5n Plus Inc Aktie

Good morning, ladies and gentlemen. Thank you for standing by, and welcome to the 5N Plus Inc. First Quarter 2026 Results Conference Call.

[Operator Instructions] I would like to turn the conference over to your speaker today, Richard Perron, President. Please go ahead, sir.

Good morning, everyone, and thank you for joining us for our Q1 2026 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 Gervais Jacques, our 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's discussion and analysis of 2025 dated February 24, 2026, 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 information, please refer to our management's discussion and analysis.

I would now turn the conference call over to Gervais.

Thank you, Richard. Good morning, everyone, and thank you for joining us today. Before we begin, I would like to say a few words. As you know, I'm transitioning to the role of Executive Chair. So this is my last earnings call as Chief Executive Officer of 5N Plus. It has been a privilege and an honor to serve as CEO, and I would like to thank our shareholders and the broader investment community for their continued support. I look forward to contributing in my new capacity to the company's strategic direction and long term development.

I have great confidence in Richard as he steps into the CEO role. Richard has been instrumental in our success, and he is well positioned to continue executing on our strategy and take 5N Plus to the next level.

Now turning to the quarter. Q1 2026 reflects a powerful start to the year with strong momentum across our core end markets above expectations. Performance was driven by sustained demand in Specialty Semiconductors, as well as favorable pricing conditions in Performance Materials. In Specialty Semiconductors, demand remained strong across our strategic sectors with backlog continuing to provide excellent visibility, supported by ongoing strength in terrestrial renewable energy and space solar power. Bookings are now extending even beyond 2028.

Segment performance in the quarter was driven by demand in terrestrial renewable energy in large part, reflecting our expanded agreement with our strategic U.S.-based customer in this sector. As you will recall, under this agreement, volumes increased by 33% for the year of '25-'26 and will increase by a further 25% for the subsequent term through 2028. In Performance Materials, the favorable pricing conditions we benefited from in 2025 persisted longer than anticipated and contributed positively to results, once again, reflecting the agility of our global sourcing platform. Across the business, we remain focused on disciplined execution, productivity initiatives and capacity expansion plans.

At our AZUR facility in Heilbronn, Germany, we initiated work on our latest and previously announced capacity expansion project. This follows the 30% increase in solar cell production capacity achieved in 2025. We have begun our work and are now progressing towards an additional 25% increase, which is expected to come online by the second half of 2026, in line with customer demand. As a reminder, this capacity expansion requires targeted investment because much of the equipment is already in place.

Overall, our first quarter performance reflects disciplined strategy execution. We remain focused on the right value-added products in the right end markets, supported by agile operations and sourcing as well as strong customer relationships. At the same time, we are fully engaged to mitigate the best we can the pressure resulting from the uncertain economic environment.

Before turning the call over, I would also like to mention that our new Chief Financial Officer, Alban Fournier, joined the company just a few days ago. We are very pleased to welcome him to the leadership team, and we look forward to introducing him to the investment community ahead of our next call.

With that, I will now turn it over to Richard.

Thank you, Gervais, and good morning, everyone. Before turning to the financials, I too would like to acknowledge Gervais for his leadership and contributions to 5N Plus. Gervais and I established a strong working relationship over the years, and we will continue to cooperate closely in his capacity as Executive Chair. I look forward to building on the strategy we developed and deployed the success as a team.

I also look forward to working closely with our new CFO, Alban, who is quite quickly setting up to speed on all aspects of the business and the rest of our leadership team. As we move into our next phase of growth, our focus remains on disciplined execution, scaling our position in high-growth end markets, thanks to our value-added expertise and driving operational efficiency. All of this is being pursued with a view to delivering long term sustainable value to our stakeholders.

Turning now to our financial performance for the first quarter. Revenue for Q1 2026 was $117.9 million, an increase of 33% compared to $88.9 million in Q1 of last year, primarily driven by higher volumes in Specialty Semiconductors and stronger pricing in Performance Materials, all of which reflects a favorable product mix. Adjusted gross margin increased by 36% to $41.4 million, representing 35.1% of sales compared to 34.2% in the prior year, reflecting a favorable product mix and pricing above input costs. Adjusted EBITDA reached $29.2 million, up 41% year-over-year compared to Q1 last year. Net earnings were $17.8 million or $0.20 per share compared to $9.6 million or $0.11 per share in Q1 last year.

In Specialty Semiconductors, revenue increased to $86.2 million, up 37% year-over-year, primarily driven by higher volumes in terrestrial renewable energy. Adjusted EBITDA increased by 42% to $25.1 million, reflecting higher demand in terrestrial renewable energy and improved unit costs from economies of scale. Adjusted gross margin remained strong at $34.4 million of sales compared to 35% in Q1 last year. The decrease reflects less favorable metal input costs, partially mitigated by economies of scale. Backlog remains effectively maxed out at 365 days, providing continued visibility into future demand.

In Performance Materials, revenue increased to $31.7 million, up 21% year-over-year. Adjusted EBITDA increased by 67% to $10.1 million, supported by favorable pricing and product mix. Adjusted gross margin expanded to an impressive 37.8% of sales compared to 32.9% of sales in Q1 last year. The improvement also reflects favorable pricing and product mix, partly offset by less favorable metal input costs. Backlog represented 130 days of annualized revenue, reflecting contract timing and renewals.

Cash used in operating activities was $13.5 million in Q1 compared to cash generated in the prior year, primarily reflecting higher working capital requirements to support increased volumes and sustained demand. Net debt stood at $74.7 million at March 31 during 2026 compared to $50.3 million at the end of '25, reflecting the working capital investment in the quarter. Despite this increase, our net debt-to-EBITDA ratio remains low at 0.71x, highlighting the strength of our financial position.

Turning to the outlook. In Specialty Semiconductors, structural growth across our core end markets continues to support demand, particularly in terrestrial renewable energy and space solar power. Long-term customer agreements and FT backlog also provides strong visibility. In Performance Materials, favorable pricing conditions extended into the first quarter longer than we had anticipated. That said, we continue to expect a gradual normalization over the remainder of the year.

More broadly, we continue to operate in a dynamic environment with anticipated cost volatility and inflationary pressures due to the current geopolitical context. While we delivered strong performance in the first quarter, we continue to expect higher input and operating costs to exert some pressure on margins over the course of the year. In this context, we remain focused on the elements within our control, disciplined execution, including on productivity initiatives and capacity expansion lans to support long term growth and drive economies of scale. Taking these factors into account, along with our strong first quarter performance, we're maintaining our full year adjusted EBITDA guidance of $100 million to $105 million. We expect a more balanced contribution across the year compared to our prior expectations.

We also continue to actively evaluate external growth opportunities to further strengthen our leadership in Advanced Materials across our key markets. Overall, we are confident in the underlying growth fundamentals of our end markets, our competitive positioning within those markets and our ability to execute on our strategy to deliver sustained profitable growth.

So that concludes our formal remarks. I will now turn the call back over to the operator for the Q&A with our financial analysts.

[Operator Instructions] Your first question comes from Baltej Sidhu with National Bank of Canada.

Congratulations once again, Gervais and Richard, on the transition. Just a few questions from me.

So on the adjusted EBITDA margins in the SS segment, they reached a record high, partly driven by economies of scale. Just thinking looking forward, how sustainable are these margin levels going forward, just given the strong underlying demand? And is that a fair run rate assumption to consider going forward?

On a consolidated basis, yes. If we have any variations from a gross margin expressed as a percentage of sales, it's going to be quite limited. It's going to be quite reasonable, nothing drastic. The current margins we have is what we're expecting for the remainder of the year for the most part of the year. If anything -- if there's any variation from one quarter to another, it will be most likely due to the product mix rather than the fundamentals of our business.

That's great. And then could you share an update on your pipeline in the Space segment? And are there any changes in the competitive landscape that you're seeing right now, whether that's capacity? And it seems like pricing has continued to stay above inflation. Just any commentary that you have around AZUR SPACE.

The market is essentially -- there's essentially no newcomers, and we have 2 competitors essentially and all 3 of us are all very busy. And like we often say in the, let's say, the history of the satellite industry for the actual products that we're supplying to that industry, the Space ourselves, we expect pricing to continue to be very extremely interesting and capacity to be maxed out. That's why we continue to -- again, earlier this year, we announced a further expansion of our production capacity. And going forward, we expect similar announcement will come as well.

Perfect. And just one more here, just more on the terrestrial solar side. So in your CSR report last month, you highlighted Perovskite Precursors. Could you comment on the broader opportunity that you're seeing here and the path forward towards commerciality?

Sorry, I missed the beginning of your question.

In the CSR report, you highlighted Perovskite Precursors for terrestrial solar. Just if you can comment on the broader opportunity and path towards commerciality.

Well, as you know, we've been working in our customers and the entire industry is working to develop Perovskite. Perovskite is quite promising, but this is something that still required the development in order to make sure that the efficiency could last with a long period of time. Then we know that Perovskite could produce energy for a short period of time, a few months, but could it last for 15 years? That remains to be seen. And this is why the different companies are working on that.

So it's still under a product development phase and then we'll follow qualification before full commercialization.

Your next question comes from Nick Boychuk with ATB Cormark.

Coming back to Baltej's question on the consolidated gross margin profile, specifically for SS and your comments in the MD&A about the ongoing year's efficiency program. I'm curious how much of that is tied to either incremental capacity expansion within the existing 4 walls of terrestrial solar AZUR SPACE versus the optimization of margins and how much each could increase? If we are seeing your U.S. customer on the terrestrial solar side, expanding in the U.S. further, speaking about adding more capacity, would you be able to address that? Is that part of your ongoing program? Or is everything right now focused on margin enhancements?

Specific to the space industry, the combination of capacity expansion, the high demand, independent of the positions of our competitors from a margin perspective, we expect that it will continue to be good forward as the pressure on the actual -- on the volume that is required from a solar cell perspective continues to increase, and it seems to be the case for many years to come.

Your next question comes from Michael Glen with Raymond James.

Yes, congrats, Gervais, on everything achieved during your tenure at 5N. And Richard, congratulations too, as you transition to your new role. Just Richard, you're talking about the metal input costs. Like can you give some insight into how those maybe trend in both segments through the rest of this year in both the Specialty Semiconductor and the Performance Materials?

We typically don't speculate on where the patients will go forward. But just in the last year, for all metals that we're using to make our products, there's been some substantial increase in the patients.

Would you be able to comment at all regarding how there would be some pricing mechanisms with your customers in the various segments?

Yes. Each segment and sectors within the segments that we serve, all contracts have their own behavior. But typically, within a certain range, it's a fixed price and after that comes a formula. In other contracts that are more long term, we have special clauses where adjustments are made in time based on the most recent notation. In other parts of our business, it's typically a formula that is applied -- a premium that is applied on top of the notation. So it varies from one product to another.

We're always exposed but much, much less exposed than ever in the history of the company. But look, we're making products out of metal. So there's always a little exposure. But quite minimal today versus what we experienced in many years ago. The key is obviously the quality of the product portfolio today essentially being made of value-added products. So there could be a lag. So a lag could happen, but it will definitely not hurt our margins like in other industries, relying much less on the patients than in the past and other industries.

The sales gains you saw, you highlight the scale gains. Now does the scale gains that you expect from top line and revenue through the rest of the year, do you see that as being enough to offset the notation inflation that's been seeing?

That's what is foresees, yes.

Okay. And then just one clarification for me. So maybe I missed the first 4 minutes of the conference call. But in the MD&A, you talked about AZUR expanding by 30% of capacity. Is that a tick higher than the 25% that was...

Yes. The 30% is the capacity increase realized last year, out of which we'll get the benefits this year. And earlier this year, we made another announcement at 25%, out of which we'll get the benefit next year in '27.

Your next question comes from Frederic with Desjardins.

I just wanted to start with Performance Materials and the pricing there. You mentioned that it's been more favorable or favorable for longer than initially expected. Can you just remind us what's behind your view that this favorable pricing will eventually reverse?

It's essentially the continuation of last year where security of supply is the #1 priority these days on the current geopolitical context. And we're able to supply our clients with quality products on time without any interruption due to our footprint relations and processes in place. So that's what's behind. Essentially continuity of last year's theme, which is security of supply.

Just on First Solar, they had good comments on U.S. bookings and manufacturing utilization in the Q1 results recently. Can you share anything about the volume trends that you're seeing there relative to the contracted volumes that you have with them? Are you -- in the past, you talked about selling spot volumes to them. Maybe general thoughts on the volumes that you're seeing now and expecting for the next couple of years with them?

The volume is essentially as per the contract, no changes to that. If anything, every volume of material that we're producing needs to be expedited to First Solar in the U.S. So the contract is essentially a take-or-pay commitment and there a desperate need for the products. So there's definitely no changes to the volume other than every volume produced needs to be expedited to First Solar rapidly.

The next question comes from Nick Boychuk with ATB Cormark.

I was cut off on the question before. I just want to come back to that gross margin dynamic, specifically on the Specialty Semiconductor. I want to understand the new run rate that we're talking about here, the 34% plus. Does that factor in all of the efficiency improvements and gains that you're seeing from the improved economies of scale and cost per ton? Or could we actually see a further benefit into the year as things continue to progress?

The current margins that we are realizing is on the back of favorable market conditions and economies of scale. Going forward, we're applying ourselves to introduce various productivity initiatives and that on top of additional capacity and further economies of scale is going to bring additional benefits to the margins. That, to some extent, will obviously improve, but will mitigate any negative impact if any other factors were to increase in time due to inflation and else.

Then tying that into the unchanged guidance for the full year, what would have to happen over the next 3 quarters for either guidance not to be met or for things to be exceeded? Because on this new margin profile, assuming the top line persists and given the visibility you have there, it feels as if we're set up for a materially larger year. I'm curious if you can help me understand that.

Well, like we often bring -- I mean, in our business and many other businesses, you have typically 3 main risks. Commercially, as you know, a large portion of our business is under contract. So we have a pretty good idea of where it's going to land at year-end and the type of mix we're going to have both products and clients. What we don't know is the exact distribution per quarter. Technology-wise, this year, we're going to be essentially doing more of the same. So that's also well under control. So what we're left with is the operational risk, okay? Which -- to which will also include inflation and else.

So look, if we have a stellar year in terms of energy, consumables, reliable equipment and else, yes, the likelihood to beat the guidance is very good. Otherwise, we still believe no matter what kind of headwinds we're going to have from those factors, we still believe the guidance we have on hand is a valid guidance.

Is there material energy exposure risk to some of your European assets?

Yes, mostly, mostly. But that -- I mean, obviously, we have different measures in place also to limit our risk, but we cannot control everything, as you can imagine, in today's complex environment.

The next question comes from Yuri Lynk with Canaccord.

Yes. I want to come back to the guidance question, and maybe I'll attack it a different way. I mean, really strong start to the year. You're pointing to sustainable with some upside margins in Specialty Semiconductors. But to stay within the full year guidance, I mean, it's -- you're essentially downgrading the back half view versus what you might have had previously. So is that all within Performance Materials? Or am I misreading the implied guidance there? Just some detail on how your back half of 2026 outlook might have changed since we last spoke?

When -- before starting the year, what we anticipated was a stronger second half. Now we expect the whole -- the first 6 months and the last 6 months to be more and more aligned with similar level. So that's what we're seeing. The reason behind it is we expect some normalization of the margins under Performance Materials.

But that was the expectation previously, right? Would...

Yes, we expected that right from Q1. And as we've said, Q1 is a nice surprise from that standpoint.

Okay. So no real change to your Specialty Semiconductors...

Specialty Semi out of our 2 segments because we have long-term contracts, have a pretty good idea of the mix and the releases. No, it was originally -- and again, it was all essentially based on our expectations that Performance Materials will normalize earlier in the year, and we had an incredible Q1. But we continue to be prudent and believe that it will be normalized over the coming quarters. But it will still be an incredible superb business, obviously. Everything is relative here.

Yes, of course. I mean, we're more than a month into Q2. I mean, have you started to see that normalization? Or has those positive trends continued into Q2?

It's still positive.

So you'd say the outlook is fairly conservative for the year, the guidance? That's what it sounds like.

Yes. No, exactly. As I said, from an operational perspective, we remain prudent as to any inflation, operational challenges in the current complex environment and else. So we remain prudent. It's only 1 quarter out of 4. So years go by quickly, but at the same time, it's a little marathon that we have to go to.

[Operator Instructions] Your next question comes from Michael Glen with Raymond James.

Just a follow-up on the working capital. You had the AR and the inventory build in the quarter. Maybe how should we think about those trending over the next few quarters?

As it is often the case, in the first half of the year, we typically carry a bit more net working cap than usual. But that being said, year-over-year because of the growth, the important growth under both, especially under renewable energy and space power, there will be an increase in the net working cap by year-end. But again, in the first half, a bit more pronounced than in the second half. But on a full year basis, you'll have a little increase in net working cap aligned with the growth.

Any notable updates that you guys can share with progress on M&A targets?

Nothing specific other than as we often say, we're highly motivated to complete the transaction. We're looking at many different files with an internal team dedicated to it and the help of external resources. So we're spending a fair bit of time looking at various files. So we're very serious about it.

There are no further questions at this time. I will now turn the call over to Richard, for closing remarks.

Well, I would like to thank you all for joining us this morning, and we wish you all a good day. Thank you.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.

Good morning, ladies and gentlemen. Thank you for standing by, and welcome to 5N Plus Fourth Quarter 2025 Results Conference Call. [Operator Instructions] And I would now like to turn the conference over to your speaker today, Richard Perron, President and Chief Financial Officer. Please go ahead.

Good morning, everyone, and thank you for joining us for our Q4 and full year 2025 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 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's discussion and analysis of 2025 dated February 24, 2026, 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. Further information, please refer to our management's discussion and analysis. I would now turn the conference over to Gervais.

Thank you, Richard, and thank you all for joining us today. 2025 was truly record-setting year for 5N Plus. By leaning on our strength, we navigated a complex macroeconomic and geopolitical environment with agility and delivered phenomenal growth.

This was driven by our strategic focus on value-added products in key end markets, our flexible global sourcing and manufacturing capabilities and strong customer relationships. Customers recognize our expertise. They trust us to deliver reliability and quality in demanding advanced material applications.

In 2025, we also reached new heights in our financial performance, far exceeding the objectives we set for ourselves when we started the year. This includes accelerated revenue growth, record adjusted EBITDA and significant margin expansion, and it was made possible by contributions from both of our segments.

In Specialty Semiconductors, our strong performance across the board once again confirm our status of -- as a supplier of choice in the high-growth renewable energy and SPACE Solar Power sectors. Starting with renewable energy. The new and expanded agreement for the supply of thin-film semiconductor materials with our strategic customer announced last August was an important milestone, providing visibility on a multiyear growth path.

Under the new agreement, we increased volumes by 33% for the 2025 and '26 period underway and by another 25% for the subsequent term, taking us to the end of 2028. This agreement supports our customers' U.S. manufacturing growth plans as the leading American solar technology company. It also reinforces our critical supplier role within this value chain.

SPACE Solar Power is another key end market with a clear and multiyear path for growth. After a strong year, our project pipeline at AZUR is very robust, extending beyond 2028. By the end of 2025, we successfully increased solar cell production capacity by 30% as planned. We are also now working towards an additional 25% capacity increase, which we expect to start gradually coming online in the second half of 2026, in line with customer demand.

Whether in Montreal or in Germany, our sites are focused on scaling production and pursuing capacity expansion with discipline, unlocking productivity improvements and operational efficiencies along the way. Earlier this year, we also announced that we received a USD 18.1 million award from the American government to expand germanium recycling and refining capacity at our St. George, Utah facility.

This investment aims to strengthen domestic supply chains for optics and SPACE Solar applications. Once again, it is a recognition of our expertise in reliability in a strategic sector. Finally, in performance materials, our intentional focus on key products in the health, pharmaceuticals and technical materials sectors has been the right one.

In 2025, we capitalized on favorable pricing conditions and delivered strong results despite lower volumes. And this was no accident. As the leading supplier of bismuth-based chemicals and compounds, we took full advantage of our flexible sourcing and manufacturing capabilities to realize improved margins. Looking ahead, while the operating environment is expected to remain complex, the underlying growth trends across our key end markets remain clear.

Strategically, 5N Plus sits at the intersection of utility scale and space-based renewable energy infrastructure. We supply advanced materials that enable critical sought-after technologies. As we previously discussed, solar energy remains a key component of the U.S. energy mix despite policy shifts. One of the driver is the fast adoption of AI technology, which required large data centers with significant power needs.

At the same time, structural expansion in the space industry continues at elevated levels, where we are the go-to partner to the main players in this sector, thanks to our leadership in solar cell technology. Medium term, we also anticipate growth opportunities in imaging and sensing, both on the security and the medical imaging front.

In performance materials, we remain a key partner for health and technical materials with growth expected to remain broadly in line with GDP, consistent with historical trends. With strong foundations, a clear growth path and a proven strategy, we are well positioned to level up our performance in 2026 and deliver long-term value for our shareholders.

With that, I will now turn it over to Richard for a detailed review of our financial results and outlook.

Thank you, Gervais, and good morning, everyone. We are very pleased with our record financial performance of 2025. What you're seeing today is the result of strategic choices. Over the past several years, we have made a concerted effort to grow our specialty semiconductor business and to increase the proportion of revenue and earnings coming from high-end and high-growth sectors.

At the same time, we have streamlined our performance materials activities, increasing the resilience of our highly complementary business. We have accomplished this by adjusting our footprint and investing in operations over the years, streamlining our product portfolio with a focus on growing or solidifying our position in key end markets and prioritizing client partnerships built over the long term.

Our results speak for themselves and validate our strategy. In full year 2025, total revenue increased by 35% year-over-year, reaching $391.1 million with $285.4 million of those revenues coming from specialty semiconductors. Adjusted gross margin increased 44% year-over-year to reach $131.8 million in full year 2025. This translated into a robust adjusted gross margin as a percentage of sales of 33.7% for the year. This was boosted by an exceptional adjusted gross margin of 42.4% of sales for full year 2025 in performance materials.

Finally, full year 2025 adjusted EBITDA increased by 73% over last year to a record $92.4 million. This includes a $70.1 million contribution from specialty semiconductors, helping us exceed the high end of our twice increased annual guidance range of between $85 million and $90 million. With our increased cash flow generation and prudent balance sheet management, we have significantly reduced net debt from $100.1 million at the end of 2024 to $50.3 million at the end of 2025. This brings our net debt-to-EBITDA ratio at year-end to 0.5x.

Let's now take a closer look at our segments. Starting with our Q4 performance in Specialty Semiconductors. Revenue increased by 47% compared to Q4 last year to reach $76.2 million, supported by higher volumes in renewable energy and space solar. Adjusted gross margin increased by 27% in dollar terms. As a percentage of sales, adjusted gross margin was lower year-over-year coming in at 25.5% because of a less favorable product mix and higher planned maintenance expenses.

As discussed on our last conference calls, we completed incremental preventive maintenance in full year 2025 to support our operational objectives for the full year 2026. Adjusted EBITDA in Q4 2025 increased by 12% to reach $14.2 million, supported by higher volumes, partially offset by the same factors mentioned before.

Quarterly variations aside, the segment's performance for the year was excellent with a 41% increase in revenue to $285.4 million and a 59% increase in adjusted EBITDA to $70.1 million, while maintaining a robust annual adjusted gross margin of 30.8% of sales. Backlog also continues to be maxed out at 265 days as per our definition, with strong demand and orders in our strategic sectors booked several years out.

Turning now to performance materials with the story in Q4 consistent with what we've delivered all year. Revenue increased by 36% in the quarter to $25.8 million over Q4 2024. This brought full year segment revenue to $105.7 million, up 22% over 2024. Q4 adjusted gross margin was 40.9% of sales compared to 33.5% in Q4 of last year.

As mentioned, the segment's full year adjusted gross margin came in at an impressive 42.4% of sales. Adjusted EBITDA in Q4 increased by 108% to reach $7.8 million for the full year adjusted EBITDA increased by 59% to $35.1 million. The segment's overall performance was driven by a favorable inventory position coming into the year and improved product mix, higher prices net of inflation and higher metal input costs.

Turning now to outlook. As the geopolitical and economic backdrop continues to evolve, we expect our operating environment in 2026 to remain complex. The underlying growth fundamentals and structural expansions in our key end markets remain very strong, providing a long runway for growth. However, we must also contend with rising input and operating costs that will pressure our margins, especially after the exceptional performance of 2025.

From an operational perspective, we are laser-focused on the execution of our growth plans. This includes scaling production and increasing capacity in strategic sectors in order to meet customer demand. We have that called all of those key projects. Driving productivity and operational efficiency in 2026 is also key to help mitigate anticipated margin pressures.

With our strong balance sheet, we will continue to invest in our operations, while also pursuing external growth opportunities to further strengthen our advanced materials leadership in key markets. Taking into account this environment and what we have in the pipeline, we anticipate generating adjusted EBITDA of between $100 million and $105 million in full year 2026 with a higher contribution in the second half of the year.

This reflects a measured and disciplined approach to build on what we have achieved last year. Our focus is on solidifying our expanded earnings base and investing selectively in capacity to generate a sustainable performance. This approach positions us to further strengthen our standing as a supplier of choice in strategic sectors and to deliver continued value creation for our shareholders.

That concludes our formal remarks. I will now turn the call back over to the operator for the Q&A with our financial analyst.

[Operator Instructions] Your first question comes from Baltej Sidhu from National Bank.

Congratulations on the quarter. First one for me is on the back of the results of America's largest solar technology manufacturer, which saw its guidance coming in below expectations and some strategic underutilization of international facilities.

Just given the Trump administration's new countervailing duties for Southeast Asian imports on solar cells and panels and if this stick, we think that its U.S. operation should be a benefactor. Any comment you can provide as it relates to that, but also the pressure on international sales and any impact to BNP, if you were looking to gain more market share in that realm?

Well, thanks for the question. I believe that the emphasis that they are doing on reshoring and supply chain resilience that they've been talking about, I think it's all favorable for 5N Plus, and it's positioning us as the supplier of choice for them.

Fantastic. And now turning to your 2026 guidance. The midpoint currently aligns with consensus and implies roughly 11% year-on-year growth. Just given the underlying momentum in the business, along with the recently announced capacity expansions for Cad Tell and AZUR, can you walk us through the key drivers underpinning that 11% growth at the midpoint? And if there's any details that you can shed on puts and takes that are embedded in the guidance?

Okay. Essentially behind the guidance in terms of growth, Bal. In the case of our renewable energy, I think we've been -- it's all out there and following our press release of last year. So we have confirmed volume for 2026 and further increase in volumes to '27 and '28. That's essentially -- this is locked in, and that's by default, a solid assumption to use in our guidance.

As for space, it follows also our most recent press releases in terms of capacity expansion. So more recently, we announced capacity expansions for -- in '26 with benefits in '27. But if you go back to previous announcements of last year, all of that extra capacity on a full year basis is also embedded in our guidance numbers for this year. That's for the space business.

Everything else, we -- from a guidance perspective, we keep our assumptions as I'm going to use the term with conservatism, and small growth. And obviously, we're applying ourselves to do always better. So first 2 sectors is backed up by orders and capacity expansion projects. And on FV, we remain prudent.

Okay. That's great detail. And another one for me is just on the performance materials outperformance and the margin normalization that you noted just given the anticipated cost pressures that was noted. Could you provide more detail on your assumptions around business pricing? Margins have continued to remain elevated. What visibility are you seeing on pricing trends? And what are you hearing in conversations with your suppliers and the offtakers?

The metals we play with, it's always extremely hard to forecast any movement in prices. So we essentially -- the way we work is through our commercial contracts. That's how we protect ourselves forward. But by default, because we hold a certain inventory on hand, we have to be more prudent than less.

So again, from a guidance perspective, we tend to use either stable or decreasing prices in order to face any -- in order to plan for any, let's say, unfavorable movement from notations. But if you recall, we've made so many changes to our product portfolio and footprint that actual variations in notations, they don't have as much, impact as they had in the past. So -- but we commercially hedge ourselves to protect us against any variations rather than guess where the nations will go in time.

So we don't have a public opinion as to where bismuth prices will go in the future. We tend to manage any variation in limitations through commercial hedging and making sure that we hold on to products that have the smallest percentage of metal as possible. So value -- deliver value-added products.

Your next question comes from Amr Ezzat from Ventum Capital Markets.

Congrats to you and the 5N team on an incredible year. Maybe I should start with the margins on Specialty Semi. They stepped down meaningfully in Q4, which I think we all expected given your comments in Q3. But I'm just wondering how much of that step down is structural or product mix versus like the maintenance that you guys sort of spoke to? And what should we read as the right sort of normalized margin range heading into '26 for Specialty Semi?

Okay. Most of the key factors behind this lower margin expressed as a percentage of revenue is essentially from accelerated or definitely us applying ourselves at getting ready -- accelerated preventive maintenance expenses and us getting ready to start 2026 on solid grounds, okay?

So the vast majority of that lower margin, again, expressed as a percentage of revenue due to that. There's a little bit of product mix, and there's a little bit by default of the usual slowdown that comes in, in December. Then going forward, I think you can hold on to the full year gross margin in order to modelize your -- the business.

Fantastic. No, that's helpful. Just another one on your EBITDA guide for fiscal '26. I appreciate your remarks in the -- in your prepared commentary on the gating factors there and the inflation of input costs.

But can you speak to what assumptions you guys are using or are embedded in your model for inflation for the different input costs, like just at a very high level, then you did mention that you're being conservative as well, which is always good. So should we be expecting another 2 increases in 2026?

Yes. Look, it's not a perfect science. Obviously, labor costs, we come up with assumptions that are based on external data. When it comes to energy and consumables, we tend to anticipate a bit more than what is the market consensus right from the start. Then the tough part remains the input metal that we use, okay?

Obviously, we're using much less metal than everything we're manufacturing and selling today, but it starts with a piece of metal. There are 2, we tend to look back and assume that similar increase will happen in the following year, okay? That's our approach, which is an approach that is more -- that shows more conservatism than less. But again, the best way for us to protect us against input metal increases is through our commercial aging practices and everything else.

Okay. I appreciate that. Then maybe if we could dig into space a little bit. Can you speak to the pricing dynamics you're seeing? Should investors expect any erosion whatsoever once competitor capacity arrives or from your vantage point, demand absorption is strong enough to keep pricing rational?

Well, if you remember, the way this business works, you earn contracts today to be delivered later on. So the backlog that we have for '26, '27 and '28, all of that is based on the most recent favorable pricing environment, okay?

So everything that you're describing is more on a way forward-looking basis. But have in mind that we're producing more and more and we have economies of scale going forward that allow us to maintain margins independent of where pricing will go to.

Fantastic. That's always good to hear. Then maybe one last one, Richard. It will be your first year as CEO, then as Gervais as Chairman. What changes, if any, should we expect in strategic priorities?

Look, it's a transition where there's -- we're making sure that there's continuity in our strategy. So don't expect anything more than us applying ourselves to go further the business on everything that we've built so far.

Your next question comes from Yuri Lynk from Canaccord Genuity.

You called out in your outlook section, I think, for the first time, some medium-term opportunities in Security and Defense. Just wondering if you can provide a little more detail on that line.

Well, as you may know, we've been working really hard in developing new products for this product line. And we know all these -- the shift to photon counting detector is starting to happen, and we can feel it, we can see it.

And this will have an impact going forward. This year, quite limited, but in 2027 and '28, that's going to start to be something significant. And we also -- we're developing all sorts of detectors that are being used both for Medical and Defense application. And today, being a Western world producer being able to do that is now definitely a key attribute that position 5N favorably.

Over the past few months, many of the big names associated with the Defense industry have come up to us and they're pretty impressed and interested in our capabilities to grow crystals, make substrates, lenses, recycle and refine strategic minerals and health. So all of that is giving us a lot of comfort that the whole topic of Defense will play favorably for us in time.

And does that Defense reference in the outlook, does that specifically tie back to the upstream expansions at St. George?

It's one of the factor, but it's the equation -- what is favorable -- what is playing favorably for us is the equation of us starting from piece of metal all the way to fancy semiconductor products. That's really the full integration that we can offer to the industry, obviously, based out of China, which is a definite -- it's a prerequisite.

Okay. And it reads to me that those security and Defense applications might show up in your revenue line before the sensing and imaging opportunity that you've talked about previously. Is that the correct way to read that?

No, it's going to -- we -- as you know, the way -- like we have this segment and we have those sectors that we serve under those segments, Defense is actually kind of spread out in between space and sensing and imaging today and to some extent, technical materials as well.

Okay. Switching gears, really nice cash generation in the quarter, balance sheet in fantastic shape. Can you talk a little bit about the M&A pipeline, if we want to call it that, and how that might have evolved over the last, say, 6 to 9 months?

We continue to look at many different files. Yes, we have what you call -- what you refer to as a pipeline, but it still requires a fair bit of work on our side before coming out to the market and say, here's the target and here's why it's a good target.

But we're actively revving many different files, meeting people, making what choose and out. We're very serious about completing a transaction this year, highly motivated as we say. But can we give you more details this morning as to the exact materials and/or markets that it came for? It's a bit hurry.

Yes. No, I understand that. I mean you say you expect to do something this year. I mean, sometimes these things aren't in your control. I mean, are you okay, if nothing -- if you can't do an acquisition this year, you're okay with that? I mean, how do we think about other ways to put the balance sheet to use?

We have a lot of internal growth to manage. This year, we're focusing on execution and deliver a strong pipeline of order that we have. And we have -- the backlog is more than 365 days. But if you look at it segmented by sectors in renewable, it's more than 3 years. Then what we're doing now is looking at M&A, but without pressure because we want the right deal. We don't want to do an acquisition. We want to do the right one, like we did successfully with AZUR 3.5 years ago.

Your next question comes from Michael Glen from Raymond James.

Maybe just to start, CapEx in '25, including intangibles, was just below $21 million for the full year. Can you provide an outlook for 2026 on CapEx?

It's going to be in a similar range.

Similar range. Okay. And then working back to the germanium investment or alignment with the U.S. Department of War. What should we think about in terms of revenue impact in 2026 and 2027 from that specific agreement?

For 2026, very little. 2027, we will start to realize some benefits out of it, but it's more a '28, '29 perspective because it takes some time to install it all and get going, and we expect it's going to take at least a year, like we have already a plan with a short list of equipment and feeds to treat, but all of that will take most likely all of this year to at least get the initial stuff in place and get going.

So it's more of an horizon '28, '29, but there will be some benefit this year and next year associated with recycling and refining complex feeds that contain germanium and from that germanium additional businesses associated with lenses, detectors and else.

Okay. And then just circling back to the First Solar-related business. So I get that a lot of what they're speaking about during the conference calls related to low capacity utilization internationally.

Can you remind us or speak to your -- what level of capacity increases you've put in Canada and Germany, maybe since the end of 2024, like how much has capacity increased for you? And speak to or remind us of the -- some of the higher level contract terms associated with First Solar volumes?

Essentially, since the end or close to the end of 2024, we must have at least doubled our capacity. And this year, we continue to add a bit capacity, and we're adding new and we're adding new equipment, brand-new capacity associated with this additional thin-film PV materials that we're going to be supplying for Solar, Cadmium [ selenide ] as we presented in our press release last August.

Okay. And are you able to remind us just the contract like pricing or volume commitments? Like how do we think about those?

Well, the volume for '25 and '26 is 33% higher than '24. And for '27 and '28, it's an additional 25%...

Over 25%, 26%.

Yes.

And that's -- we can characterize that as take-or-pay in nature.

It is.

And it is back with their capacity and most of their growth has been happening in the U.S. with their Louisiana and Alabama facility. And as you know, Petersburg has been also optimizing their production. Then what they said and what they continue to do is trying to refocus, recenter their production in North America.

Okay. And just final one. How do you think about -- are you able to give us -- I know you guide on EBITDA, but not on revenue. Are you able to give us any indication? Should we expect that revenue will -- should meaningfully outpace EBITDA growth next year?

Yes. Based on our current assumptions and again, being prudent, we're very prudent as to the actual gross margin expressed as a percentage of revenue. So you see where our guidance goes from our current 2025 EBITDA. So yes, revenue should -- as a percentage increase, should outpace a little bit the growth in EBITDA.

Your next question comes from Frederic Tremblay from Desjardins.

Just wanted to dig a bit deeper on the '26 guidance. In your comments, you did mention that you expect a higher contribution in the second half of 2026. Wondering if you can maybe provide a bit more color on the factors that are driving that? Is it just business seasonality or some of the capacity increase is coming online?

As you know, as I explained in order to build or compile our guidance, we have renewable energy and our space solar business essentially all under contract. So it's just the actual anticipated release date of those contracts that makes it -- that makes the second half a bit -- anticipated to be a bit stronger than the first half.

Obviously, releases can change from clients. We occasionally can move things around. But based on the current releases communicated by clients, assuming a stable allocation of the rest of our businesses throughout the quarter, we can anticipate the second half to be stronger. But all of that is -- I mean, it's still early stage, but it's based -- what's behind it are communicated releases from clients.

Okay. And you mentioned a bit stronger. So it's in terms of quantifying it, it's not -- it's not really a huge.

It's a bit stronger, exactly. But as I said, the full year is always committed under contract, but it may change from one quarter to another depending on confirmed releases from clients, but we start the year with a first plan discussed with clients, and that's what we have modelized and built up from a bottom-up forecast perspective.

Yes. Understood. Okay. And then you did mention your intention to drive productivity and operational efficiencies across the business. Wondering if you could provide some high-level examples of what you guys are working on, on that front?

Well, as you know, we've been adding capacity. And normally, when you're adding capacity, you're hiring new employees, you're training them, you're developing new methods of working.

And then second wave is you're doing optimization. And this is what we will be focusing on doing is trying to optimize, also bring more automation on board in both at AZUR, but also into our renewable energy. Then we've been successfully able to start the equipment, deliver products. Now we're now starting the wave of improvement.

Perfect. And then last question for me. Just on the preventive maintenance that happened in Q4, did you complete everything you wanted to complete there? Or are we expecting an impact in Q1 as well?

It's not going to be -- we did not complete everything we wanted to complete, but it's not an impact per se because if you recall, what we've done is accelerating stuff that we typically do every year. Whatever is not done in '25 is not incremental to '26. It's rather the other way around.

It's a burden to '25 that's what he said so...

[Operator Instructions] Your next question comes from Kaelan Purdie from Cormark.

It's Kaelan Purdie here filling in for Nick. Great clarity there on the maintenance strategy. Could you also maybe just speak to the pipeline for AZUR given the incremental capacity at Heilbronn, has the uptick in capacity come with any new contracts, both commercially and on behalf of government?

Well, if you recall, our approach to capacity expansion, more specifically to our SPACE Solar business is that as comes a point in time when the backlog for the following reaches the previous year's capacity level, that's when we trigger capacity expansion. So what we have announced a month or so ago is aligned with that approach, meaning that we see 2027 at level -- confirmed contracts at level of our most recent capacity and it goes on, and then we trigger those investments.

So the same will likely -- the same assessment will likely be done late '26, early '27 for '28 and so on and so forth. So to answer your question, when we increase capacity because we have the contracts.

Okay. Understood. So nothing in terms of significant pipeline without the contracts?

But the pipeline is by itself significant because the whole satellite industry continues to grow and there are more and more opportunities. It's still on a fast-growing mode today. But again, the key for us is not to bring too much capacity too earlier in time. That's where it comes to discipline that we have.

Every other week, we're bidding on projects. And when we are winning a contract, then we need to question ourselves, do we have the right capacity for -- in 2 years in time, then it's triggering decision. Then this is why we've been announcing the third expansion of AZUL might not be the last one.

Great. Understood. One last one for me. You previously identified that medical imaging is a pretty promising catalyst. I think we chat about it in the call a bit earlier here. Can you just maybe provide a quick update on the commercialization time line for the detectors? Is it still 2027?

Yes. Well, we have now one customer who is manufacturing PCBs at industrial scale. What we expect is later this year and starting next year, you will have more than one customer doing it. Then the demand will be increasing. We will play an important role. We're not the only one we're competing against China, but we will play an important role in securing the supply chain for these new products.

And that's something we've been developing for many, many years. Then I think the change is happening. We see the industry moving from scintillators to photon counting detectors. It takes time. But when it's done, it's going to be there for a long period of time.

Your next question comes from Baltej Sidhu from National Bank.

Just a quick one for me. Just given we've spoken about the cadence of contribution from the recent U.S. government investment to expand domestic germanium refining. And appreciating that it's still early days, could you share any details on how we should think about the CapEx deployment cadence?

Okay. The CapEx deployment, essentially that grant pays for CapEx. That's what's behind it ultimately. It covers also some of our own development costs, our engineers' time [indiscernible] to that. The actual deployment -- if it's for modelizing him, again, keep in mind, it's all backed up by grant, it's for your model.

It's to anticipate the business that will come out of it by default, there's a little bit of CapEx in the first year, but most of it comes in, in the second and third year by default because what's behind it is for us to finalize developing the processes and put the capabilities and capacity in place to treat various feeds that contain germanium, where by default, we will start with the easier feed and then more complex feed and even more complex feed and keep towards the end, like the real complex done, okay?

So the CapEx will also be linked to the complexity of the feeds in time. So it's going to be gradual with the most important CapEx to be realized somewhere in the middle of the project by default. But again, if your question is around helping you to modalize CapEx, there's a grant behind it.

Yes, yes. No, I was just looking at kind of backing into the cadence of the realization for that.

And there are no further questions at this time. I will turn the call back over to Richard Perron for closing remarks.

Okay. Well, we would like to thank you all for joining us this morning, and we wish you a great day.

Thank you.

Thank you.

Ladies and gentlemen, this concludes today's conference call. You may now disconnect.

[Foreign Language] Good morning, ladies and gentlemen. Thank you for standing by, and welcome to the 5N Plus Inc. Third Quarter 2025 Results Conference Call. [Operator Instructions]

And now, I would like to turn the conference over to your speaker today, Richard Perron, President and Chief Financial Officer. Please go ahead, sir.

Good morning, everyone, and thank you for joining us for our Q3 2025 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 Gervais Jacques, our 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 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 2024 dated February 25, 2025, 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 call over to Gervais.

Good morning. Thank you, Richard, and thank you all for joining us this morning.

This quarter marks another financial milestone for 5N Plus, with our strongest quarterly revenue in a decade, record adjusted gross margin and a new high for quarterly adjusted EBITDA. These results reflect strong performance across strategic sectors, reinforced by our global sourcing, our manufacturing capabilities and our focus on high-growth and high-value markets. These trends have continued consistently throughout the year.

In a complex environment, we are executing our growth strategy with discipline, focusing on the factors within our control. We are building on our unique advanced materials capabilities and leveraging our market positioning as the trusted partner of choice. Entering the year with incredible momentum, our performance has exceeded our expectations, improving quarter after quarter. This is reflected in the latest upward revision to our annual adjusted EBITDA guidance and sets a high bar for the year ahead.

Now, let's start with an overview of our Specialty Semiconductor segment. In terrestrial renewable energy, demand remained very strong in the third quarter, with revenue for this sector up 53% over the past year. We continue to ship increased volumes to our key strategic customer under the terms of the expanded supply agreement, which we announced along with our Q2 results in August. Under the new terms, semiconductor compound supply volumes are set to rise approximately 33% above initial contract levels for 2025-2026 period, with a further 25% increase expected over the subsequent 2-year term.

Our teams in Montreal and in Germany are working diligently to meet this higher demand, building on our experience from previous expansions. New equipment has mostly been installed, and we are now progressively ramping up effective capacity, with a focus on hiring and training new staff and on maximizing efficiency and productivity.

Turning to space power sector. AZUR's revenues increased 43% compared to the same period last year. We have a robust long-term project pipeline firmly in place. At our Heilbronn site, the ramp-up of solar cell production is on track to add an additional 30% by year-end as planned. We continue to explore further opportunities to expand our operations and capture growing demand.

On the Performance Materials side, we continue to benefit from exceptional margins despite lower volumes. This once again reflects our unique positioning in a volatile business environment and the strength of our strategic diversified global supply. Thanks to our market leadership and competitive advantages, we will continue to solidify our position as the strategic partner of choice.

Looking to 2026, several demand trends are expected to support our continued growth. As discussed last quarter, domestic solar energy is expected to remain a key component of the U.S. energy equation despite shifts in U.S. energy policy. 5N Plus is poised to benefit as a key strategic North American supplier within our U.S.-based customers value chain as reflected in our expanded supply agreement. This outlook is further reinforced by the acceleration in AI adoption, which will rely on abundant clean power and seamless global connectivity.

We are uniquely positioned at the intersection of both these megatrends. We can deliver the advanced semiconductor compounds required for the thin-film photovoltaics on earth as well as space solar cells using germanium substrates, which are needed for clean energy and satellite infrastructure. Although the global business environment remains unpredictable, our unique expertise and manufacturing footprint position us to grow organically while we also pursue external growth opportunities.

Before moving to financial details, I would like to say a few words about Richard, who, as we announced last week, was appointed President on November 1 and will succeed me as CEO at the end of May. Having worked closely with Richard over the past 5 years, I have full confidence in his leadership, strategic insight and ability to drive 5N Plus forward. He has been instrumental in shaping our growth strategy and strengthening our operations, making him exceptionally well placed to lead the company into its next phase. This transition also comes at the right time for 5N Plus, ensuring continuity at a time of strong momentum.

We believe this positions for 5N Plus to maintain its market leadership, execute on growth initiatives and continue delivering for our shareholders. For my part, I look forward to taking on the new role of Executive Chair upon Richard's appointment as CEO next May. In that capacity, I will continue to support the leadership team in the execution of our strategic priorities, ensuring that we remain steadfast in our focus on long-term value creation.

With that, I'll pass it over to Richard for a review of our financial results.

Good morning, everyone, and thank you, Gervais, for your kind words. I appreciate your trust and support. I'm honored by this appointment, and I look forward to taking on increased responsibilities as President and to leading 5N Plus into its next chapter. I have a strong foundation and a clear strategy and a great team. I also look forward to continuing to work closely with Gervais and the rest of the Board to keep 5N Plus on its path for growth.

On that note, let's move to our financial results. Another record quarter that highlights the continued strength of our strategy and operations. Increase in revenue, earnings and margins this quarter reflects the accelerating demand we have seen since the beginning of the year in the terrestrial renewable energy and space solar power sectors as well as strong pricing for bismuth-based products. Once again, these results speak for themselves.

In today's complex environment, our unique positioning, expertise and agile global supply chain makes us the reliable partner of choice across our strategic sectors. We remain one of the few businesses in our sector and geographies that can both source critical minerals and recycle or refine secondary materials, a key competitive advantage in the current geopolitical context.

Starting with our consolidated results, revenue in Q3 increased by 33%, reaching $104.9 million and marking a 10-year high, while year-to-date revenue reached $289.1 million. We delivered record quarterly adjusted gross margin, both in terms of dollars and as a percentage of sales. In dollars, adjusted gross margin increased by 58% to $38.7 million and came in at 36.9% of sales. Adjusted gross margin year-to-date was $102.1 million and 35.3% of sales. We also generated our highest adjusted EBITDA, which increased by 86% to a record $29.1 million in Q3 and grew to $74 million year-to-date 2025, an 81% increase compared to year-to-date 2024.

Turning now to our segments, starting with Specialty Semiconductors, where we saw strong volumes across our strategic sectors, better pricing that outpaced inflation and continued benefits from economies of scale. Segment revenue was $75.2 million compared to $53 million in Q3 last year. Year-to-date revenue was $209.2 million compared to $150.5 million last year. Adjusted gross margin was 30.8% of sales compared to 24.8% in Q3 last year. Year-to-date, it was 32.7% compared to 29% last year, favorably impacted by economies of scale due to higher production and higher pricing, net of inflation.

Adjusted EBITDA increased by 120% to reach $19.2 million in Q3 and year-to-date $24.5 million -- increased by $24.5 million to $55.8 million. Backlog for Specialty Semiconductors was maxed out at 365 days of annualized revenue as per our definition. However, the effective backlog in reality surpassed the next 12 months at quarter end, given our strong pipeline of locked-in orders.

Turning now to Performance Materials, where we continue to experience extraordinary margins, thanks to a combination of favorable inventory positioning, strong pricing conditions over metal output -- input costs. Segment revenue was $29.7 million in Q3 compared to $25.9 million in Q3 last year, where year-to-date revenue was $79.9 million compared to $68 million year-to-date last year. Adjusted gross margin was a record 53.1% of sales in Q3 this year compared to 44.4% in Q3 last year and 42.9% for year-to-date this year versus 36.5% year-to-date last year.

Adjusted EBITDA in Q3 increased by 39% to $13.3 million. Adjusted EBITDA year-to-date increased by $9 million to $27.4 million. Backlog for Performance Materials was 104 days, 23 days lower than on June. Combined with Specialty Semiconductors, this bring our consolidated backlog to 311 days of annualized revenue at quarter end, 14 days higher than in the previous quarter.

Looking now at our financial position. Net debt was once again maintained at a low level of $63.3 million. This represents a decrease of $26.8 million compared to year-end. That brings our net debt-to-EBITDA ratio to 0.74x at quarter end. Our strong balance sheet and borrowing capacity continue to give us the flexibility to pursue growth opportunities. We are actively assessing potential acquisitions with a preference for the U.S., but we will take the time needed to find the right fit. In parallel, we remain highly focused on hitting our increased capacity targets, optimizing production and identifying more opportunities to expand capacity to meet anticipated demand.

Turning now to guidance. For the remainder of 2025, we anticipate demand under Specialty Semiconductors from both the terrestrial renewable energy and space solar power markets to remain strong as customers look to secure advanced materials from trusted and reliable partners. Performance Materials volumes are expected to be slightly lower compared to the first half of the year, consistent with historical trends.

Margins will continue to benefit from our strategic global supply chain and sourcing capabilities in today's volatile business environment. Based on our financial performance year-to-date, along with anticipated seasonality and other operational factors, we have increased our adjusted EBITDA guidance from a range of $65 million to $70 million to a new range of $85 million to $90 million. This means that 2025 will be a truly exceptional year from an earnings generation perspective, and the whole team deserves recognition for making this possible. Now, we must remain focused on execution through the end of the year. We look forward to providing 2026 guidance in conjunction with our Q4 results released in February of next year.

Looking ahead, we remain prudent in an evolving geopolitical environment that could have impacts on operating costs. As a preferred supplier of ultra-high purity and high-quality advanced materials, we are well positioned to continue solidifying our leadership in key markets through the end of 2025 and into 2026.

That concludes our formal remarks. I will now turn the call back over to the operator for the Q&A session with financial analysts.

[Operator Instructions] Your first question comes from Amr Ezzat with Ventum Capital Markets.

Congrats on the outstanding quarter.

Thanks.

Yes, on a personal note, I'd like to congratulate both of you on the leadership transition. I'm sure I speak for many when I say it's great to see both of you continuing to play a key role in the company.

Thank you.

On to that outstanding quarter, Performance Materials, like 53% gross margin just blew my mind. You noted in the MD&A and in your prepared remarks, support from higher business pricing, product mix and favorable inventory position. Can you help disaggregate how much of that uplift actually came from pricing power versus inventory timing or other one-offs?

The most -- if you have to weigh the various factors, the most important factor remains the better pricing over the input metal costs, okay, supported by our unique supply chain. The inventory position is a factor, but it's not the most important in realizing the great margins that we've done in Q3.

Understood. That's great to hear. So looking ahead, how should we think about the structural floor for Performance Materials when it comes to gross margins? I've always thought of this as a 30% to 35% sort of gross margin business is like 40% plus like the new sort of bands? Or how do I think of that?

I have to be honest. This year's performance for that segment is also a surprise for us. But ultimately, when you look back, I mean, it's the -- we're realizing those margins because of all the different things we've done over the years. And now based on the current geopolitical environment, we're doing even better than ever anticipated. So to answer your question, looking forward, this quarter was exceptional. I'll be more inclined to look at the performance or the average performance of the first 2 quarters going forward, which still represent a fairly high gross margin.

Yes, indeed. Okay. Then on your updated 2025 EBITDA guidance of $85 million to $90 million, it implies a material step down in Q4, especially considering the last couple of quarters have just been blockbuster quarters. Can you walk us through the moving pieces driving the implied Q4 EBITDA? Is it mostly like Performance Materials maybe like coming back down to what you consider to be a normal quarter? Or is there some costs maybe embedded in Q4 that we should think about?

Well, there's a factor that remains under Performance Materials. Typically, if you leave aside the pricing over the metal cost, volume tends to be lower in the second half, and it's in Q4 that it occurs the most, okay? It has the biggest impact from a seasonality perspective. For Specialty Semiconductors, the volume is definitely better than in previous periods in our overall financial performance.

But we're in a situation where we're going to take advantage of this Q4 to most likely accelerate some of our annual maintenance announced to start 2026 on a more stronger foot than ever, okay? We've been pushing hard on all of our teams and equipment this year. So this year, we're going to be bringing forward some of our annual maintenance that were originally planned for 2026 and other things around our operations to start 2026 in perfect shape.

Okay. Understood. So that's just like...

So, we are moving -- we're going to be moving maintenance schedule essentially and other projects forward.

In order to meet the growing demand for 2026, you need to be -- we need to make sure that all the equipment are in great shape.

Understood. So, you're moving forward some OpEx from 2026 into Q4?

It's going to have an impact, both on OpEx because we're going to be accelerating some of our planned maintenance expenses of next year. And it may have some impact also on volume that will be most likely realized starting in the new year.

Yes. Understood. And ensuring that, you've got a good first year as President and CEO. Then maybe one last one for me. On the First Solar conference call, an announcement, they were speaking about their new 3.7 gigawatt facility in the U.S. And like, obviously, the theme we've been following the reshoring, I guess, from Southeast Asia. I'm just wondering if we should think of this as incremental demand for 5N?

Or is it just part of the agreement you guys just announced or the expanded agreement, I should say, that you guys announced last quarter? And if it is part of the agreement you announced last quarter, is there a potential for you guys to start to see some like pull forward of volumes into the second half of 2026 as this facility comes online? Maybe just some of your thoughts on that.

Well first of all, it's a great news to see First Solar investing in North America. I think it supports our strategy, and it's a great news. Secondly, the announcement was related to a finishing line. Then it's not the full line that they are moving. It's really the finishing part of the panels. Then we don't expect that to have an impact directly on our volume, though it was already embedded in the new contract we signed for the existing line. It does not mean that further investment will not happen for First Solar. But for the time being, it does not have a material impact on the volume we're producing to them. Remember, we're growing 33% for '25 and '26 and an additional 25% for '27 and '28.

But as Gervais said, it remains a very important announcement because that confirms that they're definitely extremely competitive in the U.S. market, which is one of the most important growing market.

Congratulations again to both of you.

Thank you.

Thanks.

Your next question comes from Michael Glen with Raymond James.

I'll just echo Amr's comments. Congratulations on the promotion and for all of the progress made at 5N Plus since you stepped into the role as well.

Thanks.

Thanks.

Just to come back to the pricing dynamic on business. Is it natural to think, or is there a scenario where if you're getting this better pricing on the business, you will have to eventually flow that through to some of the end customers in the market?

No, no, no. I'm not sure I understand your question, but there's essentially the way it works, it's a bit different from one product to another. But for many of our key products that are especially performing well this year, we charge a premium over the most recent notation. And then anything that we have from a positioning or supply advantage becomes part of the profit on top.

So, you're able to hold on to whatever that input cost pricing is?

Yes, yes. That gets repriced every period or -- yes.

And moving over to some of the critical materials that you're involved with on the AZUR and First Solar side, germanium availability, have you seen any limiting factors with germanium availability in your global supply chain? And maybe as well, if you could comment on tellurium

as well.

Well, in terms of germanium, there's definitely no problem on availability. On pricing, though, it costs more. And you've seen the germanium price increase over the last few months. But in terms of availability, there's no -- it's not an issue for us. In terms of tellurium, again, same thing. Pricing has been evolving over the last few months. But in terms of availability, we have a strategy to capture all the tellurium available outside of China.

And just circling in on germanium, we do get a lot of questions about sourcing of the material. Can you give us some sense as to how you source your internal needs for germanium, where the material comes from? And is there still material that does get supplied from Chinese sources in...

No. Without disclosing names, our germanium is coming from Canada, coming from Europe and some small volume from the U.S.

Germanium is not exclusive to China. Germanium comes from zinc and coal operations. So, there's definitely germanium available outside China. And germanium usage consumption for space applications remain quite small compared to other sectors like fiber optics and others.

And currently, there's a lot of germanium being landfilled, not being valorized. Now at the new pricing, some companies that are currently not valorizing germanium, they're looking at projects to start valorizing it. One example is Kennecott Utah Copper. They're not valorizing their germanium so far.

Interesting. And just one final. Just with AZUR, can you speak to what we should think about in terms of margin tailwinds at AZUR? Is there still -- for '26, '27, is there still pricing tailwinds, mix tailwinds? Just trying to think about what's still there from a margin expansion perspective.

Okay. On an absolute basis, as you're aware, we've been adding constantly capacity. So, you're going to have economies of scale from producing more. From a pricing perspective, we expect that we'll be able to adjust pricing over and above inflation and/or cost of the key input materials. So, that's what we foresee forward. So economies of scale from our production, while at the same time being able to adjust price based on inflation and input costs.

Next question comes from Michael Doumet with National Bank.

Again, congratulations on the results and obviously, congratulations on the [indiscernible]. The first question I had, and it really, I guess, leads up to the previous one. I was wondering if there was any change or evolution in how the company is currently securing China metals this year. I think you already talked about germanium, but in the previous question. But I'd like to hear a little bit more on the business side versus prior years and whether or not that's leading to [indiscernible] margins?

Look, we have not changed anything. We're just -- we just have, as you know, adjusted our footprint over the years in our product portfolio. And today, we've been holding on to the best of the best products, the best combination of clients and products, while at the same time, we've been investing in our assets. So today, we're in that position where we can source business at a very good price, while at the same time, products that we're making and supplying to our clients are critical, and our clients are extremely happy to rely on us for that key material.

And then I guess turning to AZUR, you talked about how well that business performed in the quarter. At what point do you think you'll have enough visibility to consider another capacity expansion beyond the 30% [indiscernible].

The way we work, and we've been super consistent on that, we are securing the contracts. And when the backlog is large enough, we're investing. Then we've been doing that since the acquisition of AZUR, and we will continue to adopt this strategy. Then so far, most of the sales for next year are already being done. We're securing contracts for '27, '28. We already have some volume after '28 already secured. Then once we're going to feel comfortable enough, we will look at further increasing the capacity.

So not quite there yet, but presumably getting closer. Maybe just a third question, I guess. On the M&A piece, you spent -- it sounds like quite a bit of time doing diligence and M&A opportunities. So, I'm assuming you've refined, I guess, what you're looking at this point. Any way you can outline for us the framework or how investors should think about next deal could look like for the company?

It's a bit early to give details, but I guess we can say what it won't be. It won't be a start-up, and it won't be a business that does not generate EBITDA today. It's going to be a quality asset in the material technology field and/or specialty chemical field that ideally has those 3 key attributes that are behind today's success for the company, manufacturing and selling enablers to our clients, remaining a small cost component to our clients' products and ideally the relationship this business will have with its clients will be one that is referred to as a partnership rather than making and trying to sell stuff.

Your next question comes from Nick Boychuk with Cormark Securities.

On the AZUR pipeline and capacity expansion in Germany, can you give us a little bit of color on how you're thinking about where that capacity expansion is going to happen and how much you can take the Heilbronn facility higher? And at that point, what the next step would look like?

Well, at Heilbronn, I think we have the space to further grow the capacity. Then I think we're not limited by the physical space of the Heilbronn facility. It will most likely -- the expansion will most likely happen in Germany to take on the benefit of having all the experts located at Heilbronn. Then it's really a matter of making sure that we have all the contracts on hand before further increasing the capacity.

We believe we still have a few rounds of capacity expansions. We're working the layout and using the available space.

Got it. And then switching to margins within the specialty semiconductor space. I'm hoping you can maybe unpack a little bit how much of the year-over-year improvement was due specifically to price versus economies of scale. Obviously, it's tough with First Solar given the new contracts, but how should we be thinking about what that margin profile looks like now going forward, given that effectively all of the volume with First Solar is now contracted and no longer spot?

Well, if you look at it from a year-to-date perspective, that should be a good level to go forward. Obviously, we'll continue to be positively impacted by economies of scale. But as we've been mentioning, being quite vocal, we expect some costs to increase due to inflation and other geopolitical factors.

And then last one, can you give us a little bit of an update on some of the other maybe longer-tail growth initiatives you have ongoing, things like MRI applications in defense with germanium, long-duration storage, any of those programs progressing and advancing as you'd like to see?

Well, in the case of medical imaging, I think we're collaborating with different customers. We've been developing products with them together with the different customers. They are now -- they've been testing it. They've been producing their spect scan or their photon counting detectors, depending on their products. And some of them are currently into commercialization like Siemens. Other one will soon launch their products. Then we're getting closer and closer to see the demand increasing. We have all the capacity available at our St. George, facility in Montreal. Now it's a matter of meeting the demand when the demand will be there. Then we're quite confident to see the volume increasing next year, but significantly in year 2 and 3.

Yes. How it's going to evolve most likely will go from spot business to long-term contracts.

And is that the same kind of picture that we're seeing with some of the long-duration storage and defense applications?

Yes, most likely, similar scenario.

Similar scenario as well, yes.

[Operator Instructions] Your next question comes from Frederic Tremblay with Desjardins.

I wanted to ask on AZUR, if you've seen any notable changes in the business environment there, whether it's from a competition perspective or customer demand in the space sector, just your update on the business environment in space?

Well, so far, if you look at the supply -- the fundamental supply and demand, we believe that the market is still stretched, meaning that the demand is currently exceeding the supply. Then we're taking -- because we were the first one to move and install additional capacity, we're taking full benefit of securing these contracts. Our competitors is also currently -- one of them is currently investing, increasing its capacity. It will have an impact on 2027 onwards. Then we have another year ahead of us to secure more contract and taking the full advantage of being the first mover.

Great. And then obviously, in terrestrial, we know about your key customer there. But for AZUR, how is the customer concentration landscape? Is the customer base pretty broad? Or is there 1 or 2 that are the bulk of the business? Maybe just a reminder on that would be helpful.

The way it works is we're earning contracts. Then every year, if you look at our top 5 customers, there's a lot of movement. It's not the same 5 customers year after year. We do have one, which has been there for the last 2 years because we developed the product together, then they are already -- they are always on the top 5. But the remaining list is quite in motion depending on the contract we earn. Then if I look at the year to come, we will see again some changes on the top 5 list.

So, you have somewhere between 5 and 10 really active clients. And from one year to another, the actual revenue level changes based on the projects that we've earned with these guys. But it does not have the concentration that we have on the renewable energy.

Understood. And then lastly, just on CapEx, maybe as we look to next year, I know it's probably tough to tell right now. But directionally speaking, should we expect CapEx to move up slightly or perhaps meaningfully if there's something to do at AZUR?

It's most likely going to be at a similar level than this year.

There are no further questions at this time. I will now turn the call over to Mr. Perron for closing remarks.

Okay. Well, we would like to thank you all for joining us this morning, and we wish you all a good day.

Thank you.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.

[Foreign Language] Good morning, ladies and gentlemen. Thank you for standing by, and welcome to the 5N Plus Inc. Second Quarter 2025 Conference Call. [Operator Instructions] I would like to turn the conference over to your speaker today, Richard Perron, Chief Financial Officer. Please go ahead, sir.

Good morning, everyone, and thank you for joining us for our Q2 2025 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 Gervais Jacques, our President and CEO. We issued our financial results yesterday and posted today's 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 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 2024 dated February 25, 2025, 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's discussion and analysis. I would now turn the conference over to Gervais.

Thank you, Richard, and thank you all for joining us this morning. Yesterday evening, we announced record results for the second quarter of 2025 and year-to-date across several indicators. Our performance marks several new all-time highs for 5N Plus and positions us well for the remainder of the year. This includes record quarterly and first half adjusted EBITDA, record quarterly adjusted gross margin and our strongest first half revenues in a decade. In a volatile business environment, where customers are seeking out dependable partners, 5N Plus continues to stand out. We are a deep partner of choice outside of China for high-purity, high-quality advanced materials.

Customers appreciate the value and depth of our diversified global sourcing and manufacturing capabilities. Today, our reliability and supply chain are not just competitive advantage for us. They are of strategic importance for our customers. This morning, we also announced a milestone supply agreement with First Solar, which I will discuss in more detail in a moment. As we head into the second half of the year, we're not only well placed to deliver on our new increased adjusted EBITDA guidance for 2025. We will also be able to build on this momentum going into 2026.

Let's start with our activities and strategic sectors under Specialty Semiconductors. In terrestrial renewable energy, volumes were significantly up for the second quarter compared to last year and up compared to the first quarter. We are on pace to continue shipping more products than originally planned to our key strategic customer in this sector as reflected in the terms of our new and expanded supply agreement. Under our new terms, we are increasing semiconductor compound supply volumes by 33% for the '25, '26 period underway. This is compared to initial contract levels.

As we are increasing volumes by an additional -- over 25% over this period for the subsequent '27 and '28 terms. This will also include the delivery of additional next-generation semiconductor compound as we continue to work with First Solar on product development. With the investment recently completed in our Germany and Montreal plant operation, we will be able to meet this increased demand with minimum -- minimal additional investments. Our team is incredibly proud to solidify its standing as a critical enabler to the U.S. solar energy sector and to further strengthen our long-standing partnership with First Solar.

Amidst shifting U.S. energy policy First Solar is uniquely positioned to capitalize on new wet economic growth, digital infrastructure expansion and accelerating electrification as the leading American solar technology company. Make no mistake, America needs solar energy in the mix as it seeks to diversify its energy sources, enhance its energy security and to meet significant power demand over the next decade. They need access to domestically produce reliable, scalable, cost-effective and quick-to-market solution. First Solar provides all those things. and they are currently actively expanding their U.S. nameplate capacity to meet the moment.

With the U.S. administration's Big Beautiful Bill Act and despite the phaseout of the Inflation Reduction Act anticipated in 2026, domestic solar energy will remain a part of the U.S. energy equation. The why and how may have evolved, but the fundamentals remain. In this context, 5N Plus is also benefiting as a key strategic North American supplier embedded in First Solar's value chain and as reinforced by our extended supply agreement. Turning now to Space Power and our activities at AZUR in Germany. Demand for our solar cell technology remains very strong. further driving our performance in the second quarter, including pricing margins.

Customers are planning ahead and securing products early to support future satellite programs and space missions. To illustrate, we recently submitted a quote for deliveries extending into 2029, 2030 and 2031. This highlights both the long-term visibility the sector provides and customer confidence in the reliability of our technology. After increasing capacity in Heilbronn by 35% last year, we continue to boost solar cell production by an additional 30% this year. All equipment, including 2 new reactors has been installed and commissioned. We are currently ramping up production while optimizing the full value chain.

We remain on schedule to reach our full production target by Q4, 2025. Looking now at energy storage. A few weeks back, our customer Australia-based RayGen announced the acquisition of its Yadnarie project by AGL, a project which has been granted development approval. This acquisition marks a major step towards the industrialization and commercial development of long-duration storage technology. As the supplier who supplies the solar cells that form the foundation of RayGen's core module technology, this announcement bodes well for us as a commercial opportunity in the medium term. When that time comes, we will be ready and able to deliver on RayGen's global pipeline of projects, including Yadnarie which will have a total of 150 megawatts of solar energy capacity once operational.

Finally, on the performance materials side, we are benefiting from exceptional margins, and this is no accident. In Q2, this segment was positively impacted by a favorable sales mix despite slightly lower volumes over last year. This, once again, reflects our unique positioning in the context of high business volatility with a strategic and diversified global supply chain. In conclusion, we have many tools in our toolbox to continue capturing market share and the growing demand in key sectors for our advanced materials. We have the capacity to grow organically, thanks to our flexible manufacturing footprint, while we also continue to actively pursue external opportunities from a strong financial position. Thanks to our market leadership and competitive advantages, we will continue to solidify our status as the strategic partner of choice. Richard, over to you for a review of our financial results in more detail.

Thank you, Gervais, and good morning, everyone. Strong financial results across the board in Q2 2025 and year-to-date reflects significant volume increases in specialty semiconductors on the back of accelerating demand in strategic sectors and exceptional margin expansion on the performance materials. In an environment of ongoing global trade and economic volatility, our customers are acting decisively to secure the advanced materials they require, and we are delivering. We have the right expertise to supply it, high-quality products as well as diverse sourcing and manufacturing capabilities, customers can depend on.

And this is translating into sustained outperformance since the beginning of the year. To illustrate, consolidated revenue in Q2 increased by 28%, reaching $95.3 million, while revenue year-to-date reached $184.2 million, representing a 37% growth year-over-year and a 10-year high in terms of first half revenue generation for 5N Plus. Adjusted EBITDA increased by 79% to a record $24.1 million in Q2 and grew to a record $44.9 million year-to-date and a 78% increase compared to year-to-date 2024. For Q2, we also delivered a record adjusted gross margin, both in terms of dollars and as a percentage of sales. In dollars, adjusted gross margin increased by 41% to $33 million and came in at 34.6% of sales.

Adjusted gross margin through the first half of 2025 came in at $63.4 million and $34.4 million of sales. Turning now to our segments and the drivers beyond the outstanding KPI performance, starting with Specialty Semiconductor, Q2 volumes in terrestrial renewable energy were up 50% year-over-year and 15% compared to Q1. Our new agreement with First Solar announced this morning only further confirms that this acceleration in demand is not a question of timing or pull forward, but really a step up in demand that is sustained and that will continue to grow over the next few years.

Q2 segment performance was further supported by high demand for solar sales, which is also positively impacting pricing margins as we progressively benefit from our capacity expansion at AZUR. Meanwhile, Imaging and sensing performance was on plan and as expected. Specialty Semiconductors revenue was $71.2 million compared to $52.3 million in Q2 last year. Year-to-date, revenue was $134 million compared to $97.5 million in 2024, supported by this higher demand. Adjusted gross margin as a percentage of sales was 32.7% in Q2 compared to 33% in Q2 of last year. Year-to-date, it was 32.8% compared to 31.2% year-to-date, favorably impacted by economies of scale due to higher production and higher prices net of inflation.

Adjusted EBITDA increased by $5.9 million or 45% to reach $19 million for Q2, and adjusted EBITDA year-to-date increased by $14 million to $36.7 million. The increase is primarily attributable to higher demand, higher prices than inflation and favorable unit costs from economies of scale. For its part, our performance materials segment performance was positively impacted by favorable sales mix. This is despite slightly lower volumes over last year and the absence of the pull forward in purchasing experienced in Q1. Our ability to supply bismuth-based products for industrial applications at our margins in the context of business volatility speaks to our unique strategic and diversified global supply chain.

performance materials revenue reached $24.1 million in Q2 compared to $22 million in Q2 of last year. Year-to-date, revenue was $50.2 million compared to $42.1 million last year. Adjusted gross margin as a percentage of sales was a record 41.1% in Q2 this year compared to 28.4% in Q2 last year and 36.8% for year-to-date compared to 31.7% last year. We had a favorable inventory position going into the quarter from which we benefited on top of a favorable product mix and higher prices net of inflation. Adjusted EBITDA in Q2 increased by $4.2 million or 108% and reached $8 million. Adjusted EBITDA year-to-date increased by $5.3 million to $14.1 million. positively impacted by the same factors.

Turning now to backlog. Backlog for Specialty Semiconductors was 364 days of annualized revenue, 17 days higher than on March 31, [ 2025 ]. While the estimated number of days based on annualized revenue cannot exceed 365 days per hour backlog definition, the effective backlog for the terrestrial renewable energy and space solar power sector, specifically continues to surpass the next 12 months. Backlog for performance materials was 127 days, 25 days higher than on March. Combined backlog at Q2 was 297 days of annualized revenue, 29 days higher than March. We also ended the quarter in a strong financial position with net debt at the low level of $74.3 million. This is compared to $100.1 million as of the end of December 2024, representing a decrease of $25.7 million.

That brings our net debt-to-EBITDA ratio to 1.07x as at June 30, 2025. Our strong balance sheet, coupled with our borrowing capacity continues to provide us with financial flexibility to execute on internal or external growth opportunities. We continue to actively assess opportunities, and the team is very motivated to enter 2026 with an acquisition. However, we will take the time required to find the right opportunity that meet our criteria. We are pursuing these opportunities while remaining highly focused on our increased capacity targets and production optimization to meet anticipated demand.

Turning now to outlook and the adjusted EBITDA guidance. Through the second half of 2025, we anticipate demand under Specialty Semiconductors from the terrestrial renewable energy and space solar power markets to increase further, as customers look to secure high-quality advanced materials from trusted partners. Under performance Materials, consistent with historical trends, volumes through the second half are expected to be slightly lower than in the first half. but with margins continuing to benefit from a strategic global supply chain. Based on our financial performance year-to-date and our expectations for the second half of 2025, we have increased our adjusted EBITDA guidance from a range of $55 million to $60 million to a new range of $65 million to $70 million.

This revised guidance takes into account the increased volumes anticipated through the end of this year as a result of our new contract with First Solar. Looking ahead, we are excited about the growth opportunities ahead, but also remain very prudent and mindful of the evolving geopolitical and trade environment. We're keeping a close eye on any impact on operating costs and focus on supporting our clients. All in all, given our unique and global standing as a preferred partner, we are well positioned for the rest of the year, but we will also capitalize on our strong momentum to enter 2026 at higher levels. We will continue to raise the bar as we have done consistently over the last few years and keep the momentum going. So that concludes our formal remarks. I will now turn the call back over to the operator for the Q&A with financial analysts.

[Operator Instructions] And your first question will be from Michael Doumet of National Bank Financial.

Good morning. Congratulations on the quarter and obviously, the First Solar contract expansion and extension. So maybe I'll start on the latter piece. So on the contract, would you be able to provide some details around just pricing in general. And I know Gervais, you said minimal CapEx, but if you can get a little bit more specific on that, that would be great. And then also, I guess, separately, any way you can comment on whether or not you expect the deliveries there to extend much beyond the first solar U.S. production, as well just to get a general view.

Okay. As a starting point, spike default, the vast majority of the volume secured contract will be adding to the U.S. to the United States. So there are various plants that they have in the U.S. as a starting point. Then to answer the CapEx part, we have already in this year's budget, capital allocated to meet the current year's demand, and we have launched another program in order to meet next year and the following 2 years demand. And all of that is on its way, and those capital investments will be done for the most part, but not exclusively, for the most part in Montreal. So that's all undergoing. And from -- and the other part of your question was pricing.

So pricing, it's on favorable terms. But at the same time, remember, in our last remarks, we're extremely mindful of inflation and operating costs that will most likely not stay at the current level, but all have to be to see.

And maybe just to add, it will all happen within our own installation both in Heilbronn and Montreal. No need to build a new building. It will be happening within the same installation, and we keep the same strategy, securing contract first and then adding capacity in an incremental manner.

We're extremely disciplined when it comes to capital investments.

Perfect. So maybe turning to the results, like, obviously, a very strong first half. If I tell you to go back to the beginning of the year and compare your early year expectations, the results so far, I wonder in your view, what really exceeded the expectations? And I guess, separately, has the expanded agreement with First Solar already provided to boost to the first half? Or is that really just expected to start going into the second half and into '26?

The last part of your question with this morning's announcements, what we need to say is that in the first half, part of that is already realized. Okay. It's what we referred to in the past as our spot business now being confirmed or contracted that's essentially what's behind today's announcement. And more, as you can see, it goes 4 years ahead of us, okay? And the other part of your question was on?

Where the performance...

Compared to the beginning .

Yes, the expectation. So I guess, our biggest single positive impact in the year would be under Performance Materials. It does perform better than anticipated. Okay, from a margin perspective and obviously, we did not at the beginning of the year, anticipated the pull forward in Q1. But as we just mentioned, it did not occur in Q2. But the margins that we're currently realizing on the performance in those, that's a nice, let's say, surprise or a factor that we did not anticipate at the beginning of the year. We always anticipate good results from that segment, but the results are better than anticipated, we have to be honest.

Right. And maybe if I can end with the third, but I noticed you didn't characterize the strength in your Q2 sales is benefiting from any pull forward like you did for Q1. So if I take your comments on the accelerating demand in Special Semiconductors, obviously, including First Solar, the expansion at AZUR in my mind, how is it not possible that the Q2 -- sorry, the second half sales don't exceed the first half sales. Just trying to really square away the guide with some of the commentary.

Well, in the case of renewable energy, we -- what was the spot sales in Q1 will be under contract and will increase gradually over the year to be ready to be at the level of 2026 and so on after then what we see is an improvement on renewable terrestrial energy. On space solar, you will see an increase going forward as we completed the commissioning and now we're doing all the qualification and ramping up the production, then AZUR, production would gradually increase over the year as well. And on performance materials, well, we -- as you know, we have enough capacity to meet all the demand. But the volume is slightly down, but margin up, then we'll see how the market will react over the next 2 quarters.

Next question will be from Nicholas Boychuk at Cormark Securities.

On the First Solar contract, can you just kind of qualify Richard, you mentioned that a lot of the new material you're producing is going to be going to the U.S., but does this incremental capacity account for all of the new facilities they have coming online there? Or might there be additional demand that they have as these other facilities like Louisiana and Alabama fully ramped to production?

Well, our understanding from discussion with them and also their own public filings. Their strategy forward is to increase further the capacity in the U.S. When I say further, further from what they have announced a couple of years back when they officially announced the Alabama and the Louisiana plant. Now they want to bring to a higher level that capacity they have in the U.S.

Okay. But to confirm, do you guys know if what you are producing represents all of the CdTe and all of the advanced materials that are going into those facilities? Or?

That's our understanding. Yes, it's not all of it. It's by far the vast majority of all this -- the Semiconductor Compounds, they're going to be using their thin film technology.

Sorry, just to quickly add on this morning's announcement. As you've read, we're also adding another infant materials referred to as CdSe.

Exactly. I was just going to ask the CdSe, can you comment at all on where that's going to be produced? And the expected volumes, the type of product that's going to be going into? Any color there?

It's going to be produced in Montreal then we're currently -- we will be investing in Montreal to put in place a new production line, producing CdSe. And this will -- it is part of the different semiconductor compound layers when you're producing a panel at a thin-film solar panel at First Solar, you do have 1 layer of CdSe then this will be produced in Montreal.

Okay. Understood. And then switching gears to AZUR and the capacity demand you have there, it's remarkable that your booking business as far as you are. How are you guys thinking about capacity there? What would you have to see, I guess, to increase further production run rate? And yes, what would capitalize that?

Well as you know, '25 is fully sold. '26 is fully sold. Now we are booking '27 and onwards. And the way it works for us, the same strategy will apply as soon as the booking will be when we have super good visibility and we know that we will be lacking capacity we will be looking at projects to add capacity again. But again, it will be 1 step at a time in an incremental manner. Always the same strategy, securing contracts and then investing.

So we essentially have a whole list of options prepared. And as we're filling up those years, we'll come a point in time, we'll make the call.

Next question will be from Frederic Tremblay at Desjardins.

Thank you and congrats on the quarter and the new agreement with First Solar.

Thanks, Fred.

Just on the First Solar agreement, can you help us maybe understand how the incremental volume that the increase that you announced at 33%, how that's going to be distributed roughly over 2025 and 2026. Is that -- should we think about it as an increase in both years? Or is it mainly weighted to 2026?

So the way we have made our announcement, we've compared the '25, '26 versus that previous contract that we had announced a year ago. So you got a first increase whereby default 2026 as higher volume than '25. Then when you get into '27 and '28, the increase we have announced is against '25, '26. In this case, at this point in time, the 3 years should be pretty much at the same level. But for the first 2 years, the second year being 2026 would be on a higher level than this year.

Okay. That's helpful. And then maybe just switching to performance materials and trying to better understand the elevated margins there. Is it -- I mean you're talking about Bismuth base pricing -- is it mainly just a pass-through of the higher bismuth prices that we're seeing in the market right now that's sort of helping the operating leverage and the margin there? Or is there something else that's driving that margin higher? I'm just trying to better get a better grasp of the sustainability of that margin.

It's the combination of various factors, okay, the sales mix and if you recall, we made some investments into that segment 3 years or so back, we had added automation, we added capacity. And we also recently made additional investments. All of that leading to operations that are more productive overall. But in the current geopolitical, what we've been able to take advantage of is what we referred to in our official remarks as our strategic global supply chain. We've been able in the context of higher prices of bismuth, not to name it. through our various sources of business, the shapes and form the value add that we're having to make the products that we're selling in high end markets, we've been able to pull the best of our margins, we could.

Okay. Perfect. And then maybe just lastly on AZUR, you commented on the year that you're booking business. And can you talk about pricing and margins and what you're seeing there. There's obviously been significant improvements since you acquired the company. But just given the strong demand, I would imagine that pricing is stable as well in the new agreements that you're signing to this day.

Yes. Indeed, if you look at the new agreement that we're signing compared to the one we had 3, 4 years ago, it's totally different. And the reason is the following. The supply and demand is super tight. And the market has been quite disciplined. Our 2 main competitors in the U.S., 1 of the 2 announced investment to increase its capacity, but also in a manner where it's quite gradual. Then I think the -- from a supply side, there's a lot of discipline and we're growing based on order. Then if you don't have the contract, you're not adding capacity, which definitely helps to maintain and improve the margin.

Next question will be from Michael Glen of Raymond James.

So just the first question. So look, if I look at your back half guidance, you're effectively pointing to decline in EBITDA relative to the front half of the year at the midpoint of the second half implied guide on EBITDA. Is it realistic to think that your EBITDA will decline that much in the back half of the year versus the first half?

We're going to have a great H2, but we expect it to be lower than H1 for various reasons. On the performance materials, as we've been saying I would say, 8 years out of 10, most often, the volume is down because of the type of industries and clients we are addressing. We are more cautious about their year-end balance sheet. And then in the case of Specialty Semiconductors, obviously, volume is up, but we can foresee at this point in time without exact numbers that operating costs will be higher. So again, we're going to have 2 great quarters ahead, but slightly lower than the first. And so the extent of which is always difficult to assess with precision.

Okay. And then just to go back to the First Solar, is the volume -- I know you're saying a lot of -- you're commenting a lot of it, but is the volume we should see in the back half of the year consistent with the first solar volume that we saw in the front half of the year? .

It should because essentially, for solar, every, every unit of product, we could produce the took it in the first half. It's not like it's been pace with a lot more in the second half than the first half. So going forward, it should be similar level or slightly higher and then as always, there's always that tricky cutoff part when you reach the holiday period towards the end that may play, but the volume will be superb in the second half.

Okay. And then one of the comments was towards 2026. Like in M&A, maybe having motivated to enter 2026 with an acquisition. Can you just maybe -- are you getting closer on the type of business you would like to acquire? Or like just maybe additional information on what's happening with your M&A conversations.

We have a short lease of companies that we're spending a fair bit of time to better understand the operations of the market and assess the fit with 5N Plus. So that's where we're at and more entertaining exchange. But at this point in time, it's still getting familiar with the markets, the operations and how it fits into the 5N Plus 3.

And again, we're not looking for an acquisition. We're looking for a successful acquisition like then I think the mantra and the mindset is really -- we're super focused on that. .

Next question will be from Amr Ezzat at Ventum Capital Markets.

Congrats. I hate to ask again, but just for an abundance of clarity on the volumes, obviously, where it becomes difficult is you have like all of the spot purchases. So from what you guys said in the Q&A, Q2 results already reflect the run rate that we should have for the rest of 2025. I think we all understand that. But then for 2026, I heard or I thought I understood that we get a bit of an uptick relative to 2025. Did I misunderstand? Or is that correct?

It is correct. '26, we'll have more volume than '25. And that is able -- that is true for renewable and space. Yes.

Yes. Let's just -- yes, for space, I understand. Then so for renewable, how do I think -- how much of an uptick do we have in 2026 relative to 2025? Are you guys like comfortable sharing that?

It's an important uptick. It's in the 35% to 45%.

Okay. Because when you guys like say, 33% for 2025, 2026?

That's the combination of the 2 years. Yes.

Okay. Understood. Then for '27, '28, we layer another 25% on top of that ?

25% over '25, '26? Yes, exactly. On top of that.

Perfect. Okay. I think that was very clear. The expanded agreement includes like CdSe beginning in 2026, which we haven't discussed like to too much in past calls, number one, is the -- is that in addition to the 33% of increased volumes for CdTe?

It is, sir.

Yes.

Fantastic. Can you guys like quantify for us like that volume number one. Then if you could elaborate on how CdSe fits into your product and manufacturing road map relative to CdTe? I do understand for first where it's complementary to CdTe within the same sort of module architecture. But I just wonder how does it sort of impact your production processes and requirements and maybe thoughts on the margin profile over time for CdSe relative to CdTe.

Yes. From a manufacturing perspective, it is very similar in terms of equipment and processes, but it will need to be manufactured in a separate room to avoid, obviously, contamination. Okay? But the processes and the type of equipment, all that works out in a similar fashion to CdTe , where we built our own reactors and so on and so forth and the chemistry has a lot of similarities by all of the processes to make it. From a margin perspective, it is also pretty similar.

And in terms of quantity, the layer of CdSe, it's thinner, much thinner than the layer of CdTe less quantity.

Yes. volume-wise, it's not at all to the magnitude of CdTe because they use a much thinner layer.

But it's a super interesting niche product and a Yes, high value add and technology, pretty similar.

And at this time, gentlemen, it appears that we have no other questions registered. Please proceed.

Okay. Well, we would like to thank you all for joining us this morning, and have a great day.

Yes. Thanks.

Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we ask that you please disconnect your lines.