MATR Q1 2025 Update - $MATR.to

Solid Q on demand pull. Tariff uncertainty remains.

*Disclosure: I own shares in MATR. I am not a professional. Please do your own due diligence.

Price: $10.36 CAD

MC: 652 million CAD

EV: 1.214 billion CAD

1 year performance: -39%

MATR reported Wednesday night and held a call yesterday morning. Results were ahead of my expectations, the guide was cautious and the stock was down 7.8%.

*all numbers in CAD unless stated otherwise

Quarter Recap

• Revenue came in at 320.1 million.

• EBITDA came in at 54 million for continuing operations.

• Some pull forward due to customers purchasing ahead of tariffs.

• They anticipate Q2 to be lower than Q1.

• Composites

  • Flexpipe seem the most pull forward from the anticipation of tariffs. Sales likely lower in Q2.

  • Xerxes should see better activity sequentially due to better weather for underground installation of tanks.

• Connection

  • DSG-Canusa should be stable as lower automotive activity is offset by market share gains.

  • Shawflex and AmerCable sales to be lower in Q2 due to some specific industry activity in the business.

• Capex to be 60-70 million in 2025.

  • 15 million of it is maintenance.

• They are above the 2x leverage level (including leases) and feel they will get where they want to be in 12-18 months of the AmerCable acquisition.

• They will continue with a mix of the NCIB and paying back debt.

Call Notes

• The MEO (modernization, expansion and optimization) costs should be completed in Q2 2025.

• Flexpipe has the most pull forward demand in anticipation of tariffs.

• They have not changed their expectations for Xerxes and AmerCable over time dispute short term disruptions.

• Should see some more meaningful revenue from nuclear in 2026.

  • This is from refurbishment activities at Bruce Power and new products being introduced.

• Stormwater management has grown nicely in the last 2 years and then hit a ceiling due to capacity. They should see it grow again with the MEO initiatives and the new HydroChain product.

Valuation

I have lowered the remaining 2025 numbers due to the quarter and tariff uncertainty. I am estimating about 185 million EBITDA for 2025. I have them at about 6.5x EV/2025 estimated EBITDA. I am using all lease liabilities in that calculation. I will let you decide if that is appropriate.

Closing Thoughts

The quarter was better than I was expecting. Even if I removed the roughly 4 mil EBITDA pull forward they mentioned on the call, they were still ahead of my estimates.

The capex number is higher than I was hoping for in 2025. There are still some MEO costs in Q2, but the remainder of the year is not quite as low as I was expecting. Having said that, the large part of the capex spend and facility optimization is done. They should have more of their FCF dedicated to repurchases or paying down debt moving forward.

I do think there is risk to market getting a bit bored in the coming quarters as they continue to de-lever. The softer Q2 and tariff uncertainty does make MATR a potential candidate to see some selling pressure in the short term. These former X darlings tend to need some time for the shareholder base to rotate.

I still believe the thesis in intact despite the short term headwinds. I am maintaining my position at this point.

Thanks for reading.

Dean

* long MATR.to