of those small to medium size, higher margin projects as well.
Jeff Walker: Question on consolidation. Is there any plan to do any kind of consolidation, perhaps on one to 10 to reduce the number of shares?
Jeff Kendrick: Not at this time.
Jeff Walker: Question on can you make the company more profitable?
Jeff Kendrick: Yes, we can. Well, in the game, the game is to do that right. So, important to know that our breakeven level in sales on consolidated basis is somewhere between $25 million and $30 million depending on the makeup of the sales. And so with 30 % plus growth expected on average, for the next five years we will have 100 million plus sales without doing any acquisitions. So as we grow in sales, and when we get beyond that breakeven point, all of that margin goes to the bottom line. So it improves our margin percentages, as you saw in the prior years, success and growth and margin, and also in the bottom line. So we expect that one we -- once we get up in the 70 million, 60 million 70 million plus sales, the percentage of EBITDA versus sales will become much higher. And of course, our profits, the bottom line will become much larger as well.
Jeff Walker: The technical question, given the high amount of void space between the air and the mix, do you see any issues of long term durability in the products in freezer-thaw, seismic, anything like that crackling or settling?
Jeff Kendrick: Good question. And it's a big one. I mean, we'll have all kinds of different applications. But it's important to note that say the concrete is not the final surface. If it was final surface, then the wearing on the air bubbles, and that would break the material down. But there's always something on top. And so it is it provides a strong underlay for whatever infrastructure situation that we're dealing with, whether it's a road or a bridge run up or a tunnel project. The product itself because it's insulating, has tremendous freeze-thaw capabilities. So it doesn't expand and grow or filled with water because it's basically impermeable as well. It's not going to expand and break out like a regular concrete will, that doesn't have rebar in it like regular concrete. So there's nothing really to break down within the material, essentially, the material could last forever. And also, it was mentioned, I think, in the question in seismic situations, so certainly during a seismic event, it's going to affect whatever material was there. But the material is designed to carry the infrastructures on top of it. So it's designed to stay in place and not break down. And so that's important to note. And unlike the legacy products that we replace, like a, for example, EPS block or rigid installations, or there lightweight aggregate, it's a monolithic material. That's one solid base that doesn't move. So it's not going to create soil or PS block or rigid insulation. So it's really important material for North American infrastructure for the future.
Jeff Walker: Thank you. Question on booking revenues? Do you book them when they are complete? Or is a percentage of it done upon completion?
Jeff Kendrick: Randy, would you like to think about one?
Randy Boomhour: Yeah. Good question, Jeff. So we record revenue as they occur. So if we have 10 days of work, or 100 cubes that are pour in a month, we record that revenue. And we rarely have projects that span multiple months or multiple years, so the revenue recognition is actually fairly straightforward and simple.
Jeff Walker: Thank you.
Jeff Kendrick: I add on to that, just so everyone knows is that, as Randy mentioned, the jobs are typically not that long. And so our backlog is not a 10-year backlog. It's really mostly a two to two and a half year backlog although, some projects can be longer.
Jeff Walker: Thank you. What is your capital investment for incremental dollar in revenue for new equipment once the present equipment is fully deployed? Well, they're asking about, are you putting money aside basically, for new equipment, planning for the new, or the existing equipment to be fully employed.
Jeff Kendrick: Yeah. So right now, we have a lot of capacity. So we're not planning any major capital additions in the next few years, probably. But again, it will depend on the market growth. And when it does grow, we will add equipment as needed. A new piece of dry mixing unit can cost anywhere between $1 million to $1.5 million. But it's not required again, in the short-term. Our maintenance capital, although, again, normally is somewhere between $0.5 million and $7,50,000 a year. And this is really to replace things like vehicles and other pieces of equipment that are support equipment for the equipment that we have as our main production equipment.
Jeff Walker: What the challenges might be that should be anticipated? Are you expecting any threats to the business like new competitors?
Jeff Kendrick: Competitors have actually been really good for the business, and that's why in the US where you have competition, the market has grown dramatically. I remember the days when, selling 100 cubic yards or 100 cubic meters of product was just that was the size of the market at that time. Well, now it's in the hundreds of thousands of cubic yards or cubic meters a year. And that's all because the competition and CEMATRIX and its subsidiaries have helped build that market. In Canada, where really there's only one supplier, that being CEMATRIX, the market is much smaller, of course, but it's taken much longer to develop, because there's really no competition here to help build that business. A lot of contractors, particularly big contractors, do not like to use one supplier. And since we are a sole supplier in Canada, it makes it more difficult and takes more time to develop this marketing candidate.
Jeff Walker: Thank you. You stated you might consider further acquisitions once the debt is paid off. What type of company would be on your radar? Would it be a direct competitor or a company allowing you to enter a new market?
Jeff Kendrick: We look at various opportunities, but generally within our scope of business, maybe one or two steps out of the mall with strep test. Generally, there are opportunities within the study of the concrete market to allow for some consolidation. There are also companies that are similar businesses that could be complementary to what we're doing for our future. We'll also look at other potential complementary materials and products that will come along in the future. We also may look at some vertical integration, whether it's buying foam suppliers. I don't think we'll buy a cement company. They're a little bit above our capability at this time. But after a couple more years of strong results, maybe we can buy somebody like Lafarge. But right now we'll focus on complementary companies to what we're doing to help us grow, particularly in the regions where we have less of a presence. So southern U.S., southwestern U.S. is an area we're looking at expanding into more in the foreseeable future.
Jeff Walker: More questions, you know, that kind of talk about guidance. Is Q1 this year better than Q1 last year? If you do care to comment. And on that, if you did $65 million in sales, do you think earnings per share would crack $0.05 per share?
Jeff Kendrick: First of all, the first quarter results will come out on May 8th, so you will all find out if we did better than last year. But generally, if we expect to continue to grow, you would expect under normal conditions that sales should grow then, right, so in each of the quarters. But, again, it's dependent on when those projects actually go forward. As to the number of cents per share, I can't comment on that right now. It would be too difficult from an expectation perspective and again, we're not giving guidance at this time.
Jeff Walker: So think it did want to wrap it up. Analysts have predicted CEMATRIX price from $0.60 to in the past $1.25. Any comments on these target prices? And do you feel CEMATRIX is undervalued?
Jeff Kendrick: Well, everybody expects that their company is undervalued and we do too as well. What's important to know, that's a good question, because the analysts before they're no longer covering. So a few years when COVID has started, they were calling for $1 to $1.25 a share. And they were calling for the kind of sales that regenerating right now. So they weren't wrong. They were just delayed by COVID. And it's important to note that, so I always compliment, both Claris and partners for the analytical work that they did on our company back then. They were very perceptive and wise in their forecasting, Beacon, who is now our analyst, they're doing a great job as well. And they're a little bit more conservative. And that's largely due to the capital markets, and the experience that we've seen in the past because of the delays caused by COVID. So, I think that Beacon will be coming up with an update in the next couple of days. And, and I think that we are undervalued. And I think people are starting to realize that, as you can see in the share price last couple of days, as they starting to go up. And hopefully the capital markets continue to improve, and people continue to follow us and join our team as we grow this company and grow the value and then the value will hopefully get to the point where it should be in this marketplace.
MJ Cantin: And it does have a lot to do with the current state of the market, because we had $1.25 target when $50 million was in the future, and we're at $50 million today, dealing in a totally different world but it is what it is.
Jeff Walker: So that was the last of the questions. There's any further comments who want to make before we sign off. This recording will be available tomorrow for anybody that missed it. We'll have it posted and sent up for you as well.
Jeff Kendrick: I just want to thank everybody for participating. And for you that are shareholders already, I want to thank you for helping us get to where we are today. It's been a long 23 year overnight success story. But we're only a success because of the great people that we have here and the great shareholders that have been supporting us all along. We expect this growth to continue for the foreseeable future. And if you're not a shareholder now, we'll welcome you in the future and keep an eye on us because you're going to see a company that's going to continue to grow, continue to grow its profits and EBITDA and be a company to reckon with in the future.
Jeff Walker: Wonderful. Once again, congratulations to all of you. We look forward to seeing what 2024 brings to CEMATRIX.
Jeff Kendrick: Thank you, Jeff.
Jeff Walker: Thank you.
MJ Cantin: Thank you.
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