TSE:VNP 5N Plus Q4 2023 Earnings Report $1.28 -0.02 (-1.20%) Closing price 04/17/2025 04:00 PM EasternExtended Trading$1.28 +0.00 (+0.39%) As of 04/17/2025 04:43 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast Inspire Veterinary Partners EPS ResultsActual EPS$0.04Consensus EPS $0.06Beat/MissMissed by -$0.02One Year Ago EPSN/AInspire Veterinary Partners Revenue ResultsActual Revenue$88.59 millionExpected Revenue$84.15 millionBeat/MissBeat by +$4.44 millionYoY Revenue GrowthN/AInspire Veterinary Partners Announcement DetailsQuarterQ4 2023Date2/27/2024TimeN/AConference Call DateWednesday, February 28, 2024Conference Call Time8:00AM ETUpcoming EarningsInspire Veterinary Partners' next earnings date is estimated for Wednesday, May 21, 2025, based on past reporting schedules. Conference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress ReleaseEarnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Inspire Veterinary Partners Q4 2023 Earnings Call TranscriptProvided by QuartrFebruary 28, 2024 ShareLink copied to clipboard.There are 7 speakers on the call. Operator00:00:00Good morning, ladies and gentlemen. Thank you for standing by, and welcome to the 5N Plus Inc. 4th Quarter 20 22 Results I would like to turn the conference over to your speaker today, Richard Perron, Chief Financial Officer. Please go ahead, sir. Speaker 100:00:45Good morning, everyone, and thank you for joining us for our Q4 and full year 2023 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 Gerard 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. Speaker 100:01:10Information 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's discussion and analysis of 2023, dated February 27, 2024, available on our website and 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's discussion and analysis. I would like now to turn the conference over to Geraldine. Speaker 200:01:53Thank you, Richard, and welcome, everyone. Yesterday, we announced results for our 4th quarter fiscal year ended December 31, 2023. For full year 2023, we delivered record reported adjusted EBITDA and significant margin expansion, while sustaining a strong backlog. Our performance across these key metrics is proof that our strategy focused on commercial excellence, value added products and long term partnerships is delivering tangible results. It is also enabling us to provide the market with increased visibility on our growth path. Speaker 200:02:41I will begin by discussing our segmented performance. Specialty semiconductors continued to benefit from strong demand, especially in the high growth terrestrial renewable energy and space solar power sectors. Both revenue and adjusted EBITDA were up in the quarter the year compared to 2022. On terrestrial renewable energy, as previously communicated, growth was more than 40% compared to 2022 levels. This follows the historic multiyear agreement we signed with long time partner First Solar announced in late 2022. Speaker 200:03:28In terms of projects that highlight the role we play for our customers is the solar power plant recently inaugurated at Rio Pinto's Kennecott Copper operation in Utah, from which we secured a Tellurium supply agreement. They inaugurated a 5 Megawatt solar power plant with First Solar panels made with the very tellurium we refined for First Solar, really bringing things full circle. On the EASO side, high profile projects that use our solar cell technology included the European Space Agency's mission to Jupiter and the Indian Space Research Organization's lunar exploration mission. In addition, Regent integrated the world's largest and highest efficiency next generation long duration solar energy storage project in Australia, which also use Azure solar cells. These projects are just a handful of examples demonstrating that our world class expertise, favorable global footprint and value added product development continue to be valued by our key customers in critical sectors of the economy. Speaker 200:05:06In Performance Materials, we are still seeing a drag on revenue due to the strategic exit from our low margin business in Belgium in the second half of twenty twenty two. However, adjusted EBITDA from this segment was higher in the Q4 and full year compared to 2022. Looking ahead, we expect most of the growth from this segment to come from the health and pharmaceutical sectors. We will also continue to explore product expansion opportunities and development initiatives both independently and through partnerships. Turning to operation. Speaker 200:05:51As you know, we have been investing in our production capacity to ensure that we could fully capitalize on the growing demand for our specialty semiconductor products. On terrestrial renewable energy, we successfully increased capacity by 40% at our Eisen Utenstadt facility. Now we are executing the extension project in Saint Laurent, Montreal to increase capacity by 60%. The Montreal project is being led by the same project lead as in Germany. To meet strong demand for our Azure space solar technology, we are also investing to increase production capacity by 30%. Speaker 200:06:42Finally, as we secure additional complex feeds and secondary market streams for the recovery of critical minerals, we expect operations in recycling and refining in Montreal to be at capacity in 2024. Our success in 2023 is a direct result of our focus on commercial excellence. Our approach ensures we are an integral and valued part of our customer solutions, focusing on the development of strategic long standing relationships, working with customers to produce innovative products that meet their unique needs. With this approach, we also seek to accelerate our go to market timeline while optimizing capital deployment through co investment initiatives. This entrenches us with key customers and solidifies our market leadership position, allowing us to grow revenues without compromising margins. Speaker 200:07:54With our strong backlog and growing demand in the critical end markets, which we supply, we have confidence in our approach and our future. Records are made to be broken and it is our objective to do just that in the coming years. We are confident in our approach and as reflected in our guidance for 2024 2025, we expect to be able to keep leveling up our performance year after year. For full year 2024, we are maintaining our previously disclosed adjusted EBITDA guidance range of between $45,000,000 to $50,000,000 which if realized would represent growth of 17% to 31% over 2023, 100% supported by organic growth initiatives. Additionally, we are pleased to introduce adjusted EBITDA guidance for full year 2025 of between $50,000,000 $55,000,000 Taking the midpoint of this range, this would represent an approximately 37% increase over 2023 or 11% increase over 2024. Speaker 200:09:22Also 100% supported by an organic growth initiatives. To achieve our goals, we will continue our disciplined execution on our growth strategy and commercial excellence, including prudent investment in our production capacity. By leveraging our strong customer relationships and deep industry expertise, we expect to continue on our growth trajectory, while maintaining our unique position as a trusted developer and manufacturer of ultra high purity specialty semiconductors and performance materials. Of course, none of this would be possible without our amazing team on 3 continents. Our people have been instrumental in our success to date and will continue to play a key role in helping execute on our game plan and record breaking ambitions. Speaker 200:10:25Richard, over to you for a review of our financial results in more detail. Thank you, Gerben. Good morning, everyone. To begin, Speaker 100:10:33I would like to echo Jarvin's positive sentiments with respect to our results for the Q4 and fiscal 2023 as well as with respect to our expectations for the years ahead. Our strategy for growth and customer centric approach continue to bear fruit and much better adjusted EBITDA results. We believe this is a tip of the iceberg and that we will continue to benefit from our proven approach capitalizing on a variety of future opportunities for continued profitable growth. Starting with revenue for Q4 2023, revenue was up 7% over last year. The increase is primarily attributable to the growth in specialty semiconductors from the renewable energy and space power sectors, offset by lower revenue in Performance Materials, resulting from our strategic exit from the manufacturing of low margin extractive and catalytic products in the second half of twenty twenty two and related divestiture of Belgium operations in Q4 last year. Speaker 100:11:27We expect Q4 to be the last quarter to experience this drag on the Performance Materials as the transition period is not behind us and revenue comparisons will no longer be skewed by the exit. Adjusted gross margin reached 28.5 percent in the 4th quarter compared to 26.7% in Q4 of last year. For fiscal 2023, adjusted gross margin was 29% compared to 23.7% last year. We achieved an adjusted EBITDA in the Q4 of US9 $1,000,000 an increase of $2,300,000 or 35% compared to $6,700,000 in the Q4 of 2022. On a year over year basis, we reached a record reported adjusted EBITDA of $38,300,000 an increase of 28% over the $30,000,000 achieved last year. Speaker 100:12:20This is the strongest reported adjusted EBITDA performance since the company's inception. On a segmented basis, adjusted EBITDA for Specialty Semiconductors was $7,500,000 in Q4, an increase of 31% over the same quarter last year. For the year, adjusted EBITDA was $27,500,000 an increase of 13% over fiscal 2022. For the fiscal year, our adjusted EBITDA margins was 18% compared to 20% for the same period last year. It is worth noting that in the second half of twenty twenty three, the company brought on board additional qualified manpower to be integrated and trained as well accelerated preventive maintenance and other initiatives to bolster production and support incremental demand in 2024. Speaker 100:13:08In Performance Materials, adjusted EBITDA in Q4 2023 was $4,600,000 an increase of 15% over the same quarter last year and representing an adjusted EBITDA margin of 24% compared to 14% in Q4 last year. For fiscal 2023, adjusted EBITDA was $21,900,000 an increase of 27% over fiscal 2022, representing an adjusted EBITDA margin of 26 percent compared to 12% for fiscal 2022. This is where you see the positive impact of our improved product mix. Looking at our backlog on December 31, 2023, it represented 290 days, which was 8 days higher than the previous quarter and 39 days higher than at December 2022. For Specialty Semiconductors, backlog is close to max at 350 days, which is down 15 days or 4% compared to September December due to the timing of signing and or renewal of contracts. Speaker 100:14:09The backlog for Performance Materials represented 157 days of annualized revenue, up 35 days or 29% compared to the backlog on September and up 33 days or 27% compared to December last year, also due to the signing and or renewal of contracts, which for this segment typically occur in the 4th and the 1st quarters of this year of the year. Total debt stood at $108,500,000 as of December compared to $121,000,000 last December. However, net debt after considering cash and cash equivalents decreased by $4,500,000 to $73,800,000 on December 2023 from $78,300,000 on December 2022. Lastly, I will provide some remarks on our outlook. Given our long standing customer relationships, contracted demand and proven customer excellence program, we are confident we will continue to benefit from increasing demand and the trust of our long term and strategic clients. Speaker 100:15:09With this in mind, we are reiterating our previously disclosed adjusted EBITDA guidance for fiscal 2024, which we expect to be between $45,000,000 $50,000,000 We're also pleased to introduce full year 2025 adjusted EBITDA guidance, which we anticipate will be between $50,000,000 $55,000,000 Consistent with what we discussed on our Q3 call, we ended 2023 right on target with an adjusted gross margin of 29%, which exceeded our past performance in this metric. We continue to believe this level of gross margin is sustainable over the long term and that there is potential for higher margins over the short to medium term, assuming continued revenue growth, favorable product mix and further optimization efforts. Our conviction in our ability to deliver on these targets is thanks to our successful move over the last several years away from more commodity driven and lower margin products towards more high growth markets and value added products supported by our strong go to market and client partnership approach. We will keep executing on this path in 2024 and beyond to deliver our growth and value creation objectives. This concludes our formal remarks. Speaker 100:16:19I will now turn the call back to the operator for the Q and A session. Thank Operator00:16:51Your first question comes from David Ocampo with Cormark Securities. Please go ahead. Speaker 300:16:57Thanks. Good morning, gentlemen. Speaker 200:16:59Good morning. Good morning. Speaker 300:17:01My first set of questions is on specialty semiconductors. I mean, if we take a look at the Q3 and the Q4, the margins in the quarter were weaker than the first half of the year. And I think on the last conference call, you guys called out some old contracts with Azure that was signed by the previous ownership group that was negatively impacting margins. Curious if that was the case this quarter and when you expect all those contracts or the older contracts to be completely rolled off yearbooks? Speaker 100:17:30Okay. Two factors. There is what you just described, the contracts that were earned by, I'm going to use the term our predecessor that are being realized and then we're going to be going to periods where we're going to be rising those recently earned contracts. So that will improve. This will continue for part of 2024 and for most of them will be behind us towards the second half of this year, but most certainly in 2025. Speaker 100:17:55The other factor impacting the absolute dollars or margins as we've seen are superb. As a percentage of sales is, as I mentioned in my webcast, demand is important in 2024 and in 2025. So in the second half of twenty twenty three, we brought on board, I'm going to use the term incremental qualified manpower. We've done some proactive preventive maintenance and a bunch of other initiatives to make sure that we bolster production and increase our capacity so that we can be ready for 2024. So that by default that also an impact, but it was all done for good reasons as you can imagine. Speaker 300:18:34Yes. That's very helpful. And then thinking bigger picture on Specialty Semi, I mean, this is clearly your growth segment and all of your products do seem mission critical for your end customers. But when I look at even the first half of call it 2023, the margin profile is or it lags your Performance Materials division. What are some of the drivers that you guys can pull where the margins can inflect higher than where your Performance Materials segment is? Speaker 100:19:05The margins for 2023 on the Performance Materials were, as you can see, extremely good. But it's simply because from an operation perspective and commercial perspective, as I can say all the stars were well aligned, but it's going to be difficult to maintain that same level of margins forward, okay. You will see specialty semiconductors improving over time and Performance Materials expressed as a percentage of sales most likely be lower than 2023. So 2023 is a superb year for that segment that brings as little as challenges to repeat year after year. Speaker 300:19:45Got you. And then last one for me. You guys haven't signed a new First Solar agreement, but we clearly see the growth there with the opening of both 2 new facilities in 2025 and 2026. I'm just curious what volume growth assumption you guys are using for your 2025 guidance as it relates to First Solar. And I'm just curious if there's any other initiatives that are baked into that guidance, whether it's from RayGen or from your CT scanner business? Speaker 200:20:14Well, with First Solar, as you may imagine, we have started to discuss about the next few coming years. You know you are aware that they are going through a vast expansion mode in the U. S. Then what we have taken into consideration is conservative growth and we will conclude this negotiation in the next few months. Speaker 100:20:42The reality is we're very aware of the need in the coming years and we've picked their level for the purpose of our guidance at this point in time and we'll adjust it in time if required. Speaker 300:20:54Okay. That's it for me. I'll hop back in the queue. Operator00:20:58Your next question comes from Michael Glen with Raymond James. Please go ahead. Speaker 400:21:04Hey, guys. Just to follow-up on the First Solar negotiation. Would it be if we were to think about the potential, is there should we be thinking about potential to for a bump to the EBITDA guidance once that contract is negotiated? Speaker 100:21:26It's a possibility, yes, that we will communicate in time. Speaker 400:21:34Okay. And then just circling back onto the margins. And if I'm thinking about Azure margins in 2024 versus 2023, you're describing there is still some more of this older backlog that needs to be worked through. Will Azure expand margins in 2024 versus 2023? Speaker 100:22:01In 2024 by default, as we have made an announcement, we are we had it capacity as there. So on an absolute basis, like dollar basis, margins will be higher and it will also improve on a percentage basis because of the additional volume and the effect of older contracts being realized. So the short answer is yes, a combination of volume driven for the absolute dollars and contract mix if you want from percentage basis. Yes. Speaker 200:22:33And we expect that to continue obviously. In this segment, we're managing growth. Then it's all about the art of adding the right people at the right time, adding the we had a new shift in a few months ago. Now we're adding equipment. Then it's we're managing growth. Speaker 200:22:52We're working closely with our customers and we're making sure that the new contract that we will be realizing would be at better margin. Speaker 400:23:01Okay. And in the quarter, did Azure have are you able to indicate at all what Azure's exit run rate was on revenue this year? Speaker 100:23:16It was definitely higher than the previous year. Let us we it's a competitive industry, obviously. We're in Europe. So ultimately in time numbers will be available to the public. But for competitive reason, we would like to keep it at the Speaker 300:23:41sectors. Speaker 400:23:43Okay. And just then can you give an outlook? I mean, if I'm looking at your cash flow statement next year, what would be the CapEx number we will see on the cash flow statement in 2024? Speaker 100:24:00Okay. First, the as we explained on the MERS calls before, we have under our Space Power Extra business, we have clients that are providing assets to us that as per IFRS, those assets are presented in the accounting cash flow as a CapEx to us, but ultimately we get reimbursed on a cash basis. The CapEx figure out of the accounting cash flow does not represent the true CapEx out. The rule of thumb that I've communicated in the past where on average on a net cash out basis, CapEx should average the depreciation charge, the annual depreciation charge for property, plant and equipment. Speaker 400:24:44So that is. Okay. But would the just the absolute figure that I see on the cash flow statement would be something equivalent to the figure that Speaker 100:24:55Yes, if you remove the reimbursement received from that partner, you would end up at a figure that is close to what I just described as a rule of thumb for CapEx and time. Speaker 400:25:08Okay. Thank you. Operator00:25:13Your next question comes from Rupert Merer with National Bank. Please go ahead. Speaker 500:25:19Hi, good morning. Good morning, Rupert. Good morning. Now you've already given us some color on your guidance over the next couple of years with respect to expectations from for solar and from your margin changes. But I'm just wondering if you can go through on a high level your general process for building up guidance for next couple of years and what some of the assumptions that you use for that guidance are? Speaker 500:25:46Maybe if you're depending on any capacity expansions to hit those numbers, it's basically a general high level look at the process rebuilding guidance. Speaker 100:25:57It's a similar approach to the approach we've used for 2023 and 2024 and 2025. We're using very conservative level of growth on the Performance Materials. We still foresee that under Specialty Semiconductors, the sensing and imaging sector will grow, but much lower than the other sectors. And then we're left with contracts on hand for the other 2 sectors. That's how we built our guidance forward. Speaker 500:26:30Okay. So contracts on hand for the other 2 sectors. So potentially is there upside from additional contracts not just from First Solar but maybe from the space industry as well? Speaker 100:26:43Yes. And I'll continue, I guess, the second half of your question from a capacity perspective and that will answer that last question. We brought on board, as I've mentioned, at the incremental qualifying manpower to be ready. We've added we are adding and we've added equipment here and there. And the capacity added from both a human resources perspective and equipment exceeds the assumptions used for guidance. Speaker 100:27:09So any additional orders coming our way, we will be able to address. Speaker 500:27:16Okay. Very good. Thanks. And then secondly, terrestrial solar, you also have your initiative with RayGen. I believe you delivered to RayGen in previous quarters. Speaker 500:27:29Can you give us an update on the outlook for that business? And is any of that baked into your guidance for the next couple of years? Speaker 200:27:37Well, what we have in our guidance is the contract we have with RayGen for the time being. And as you may imagine, they're currently potential sites to produce energy and this is not included in the guidance. Speaker 500:27:55So the existing contract you have with them, is that a material amount for the next couple of years? Speaker 100:28:01If you sum the 2 years, yes, it is. Speaker 400:28:05Yes. Speaker 500:28:08All right. Very good. I'll get back in the queue. Thank you. Operator00:28:19Your next question comes from Frederic Tremblay with Desjardins. Please go ahead. Speaker 600:28:24Good morning. Speaker 200:28:26Good Speaker 600:28:27morning. Just want to maybe clarify the incremental manpower and preventive maintenance. So am I right in sort of interpreting this as kind of a headwind in the second half of twenty twenty three, but this will actually be offset in 2024 through an increased level of business. Essentially, it was a bit of a profitability headwind in Q4, but should normalize in 2024. Is that the right way to look at it? Speaker 600:28:58Or is there still going to be, call it, a bit of margin pressure in early 2024 from this? Speaker 200:29:05Thanks for the question. Managing growth is always complicated. You want to make sure that you will have both the equipment ready and all the capacity as well in terms of the workforce being trained. Then what we've been doing, we've been growing this company organically. We have contracts on end. Speaker 200:29:25We're adding capacity both at Azure and also in our Terrestrial division in Montreal now. We did Eisenhuttenstad last year. Then what we look is the optimal way to execute the game plan. And this is why we've done that in Q4. We hired more people in Q4 than expected. Speaker 200:29:47We decided to do a preventive maintenance in order to be ready to break records again in 2024. Speaker 600:29:57Okay, perfect. That's helpful. Just on contract renewals, I know Q4 and Q1 are busy periods for that. Can you maybe just generally speak to what you're seeing or hearing from clients in terms of their volume needs and their views on pricing? Is that is your positioning in the industry allowing you to generate attractive pricing in the current environment? Speaker 100:30:24For the sectors we serve, I mean, we don't see any contractions on volume because of, I don't know, general economic conditions if that's where you're going. Except a tiny little portion of our business, like we still have a small portion of our business that we refer to as technical materials. Those may be a bit more impacted by any slowdown that could occur in time. For the rest of pharma products and other key sectors that you know now very well, volume and pricing, we don't see any negative trend or pressure Speaker 200:31:02forward. And we're currently negotiating contract at Azur for a year for 20272028. Then we don't see any slowing demand. We see the demand being very strong. Speaker 600:31:17Okay, perfect. I think you mentioned your recycling capacity being basically at capacity in 2024. Overall, in terms of the supply environment, is there enough supply in your pipeline to realize the growth opportunities that you're seeing out there? Or is it becoming more challenging on the supply side? Speaker 200:31:42What we've been doing for the last couple of years is developing this capacity, working with different companies in order to valorize their feed. And what we see is the appetite from this company to valorize their secondary feed is increasing. They are quite active from a sometime it's from a sustainability standpoint, sometime it's also good from an economic standpoint for them. But we're not we're no longer chasing them. They're chasing us to valorize their byproducts. Speaker 600:32:19Helpful. Thanks for taking the questions. Operator00:32:23Your next question comes from Michael Glen with Raymond James. Please go ahead. Speaker 400:32:29Hey, I just want to, Gervais, in your opening comments, you talked about the first solar contract renewal being I believe the wording used was in within the next few months. Is that do you guys think that that's something you could have out before Q1 report? Speaker 200:32:49Honestly, we don't want to put any pressure on the timing. We want to get the best contract possible. If it's Q2, it will be Q2. Speaker 400:33:01Okay, understood. Thank you. Operator00:33:07There are no further questions at this time. Please proceed. Speaker 100:33:11Okay. Well, we'd like thank you all for joining us this morning and we're wishing you a good day. Speaker 500:33:17Thank you. Operator00:33:19Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallInspire Veterinary Partners Q4 202300:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release Inspire Veterinary Partners Earnings HeadlinesInspire Veterinary prices 1.09M shares at $1.83 in registered direct offeringMarch 26, 2025 | markets.businessinsider.comInspire Veterinary signs LOI to acquire Central Florida-based animal hospitalMarch 17, 2025 | markets.businessinsider.comHow War with China Could Start in 128 DaysThe clock is ticking. Those who aren't prepared could lose everything. I've identified 43 investments we believe are in immediate danger.April 20, 2025 | Behind the Markets (Ad)Inspire Veterinary registers ‘Family Pet Care’ trade name in MarylandMarch 6, 2025 | markets.businessinsider.comInspire Veterinary increases authorized shares, regains Nasdaq complianceFebruary 13, 2025 | msn.comINSPIRE VETERINARY PARTNERS, INC.: Inspire Veterinary Partners Issues Corporate Update Letter to ShareholdersFebruary 12, 2025 | finanznachrichten.deSee More Inspire Veterinary Partners Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Inspire Veterinary Partners? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Inspire Veterinary Partners and other key companies, straight to your email. Email Address About Inspire Veterinary PartnersInspire Veterinary Partners (NASDAQ:IVP) owns and operates veterinary hospitals in the United States. The company specializes in small animal general practice hospitals, which serve companion pets, canine, and feline breeds, including equine care. Its hospitals provide preventive care for companion animals consisting of annual health exams and parasite control; dental health; nutrition and body condition counseling; neurological examinations; radiology; bloodwork; and skin and coat health, and other breed specific preventive care services. It also offers surgical services, which include soft tissue procedures, such as spays and neuters, mass removals, splenectomies, gastropexies, orthopedic procedures, and other surgical offerings; and care and alternative procedures, such as acupuncture, chiropractic, and other health and wellness services. The company was incorporated in 2020 and is based in Virginia Beach, Virginia.View Inspire Veterinary Partners ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Archer Aviation Unveils NYC Network Ahead of Key Earnings Report3 Reasons to Like the Look of Amazon Ahead of EarningsTesla Stock Eyes Breakout With Earnings on DeckJohnson & Johnson Earnings Were More Good Than Bad—Time to Buy? 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There are 7 speakers on the call. Operator00:00:00Good morning, ladies and gentlemen. Thank you for standing by, and welcome to the 5N Plus Inc. 4th Quarter 20 22 Results I would like to turn the conference over to your speaker today, Richard Perron, Chief Financial Officer. Please go ahead, sir. Speaker 100:00:45Good morning, everyone, and thank you for joining us for our Q4 and full year 2023 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 Gerard 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. Speaker 100:01:10Information 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's discussion and analysis of 2023, dated February 27, 2024, available on our website and 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's discussion and analysis. I would like now to turn the conference over to Geraldine. Speaker 200:01:53Thank you, Richard, and welcome, everyone. Yesterday, we announced results for our 4th quarter fiscal year ended December 31, 2023. For full year 2023, we delivered record reported adjusted EBITDA and significant margin expansion, while sustaining a strong backlog. Our performance across these key metrics is proof that our strategy focused on commercial excellence, value added products and long term partnerships is delivering tangible results. It is also enabling us to provide the market with increased visibility on our growth path. Speaker 200:02:41I will begin by discussing our segmented performance. Specialty semiconductors continued to benefit from strong demand, especially in the high growth terrestrial renewable energy and space solar power sectors. Both revenue and adjusted EBITDA were up in the quarter the year compared to 2022. On terrestrial renewable energy, as previously communicated, growth was more than 40% compared to 2022 levels. This follows the historic multiyear agreement we signed with long time partner First Solar announced in late 2022. Speaker 200:03:28In terms of projects that highlight the role we play for our customers is the solar power plant recently inaugurated at Rio Pinto's Kennecott Copper operation in Utah, from which we secured a Tellurium supply agreement. They inaugurated a 5 Megawatt solar power plant with First Solar panels made with the very tellurium we refined for First Solar, really bringing things full circle. On the EASO side, high profile projects that use our solar cell technology included the European Space Agency's mission to Jupiter and the Indian Space Research Organization's lunar exploration mission. In addition, Regent integrated the world's largest and highest efficiency next generation long duration solar energy storage project in Australia, which also use Azure solar cells. These projects are just a handful of examples demonstrating that our world class expertise, favorable global footprint and value added product development continue to be valued by our key customers in critical sectors of the economy. Speaker 200:05:06In Performance Materials, we are still seeing a drag on revenue due to the strategic exit from our low margin business in Belgium in the second half of twenty twenty two. However, adjusted EBITDA from this segment was higher in the Q4 and full year compared to 2022. Looking ahead, we expect most of the growth from this segment to come from the health and pharmaceutical sectors. We will also continue to explore product expansion opportunities and development initiatives both independently and through partnerships. Turning to operation. Speaker 200:05:51As you know, we have been investing in our production capacity to ensure that we could fully capitalize on the growing demand for our specialty semiconductor products. On terrestrial renewable energy, we successfully increased capacity by 40% at our Eisen Utenstadt facility. Now we are executing the extension project in Saint Laurent, Montreal to increase capacity by 60%. The Montreal project is being led by the same project lead as in Germany. To meet strong demand for our Azure space solar technology, we are also investing to increase production capacity by 30%. Speaker 200:06:42Finally, as we secure additional complex feeds and secondary market streams for the recovery of critical minerals, we expect operations in recycling and refining in Montreal to be at capacity in 2024. Our success in 2023 is a direct result of our focus on commercial excellence. Our approach ensures we are an integral and valued part of our customer solutions, focusing on the development of strategic long standing relationships, working with customers to produce innovative products that meet their unique needs. With this approach, we also seek to accelerate our go to market timeline while optimizing capital deployment through co investment initiatives. This entrenches us with key customers and solidifies our market leadership position, allowing us to grow revenues without compromising margins. Speaker 200:07:54With our strong backlog and growing demand in the critical end markets, which we supply, we have confidence in our approach and our future. Records are made to be broken and it is our objective to do just that in the coming years. We are confident in our approach and as reflected in our guidance for 2024 2025, we expect to be able to keep leveling up our performance year after year. For full year 2024, we are maintaining our previously disclosed adjusted EBITDA guidance range of between $45,000,000 to $50,000,000 which if realized would represent growth of 17% to 31% over 2023, 100% supported by organic growth initiatives. Additionally, we are pleased to introduce adjusted EBITDA guidance for full year 2025 of between $50,000,000 $55,000,000 Taking the midpoint of this range, this would represent an approximately 37% increase over 2023 or 11% increase over 2024. Speaker 200:09:22Also 100% supported by an organic growth initiatives. To achieve our goals, we will continue our disciplined execution on our growth strategy and commercial excellence, including prudent investment in our production capacity. By leveraging our strong customer relationships and deep industry expertise, we expect to continue on our growth trajectory, while maintaining our unique position as a trusted developer and manufacturer of ultra high purity specialty semiconductors and performance materials. Of course, none of this would be possible without our amazing team on 3 continents. Our people have been instrumental in our success to date and will continue to play a key role in helping execute on our game plan and record breaking ambitions. Speaker 200:10:25Richard, over to you for a review of our financial results in more detail. Thank you, Gerben. Good morning, everyone. To begin, Speaker 100:10:33I would like to echo Jarvin's positive sentiments with respect to our results for the Q4 and fiscal 2023 as well as with respect to our expectations for the years ahead. Our strategy for growth and customer centric approach continue to bear fruit and much better adjusted EBITDA results. We believe this is a tip of the iceberg and that we will continue to benefit from our proven approach capitalizing on a variety of future opportunities for continued profitable growth. Starting with revenue for Q4 2023, revenue was up 7% over last year. The increase is primarily attributable to the growth in specialty semiconductors from the renewable energy and space power sectors, offset by lower revenue in Performance Materials, resulting from our strategic exit from the manufacturing of low margin extractive and catalytic products in the second half of twenty twenty two and related divestiture of Belgium operations in Q4 last year. Speaker 100:11:27We expect Q4 to be the last quarter to experience this drag on the Performance Materials as the transition period is not behind us and revenue comparisons will no longer be skewed by the exit. Adjusted gross margin reached 28.5 percent in the 4th quarter compared to 26.7% in Q4 of last year. For fiscal 2023, adjusted gross margin was 29% compared to 23.7% last year. We achieved an adjusted EBITDA in the Q4 of US9 $1,000,000 an increase of $2,300,000 or 35% compared to $6,700,000 in the Q4 of 2022. On a year over year basis, we reached a record reported adjusted EBITDA of $38,300,000 an increase of 28% over the $30,000,000 achieved last year. Speaker 100:12:20This is the strongest reported adjusted EBITDA performance since the company's inception. On a segmented basis, adjusted EBITDA for Specialty Semiconductors was $7,500,000 in Q4, an increase of 31% over the same quarter last year. For the year, adjusted EBITDA was $27,500,000 an increase of 13% over fiscal 2022. For the fiscal year, our adjusted EBITDA margins was 18% compared to 20% for the same period last year. It is worth noting that in the second half of twenty twenty three, the company brought on board additional qualified manpower to be integrated and trained as well accelerated preventive maintenance and other initiatives to bolster production and support incremental demand in 2024. Speaker 100:13:08In Performance Materials, adjusted EBITDA in Q4 2023 was $4,600,000 an increase of 15% over the same quarter last year and representing an adjusted EBITDA margin of 24% compared to 14% in Q4 last year. For fiscal 2023, adjusted EBITDA was $21,900,000 an increase of 27% over fiscal 2022, representing an adjusted EBITDA margin of 26 percent compared to 12% for fiscal 2022. This is where you see the positive impact of our improved product mix. Looking at our backlog on December 31, 2023, it represented 290 days, which was 8 days higher than the previous quarter and 39 days higher than at December 2022. For Specialty Semiconductors, backlog is close to max at 350 days, which is down 15 days or 4% compared to September December due to the timing of signing and or renewal of contracts. Speaker 100:14:09The backlog for Performance Materials represented 157 days of annualized revenue, up 35 days or 29% compared to the backlog on September and up 33 days or 27% compared to December last year, also due to the signing and or renewal of contracts, which for this segment typically occur in the 4th and the 1st quarters of this year of the year. Total debt stood at $108,500,000 as of December compared to $121,000,000 last December. However, net debt after considering cash and cash equivalents decreased by $4,500,000 to $73,800,000 on December 2023 from $78,300,000 on December 2022. Lastly, I will provide some remarks on our outlook. Given our long standing customer relationships, contracted demand and proven customer excellence program, we are confident we will continue to benefit from increasing demand and the trust of our long term and strategic clients. Speaker 100:15:09With this in mind, we are reiterating our previously disclosed adjusted EBITDA guidance for fiscal 2024, which we expect to be between $45,000,000 $50,000,000 We're also pleased to introduce full year 2025 adjusted EBITDA guidance, which we anticipate will be between $50,000,000 $55,000,000 Consistent with what we discussed on our Q3 call, we ended 2023 right on target with an adjusted gross margin of 29%, which exceeded our past performance in this metric. We continue to believe this level of gross margin is sustainable over the long term and that there is potential for higher margins over the short to medium term, assuming continued revenue growth, favorable product mix and further optimization efforts. Our conviction in our ability to deliver on these targets is thanks to our successful move over the last several years away from more commodity driven and lower margin products towards more high growth markets and value added products supported by our strong go to market and client partnership approach. We will keep executing on this path in 2024 and beyond to deliver our growth and value creation objectives. This concludes our formal remarks. Speaker 100:16:19I will now turn the call back to the operator for the Q and A session. Thank Operator00:16:51Your first question comes from David Ocampo with Cormark Securities. Please go ahead. Speaker 300:16:57Thanks. Good morning, gentlemen. Speaker 200:16:59Good morning. Good morning. Speaker 300:17:01My first set of questions is on specialty semiconductors. I mean, if we take a look at the Q3 and the Q4, the margins in the quarter were weaker than the first half of the year. And I think on the last conference call, you guys called out some old contracts with Azure that was signed by the previous ownership group that was negatively impacting margins. Curious if that was the case this quarter and when you expect all those contracts or the older contracts to be completely rolled off yearbooks? Speaker 100:17:30Okay. Two factors. There is what you just described, the contracts that were earned by, I'm going to use the term our predecessor that are being realized and then we're going to be going to periods where we're going to be rising those recently earned contracts. So that will improve. This will continue for part of 2024 and for most of them will be behind us towards the second half of this year, but most certainly in 2025. Speaker 100:17:55The other factor impacting the absolute dollars or margins as we've seen are superb. As a percentage of sales is, as I mentioned in my webcast, demand is important in 2024 and in 2025. So in the second half of twenty twenty three, we brought on board, I'm going to use the term incremental qualified manpower. We've done some proactive preventive maintenance and a bunch of other initiatives to make sure that we bolster production and increase our capacity so that we can be ready for 2024. So that by default that also an impact, but it was all done for good reasons as you can imagine. Speaker 300:18:34Yes. That's very helpful. And then thinking bigger picture on Specialty Semi, I mean, this is clearly your growth segment and all of your products do seem mission critical for your end customers. But when I look at even the first half of call it 2023, the margin profile is or it lags your Performance Materials division. What are some of the drivers that you guys can pull where the margins can inflect higher than where your Performance Materials segment is? Speaker 100:19:05The margins for 2023 on the Performance Materials were, as you can see, extremely good. But it's simply because from an operation perspective and commercial perspective, as I can say all the stars were well aligned, but it's going to be difficult to maintain that same level of margins forward, okay. You will see specialty semiconductors improving over time and Performance Materials expressed as a percentage of sales most likely be lower than 2023. So 2023 is a superb year for that segment that brings as little as challenges to repeat year after year. Speaker 300:19:45Got you. And then last one for me. You guys haven't signed a new First Solar agreement, but we clearly see the growth there with the opening of both 2 new facilities in 2025 and 2026. I'm just curious what volume growth assumption you guys are using for your 2025 guidance as it relates to First Solar. And I'm just curious if there's any other initiatives that are baked into that guidance, whether it's from RayGen or from your CT scanner business? Speaker 200:20:14Well, with First Solar, as you may imagine, we have started to discuss about the next few coming years. You know you are aware that they are going through a vast expansion mode in the U. S. Then what we have taken into consideration is conservative growth and we will conclude this negotiation in the next few months. Speaker 100:20:42The reality is we're very aware of the need in the coming years and we've picked their level for the purpose of our guidance at this point in time and we'll adjust it in time if required. Speaker 300:20:54Okay. That's it for me. I'll hop back in the queue. Operator00:20:58Your next question comes from Michael Glen with Raymond James. Please go ahead. Speaker 400:21:04Hey, guys. Just to follow-up on the First Solar negotiation. Would it be if we were to think about the potential, is there should we be thinking about potential to for a bump to the EBITDA guidance once that contract is negotiated? Speaker 100:21:26It's a possibility, yes, that we will communicate in time. Speaker 400:21:34Okay. And then just circling back onto the margins. And if I'm thinking about Azure margins in 2024 versus 2023, you're describing there is still some more of this older backlog that needs to be worked through. Will Azure expand margins in 2024 versus 2023? Speaker 100:22:01In 2024 by default, as we have made an announcement, we are we had it capacity as there. So on an absolute basis, like dollar basis, margins will be higher and it will also improve on a percentage basis because of the additional volume and the effect of older contracts being realized. So the short answer is yes, a combination of volume driven for the absolute dollars and contract mix if you want from percentage basis. Yes. Speaker 200:22:33And we expect that to continue obviously. In this segment, we're managing growth. Then it's all about the art of adding the right people at the right time, adding the we had a new shift in a few months ago. Now we're adding equipment. Then it's we're managing growth. Speaker 200:22:52We're working closely with our customers and we're making sure that the new contract that we will be realizing would be at better margin. Speaker 400:23:01Okay. And in the quarter, did Azure have are you able to indicate at all what Azure's exit run rate was on revenue this year? Speaker 100:23:16It was definitely higher than the previous year. Let us we it's a competitive industry, obviously. We're in Europe. So ultimately in time numbers will be available to the public. But for competitive reason, we would like to keep it at the Speaker 300:23:41sectors. Speaker 400:23:43Okay. And just then can you give an outlook? I mean, if I'm looking at your cash flow statement next year, what would be the CapEx number we will see on the cash flow statement in 2024? Speaker 100:24:00Okay. First, the as we explained on the MERS calls before, we have under our Space Power Extra business, we have clients that are providing assets to us that as per IFRS, those assets are presented in the accounting cash flow as a CapEx to us, but ultimately we get reimbursed on a cash basis. The CapEx figure out of the accounting cash flow does not represent the true CapEx out. The rule of thumb that I've communicated in the past where on average on a net cash out basis, CapEx should average the depreciation charge, the annual depreciation charge for property, plant and equipment. Speaker 400:24:44So that is. Okay. But would the just the absolute figure that I see on the cash flow statement would be something equivalent to the figure that Speaker 100:24:55Yes, if you remove the reimbursement received from that partner, you would end up at a figure that is close to what I just described as a rule of thumb for CapEx and time. Speaker 400:25:08Okay. Thank you. Operator00:25:13Your next question comes from Rupert Merer with National Bank. Please go ahead. Speaker 500:25:19Hi, good morning. Good morning, Rupert. Good morning. Now you've already given us some color on your guidance over the next couple of years with respect to expectations from for solar and from your margin changes. But I'm just wondering if you can go through on a high level your general process for building up guidance for next couple of years and what some of the assumptions that you use for that guidance are? Speaker 500:25:46Maybe if you're depending on any capacity expansions to hit those numbers, it's basically a general high level look at the process rebuilding guidance. Speaker 100:25:57It's a similar approach to the approach we've used for 2023 and 2024 and 2025. We're using very conservative level of growth on the Performance Materials. We still foresee that under Specialty Semiconductors, the sensing and imaging sector will grow, but much lower than the other sectors. And then we're left with contracts on hand for the other 2 sectors. That's how we built our guidance forward. Speaker 500:26:30Okay. So contracts on hand for the other 2 sectors. So potentially is there upside from additional contracts not just from First Solar but maybe from the space industry as well? Speaker 100:26:43Yes. And I'll continue, I guess, the second half of your question from a capacity perspective and that will answer that last question. We brought on board, as I've mentioned, at the incremental qualifying manpower to be ready. We've added we are adding and we've added equipment here and there. And the capacity added from both a human resources perspective and equipment exceeds the assumptions used for guidance. Speaker 100:27:09So any additional orders coming our way, we will be able to address. Speaker 500:27:16Okay. Very good. Thanks. And then secondly, terrestrial solar, you also have your initiative with RayGen. I believe you delivered to RayGen in previous quarters. Speaker 500:27:29Can you give us an update on the outlook for that business? And is any of that baked into your guidance for the next couple of years? Speaker 200:27:37Well, what we have in our guidance is the contract we have with RayGen for the time being. And as you may imagine, they're currently potential sites to produce energy and this is not included in the guidance. Speaker 500:27:55So the existing contract you have with them, is that a material amount for the next couple of years? Speaker 100:28:01If you sum the 2 years, yes, it is. Speaker 400:28:05Yes. Speaker 500:28:08All right. Very good. I'll get back in the queue. Thank you. Operator00:28:19Your next question comes from Frederic Tremblay with Desjardins. Please go ahead. Speaker 600:28:24Good morning. Speaker 200:28:26Good Speaker 600:28:27morning. Just want to maybe clarify the incremental manpower and preventive maintenance. So am I right in sort of interpreting this as kind of a headwind in the second half of twenty twenty three, but this will actually be offset in 2024 through an increased level of business. Essentially, it was a bit of a profitability headwind in Q4, but should normalize in 2024. Is that the right way to look at it? Speaker 600:28:58Or is there still going to be, call it, a bit of margin pressure in early 2024 from this? Speaker 200:29:05Thanks for the question. Managing growth is always complicated. You want to make sure that you will have both the equipment ready and all the capacity as well in terms of the workforce being trained. Then what we've been doing, we've been growing this company organically. We have contracts on end. Speaker 200:29:25We're adding capacity both at Azure and also in our Terrestrial division in Montreal now. We did Eisenhuttenstad last year. Then what we look is the optimal way to execute the game plan. And this is why we've done that in Q4. We hired more people in Q4 than expected. Speaker 200:29:47We decided to do a preventive maintenance in order to be ready to break records again in 2024. Speaker 600:29:57Okay, perfect. That's helpful. Just on contract renewals, I know Q4 and Q1 are busy periods for that. Can you maybe just generally speak to what you're seeing or hearing from clients in terms of their volume needs and their views on pricing? Is that is your positioning in the industry allowing you to generate attractive pricing in the current environment? Speaker 100:30:24For the sectors we serve, I mean, we don't see any contractions on volume because of, I don't know, general economic conditions if that's where you're going. Except a tiny little portion of our business, like we still have a small portion of our business that we refer to as technical materials. Those may be a bit more impacted by any slowdown that could occur in time. For the rest of pharma products and other key sectors that you know now very well, volume and pricing, we don't see any negative trend or pressure Speaker 200:31:02forward. And we're currently negotiating contract at Azur for a year for 20272028. Then we don't see any slowing demand. We see the demand being very strong. Speaker 600:31:17Okay, perfect. I think you mentioned your recycling capacity being basically at capacity in 2024. Overall, in terms of the supply environment, is there enough supply in your pipeline to realize the growth opportunities that you're seeing out there? Or is it becoming more challenging on the supply side? Speaker 200:31:42What we've been doing for the last couple of years is developing this capacity, working with different companies in order to valorize their feed. And what we see is the appetite from this company to valorize their secondary feed is increasing. They are quite active from a sometime it's from a sustainability standpoint, sometime it's also good from an economic standpoint for them. But we're not we're no longer chasing them. They're chasing us to valorize their byproducts. Speaker 600:32:19Helpful. Thanks for taking the questions. Operator00:32:23Your next question comes from Michael Glen with Raymond James. Please go ahead. Speaker 400:32:29Hey, I just want to, Gervais, in your opening comments, you talked about the first solar contract renewal being I believe the wording used was in within the next few months. Is that do you guys think that that's something you could have out before Q1 report? Speaker 200:32:49Honestly, we don't want to put any pressure on the timing. We want to get the best contract possible. If it's Q2, it will be Q2. Speaker 400:33:01Okay, understood. Thank you. Operator00:33:07There are no further questions at this time. Please proceed. Speaker 100:33:11Okay. Well, we'd like thank you all for joining us this morning and we're wishing you a good day. Speaker 500:33:17Thank you. Operator00:33:19Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.Read morePowered by