5N Plus Inc
TSX:VNP
| US |
|
Fubotv Inc
NYSE:FUBO
|
Media
|
| US |
|
Bank of America Corp
NYSE:BAC
|
Banking
|
| US |
|
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
| US |
C
|
C3.ai Inc
NYSE:AI
|
Technology
|
| US |
|
Uber Technologies Inc
NYSE:UBER
|
Road & Rail
|
| CN |
|
NIO Inc
NYSE:NIO
|
Automobiles
|
| US |
|
Fluor Corp
NYSE:FLR
|
Construction
|
| US |
|
Jacobs Engineering Group Inc
NYSE:J
|
Professional Services
|
| US |
|
TopBuild Corp
NYSE:BLD
|
Consumer products
|
| US |
|
Abbott Laboratories
NYSE:ABT
|
Health Care
|
| US |
|
Chevron Corp
NYSE:CVX
|
Energy
|
| US |
|
Occidental Petroleum Corp
NYSE:OXY
|
Energy
|
| US |
|
Matrix Service Co
NASDAQ:MTRX
|
Construction
|
| US |
|
Automatic Data Processing Inc
NASDAQ:ADP
|
Technology
|
| US |
|
Qualcomm Inc
NASDAQ:QCOM
|
Semiconductors
|
| US |
|
Ambarella Inc
NASDAQ:AMBA
|
Semiconductors
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
3.11
7.55
|
| Price Target |
|
We'll email you a reminder when the closing price reaches CAD.
Choose the stock you wish to monitor with a price alert.
|
|
Fubotv Inc
NYSE:FUBO
|
US |
|
|
Bank of America Corp
NYSE:BAC
|
US |
|
|
Palantir Technologies Inc
NYSE:PLTR
|
US |
|
C
|
C3.ai Inc
NYSE:AI
|
US |
|
|
Uber Technologies Inc
NYSE:UBER
|
US |
|
|
NIO Inc
NYSE:NIO
|
CN |
|
|
Fluor Corp
NYSE:FLR
|
US |
|
|
Jacobs Engineering Group Inc
NYSE:J
|
US |
|
|
TopBuild Corp
NYSE:BLD
|
US |
|
|
Abbott Laboratories
NYSE:ABT
|
US |
|
|
Chevron Corp
NYSE:CVX
|
US |
|
|
Occidental Petroleum Corp
NYSE:OXY
|
US |
|
|
Matrix Service Co
NASDAQ:MTRX
|
US |
|
|
Automatic Data Processing Inc
NASDAQ:ADP
|
US |
|
|
Qualcomm Inc
NASDAQ:QCOM
|
US |
|
|
Ambarella Inc
NASDAQ:AMBA
|
US |
This alert will be permanently deleted.
5N Plus Inc
You don't have any saved screeners yet
[Foreign Language] Good morning, ladies and gentlemen. Thank you for standing by and welcome to the 5N Plus Second Quarter 2023 Results Conference Call. [Operator Instructions] And I would like to turn the conference over to your speaker today, Richard Perron, Chief Financial Officer. Please go ahead, sir.
[Foreign Language] Good morning, everyone, and thank you for joining us for our Q3 2023 financial results conference call and webcast. We'll begin with a short presentation, followed by a question period with financial analysts. Joining me this morning is Gervais Jacques, our President and 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 risks and uncertainties.
A detailed description of the risk factors that may affect future results is contained in our management discussion and analysis of 2022 dated February 21, 2023, available on our website in our public filings. 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 further information, please refer to our management discussion and analysis.
I would now turn the conference over to Gervais.
Merci, Richard, and Board of Directors. Yesterday, we announced very strong Q2 results for the three months ended June 30, 2023. Specifically, the 5N Plus team achieved our strongest quarterly and year-to-date adjusted EBITDA and gross margin performance in nearly a decade. This remarkable performance on 2 KPIs truly represents the fruits of our labors over the past several years, including the effective execution of our strategy to improve our product mix, while targeting critical high-growth sectors.
Our performance also reflects the success of our commercial excellence program implemented over a year ago now. We are committed to maintaining this track going forward. To that end, we remain on track to achieve the higher end of our previously disclosed guidance range for adjusted EBITDA for this fiscal year.
Looking now at our performance by segment. In Performance Materials, our intention to exit of low-margin extractive and catalytic products announced in the second half of 2022 is paying off. Beyond the near-term impact on year-over-year revenue comps, the segment is now generating strong earnings and margins with adjusted EBITDA increasing 12% in Q2 and 31% year-to-date.
Another proof point to our strategy of focusing on an improved product mix comprised of more value-added and higher-margin products. Specialty Semiconductors delivered another excellent quarter of strong revenue and adjusted EBITDA growth in the context of unprecedented customer demand, namely from AZUR and the space solar power market and from terrestrial renewable energy.
This strong demand is reflected in the segment's backlog, which once again stood at the maximum 365 days at period end. As like last quarter, the effective backlog, in fact, surpasses the next 12 months because of our confirmed long-term contracts. As the only viable global supplier of ultra-high purity specialized semiconductor materials outside China, we continue to be uniquely positioned to support current and future clients operating in critical and high-growth industries to reach their own capacity extension objectives.
First Solar's recent announcement in the renewable energy space illustrates the strong demand in key market ends. In the context of unprecedented demand in several key end markets, and given our market leadership position, we have a very active pipeline of future business opportunities, which we are pursuing with our usual discipline.
Our commercial excellence program continues to guide us. In particular, our pillars of innovation drives our value-added product development approach across both segments, which complements our focus on value optimization pricing strategy and co-investment initiatives under our client partnerships.
As I mentioned in our last call, we have begun the process of increasing AZUR's output capacity by 30% by the end of 2024. We are also increasing production capacity for renewable energy applications by 35% in 2023, and 100% in 2024, in support of key customer capacity expansion plans.
From a critical metal sourcing and recovery perspective, another key competitive advantage for 5N Plus, we are also in the advanced stages of securing additional complex feeds and secondary streams for the recovery of critical minerals. This is following the recent expansion of recycling and refining capacity at our Montreal plant and additional investments we are making to further leverage our closed-loop metals management, recovery and refining capabilities.
Looking ahead, we expect demand to remain strong in our end markets, especially in terrestrial renewable energy and space solar power under our Specialty Semiconductor segment and in health and pharmaceuticals in our Performance Materials segment. We remain focused on the execution of our commercial excellence program and our capacity expansion plans. We will continue to invest in building our own capacity as our customers also ramp up their production of finished products employing our value-added materials.
In addition, we will maintain our focus on developing long-term value-added partnerships with customers operating in high-growth markets. Our strong financial results year-to-date are a testament to our strategy and market leadership, and we are motivated and excited for what is to come.
Richard, over to you to provide further details on our financial results before we take questions from analysts.
Thank you, Gervais, and good morning, everyone. So as Gervais noted, we are extremely pleased with our results for this quarter as we see our strategic initiatives paying off, including our adjusted product mix to address high demand markets, such as space and renewable energy. In our commitment to that strategy, we are making investments to increase capacity at AZUR in renewable energy and recycling, refining to meet that demand in our clients' growth. We're also pleased that these efforts are getting more attention internationally as we see our investor base expand in the U.S., in Europe and in Australia.
So now looking first at revenue, gross margin and adjusted EBITDA. Revenue in Q2 of 2023 was $59.1 million, an 18% decrease compared to Q2 of last year. Similar to Q1 of this year, the year-over-year revenue decrease primarily reflects, as anticipated, our exit from the low-margin extractive and catalytic segment and related operations in H2 of last year. That strategic exit has enabled us to realize significant gross margin expansion in Performance Materials, resulting in a strong consolidated adjusted gross margin, both in Q2 and year-to-date.
For the quarter, adjusted gross margin was 32.9% compared to 22.4% in Q2 of last year, and more than 31.4% on a year-to-date basis this year compared to only 22.1% for year-to-date of last year. We are very pleased with the gross margin performance, our strongest than the earlier decade, supported by our commercial excellence program and latest footprint optimization.
We are now entering a new phase of margin expansion supported by internal initiatives to improve productivity and the completion of our capacity expansion with aggressive targets to our troops. The same puts and takes have also enabled us to generate our strongest adjusted EBITDA for the quarter and year-to-date. Adjusted EBITDA reached $10.8 million in Q2 of this year, representing a 26% increase over Q2 of last year. Under Specialty Semiconductors, an increase by $1.7 million or 27%, and by $0.7 million or 12% under Performance Materials.
Adjusted EBITDA year-to-date was $19.6 million, representing a 38% year-over-year increase and positioning us well, not only achieving our annual guidance, but also potentially achieve our end of the previously disclosed target range between $35 million and $40 million for the full fiscal year.
Looking at EBITDA, it reached $17.5 million compared to $6.7 million in Q2 of last year. The important year-over-year increase is mainly explained by $9 million in income received from the previous shareholder of AZUR as per stipulations of the share purchase agreement. This post-transaction adjustment, it goes without saying, in no way reflects AZUR's performance post acquisition, with which we continue to be extremely pleased as evidenced by the significant contracts we have secured through AZUR.
Now turning to backlog. The backlog at quarter end represented 289 days of annualized revenue, a slight decrease of 7 days or 6% over the backlog of Q1. The backlog for Specialty Semiconductors represented 365 days of annualized revenue at a similar level of the backlog of the previous quarter. When expressed in days and while the estimated number of days based on annualized revenue cannot exceed 365 days per our definition, the effective backlog under Specialty Semiconductors actually surpasses the next 12 months due to confirmed long-term contracts in renewable energy and space solar power.
The backlog for Performance Materials represented 113 days of annualized revenue, a decrease of 40 days or 26% compared to the backlog of the previous quarter, mainly due to the quarterly realization of yearly contracts. The key contracts under this segment, not presenting an improved product mix, continue to be mainly renewed in the fourth and first quarter of the year. This also explains the slight decrease in the consolidated backlog.
Turning to items of note under expenses. In Q2 of this year, we recorded litigation and restructuring income of $8.8 million, which represents the amount received from the previous shareholder of AZUR, net of related expenses, as discussed earlier. This is compared to litigation and restructuring costs of $0.4 million in Q2 of last year, following the settlement of our contract by mutual agreement.
In Q2 of this year, we recorded an impairment of noncurrent assets of $0.6 million in relation to property, plant and equipment under Performance Materials to reflect the assessment of the current value of machinery following a switch to higher capacity equipment.
Finally, we also recorded a loss of $1.1 million in Q2 on the disposal of equipment following a change in technical requirements. We disposed of this equipment in a nonmonetary transaction with the supplier in exchange for credit on future equipment purchases.
Covering liquidity. In Q2 of this year, cash generated from operating activities was $11.4 million compared to $5.1 million in Q2 of last year. Year-to-date, cash generated amounted to $7.6 million compared to $0.2 million last year. The increase year-to-date is mainly due to the net difference from our contribution of funds from operating activities, offset by a less favorable change in non-cash working capital.
In Q2 of this year, cash used in investing activities amounted to $4.5 million compared to $2.8 million in Q2 of last year. The increase mainly explained by the increase in additions to property, plant and equipment. On a year-to-date basis, cash used amounted to $1.6 million compared to $6.8 million last year. The decrease is mainly explained by the proceeds on settlement of an index deposit agreement amended during Q1 of this year, resulting in a receipt of cash of $6.5 million, which was partially mitigated by our additions to property, plant and equipment in year-to-date of 23%. In Q2 of 2023, cash used in financing activities amounted to $8.2 million compared to cash generated from financing activities of $8.8 million last year.
Finally, looking at debt. Total debt stood at $113.5 million at quarter end compared to $121 million at year-end. Our financial performance is enabling us to pay down our debt, with net debt reduced by $4.9 million since the beginning of the year and by $6.2 million compared to Q1 of this year, coming at $73.4 million as of June of 2023.
In conclusion, our Q2 2023 and year-to-date 2023 results reflect strong demand for our target end markets, our improved product mix and the effectiveness of our commercial excellence program. Our ability to deliver some of our best KPI performances in nearly a decade truly demonstrates not only our continued momentum, but also the strategic importance of the crucial position we occupy in the supply chains of so many essential industries, industries in need of our expertise, and ability to produce ultra-high purity engineering materials.
As the global leader of ultra-high purity specialty semiconductor materials outside of China and as a leader in critical metal recovery, we are well positioned better than ever before to benefit from strong demand in critical and high-growth industry sectors such as space solar power and terrestrial renewable energy.
This concludes our formal remarks. I will now turn the call back over to the operator for the questions period with our financial analysts.
Thank you sir.[Operator Instructions] The first question comes from David Ocampo with Cormark Securities. Please go ahead.
Thanks. Good morning gentlemen. Yes. So when I think about your 2023 guidance, you now expect to come in at the top end, but I believe prior commentary from the previous two calls was your expectation was that H2 would be stronger than H1, just given how your contracts are laid out. Is that still the case? Or were there higher margin items that were delivered in Q2 that may have inflated the Q2 number by a little bit?
Yes, exactly. So what we see is the following. Q2 came up a bit better than anticipated. So it's less likely that H2 will be materially better than H1. But again, in terms of guidance for the year, we're going to complete a superb year as we just mentioned in the higher end of the bracket.
Got it. And I guess if I look at the margin profile, at least in Performance Materials, I think the EBITDA margin came close to 27%. So obviously, a very strong quarter there. But was there any onetime elements in there? Just trying to factor in kind of what we should expect on a go-forward basis?
No. Under both segments, there's nothing special that happened in Q2 on a year-to-date basis other than a better product mix. So nothing out of the extraordinary either segment.
Okay. That makes sense. And then you guys brought it up on the call, but just thinking beyond your guidance, I mean, we've seen First Solar announce a fifth facility, which is on top of Alabama that ramps up in 2025. So I guess two questions here. Are you saving your discussions with First Solar until the end of your contract? And then two, how should we think about the potential volume lift from this additional facility?
Obviously, we're in touch with First Solar on a regular basis. But in terms of official announcements of volume to come past the current contract, it's a bit early to declare anything. But as you can imagine, we're going to be playing an important role in their growth forward.
And as you can imagine, there is a lead time between the announcement and then the construction and then the...
Yes, still ramp up.
And the ramp-up. The process of the announcement is now done, then we can start to work all together to translate that into numbers at some point.
Okay That’s it for me. Thanks a lot gentlemen
Thank you. Your next question comes from Rupert Merer with National Bank. Please go ahead.
Hi Good morning I'd like to take another stab at this guidance question, if I may. It seems like even if your results in Q3 and Q4 come in below the level of Q2, that you might be above the guidance range. So are you being conservative here? Is there any chance to go over the high end of the guidance? Do you think that's an opportunity? Or should we just be looking at you coming in, say, a little bit below the top end?
We're not going to hold anything. So we're going to do our best to beat it. But currently, what we see is that the range is still a valid guidance for the year. And again, we anticipate we're going to complete the superb year for 5N Plus.
So you're saying there's a chance you could be higher?
You know, it's not a perfect science, business.
Okay. If I can ask about material supply, you are expanding your access to some of the materials that you need. We have seen news about export restrictions on some materials coming from China. How does that impact your business? Are you seeing any impacts from this yet? And how does that change your strategy going forward, if at all?
Well, the recent announcement made by China was referring to gallium and germanium. And we source 95% of our germanium outside of China. Then no impact for us.
Okay I got it. I’ll get back in the queue. Thank you
Thank you. Your next question comes from Frederic Tremblay with Desjardins. Please go ahead.
Thank you, Good morning. I wanted to ask first maybe on the Performance Materials segment, specifically on their growth profile, excluding the impact of the divestiture, until you sort of masked the growth in that segment currently. Anything you can give us in terms of color in terms of the growth profile of Performance Materials recently and some of your expectations moving forward on an organic basis for them?
Okay. At a high level, by default, the business that we exited last year did worse in the second half of last year than the first year. So what you can anticipate in the second half of this year is a better spread, better improvement, because we're leaving behind quarters that were worse last year.
And then more specifically to the products that are part of Performance Materials today. Obviously, the growth potential is not a lot at the level of what we have on the Specialty Semiconductors. But that being said, we hold a very high percentage of market share and our products are growing by default, but not at all to the percentage that you should expect to see under Specialty Semiconductors forward.
Thank you. That's helpful. And then on the AZUR, we obviously see news from First Solar, which is encouraging for the terrestrial products. On the space side, obviously, you're increasing capacity there for AZUR. Is there anything that you can point to in terms of your expectations in terms of your backlog or deferrals and sort of the overall demand environment that you're seeing this year and even beyond maybe next year?
As you know, we have way more than 1 year of contracts under our backlog. While as per our definition, we're disclosing the next 12 months, we continue to bid on a large number of projects. So that market continues to be extremely active, and we see it to continue to be very active for the next coming years, especially in terms of number of satellites the whole industry is expected to launch.
Yes. I was just looking at the stats this morning. Currently, we have 3,327 satellites in operation. And by 2030, they expected that to be multiplied by 10. Then there's a lot of satellites to be launched in the next 6 to 7 years, and the market is simply booming. Then what we're doing at AZUR is trying to grow the capacity in a sustainable manner, not only to answer a short-term demand, but to do it in a sustainable manner for the next decade. Then the first step of growing the production by 30% by the end of 2024, will be I think, will benefit to this industry. We're trying to do it in an orderly manner. We are currently in discussion for 2025 with most of our customers. Then it is a very interesting situation to be in.
Great. And maybe last one for me. Obviously, it seems like you're very busy with current operations, but maybe if you have any comments on potential acquisitions. Is that something that you're considering at the moment? Or you're sort of laser-focused on the current opportunities that you have internal.
We're extremely, obviously, busy increasing capacity, as we mentioned, both for our recycling and refining operations and on both terrestrial renewable energy and space, but we're also looking at different other M&A opportunities, opportunities that are more along the lines of helping us from a vertical integration perspective or improving our supply chain.
That’s great Thanks and Congrats on the great going.
Thank you
Thank you. Your next question comes from Michael Glen with Raymond James. Please go ahead.
Hey Just I want to circle back on to AZUR. Are you able to give an indication like how much AZUR is up year-over-year on a sales basis like percentage-wise?
On a sales basis, they're not much different than last year, but they're much better from a margin perspective. And the additional sales will mainly come in 2024 from 2, again, extra capacity and better margins as well.
Okay. And the margin improvement, what are the drivers on the margin improvement with AZUR primarily? Is that the product? I know you are doing some SKU rationalization. I think you're focused on that, but is it selling price? Or just -- any thoughts...
Currently, a combination of, as you just mentioned, product mix within the mix of AZUR.
And we've been doing a lot of co-development with our customers, making sure that we can focus on value added. The goal is simple. It's producing energy out of space. Then every time you're bringing efficiency, you make the satellite business more efficient, and I think from a business standpoint, for our customer, more viable. Then everything that we can do to increase the efficiency of the satellite by bringing more power on the square feet or square inch metrics, I think that's the name of the game. And I think AZUR is leading the parade, where there's only three companies doing that outside of China and AZUR is the leader. Then we're developing new technology, increasing the efficiency of the current one, and looking at specifically the need of our customers. I think it's exactly at the heart of our customer -- commercial strategy.
Okay. And then within semiconductor, like outside of the AZUR business and the First Solar business, I know that there's -- what you have left over is kind of a hodgepodge of different products and materials. Like how does that -- and that includes the medical imaging as well, how did that perform in the quarter?
In the case of Medical Imaging, there continues to be an opportunity for the next three years to five years. So it contributes, but it's not out of everything that we do. It's a very small percentage. So anything we're going to gain there in the future is going to be definitely incremental to the current performance.
And then some of the other product likes infrared how is that performing?
Infrared, those are high-margin products in small markets, and we continue to have fairly high market share, especially our infrared.
And what we see as well is, at AZUR, they were mainly focused or entirely focused on space solar energy. But now there's also the terrestrial market that is also increasing, using CPV technology. Then that's something for AZUR that is definitely new and something that is growing.
Okay. And then on the cash flow statement for the line property, plant and equipment, what number do you think that will come in for the full year -- additions to property, plant and equipment.
We're going to have most of our terrestrial renewable energy capacity expansion happening in the second half of this year. So it's going to be at least at the similar level of H1, maybe slightly over, but not materially over the H1.
Okay. And then just final one for me. When you look at your primary commodity mix, where prices are, thinking about bismuth, tellurium, maybe even germanium. When you're thinking of all of these together, all of these commodities, like how do you -- and pricing in the market, like is there an impact from commodity prices through the back half of the year? Like how do we think about that?
In the case of AZUR's products, the metal content of those solar cells that we sell represent a very small percentage of the product we sell. Very large portion of what we sell are value added, is all about value-added.
And then tellurium and bismuth?
You were specific to AZUR here? Is that it?
No, no, no. Specifically get as a whole, like if I'm thinking of all the commodities.
It varies from one product to another. By default, our bismuth products have higher metal content than our Specialty Semiconductor products. So there's no short answer as a whole. It varies from one product to another. But by default, as we've been mentioning, we've changed our product mix on a consolidated basis with a lot more weight on the Specialty Semiconductors. And then within each segment, we have also improved the product mix and it varies a lot from one product to another under Specialty Semiconductors. So there's not a short answer to all that, but it has reduced substantially from what it was years ago.
Okay thanks for taking the questions
Thanks.
Thank you. Your follow-up question comes from Rupert Merer. Please go ahead.
Hi Looking at the inventory levels, it ticked a little bit higher here with your higher activity levels. Where do you see inventory shaking out? I see there's a good percentage of that is in finished goods. Does it go much higher from here? And do we read into anything on this higher number that maybe it is forecasting higher activity levels?
The current inventory level is catching up on the growth expansion that we're going to see in the second half of this year and 2024, so we're getting geared for 2024 as well.
Okay. So should we expect it to go a little bit higher from here?
It could go a little bit higher, but technically, what you have there versus the previous quarter or year-end is already a pretty decent increase to deal with the growth coming next year.
Okay. Very good. And then just finally, you talked a little about medical imaging. Any updates on the high-power semiconductor markets and how you're thinking about entering those markets in the future?
As we mentioned last time, we're looking at potentially entering that market in a different way because all of our assets are extremely occupied with the space industry now. So we're in different negotiations and looking at different other options to commercialize that technology, which may not mean that we're going to be manufacturing short-term wide band-gap materials, but could be partnering up and/or licensing the technology.
Okay I’ll leave it there. Thanks again.
Thank you. There are no further questions at this time. You may proceed.
Well, I would like to thank you all for joining us this morning, and have a good day.
Yes. Thank you very much.
Ladies and gentlemen, this concludes your conference call for today. We thank your participating and ask that you please disconnect your lines.