5N Plus Inc.

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.

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.

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.

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.

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.

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.

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.

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.

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