Mattr (TSX:MATR) reported second-quarter financial results on Thursday. The transcript from the company's second-quarter earnings call has been provided below.

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Summary

Mattr reported record revenue and adjusted EBITDA for the second quarter of 2026, driven by strong performance across its Connection and Composite Technology segments.

The company saw substantial growth in its wire and cable businesses and increased efficiency in global mining and infrastructure markets.

Xerxes achieved new manufacturing efficiency and output records, contributing to over 15% year-over-year revenue growth, while FlexPipe captured the first commercial revenue from its new 8-inch technology.

The company secured a GICS code reclassification to the industrial sector, aiming to improve comparability with broader industrial peers.

Despite slightly negative operating cash flows due to working capital investments, Mattr expects continued deleveraging and resumed share repurchases under its NCIB.

Future outlook includes increased full-year revenue and adjusted EBITDA expectations, with strong demand in mining, data centers, and infrastructure markets.

Mattr remains focused on operational execution, technology development, and disciplined capital allocation, with ongoing opportunities for margin expansion.

Full Transcript

OPERATOR

Thank you for standing by. Welcome to Mattr Second Quarter 2026 Results Webcast and Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded.

I would now like to turn the conference over to your speaker for today, Megan McIntern. Please go ahead.

Megan McIntern, Investor Relations

Good morning. Before we begin this morning's conference call, I would like to remind listeners that today's call includes forward-looking statements that involve estimates, judgments, risks and uncertainties that may cause actual results to differ materially from those projected. The complete text of Mattr's statement on forward-looking information is included in Section 4.0 of the Second Quarter 2026 Earnings Press Release and the MD&A that is available on SEDAR+ and on the company's website at mattr.com.

For those joining via webcast, you may follow the visual presentation that accompanies this call. I'll now turn it over to Mattr's President and CEO, Mike Reeves.

Mike Reeves, President and CEO

Good morning and thank you for attending our second quarter conference call today. Megan and I are joined by our Senior Vice President of Finance and CFO, Tom Holloway. The second quarter represented a significant step forward for Mattr. We generated a new high watermark for revenue and adjusted EBITDA as once again our global team delivered effectively against strategic and operational priorities within Connection Technologies. Our wire and cable businesses levered operational efficiency gains and particular strength in global mining markets to report substantial sequential growth.

More broadly, the segment executed well against a favorable mix of mining, oil and gas, and data center demand while capturing further share gains within North American utility and infrastructure markets. Within Composite Technologies, Xerxes set new manufacturing efficiency and output records, which drove new quarterly revenue records in both fuel and water products, enabling year-over-year revenue growth of more than 15% during the first half of 2026.

Accelerating order capture across the Xerxes portfolio, including rising data center opportunities where we secured additional customer commitments during the quarter, ensured a stable quarter-end backlog at near-record levels. Our FlexPipe team took full advantage of seasonally stronger North American activity levels and modest late-quarter project acceleration by select customers, while also delivering against a growing international backlog. In parallel, FlexPipe captured the first commercial revenue from its recently released 8-inch technology and secured incremental orders that expand our backlog into Q4 for this important growth driver across Mattr. We remain focused on operational execution, technology development and disciplined capital allocation. The actions we have taken over the past several years to modernize our manufacturing footprint and refine our portfolio to prioritize highly attractive end markets are translating into strengthening financial performance. I could not be more proud of the Mattr team members who are making this possible through their hard work, creativity and dedication.

Lastly, we were pleased to secure a GICS code reclassification late in Q2. Mattr is now classified within the industrial sector, which we believe more appropriately reflects the critical infrastructure markets we serve and should improve comparability with a broader group of industrial peers over time. Tom will now walk us through some additional financial details.

Tom Holloway, CFO

Thanks, Mike. Revenue in the second quarter of 2026 increased significantly compared to both the prior-year period and the first quarter, reflecting strong commercial execution across multiple businesses, higher production volumes and continued operational efficiency improvements. Adjusted EBITDA also increased substantially versus the prior-year quarter, driven by improved operational performance, favorable order capture and delivery in several key end markets, and a favorable product mix.

Connection Technologies delivered strong year-over-year growth in both revenue and adjusted EBITDA, primarily attributed to its wire and cable businesses. Performance was supported by robust mining activities, continued growth in data center application sales, and ongoing share gains in utility and infrastructure markets. Composite Technologies delivered another strong quarter with meaningful increases in revenue and adjusted EBITDA, driven by record production levels, robust fuel and water demand, and continued manufacturing improvements.

Higher production throughput and improved manufacturing performance also enabled Xerxes to capture additional orders and establish new records for both shipments and revenue within its water business. Overall, Mattr delivered record revenue and adjusted EBITDA in the second quarter. We are incredibly proud of the teams who have worked so hard over the years to reshape this organization and enable delivery of results like these. Turning to cash flow, the second quarter delivered slightly negative operating cash flows, as necessary working capital investments offset strong operational results.

Strong late-quarter sales led to an increased accounts receivable balance, while inventories moved higher as we positioned the business for a robust second half of the year. Cash used in investing activities was primarily capital spending on property, plant and equipment, which was $6.3 million during the second quarter. This cash outflow includes approximately $1.6 million that was previously accrued and then paid in the second quarter of 2026. We continue to expect full-year capital spending to be in the $35 to $45 million range.

During the quarter, our strengthened outlook resulted in lowering of the net debt to adjusted EBITDA ratio and positioned the company to resume share repurchases under our NCIB at the end of the second quarter. We expect to remain active and opportunistic on the recently renewed NCIB for the foreseeable future, albeit at modest levels, while debt repayment remains a priority. Although Q2 required modest incremental borrowings to support rapid growth and the associated working capital needs, stronger earnings and rising cash generation are expected to drive continued deleveraging as the company progresses through the second half of 2026.

I will now turn it back over to Mike.

Mike Reeves, President and CEO

Thank you, Tom. As we look across our key end markets, the demand landscape remains generally favorable. Fundamentals in the mining, power generation and distribution, retail fuel, water management, and data center sectors are strong and expected to remain so. I'll address Mattr's data center exposure on the next slide. Within domestic oilfield markets, customer activity improved during the second quarter, although it remained below the prior-year quarter.

Looking ahead, we currently expect North American well completion activity will increase modestly again in Q3. While global oil and refined product inventory levels point to a need for continued production growth, recent fluctuations in underlying commodity prices are likely to ensure any activity increases are gradual. We currently anticipate normal late-year slowing in North American activity as capital budgets are exhausted, although the potential remains for some clients to pull incremental capital into 2026, which would offer some upside to our current outlook.

In parallel, we continue to see encouraging customer engagement and quoting activity in certain international markets, with our backlog strengthened by the large committed order we secured in early Q2. Supported by an expanding product portfolio and enhanced production capacity, FlexPipe is well positioned to pursue international opportunities as they develop. Automotive markets remain subdued, with global production expectations continuing to face pressure, particularly in Europe.

Despite these market conditions, we continue to see average electronic content in newly launched vehicle platforms increase, creating ongoing opportunities for Mattr to continue delivering year-over-year auto-related revenue growth. We constantly monitor evolving trade, commodity and geopolitical developments and have not experienced any meaningful recent disruption to raw material availability. While go-forward trade policy remains a source of uncertainty—particularly following early Q3 U.S. tariff announcements—Mattr is positioned with robust mitigation protocols to limit business impact under all foreseeable scenarios. Regardless of the external environment, our priorities remain unchanged: executing for our customers, improving operational efficiency, advancing technology development, and growing in markets where we see sustainable demand and attractive returns. These initiatives continue to strengthen the business and were important contributors to our strong second quarter performance.

Briefly taking a closer look at the data center sector, we see that demand continues to develop positively across multiple business lines including Xerxes, AmerCable, ShawFlex, and DSG-Canusa. Data center applications are becoming an increasingly important contributor to Mattr's near- and mid-term growth, with current-year sales expected to more than double versus 2025 and likely to represent around 5% of consolidated revenue this year. Data centers are expected to be an important growth driver across both segments in the coming years, but our objective here—as in all end markets—is to pursue profitable growth, not simply market share gains.

We prioritize those data center opportunities that lever our technical differentiation and yield sustainable margins, and will continue to lever our diverse end market exposure to ensure Mattr avoids becoming overly reliant on any one source of demand. Turning to our outlook, the company's expectations for full-year revenue and adjusted EBITDA have further increased since our last earnings release, reflecting both stronger-than-expected second quarter performance and improving visibility for the balance of the year.

We currently believe third quarter business performance will be similar to the second quarter before normal seasonal slowing takes effect in Q4. In combination, this drives a current outlook for second-half adjusted EBITDA that is similar to the first half. We believe normal fluctuations will cause Connection Technologies revenue in Q3 to have a less favorable mix than Q2, with lower deliveries into mining projects and higher deliveries into data center applications.

In contrast, we anticipate Composite Technologies performance will move sequentially upwards in Q3, driven by rising shipments of Xerxes fuel and water products, improving FlexPipe domestic and international activity, and further operational efficiency gains. Beyond Q3, we continue to have a constructive view of demand across all primary markets in both segments. Within Connection Technologies, we believe our mining, utility, nuclear, data center and other infrastructure markets are in the early stages of multi-year upcycles.

In Composites, Xerxes fuel and water customers are extending their planning horizons further than we've ever seen, with firm orders now in backlog for delivery throughout 2027, and FlexPipe's addressable market continues to expand meaningfully through our investments to develop and release new products, including the recently launched 8-inch product where customer order capture is accelerating and backlog continues to build. These demand factors, combined with high conviction in the value our differentiated technologies bring to customers and significant remaining opportunities for increased operational efficiency, underpin our confidence that Mattr remains well positioned to deliver meaningful growth and EBITDA margin expansion over the coming years. I'll now turn the call over to the operator and open it up for any questions you may have for myself, Tom or Megan.

OPERATOR

Thank you. As a reminder, if you would like to ask a question, please press star 11 on your telephone. You will hear the automated message advising your hand is raised. We also ask that you wait for your name and company to be announced before proceeding with your question. One moment while we compile the Q&A roster. The first question will be coming from the line of Nathan Poe of National Bank of Canada Capital Markets. Please go ahead.

Nathan Poe, Analyst at National Bank of Canada Capital Markets

Hi, good morning. Thank you for taking my question. So my first one is, historically the Composite segment's EBITDA has had a higher torque to sequential growth rates. Like we saw in Q2 this quarter, gross margins were up almost 300 basis points quarter over quarter, but EBITDA margins only 60 basis points. Could you give us some color on what was perhaps behind that and what could have been perhaps holding segment margins back?

Mike Reeves, President and CEO

Yeah. Good morning. So I think the important thing to remember about the Composite segment is that there's two fairly different businesses within there—Xerxes, where underground tanks are sold into fuel and water applications, and FlexPipe, selling into oilfield applications. Historically, FlexPipe has maintained a higher EBITDA margin than Xerxes and, as a consequence, the relative mix of revenues coming from those two businesses tends to influence the EBITDA margin for the segment.

Overall, we've seen Xerxes margins work their way upwards over the course of the last few quarters and are very pleased with that trajectory. But still, the relative mix of revenue makes a difference. So in Q2 we saw Xerxes become a bigger relative share of revenue in that segment versus the prior year. And at the same time, we saw FlexPipe begin to deliver into that large international order that we communicated at our last earnings call, and that order has a slightly lower margin profile than their traditional North American business.

So those are the two primary factors. I would tell you that pricing leverage in both businesses remains strong, so I am not concerned by the relative movements that I've just discussed. I think both Xerxes and FlexPipe are on trends that will yield continued margin expansion for the segment.

Nathan Poe, Analyst at National Bank of Canada Capital Markets

Okay, great. That's great color. And now touching on Xerxes. Xerxes is delivering record sales. Presumably, as you continue to unlock more capacity, that will just keep happening. Where are you today on achieving that 10% productive capacity gain for the year?

Mike Reeves, President and CEO

Yeah, I think our outlook for full-year productive capacity gains in Xerxes has moved to 10% to 15% year over year. So the team are doing a very, very effective job of improving operational efficiency, driving higher productive output, which allows our commercial teams to win more work and deliver more work. So all in all, I think the Xerxes team is on a very good trajectory. Demand is very strong, and we expect it to stay that way for multiple years.

The most important thing is that the relative improvement in productive output this year is not a one-year event. When we look across our network, we have many opportunities to continue this trajectory, and I would expect that over the next several years we see similar rates of growth. So, excited by Xerxes, and to have them set new records in both revenue and EBITDA contribution in Q2 and yet have so many opportunities in front of them, I think it's an exciting moment in time for that business.

Nathan Poe, Analyst at National Bank of Canada Capital Markets

Okay, great. The commentary on oil and gas activity picking up in Q3 from select customers is quite encouraging. Is that based on conversations you're having right now, or is that based on industry forecasts? The reason I'm asking, or the reason for the caution, is that over the last few years we've had some head fakes with respect to activity and bottoming. So just wanted to get some clarity on that.

Mike Reeves, President and CEO

No, I think you're absolutely right. The market has been a little difficult to predict over the last several years. As we sit here today, we are well within the window where customer orders for Q3 would already be in backlog. So I think our outlook for the quarter is one that comes with high confidence. Generally speaking, what we've observed is select customers—certainly not all customers—be willing to modestly accelerate their pace of spend and activity in U.S. land. That has pulled activity levels in Q3 to a modestly higher point than we were observing in Q2, which is good. What we need to see is whether those same customers or others are willing to actually expand their full-year capital spending program for 2026. If they do, then we would expect to see activity at least remain stable Q3 to Q4, or perhaps move modestly up. If they choose to stay fully disciplined, then this acceleration into Q3 would leave a little bigger-than-normal air gap in late Q4 as budgets are exhausted.

So the outlook that we've provided you is assuming the latter of those two scenarios. And if we see positive movement in terms of customer decision-making there, then obviously that yields some upside to the outlook we've given you.

Nathan Poe, Analyst at National Bank of Canada Capital Markets

Okay, thank you for the color. I'll turn it over.

OPERATOR

Thank you. If you would like to ask a question, please press star 11 on your telephone. You'll hear that automated message advising your hand is raised. And at this time, there are no more questions in the queue. I would like to turn the call back over to Mike for closing remarks. Please go ahead.

Mike Reeves, President and CEO

Perfect. Well, we appreciate your time today to walk through our Q2 results. Very excited to be setting new revenue and EBITDA records across the business and look forward to doing this again in 90 days and talking about what we expect to be a very strong Q3. Have a great day, everybody.

OPERATOR

Thank you for participating in today's conference call. You may now disconnect.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.