Good day, and thank you for standing by. Welcome to the Q2 2023 NanoXplore Earnings Conference Call. At this time, all participants are on a listen-only mode. After the speaker presentation, there'll be a question-and-answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to turn the conference over to Martin Gagné, Director of Investor Relations. Please go ahead. [Foreign language], operator. [Foreign language] 2023 de NanoXplore. Good morning, everyone, and welcome to NanoXplore's fiscal 2023 second quarter conference call. Today, I'm here with Soroush Nazarpour, our President and CEO, and Pedro Azevedo, our CFO. We will start with our prepared remarks and then a Q&A. Please note that our discussion will include estimates and other forward-looking information which our actual results may differ from in the future. We invite you to review the cautionary language in yesterday's earnings release and in our MD&A regarding the various factors, assum ptions and risks that could cause our actual results to differ. With that, let me turn it over to Soroush. Thank you, Martin. Good morning, everyone, and thank you for joining us today. Before we start, I would like to explain the reason for the early financial read. In the last few minutes of trading on Monday afternoon, it came to our attention that a copy of our press release had become visible to some individuals with no intention on our part. In order to ensure all market participants have access to the same information at the same time, we chose to pull up the release the Tuesday morning before market open. We followed all the regulatory protocols since learning of this information and followed IIROC guidances for early release. I would like to thank all of our team members across our organization for their hard work and dedication. I'm grateful to everyone for being on this journey with us. I start our prepared remarks with the impact of macroeconomics environment on our business, followed by quick financial review of our second quarter. I'm going to expand on some of recent achievements as we report on the progress of our five-year strategy plan. I will end my remarks with some comments on VoltaXplore. Let's begin with the macro overview. Despite hearing about a potential recession from economics in 2023, we believe some segments of economy can withstand a slowdown much better than the others. We currently do not see an impact from this Fed-induced economic slowdown to our business, and in fact, we are not seeing our partners slowing their graphene testing and validation process or planning to. There are two main reasons for this. First, the macroeconomic picture has limited impact on commercialization of graphene as it is a nascent market and early adopters are generally market leaders that can withstand the potential slowdown better. Second, heavy commercial transportation market, which represents almost half of our revenue, is recovering well, and the fundamentals are improving as chip shortage has been and supply chain challenges are abating. In fact, our main customers are increasing their production forecast. To summarize, we do not see a slowdown in our business, and we feel very good about where we're headed. Moving to our second quarter, we delivered a strong top-line growth and significant margin expansion. Total revenue grew 69% year-on-year to CAD 31.7 million in second quarter with a record level. We delivered positive adjusted EBITDA for the second time in the last three quarters. Overall, we're quite satisfied with our graphene commercialization activities as we see more and more successful customer trials. Our decisions last year to focus on applications with higher probability of success was the right one, and we believe this will increase our return on R&D initiatives and speed up commercialization efforts. Let us start with our transportation business. We are thrilled that one of our large commercial vehicle OEM customers approved the use of graphene to all current and potential future programs. The decision resulted from successful integration of our graphene in an existing program where our customer observed significant improvement in the quality of our composite products. Such decisions are rare in such a conservative market and will set the tone for other OEMs to follow along. This in turn results into more integration of our graphene in lightweight composite markets. In addition, just recently we got the approval directly from a large passenger OEM for graphene-enhanced plastics for exterior automotive applications. This well-known passenger OEM is an early adopter of graphene and has already certified our graphene and is using our graphene in its vehicles. The key benefit of adding our graphene to these applications is that it improved moisture resistance. This results into better material processability and less defective parts. This approval would have not been possible without our downstream acquisition of Canuck late in December 2021 and demonstrates our ability to expand our commercial activities with an existing client. Graphene market encountered with one-off products for a long time, and we're happy that our graphene is bringing tangible and sustainable value to our customers, and enabling us to win more business within existing platforms. Moving to drilling fluids. One of our partners, which is a market leader in the specialized drilling fluid applications, is showing that our graphene helped them with fluid loss mitigations and brought high thermal stability at very high temperatures, which speeds up the drilling process. Currently, they are setting us up as a vendor in the ERP system and commercial discussion is ongoing. This vertical is especially attractive as it is large and consumable market with significant loading potential of our GrapheneBlack powder. Just to give you some context, this vertical has a potential TAM of 256,000 tons of graphene. Turning to foam, several chemical companies that we are working with are seeing very positive performance with our GrapheneBlack solutions. We are involved in 30 technical validation programs. We are seeing success in majority of them. Based on these very good results, we are confident that our graphene integration will grow in this market. Graphene increases the thermal insulation properties by 10%-15%, improves flame retardancy and provides a more sustainable solution. We're also currently working with a well-known multinational chemical company in a late-stage trial. Results show that the combination of performance cost make graphene very attractive for insulation foam applications. The better performance is driven by improved mechanical properties and enhanced weatherability. The partner will do further field trials. Based on these excellent results, we are confident that we can win this business and grow from there. Recall that this is a large market with potential TAM of 190,000 tons of graphene. In concrete, we're also receiving some very good outcomes. As an example, we're engaged with a major concrete manufacturer whose interest in our GrapheneBlack is high. We have been testing with this partner and saw a 20% improvement in compressive strength using their scalable formulation. Even though more work is required, these impressive results are very promising for our company. Remember, this is the largest total addressable market for graphene, equating to 6 million tons of annual production, even a small market share would be significant for us. Another example is our ongoing development work with one of the market leaders in the cement additive market that achieved elevated mechanical properties after adding graphene to concrete admixture. Currently, they are moving forward with further field trials and with their own customers and championing the ASTM product certification efforts. Certification process in cement market is cumbersome and long. Having said that, this process can be accelerated significantly when a market leader is championing it. As we think long-term, NanoXplore is keeping sustainability top of mind. We firmly believe that reducing the carbon footprint should be ingrained throughout the corporate sector and their respective supply chain. As we said in the past, our GrapheneBlack solution has an 80% lower carbon footprint than competing solution. Customers are very interested in learning more. Using more recycled plastics could definitely help lower GHG. Weak performance of such recycled materials hinders the widespread use. According to a research paper from the Imperial College London, recycling saves between 30% and 80% of carbon emission versus virgin plastic, or equivalent to shutting down between 8 and 40 coal-fired power plants globally if all plastics were recycled. As noted before, graphene enables reusability of plastics by enhancing their rigidity and performance. As an example, we're supplying graphene to a sustainable packaging company from Latin America. We're expecting more of such type of customers to use graphene commercially. Moving to our five years plan. We're a conservative company. The five-year plan we have announced is in line with this. Although early in the process, we have a strong conviction in our strategic initiatives and the potential for our graphene consumption. Let us start with our SMC initiative. We're currently conducting our detailed engineering work. Started discussion and negotiations with long lead item equipment suppliers. Despite being at this early stage, we are confident that we can optimize our CapEx investment related to main equipment. We are targeting September 23 for the start of procurement, which is on time according to our schedule, and the commissioning should be early calendar year 2025. We are targeting to finance this through credit facility and cash on hand. Lightweighting will be a key theme for electrification of transport, and NanoXplore is in a desirable position. Our solution can lower parts weight by up to 25%. It prevents the surface from blistering, thus creating a high quality and smooth surface finish, leading to lower paint cost. Moreover, the reduction in consumed material reduces carbon emission and helps on the sustainability front. In addition to this, our SMC solution will improve key properties in battery enclosures for EVs. The overall battery pack components are the heaviest part of the EV at around 30% of the vehicle weight. Battery enclosures are made of metal. It is clear to us that by using composites coupled with our graphene SMC proprietary product, we can solve the weight problem for OEMs, which increases EV range. This market is very attractive, not only because of the rapid rise in EV market, but also because of high loading of graphene, which is around 5x more than average loading in other composite applications. All in all, we're confident about the potential of our company in this growing SMC market. Moving to our graphene and battery material facility. The engineering work has started, and we are looking for a suitable building to house our production lines. This facility will have a capacity of 12,000 tons per year, consisting of 7,000 tons of anode battery materials and 5,000 tons of our industrial graphene products. As we said in the past, we will sell 3 types of battery material solutions to the energy storage market and to VoltaXplore as well. The 3 solutions are anode active material, anode performance additive consisting of our graphene silicon solutions, and finally, we have our conductive additive product. We expect to commission our 100 tons-200 tons per year graphene silicon performance additive lines during 2023 by benefiting from XG's acquired assets and commission the rest by 2025. As noted before, we are very excited to enter into battery material market. This market is expecting a strong pull as supply is limited and localized, mainly in Asia. Since the Inflation Reduction Act was enacted last year, we have seen multiple new battery projects on the drawing table. The overall battery manufacturing capacity plant has increased from roughly 700 GW hour to 1,000 GW hour in North America by 2031 according to BMI, which makes the market dynamic very enticing for NanoXplore battery material solutions. Our battery material new R&D facility, which we announced after the XG acquisition, we're currently setting up the equipment and anticipating to have it up and running in a few weeks. The required lab equipment from XG, along with the important graphene silicon patents, are key for our performance additive products, and more development will be undergoing in our new lab space. Switching gears to VoltaXplore. We have been working hard behind the scenes on the development side. First, we're improving and adding hours of testing, which is very important for optimizing the performance of these cells. As previously disclosed in our AGM presentation, which is on our website, the KPIs are impressive. Volta has a high energy density. It provides lower cell temperature, which results into safer batteries and are lighter in comparison to our competitors' products. As we put these lighter cells in a battery pack with thousands of them, it's going to make a difference in increasing the vehicle range and safety. We're excited to have been selected to be a part of the Project Arrow. The unveiling of the car was very well received at the Consumer Electronics Show in early January, the Volta team was there to meet with interested parties. I want to reiterate that VoltaXplore is a top priority for NanoXplore, our desire to succeed has never been higher. We're confident about the prospect of VoltaXplore because of the strong performance that our cells bring, along with the discussion we are having with the stakeholders and future customers. I will refrain from commenting further at this point on these discussions or on financing activities for obvious reasons. What I can say is that we're still committed to building a gigafactory in Quebec, and we're actively working to make this a reality. Moreover, the 2023 upcoming federal budget has the potential to be an important contributor to this project, and we hope to see programs that can compete with the Inflation Reduction Act in the U.S. Finally, I would like to welcome Darren Hotz to the NanoXplore family as our new Vice President of Sales and Business Development for our graphene-enhanced composite business and battery enclosure. Darren brings extensive experience into auto sector and has worked with tier one global OEMs throughout his career. With that, I will pass the line to Pedro. Thank you, Soroush, and good morning, everyone. I will start with a review of our Q2 results, will be followed by our funding strategy regarding our five-year plan, and we'll close my remarks with our outlook for fiscal year 2023. Let's start with our Q2 results. Total revenues grew 69% to CAD 31.7 million, while revenues from customers grew 71%. The increase in revenue was driven by higher volumes, a positive product mix, including graphene-enhanced products, the acquisition of Canuck Compounders, which took place in December 2021, a higher US dollar FX rate, and price increases. These items were partially offset by lower to-tooling revenues. Our Q2 gross margin, excluding depreciation and amortization, was CAD 5.6 million, an increase of CAD 4.2 million compared to last year. As a percentage of revenue, gross margins improved by 1,000 basis points to 17.8% and was driven by higher margin product mix, price increases, improved productivity, and better cost controls. Our adjusted EBITDA was positive CAD 141,000, which is a gain of CAD 3.3 million versus last year. As Soroush mentioned, this is our second quarter of positive adjusted EBITDA in the last three quarters and demonstrates our ability to achieve positive adjusted EBITDA more regularly. We expect our quarters to remain lumpy, but our quarterly trailing 12-month performance, which is our preferred method of monitoring our progress, is decidedly trending favorably. The improvement in our adjusted EBITDA was largely due to higher gross margins due to the reasons I explained, partially offset by investments in SG&A related to additional headcounts, higher wages, and higher accrued variable compensations. As expected, the strengthening of the Canadian dollar during the quarter resulted in reversing part of the foreign exchange loss on hedging contracts we experienced in Q1. By CAD 1.2 million during Q2 as the US dollar depreciated to CAD 1.35 on December 31st from CAD 1.38 on September 30th. As a reminder, as part of the foreign exchange hedging policy, we engage in forward contracts for up to 24 months based on expected net US dollar cash flows during the time frame and record the monthly mark to market impact on the P&L. As mentioned during our Q4 2022 call, these variations are excluded from adjusted EBITDA as it is not deemed an operational item. With regards to our balance sheet, we ended the quarter with CAD 38.6 million of cash and cash equivalent, and CAD 10.3 million of available space on our credit line for a total liquidity of CAD 48.9 million. This amount is just slightly lower than Q1 2023. The CAD 4.2 million decrease in our cash position compared to Q1 is due to a repayment of CAD 4.5 million of the line of credit and a payment of CAD 1 million to the former Canuck shareholder as part of the terms of acquisition. During the quarter, we generated CAD 3.3 million positive cash flow from operating activities resulting from positive adjusted EBITDA and improved working capital levels. Having a strong balance sheet is part of NanoXplore's DNA, and the heavy lifting done to lower our working capital levels allowed us to pay down our debt and solidify our balance sheet further. Our total debt stood at CAD 10.1 million and was comprised of CAD 8.6 million of long-term and CAD 1.5 million of short-term debt. Moving to our five-year capital funding plan. As previously stated, our primary goal is to increase shareholder value and we'll structure our capital allocation accordingly. Since announcing our five-year strategic plan, the teams have begun a detailed review to identify the equipment needed, the partners we will work with, obtaining quotes and such for each of the initiatives in an effort to get a more accurate estimation of the capital required. Far, our more detailed work is confirming our early estimations remain reasonable and possibly higher than the final amount will actually be. In parallel with this work, we have entered into discussions with our existing debt financing partners to expand our existing debt structure into a more complete credit facility and plan to look other, at other lenders, to ensure we have the lowest borrowing costs. We remain confident that government grants will provide part of the financing and the balance, financed through debt. In the event equity financing is needed, it would not be until 2024 at the earliest. We will provide another update during our next quarterly call. Finally, considering our strong Q2 results and the visibility we have from our customers and partners for the second half of the fiscal year, we are raising our total revenue guidance for fiscal 2023 to a level between CAD 115 million and CAD 120 million from the previously stated CAD 110 million. With that, I will pass back to Soroush for his final comments. Thank you, Pedro. Looking back a year ago and seeing what I see now, I'm even more excited about how our graphene commercialization efforts are progressing based on our latest accomplishment mentioned earlier. Whether we sell pellets, powders or composite products, our graphene technology is at the core of our activity. It is the key enabler of our revenue growth because it helps boost performance and reduce carbon emissions for our customers. We do expect significant growth in the next few years as adoption accelerates. With that, I will turn it back to Pedro. [Foreign language] Soroush. Operator, we can now open the line for questions. Thank you, sir. As a reminder, to ask a question, you will need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, press star one one again. Please stand by while we compile the Q&A roster. I show our first question comes from the line of Amr Ezzat from Echelon Wealth Partners. Please go ahead. Good morning. Thanks for taking my questions. Can we start on the gross margin front? Pedro, maybe you could speak to the revenue mix in the quarter relative to last quarter. I've got you guys close to 18%, and I think last quarter you were at 12. More detail on what's driving that would be appreciated. Sure. A couple of things. Really last quarter, we had lower activity than we would have had normally, and that impacted our ability to absorb fixed overheads. This quarter, not only we had more volume to absorb overheads, but we also had operational efficiencies on direct labor. We're also able to pass along some price increases that were impacting us last quarter due to inflation and then price increases on materials. The two combined or these elements combined helped us get to the gross margin levels that we had for the quarter as we continue to try to increase those along with the product mix coming from graphene-enhanced materials that will further increase our margins. I'm sorry, I missed the last part. On the product mix, there's more graphene-enhanced materials as well? Yeah. As graphene-enhanced material sales occur, our gross margins will naturally go up. They get diluted overall because of the size of the activity, and the amount of graphene materials sold during the quarter. Overall, it's an increase. It increases the gross margin naturally. Is it safe to assume, or is that a fair statement, from here until, you know, like the end of the calendar year, expectation is for increased sales of graphene? We should expect gross margins as well to expand further. Is that a fair statement? Yes. It's just the quantity of the expansion is gonna always be somewhat limited, over the next immediate quarters, but will be progressing over the future quarters for sure as graphene sales continues to contribute positively. Of course, I can't say what could be happening on operational efficiencies or volumes and such that could impact the gross margins. Overall, it should be a positive trend, and the margins that we see right now, should continue to increase as I personally believe that the margins have room to be improved. Fantastic. Maybe Soroush, in your earlier prepared remarks, you spoke to quite a few clients, proving the use of graphene in some orders. Is it still fair to assume that by the end of the calendar year, you're capacity constrained on your current facility? Yeah. Yeah, the graphene sales is growing. A lot of new customers are coming and putting the orders. Some previous ones are putting new orders and increasing their volume. Harder to say the exact timeline of that, but for sure, less than 24 months, we have capacity issue, and we need to have more capacity on the graphene. Turning to the five-year plan, Pedro, I think you mentioned the CapEx plans you initially released, which were CAD 170 million, might be actually too high. Do you have like a revised number for us, or is it like too early stage? On the financing package, can you give us like the broad strokes of split between grants and debt, or is it too early as well? Well, on the first part of your question, the amount is still too early to confirm back to the market. We're seeing positive values, I guess valuations lower that than we were originally expecting. However, it's still too early to kind of comment on that. For the second part of your question, the grants that we're expecting is still very much as what we had talked about. It's about CAD 50 million out of the whole. The balance is gonna be through debt and cash. As you can see, we still have now almost CAD 40 million of cash available, CAD 30-some-odd million of cash on our accounts, and we should be able to tap into that. Along with the debt structure, credit facility that will be put in place, that should be covering that. The grant would be about CAD 50 million from what we can say. As a reminder, of the CAD 170 million CapEx plans, I believe only CAD 100 million were fenced and loaded, right? No, it's gonna be over time in tranches. A lot of the immediate investments will be probably in the first two years, but I can't quantify exactly that, how much that will be, 'cause it depends on the timing of the rollout, depends on the timing of the acquisition of equipment and facilities. We know that the last tranche of CAD 20 million will be for the further expansion of 4,000 tons of graphene production, which will probably not take place until 2026 or 2027. Okay. Maybe one last one, and I'll pass the line. On VoltaXplore, Soroush, I know you mentioned that you're not commenting on the details, but can you speak to timing? Is it like a first half of 2023 event? Yeah, as explained in the AGM, you know, we are really engaging with the federal government, and that's the part that we need to see a package that makes sense to us. Of course, any potential package has dependency to the federal budget, We have to see what is going to be in the budget. Following the budget announcement, we have a better understanding of where we stand in the total CapEx financing. I think, you know, we're quite confident on the Quebec side, but also quite confident on the rest of the financing. We need to have a clear indication of the exact quantum of the capital coming from the federal government. Okay, great. Congrats on the strong quarter again. I'll pass the line. Thank you. I show our next question comes from the line of Michael Glen from Raymond James. Please go ahead. Hey, thanks for getting me on. Soroush, for that federal budget situation that you're describing, like, is there a specific amount that would be embedded somewhere in that budget that would be, you know, you would be able to point to say that that's for VoltaXplore? Or is it that they will be allocating money to a fund and then VoltaXplore would have to engage with whoever that is managing that fund to propose the project? Well, we heard a lot of different versions. What I can say is the federal government has been quite tight-lipped about how they are setting up this program. At this point, the last we heard is there potentially gonna be a program. There has been discussions about investing on other funds. There has been discussions of investing in the Canada Growth Fund or similar type of programs. But it's at this point, you know, anything we hear is not definitive until we see the budget. That budget, we hope that has specific programs to compete against the IRA. I think that has been something that the federal government has repeatedly said that they're trying to put programs in place to compete with them. Okay. As you wait for that scenario to take place, like, is VoltaXplore at the same time, can you indicate whether you are engaged with strategic partners in terms of helping with some of that financing? At this point, we're already through strategic partners started this VoltaXplore. Our focus is to get the, you know, customers on the line and ready for pickup of the product when the gigafactory is in place. Currently not really focusing on getting capital from the strategic partners. We are certainly open to look at the opportunities, but we don't want to have, let's say, an OEM to come in and limit our commercial activities with other OEMs. Mainly the key is to stay independent as long as possible with the 2 GW hour. That can certainly change on the extension to 10 when we are adding 8 more gigawatt hour. That's when we look more closely to having OEM partners. At 2 GW, it's needed to stay as independent as possible. Okay. With the commercial... You talked about the commercial customer on the transportation side approving the use of graphene for future programs, and you are going to be supplying them with a graphene-enhanced product. Are you able to indicate the margin benefit? Is there a premium that the customer is paying for the graphene-enhanced product? Can you- Yeah. Identify how much of there's a margin benefit between the old product and the new product? Actually, on the first question of Amr about the gross margin, one of the thing about graphene is, of course, when we sell graphene on a powder or pellet format, we have a higher gross margin on the product. When we're selling as a graphene-enhanced composites parts, that's when you see operational improvement within our products that we are selling to the OEM. Technically, on those products, we're not getting premium or premium is very small, but we have quite a lot of drop in terms of defects and blistering. We showed those parts in the AGM, actually, to some of our shareholders that they participated. The parts are experiencing a much better quality, the reject rate drops significantly. That's, that's technically what graphene does in those parts when we're not changing the dimension of the, of the mold or part dimension. On those ones, we don't see top-line growth, but we see increase of improved productivity in-house. Okay. Just finally, do you have an update for full CapEx for the year? We expect, excluding the XG acquisition, we expect CapEx probably to be around CAD 3 million-CAD 4 million this year, before the end of the fiscal 2023. CAD 3 million-CAD 4 million. Okay. Thanks for taking the question. Thank you. I show our next question comes from the line of Rupert Merer from National Bank Financial. Please go ahead. Mr. Merer, your line is open. If you have your phone on mute, please unmute your line. We'll move on to the next participants in the queue from Ben Jekic from PI Financial Corp. Please go ahead. Yeah, good morning, guys. congrats on the very good numbers. Pedro, just a couple of sort of eclectic questions, just on the gross margin. Is it fair to say that the positive FX was not a sort of material contributor to gross margin? Like, if we were to remove an FX impact, you know, would we still be around 17% or so? The FX impact comes from the conversion of the sales in US dollars to Canadian dollars year-over-year. We wouldn't be at a larger increase, but the contribution from the FX, the higher FX, is definitely going to the bottom line. It probably contributes maybe 3% points, give or take. Oh, okay. We also make purchases in U.S. dollars which, offset the impact to the bottom line. Definitely on the sales level, it definitely is beneficial to us when we have U.S. dollar at around 1.34, 1.35 or better. Right. I just wanna understand how, sort of completely on the... I think two analysts have asked. In terms of the mix, you want when you see higher powder and or pellet sales, that's improving the mix and improving the margin profile. You are getting some benefit from graphene enhanced products, but it's more modest and it's kind of the impact there comes from internal productivity. Is that a fair statement? Yes, that's correct. When we are selling products to customers that are graphene enhanced products that are not necessarily benefiting from the graphene capabilities, but really are more about the inclusion of graphene in our materials from an operational and a quality aspect, those benefit more us operationally than the customer in terms of pricing. My last question, just on the transportation side. If I understand, the commercial customer, everything is progressing, lots of approvals for adding graphene to future products. You guys were mentioning, I think you used the term passenger OEM. Are there. Yes. How close are we to the orders from that customer? I mean, if we are, if we haven't started supplying by now, it's gonna be very soon. The product is already awarded, but I'm not really sure exact timeline of the award, of the, of the supply, but it's going to be very soon. Normally it's not a new program. It's a change over in a sense, or let's say it's an improvement to an existing program, so it's gonna be very fast. Right. Perfect. Thank you so much. That's all. Thank you. As a reminder to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. I show our next question comes from the line of Ahmad Shaath from Beacon Securities. Please go ahead. Yeah, good morning, guys. I guess back to the gross margin front, just to clarify the benefit on improvement productivity, where you're not really capturing price increases, this is sort of a legacy Sigma business where you're selling still components into the trucking market, or does that also encompass whatever you're selling as a differentiated, graphene enhanced product? What I can say is on a large portion of the Sigma business, currently we have graphene. The graphene, I mean, there was a couple of plants in Quebec City and plants in Winnipeg. Pretty much in all the products of our Winnipeg facility there is graphene already. Also a big chunk of the Quebec facility of Sigma, there's graphene in there. What graphene provides in the parts side is a lot more of a operational improvement than going to an OEM and charging them extra. These are pretty much capped with existing long-term contracts. The ability of us to pass through price increases, not because of material change, but because we're just gonna add some graphene in there and overcharge the customer, it's harder. We're benefiting a lot from operational improvement there in those products, which expands the gross margin. When we look at the graphene and graphene enhanced pellets and master batches, these are the high margin. These are high margin products that goes to someone else. We expect customers of us buying graphene and graphene enhanced pellets are benefiting from operational improvement. When we are selling to our like internally to the next level of supply chain, we benefit internally from that operational improvement. Perfect. That's very helpful, Soroush. Just to confirm, you're not getting a pushback on price when you're offering or positioning a product as a graphene enhanced product. The market is appreciating the benefits and potential premium, the prices can be absorbed. I mean, technically these type of contracts throughout the years, they always expect you to improve productivity, and they always ask for kickbacks. OEMs ask for that. Seeing that the company is capable of providing good product enhances the margin internally. They always like it because it brings potential kickbacks for them in the future. At the same time, those type of products, if applied early in the process, the OEM can actually adjust the dimension of the mold and use the lightweighting side of it. One of the things we see that right now in the SMC parts, for instance, for packaging, for EVs, for battery packs, since it's early, a lot of those weight reduction is important for clients and they want to use that weight reduction. When you go and look at the fenders in a truck, which has already been produced for 10 years, it's harder for OEMs to come and change the die and the mold to benefit from the weight reduction. Again, different customers, they have different requirements. Also, the age that the life of the program and where you're trying to include graphene demonstrate that how the OEM is using it. As you see and as we said, this market normally is resistive to change and don't like having new type of materials in. The fact that an OEM actually approved the use of graphene in all their programs regardless of SMC or let's say RTM and different type of even composites forming programs, it demonstrated the product is working for them. That's very helpful. Appreciated. Yeah. Amr, just one more thing is that over time, as new programs are awarded, our ability to put graphene and have higher margins are gonna be there as we're able also to pass along some savings to the customer by the light-weighting of products. A lot of the movement by PACCAR and eventually others to move to accept graphene will allow for these gross margins to increase in the future. The penetrant as a first. No, that makes total sense. I appreciate the color on on that solution, Pedro. That's all for me. I'll jump back in the queue. Thank you. I show our next question comes from the line of Michael Glen from Raymond James. Please go ahead. Hey, just going back to the passenger customer that you're describing, is that program, are you able to indicate, is that program via Martinrea, or is there another- Yeah. supplier involved in that? This is directly supplies from us to a tier one of the passenger OEM, but it's not through Martinrea. This is a passenger car OEM that's doing its own, some of its own, body, bodywork, body and stamping business. No. It's a passenger OEM that's picked up the product from us. Their tier one is not a part of that passenger OEM. They have their own tier ones for forming of those exterior parts. We are selling to their tier one. Tier one sell it to the passenger OEM. The approvals is coming from the passenger OEM. I see. That you're selling the composite, like the graphene- The compounds. The graphene-enhanced compounds. Recycled plastic compounds. It's supplied through Canuck. Recycled, got it. We Got it. Technically, our graphene goes to the Canuck process there, it goes to the tier one from their process there. Goes to the passenger OEM. Okay. Thank you. Thank you. I'm showing no further questions in the queue. At this time, I'd like to turn the call back over to Martin Gagné for closing remarks. I would like to thank everyone for attending this call, and we wish you a great day. You can now disconnect. Thank you. Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.