Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the H2O Innovation conference call announcing its financial results for the second quarter of fiscal year 2022. Bonjour mesdames et messieurs, et bienvenue à l'appel conférence d'H2O Innovation annonçant les résultats financiers du deuxième trimestre de l'exercice financier 2022. [/Foreign language] At this time, all participants are now listening only mode. Following the presentation, we'll conduct a question and answer session. Instruction will be provided at that time for you to queue up for questions. If anyone has any difficulty during the conference, please press the star key followed by zero for operator assistance at any time. Cet appel se déroulera en anglais, mais n'hésitez pas à poser vos questions en français. Before turning the meeting over to management, please be advised that this conference call will contain statements that could be forward-looking and subject to a number of risks and uncertainties and could cause actual results to differ materially from those anticipated. I would like to remind everyone that this conference call is being recorded today, February 14, 2022, at 10 A.M. Eastern Time. I would now like to turn the conference over to your host, Monsieur Frédéric Dugré and Marc Blanchet. Please go ahead, gentlemen. Hi, good morning, everyone. My name is Marc Blanchet. I'm CFO of H2O Innovation. This call will be held in English, but I will just say a brief word in French to our French audience. Merci. Bonjour à tous. Dans un premier temps, j'aimerais vous remercier d'assister à cet appel et de vous aviser que même si l'appel se tiendra en anglais, nous répondrons aux questions qui seront posées en français par la seconde partie de l'appel. Pour faciliter le suivi de l'appel, je vous invite à télécharger la présentation sur notre site internet, h2oinnovation.com, dans la section Investisseurs. [/Foreign language] Before we begin, I invite you to download a copy of today's presentation, which can be found on our website at h2oinnovation.com in the section Investors. Frédéric Dugré, our President and CEO, is joining me today for the call, which duration is approximately 30 minutes. During this call, Frédéric will give an update on the business and present highlights on the second quarter ended December 31, 2021, and I will be presenting the financial results. Please take a moment to read the forward-looking statement on page two and the non-IFRS financial measurement on page three of the presentation. I will now hand over the call to Frédéric. Thank you, Marc, and thank you to the analysts and the shareholders for joining the call today. We are really happy to present you these results for our second quarter ended December 31, 2021, as we are presenting sustained growth in our revenues, improvement in our profitability, and continuous business predictability with our high percentage of recurrent revenues and diversified backlog. For this second quarter, revenues stood at CAD 42 million, representing an increase of 20% compared to the last year. We are particularly proud to show strong organic growth of 16.2%, underpinned by new operation and maintenance projects, sustained activity of our WTS business pillar, growing traction for green specialty chemicals, combined with the addition of new distributors to our network. All of this is the result of investments made to expand our business development and commercial teams, development of new products, and strong business execution, even during this lasting pandemic, extreme volatility in the supply chain, and unpredictability in freight and logistics. Despite all these business challenges, we grew our adjusted EBITDA to $ 3.8 million, representing an improvement of 6.7% compared to last year. These results are aligned with our three-year strategic plan, which focus to grow the business organically at a rate of at least 10% per year while pushing to improve the adjusted EBITDA above 11%. Our net earnings also improved markedly and stood at CAD 800,000 for this second quarter. The company is focused on renewing and expanding the scope of work on existing O&M projects, combined with a targeted and selective approach for the new WTS projects. As a result of this methodical approach, backlog remains strong at $ 126 million, up 12.7% compared to last year. Our unique business model, relying on 87% of our current revenues by nature, is promoting strong customer retention throughout our different business lines and is encouraging multiple synergies and cross-selling opportunities. We're also proud of our recent acquisitions completed in mid-December 2021, allowing us to expand significantly our O&M business in the State of New York and expand margins of the business segment, which will be apparent in the subsequent quarters. At our last annual meeting of shareholders in early December, we also reveal our first ESG plan with six key initiatives that we intend to push in the coming years. Lastly, the award received by the Chamber of Commerce and Industry in Quebec for our successful strategy for business expansion outside of Quebec was the icing on the cake. Let's move to the operation and maintenance business pillar presented at page 5. First, the acquisition of JCO and Environmental Consultants in mid-December allow us to position our O&M group in the State of New York, the fourth most populous state in U.S.A. Indeed, as you can see on this map, we are expanding significantly our footprint in the northeast region with slightly more than 200 industrial and municipal customers along the Hudson River. Because the Hudson River is the main source of drinking water for the city of New York and its surroundings, the municipalities and industries upstream are highly regulated and make use of membrane filtration systems regularly. This is notably why the region was attractive to us and why it is also friendly to private O&M services. During the second quarter, we bid for the renewal of our single largest O&M project for the city of Gulfport, Mississippi. After review, the city selected us and currently elected to extend our existing O&M contract till the end of February 2022. This delay should be sufficient to finalize the negotiation with the city and determine a scope of work for the new O&M contract. Earlier this fall, we proudly renewed our O&M contract for the city of Long Beach, also in Mississippi, for the next four years. With this contract, a total of $12 million was added to our backlog. On top of being able to adjust our pricing with annual CPI increases, we expanded our scope of work and added five new employees. Moving to page 6, let's have a look at the highlights of our Water Technologies & Services business. Our business momentum remains positive for the second quarter. Indeed, we have been able to secure three new capital equipment projects for a total scope value of $ 4.1 million. On top of that, one of our most important projects in the backlog has finally resumed. We should start delivering equipment by the end of this fiscal year for the largest water reuse projects dedicated to the City of San Diego. If things are going according to the latest schedule, this flagship project should positively impact our current fiscal year, as well as the subsequent reporting periods. Our diversified backlog derived of 34% of industrial-related projects and 66% of municipal projects, stood at CAD 41 million at the end of December 2021, an increase of almost 10% compared to last year. Our service team continued to grow and add new customers, notably in the ethanol sector, where we have already strong references. The retrofit of ultrafiltration modules on existing membrane plants will allow us to propose a similar approach to multiple customers experiencing the same problem. They are looking actually for alternatives to reduce OpEx and increase performance. This upgrade was made possible notably by our technical process and automation expertise. As you can see through these pictograms, our business activity for the WTS pillar remains really high, and our engineering and fabrication teams are extremely busy. We're expecting the teams will remain busy for the multiple quarters, driven by the robustness of our backlog. Let's look at page seven for the performance of our specialty products business. The business pillar continues to provide really good results and contribute significantly to our profitability. Despite all the pressure on margins from the supply chain challenges and multiple constraints related to COVID, our EBITDA increased by 91% while revenues remained stable compared to last year. Our different business lines are working really hard to protect margins through product innovations such as the PiPerLink developed by Piedmont and launched in November 2021, by continuously adjusting our pricing, and by making investment into our plants. The investment made in Vista, California, will enable us to not only refurbish the office space, but also gain warehousing and laboratory capabilities to support the growing demand for our green chemistry. In parallel, we have doubled the square footage in Cheshire, U.K., in order to add warehousing capacity and in-source the manufacturing of specialty cleaners, which should enable us to better control the price, the quality, and the lead time of the products made. We are expecting to begin production of the powder cleaners at the end of the third quarter. During the second quarter, we continued to expand our distribution network with the addition of four new distributors covering the following territories, Indonesia, Singapore, Chile, and Israel. These countries are strategic for us and have a high demand for specialty production components. Lastly, our maple equipment business line was extremely busy to ramp up the inventory in order to fulfill the backlog of orders and get ready for the next maple season. We anticipate that the positive momentum in the maple market will remain in the coming years, as Québec government will release quotas for new taps, allowing producers to increase their production. Also, international demand and consumption for the golden syrup is expected to continue growing. Moving to slide 8, we see the results of our constant effort to grow the business both organically and through acquisitions. On an LTM basis, our revenues have grown by almost CAD 13 million or 9%. On a five-year basis, our compound annual growth rate is almost 20%. Our focus was not only to grow the business, but also to focus on improving the profitability and the EBITDA margins. Despite the nominal decrease in our LTM EBITDA, the evolution of our EBITDA over the last five years was remarkable and has been growing at 40% on a CAGR basis. Margins will normalize as the trend to our long-term targets with supply chain mitigation initiative and scaling of our SG&A as revenue continue to grow. Quarter- after- quarter, year- after- year, we are capturing business synergies between our different business lines, allowing us to improve our operational efficiencies, leverage our sales network, and most importantly, retain our customer. Talking about customer retention, we see on slide number nine that we have been able to maintain a high level of recurrent revenues by nature. Going through the pandemic, we validated the robustness and resilience of our business model at multiple times. The strategic decision to focus on growing recurring sales and customer retention have allowed us to significantly de-risk the business and improve our gross margin and adjusted EBITDA. Thanks to the multiple synergies that we have between our various business lines, our discipline in integrating the acquired companies and retaining our customers, we have improved significantly our financial performance and predictability. I will now pass it on to Marc Blanchet, our CFO, who will review with you and discuss the financial performance of our company during the second quarter of fiscal year 2022. Great. Thank you, Fred. Before I go over the financial results of the second quarter, I'd like to come back again on the last 12 months results. I always say that H2O Innovation is a business that we have to look at on a LTM basis. In this quarter, especially in this last 12 months, especially, we've made efforts to grow organically. This was one of the targets that we gave each other and we disclosed it for the three-year plan. Over LTM basis, just organic growth, we grew by 6.3% compared to 1.3% last year. We invested in growth initiatives in order to achieve the 10% organic growth, as I said in the strategic plan. To achieve this objective, we hired sales resources and invested in the SG&A to generate and support this growth. The adjusted EBITDA remain relatively stable at 15.4, compared to 16.6 in the previous LTM. The adjusted EBITDA over revenue is slightly lower at 10% compared to 11% last year. The reduction in percentage is explained by this investment in SG&A to generate growth and also a reduction of the gross profit margin, essentially due to COVID-19 pandemic. The fact that we can rely on three business pillar is the strength of H2O. It allows to be able to count on different source of revenue and thus reduce the risk of volatility on EBITDA. If we go on the Q2 results, page 12, we reported revenues of CAD 42 million compared to CAD 35 million in Q2 last year. It's an increase of 20%. As Fred mentioned earlier, assuming a constant USD exchange rate during this quarter, the consolidated revenue increase would have been 22.5 instead of 20, and the organic growth would have been 16%. Quarter- over- quarter, we grew by 16% organically. From the CAD 7 million revenue increase, 3.2 is coming from the three acquisitions closed over the last 12 months, and the FX impact for this quarter is $800,000. The gross profit margin ratio slightly decreased to 26.4% compared to 26.8% in Q2 last year. The percentage decrease was explained by reduced gross profit margin in WTS and O&M, partly offset by the improved gross profit margin in specialty products. The adjusted EBITDA improved by 7% compared to Q2 last year and reached CAD 3.8 million compared to CAD 3.6 million last year. The adjusted EBITDA margin decreased to 9% from 10.2% last year. The percentage decrease is coming from the decrease in the gross profit margin and the increase in SG&A ratio. As explained in the last two quarters, we've decided to invest in the SG&A to generate strong organic growth, which is giving results since this quarter we generated 16% organic growth. As for the gross profit margin this quarter, it has been impacted by the current global consequences of the pandemic. The company does have an action plan to mitigate cost pressure, which will be presented in each of the business lines. Finally, we're happy to report net earnings of $ 800 thousand, which is a nice increase compared to CAD 300 thousand for Q2 last year. Now let's go over the results of O&M, slide 13. Despite an unfavorable FX impact, revenue of O&M increased by 12%. Revenue for Q2 stood at CAD 19.7 million compared to CAD 17.6 million last year, representing an increase of CAD 2.1 million. Of this increase, CAD 700 thousand is coming from our recent acquisition of JCO and EC, and CAD 2 million is coming from organic growth, which growth was partly offset by an unfavorable FX impact of CAD 600 thousand. The gross profit margin and percentage has decreased from 19.8% in Q2 last year to 15.7% this quarter. This is essentially due to an efficiency related to increased illness related to COVID-19 with our workforce. We had many employees on sick leave, and on preventive isolation due to COVID cases, especially during the December month, which caused a significant increase of overtime for the remaining employee, since the nature of our service requires a constant level of staffing. We had to incur overtime cost and increase sick leave, which impacted the gross profit margin negatively. At the end of the first quarter, O&M backlog stood at CAD 85.5 million compared to CAD 74.9 million at the same time last year. It would have been CAD 11.2 million higher or 15% higher, assuming a constant U.S. exchange rate between the two periods. As we said in previous calls, backlog contains some contracts that are approaching to their renewal date, creating important fluctuation on the O&M backlog. O&M long-term contract has typical duration of three to five years and have different anniversary date for renewal. Since we have a very high renewal rate with more than 95% of O&M contract renewed since 2016, we believe that we're very well positioned to replenish the backlog in the next 12 months. As it was said earlier, we're under negotiation to renew our most important O&M contract with the City of Gulfport, Mississippi. Last January, a resolution was adopted by the city council to approve the extension of the city contract by one month until February 28. The city extended the contract for one month to allow time to finalize discussion for a new service contract agreement. It's also important to note that the contracts in Texas and in State of New York are usually evergreens. They're not included in the backlog. Now let's move to slide 14, Water Technologies & Services. The WTS financial performance for Q2 was highlighted by 23% growth in revenue compared to Q2 last year. Most of this increase is coming from the project side of our business, so the project activities, which generally brings lower gross profit margin compared to the service activities. Therefore, due to the business mix between the service and the project activities, the gross profit margin and percentage decreased to 18.8% compared to 22.4% last year. The profitability of WTS was also affected by consequences of COVID, such as delay in equipment deliveries and increased cost of material. When it's possible, based on contract language and client relationship, these increased costs of material will be passed through to the customer down the road when we negotiate extras. For the reason I just explained, WTS EBITDA stood at CAD half a million for Q2 compared to CAD 800,000 last year. With the CAD 4.1 million of new capital equipment project awarded in November, the backlog of WTS stood at CAD 40.7 million compared to CAD 37.1 million last year. As Fred explained earlier, the backlog is well balanced between industrial and municipal projects. Now let's look at Specialty Products. Slide 15. Specialty Products had a very strong second quarter. Revenue increased by 32% and EBITDA increased by 91% compared to last year. Revenue stood at CAD 13.8 million compared to CAD 10.4 million last year, and EBITDA stood at CAD 4 million compared to CAD 2.1 million in Q2 last year. The significant improvement of its financial performance is due to higher proportion of sales coming from specialty chemicals and GMP acquired in Q3 last year. Even though Specialty Products showed a strong financial performance this quarter, this business pillar also faced significant challenges caused by COVID-19 pandemic. As explained in previous call, Specialty Products is a business based on import and export of goods and had to deal with global supply chain matters and increased costs of materials. The gross profit margin was affected negatively, even though the Q2 profitability was improved compared to last year. We're taking proactive measures to mitigate these increases and to minimize the impact on the supply chain issues. Financial position, so page sixteen. The working capital, which is reconciled in the appendix 28, increased by CAD 3.3 million since January 30. The variation on working cap is mainly due to increase in inventory and accounts receivable. I will give further explanation in the next slide on that. As for the other working cap items, I won't go over each of them since the variation compared to June 30 balance sheet is essentially explained by the growth or the FX impact. Page 17, I add that chart to help the investors to reconcile our financial position. As I said previously, the variation on working capital is mainly due to increase in accounts receivable and inventory. If we go to this, the first column, the first green one here is the accounts receivable. There's CAD 7.5 million increase in accounts receivable. From that 7.5, 1.2 is coming from the acquisition of JCO and EC, which was acquired on December 15. We have a full balance sheet without the revenues or barely any revenues. As for the balance, the remaining, a third come from revenue growth, a third come from the seasonality of maple business, and a third come from delay in collection. Sorry. Although we had some late payments as of December 31, there is no significant account that were over 60 days late. This increase is explained by timing issue, and all the late payments have been paid as of today. If we go to the next column, the second biggest one in green is the inventory. The inventory increased by, and I realize I didn't... Yeah, we don't see that very well. It's inventory. I just noticed that, on my printed version, we don't see, the wording. I don't know on yours, but. The second one, 4.3, is inventory increase. This increase is really due to our proactive measure to maintain a higher level of inventory and thus respond to the current supply chain issues, price increase. So CAD 3.3 million is explained by the increase of the specialty products inventory. The remaining is growth coming from the maple business line, which is currently building its inventory for the upcoming maple season. Just want to highlight also the contingent consideration, which is the, I think the last column there, increased by CAD 2.7 million, since June 30. Part of it is explained by the acquisition of JCO and EC. Another part is the reevaluation of the contingent consideration of GMP, since their financial performance was higher than what was initially forecasted at year-end. Slide 18, let's go to net debt. As you can see, we show the evolution here over the last four quarters, five quarters. On December 31, the net debt stood at CAD 26 million compared to CAD 0.5 million on June 30. This increase since June is mainly due to the financing of JCO and EC acquisition on December 15, for which we paid CAD 22.2 million from cash on hand. The increase is also due to cash flow used in our operating activities coming from the increase in inventory and the higher receivable, as I just explained. As announced on December sixth, the increase of the revolving facility to CAD 55 million provides greater flexibility to the corporation, and to support our acquisition strategy described in our three-year plan. This concludes my remark on the financial section. I'll now hand the call over back to Frédéric for conclusion remarks. Thank you, Marc. Let's move to slide 19 for the conclusion and takeaways. Well, overall, we are pleased with our financial and business performance for the second quarter. As mentioned by Marc earlier in the presentation, despite the challenges related to the COVID and the supply chain, our business remains strong and predictable with 87% of our current revenues by nature. With approximately 50% of our consolidated revenues coming from the operation and maintenance contracts, we have less exposure to the volatility of the supply chain. Our multiple initiatives to grow the sales team, develop new products, and expand our distribution networks are paying off, as we are presenting organic growth of 16% for this second quarter. This is also in line with our objective to grow revenues at a double-digit pace while continuously looking for initiatives to improve our adjusted EBITDA margin. Our balance sheet is strong with very manageable leverage, and the recent extension of our credit revolver has allowed us to complete two O&M acquisitions in the state of New York. This new credit facility of CAD 55 million will enable us to execute our three-year plan, invest in CapEx to grow and improve manufacturing, as well as to complete other tuck-ins acquisitions. Talking about acquisitions, we're really happy of the contribution of the three companies added in the last 12 months. Our constant focus to find ways and alternatives to mitigate inflation in our supply chain, to properly integrate the acquired companies and maximize the synergies are allowing us to improve the profitability continuously. Finally, the water sector and its investment thesis will remain very attractive for many years. This is driven by strong and sustainable fundamental drivers that the planet is currently facing. The first one, the growing water scarcity with more drought events in highly populated areas. The tightening of more stringent regulations, notably driven by emerging compounds such as PFAS, microplastic, and hormones that we find in water. The urgent needs of investment to upgrade, refurbish, and expand aging water and wastewater infrastructure. Finally, the constant population growth, which will further push the adoption of water reuse and the installation of the centralized water and wastewater plants. All these drivers will continue to influence our industry and impact positively our business. For this reason, as you can see at page 20, we will take advantage of the World Water Day on March 22, 2022 to not only graduate officially to the TSX exchange, but to also organize a special Investor Day to create more awareness around the global water challenges and the solutions out there. More details will be announced in the coming weeks on that matter. I thank you, and I will now turn it back to the operator for the Q&A session. Thank you. At this time, I would like to remind everyone in order to ask a question, press star then the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Your first question comes from Michael Glen with Raymond James. Please go ahead. Hey, good morning. Maybe just to start, can you just talk a little bit about the two acquisitions completed in New York? Just remind us, how are those two businesses being managed now that they're under H2O? Is there a single point person from one of the businesses that oversees both operations or just trying to get some insight as to how that operation is being managed? Both companies acquired actually are integrated as part of our O&M business pillar under the leadership of one of our vice presidents, which is already leading the entire group of operation and maintenance. Both of these businesses have been acquired also because the owners were looking for an exit as going for a transition. It was already planned right from the get go that these business, you know, there will be people inside the organization that will step up within the organization to take regional leadership. The idea will be progressively to integrate them with best practices that we have already with other projects that we run in the Northeast. Again, if you look in the map that we put in the presentation, you will see that we had previously quite important projects as well in the Northeast area and already in Vermont, in the New Hampshire area. We're going to take what we have as a basis, add to what we have now with these two companies in the state of New York. The great news now is that we have a large new customer base of 200+ customers of industrial and municipal type of customers. As we think about the next 12 months with those two deals, are there any near-term priorities as you've had these now ownership of them for a few months? Any near-term priorities that you would like to focus on? I think the priorities for these two acquisitions and the low-hanging fruit as well is to maximize the synergies with, I would say, the WTS business. Because, as I said, this area in New York is very friendly to membrane systems. We believe there are existing capital equipment improvements, capital equipment upgrades that we can bring to existing customers of these two groups. So we have already projects that are under discussions with existing customers where we can bring a lot of value. So the priority for us is to really extract and capture these synergies and try to capture these low-hanging fruits that we call. The WTS says it's a gold mine over there. It's a goldmine of opportunities indeed. That's great. Just, Marc, thank you for the information and detail on working capital. Would you be able to, as we look through the next two quarters to the balance of the year, any indication on what working capital as a whole should look like for the company? Yes, well, the receivables, you know, other than the, you know, you'll see working cap follow growth, obviously. Receivables will come back to normal as already is the case in the middle of this quarter. It was a timing issue. As for inventory, you know, we start to build up, ramp up inventory a little bit over the last few quarters, especially Q1, Q2, especially due to the chemicals, on the chemical side of our business and even Piedmont. This is by design. We're doing that to not miss on sales opportunities. We've also increased inventory at different customers or, you know, closer to our customers to avoid them the delays into shipping. I don't expect to see. I have to be frank with you, we're investing into inventories a little bit now, just so we're able to capture the growth and preserve margin. Okay. So, uh- That's interesting. It's not going to be rocket high and much more than that, but I think the investment has been done. For now, it'll be, I think, stabilized. Yeah. The rest will follow growth. Again, it's by design. I mean, there's a couple of things behind it that drive this. As I explained, there's new distributors also that we're adding, so we wanna make sure that we have sufficient also supply. As you probably realize, the supply chain issues with unpredictability for freight carriers to move materials around, either incoming freight or outgoing freight, make it a little bit more complicated. So this is why also having inventory in hand is allowing us to mitigate, you know, these challenges related to lead time and deliveries. You know, the whole world has changed. I mean, we went from having best practices of trying to minimize inventory and have, you know, just-in-time practices. Now, I would say it's moved them from just in time to just enough. We feel confident the business is going strong. There was the seasonality from the maple, obviously, that will resolve in this current third quarter. That will be positive. We feel good where we are and this is why we are investing into our plants and manufacturing facilities in both California and Oakville and U.K. Your next question comes from Andrew Lemieux with National Bank Financial. Please go ahead. Oh, hi. Good morning and thanks for taking my questions. I'll start with the first one. Congrats on the Gulfport contract that you won. I was wondering if you can talk a little bit about it in terms of how large of an opportunity is it and as to the nature of your discussions with the municipality. I mean, obviously to the extent that you can share with us. Thank you. On WTS you're talking about? Gulfport. Gulfport, sorry. Gulfport. Yeah. This is actually the single largest O&M contract we have and one of our oldest as well in terms of relationship with the customer. In terms of size currently, it's a project that was mostly on the long-term basis with two components, sewer and drainage and operation and maintenance of assets. It is quite significant. For years now, this contract would renew. The city called for a public bid that we bid on. It was a competitive bid. There were other bidders also. Earlier, before Christmas, they selected the company H2O to continue negotiation and finalize the scope of work. There are currently opportunities to even further expand the scope of work that we have. This is why it's taking a little bit more time. At this point, we feel confident that we're going to come to an agreement with them and be in a position, I hope shortly, to announce officially the renewal of this contract for multiple years. Okay. Great. Thank you. Next question I have. Marc, you mentioned that there are several contracts coming up for renewal, in, well, this year, at least. I was wondering if you can share as to what percentage of your backlog that is, and would you have the opportunity to pass on CPI increases when you renegotiate those contracts? In terms of size, we—I mean, you know—we haven't disclosed it and it's not as material as this year with Long Beach and Gulfport. Gulfport. Okay. I can reassure you there. You know, and right now, what we feel is that, you know, we'll sit down with municipalities for the CPI and, you know, everyone's expecting a higher CPI than historically high. What will be the strategy? Will we have, you know, will we want to have like long-term contract or maybe a shorter term with a stronger adjustments and be able to sit down in two years or in a year with. That's what we're discussing. I don't want to disclose too much right now. I don't know who's on the call, if we've got any competitors. We will work on that and try to pass those increases that we're facing and that everyone's facing right now on salary push, health insurance, you know, COVID leaves and overtime and all that. You know, we will sit down with our customers and make the best out of that. Make the best out of that. Many of these contracts have already provisioned for CPI adjustment, already embedded in the contract. In the contract As we speak right now. Yeah. We're just going to apply and the clause as we come to the yearly renewal. Okay. Great. I'll just ask one follow-up on that, and then I'll jump back to the queue. This, the CPI escalators, are those only for the contracts that have a certain term, or do you have those provisions in the evergreen ones as well? The provision itself is into the long-term contract. For the evergreen, it's managed differently because, you know, the evergreen allows you also to regularly approach a customer and negotiate, you know, even on a monthly basis or yearly basis, new terms. Again, as Marc explained, we wanna be prudent because there's still competition out there. Yes, we wanna adjust price as we move, but we wanna be strategic also. We need to look at each of these customers differently depending on the scope that we need to perform. You know, I'll give you an example. On some MUDs in the Houston area, Municipal Utility District, you may have a very mature MUD where you have already a number of houses there where they're not really growing. You know, you'll be doing mostly maintaining of these assets. While if you look, for example, at a new MUD under construction, under expansion, where you know that in the coming years there'll be maybe 200, 400 houses built over the next years, you may approach your pricing strategy differently in the service you will perform to a newer MUD than you will do for an old existing MUD already well-established. This is why our strategy will be different and personalized to each of these evergreen contracts. Okay. No, that's great color. Thank you. I'll jump back in the queue. Thanks again and, congrats. Thank you. Your next question comes from Frédérick Tremblay with Desjardins. Please go ahead. Thank you. Good morning. Good morning, Frédéric. Good morning, Frédéric. The first question for me is on the O&M side. In the prepared remarks, you mentioned some COVID-related illnesses and overtime costs. I think you mentioned mostly in December. Just wanted to confirm if those challenges have eased so far in Q3 and potentially have less of an impact in this quarter and the next few quarters. Yeah. Our strategy related to COVID since the beginning was really like Canadian, I would say. Okay. We were very prudent. Sorry, it's the first word I'd say. We were very prudent and asking everyone to stay, you know, if you would be in contact, you know, you stay in like isolation for, you know, quite a high number of days, you know, 14 days or 10 days, depending. Then the Omicron wave came in, so at a certain point in mid-December, we were really struggling 'cause we had so many people in isolation. The rest of the guys were doing crazy hours of overtime that could not be recharged to the customer. During the holidays, we readjusted that and then CDC came up also with different guidance, the five days guidance, which we applied, but you know, frankly, it arrived quite late into the month, into the quarter. January is different. Nevertheless, there are still cases, there are still absences, and there's still some overtime. It's being resolved. We don't see much more in February. Nevertheless, I mean, we were struggling and had important costs, and especially in the whole Houston area, where crews are teaming up, so that's where we got hit and hit the margin. Okay. Perfect. Just on the margin profile of the whole business, 9% EBITDA margin in the quarter. Obviously some lag between price increases and your cost inflation. Just wondering if you could provide maybe a bit more color on the gradual aspect of your price adjustments and how that translates into your path going forward coming back to 10% plus margins and eventually reaching that 11% that's set out in the strategic plan. As Marc explained, I mean, there is this issue related to hours, which I think, you know, will resolve by itself, you know, as we go through this Omicron wave. We already saw improvement and seeing improvement as we speak. On the pricing, we are extremely diligent and proactive when it comes to specialty products to continuously adjust our price versus our cost, as cost, you know, fluctuates regularly. So far we have been playing good defense on that front and collaborated with our distributors to adjust, you know, our pricing on a regular basis. For the WTS on the equipment and projects, we have done already a few things to mitigate these volatility and price increases related to material. For example, we have our contingency that we bid into our projects when we bid. The validity also of our price on new projects that we bid also has been shortened, allowing us, you know, to mitigate these escalation clause. When we can also, we have, you know, in multiple projects, change orders, where we can to adjust this pricing and reflect the new reality. We're being very proactive on a couple of things to mitigate these pricings and we're confident in our strategy that, yes, we're going to get there, you know, back to the 10% plus and 11% on a three-year plan. Maybe if I can add, you know, there's two elements in that three-year plan is also 10% growth. We took proactive decisions to hire salespeople, and we've been talking about that since you know, third quarter last year. We can see the results also in the growth. There is temporary, I think, effect on the gross profit margin for this quarter for the reasons we explained. You know, that growth is starting to build up and, you know, this will even out at a certain point in time where we will be able to generate that double-digit growth and preserving that double-digit EBITDA. It's a matter of timing, I think. Good. If I can just ask a quick follow-up on that, on the growth side. I know that the target was over 10% organic growth or around 10% organic growth by fiscal 2024. You've already done, I think you reported 16% in the quarter there. Just maybe your thoughts on the sustainable aspect of your current growth profile or if there was anything in the quarter here that was a bit one-time in nature. Just maybe your thoughts on, you know, near- and mid-term growth as you think about that 10% that you're targeting. Well, if you just look at our backlog, for example, right now, I mean, the backlog has been already growing, you know, significantly over the last 12 months. Within this backlog, you can more or less predict or expect what should be coming up in the next fiscal year as well. The 12% growth we added into our backlog will start to impact, you know, the coming quarter as well, delivering new projects, delivering revenue recognition also from operation and maintenance contracts. As we said also, we are currently looking for scope expansion into one of our important customer for Gulfport. This will be another area where we think that, you know, we'll be impacted positively by growth. We are growing our distribution network, with new distributors, both for Piedmont, both for our specialty chemicals as well. This is an area and we're starting to see significant demand and traction for green chemistry. It's funny because, I mean, we add into our company for the last 12 years, PWT, and we have been doing the same chemistry, the SpectraGuard, with the benefit of being the only one chemicals out there without phosphate and made into a super concentrated formulation, allowing us to reduce the cost of freight. Now, finally, you know, we're receiving solid traction on our products because it's green and because the cost to move them around the world is way cheaper. That's why we feel pretty good and confident that we'll be able to continue to see sustained growth into our revenues. We launched new products. There's new products also that we launched that are starting to get traction as well. I mean, it's not only a bump of a quarter. You know, it's a significant bump in one quarter. We always have to look at it on a 12-month basis. You know, the objective is to be that 10% on a LTM basis and 11% EBITDA, and we're confident that this is doable. Great. That's helpful. Thank you very much. Your next question comes from Naji Baydoun with iA Capital Markets. Please go ahead. Hi, good morning. Just wanted to start on the cost. I know you've cited several sort of drivers here, but is it possible to estimate or quantify how much of the overall sort of change in SG&A is more permanent and how much can be passed through to customers? In SG&A? Well- In overall cost, I should say. One is coming from, again, by design, because we added just in the last 12 months about 4 guys for sales only. This is a little bit by design. There is an area where I think it's a matter of time before we're starting to see revenue growth, and then we're going to see scalability happening and then a reduction in percentage of SG&A over revenues as we start to generate more and more sales moving forward. What can be passed to the customers? I would say at this point, very little. I think the money is within our supply chain, and this is where we are, you know, making efforts to adjust our price accordingly. Okay. It sounds like it's just a question of timing for some of that to pass through. I wanted to Again, as we said, if we wanna be able to sustain this 10% growth for the coming years, we have no choice but to invest, right? What we're starting to see at this second quarter is the results also of actions we took, I would say six months and nine months and twelve months ago, to start to increase our sales. I mean, just on a chemical side, we added one salesman in Middle East, we added one salesman in India, and we added one salesman in Southeast Asia. With it, this is what we did over the last nine months. Now we're starting to see the benefit of that. Again, we had to carry the costs and burden of these new guys that joined the team. It's only about two years payback before, you know, he pays for himself and for all you've paid for him until then, so. Got it. That is very helpful. I wanted to ask about the retrofit project in Iowa. I think in the press release you highlighted that there are significant amounts of similar sort of facilities that need replacements or upgrades in the U.S. in the next 5-10 years. Just wondering if you can expand on that and how you're positioning the company to capitalize on those projects. Yes. Indeed, there are multiple ultrafiltration systems already out there. We have been successful in changing, not only changing and replacing the membranes with an alternative membrane, but the idea with this new membrane was to gain additional throughput, in a sense that the membrane that we replaced with was able to process more water. I'll try to simplify it, but process more water in the same volume and in this way, you know, allow the customer to reduce their OpEx or improve, you know, their production. Also because of our expertise process-wise, and because we have a team of engineers and a team of automation engineers, we have been able to change, you know, the parameters also of operation of the existing systems to improve the efficiency and reduce the OpEx for the customer. Now there are multiple, like, thousands of systems out there, in stock more or less in a similar problem. This is why progressively we wanna approach the markets. We have done a successful retrofit, and now we're targeting other ones, that our service team will tackle in the coming months. I've already tackled a few more. This is exciting. It's kind of a very technical niche approach, but it's also a way to get into new customers because if we're successful to retrofit and replace these membranes, well, most likely we're well positioned to bring the specialty chemicals, to bring other components, to bring additional upgrades, propose operation and maintenance. It's kind of a door opener on existing infrastructure. Mm-hmm. On this, the project in Iowa, I think you were working with another company. Do you see any opportunities to maybe sign some strategic partnerships with some key players in that market? Yeah, there are a few. I would say local companies out there that can help us on the service side. This was a company that help us, you know, to conduct the physical replacement and carry and move the membranes in the field. There are a few companies of similar nature out there that we could team up with, depending on where they are geographically. Okay, it's not a large strategic with the national footprint. It's really more of a local or state-by-state approach. Correct. Feet on the ground. Okay. Just one last question about the Investor Day. You had the recent update at the AGM in December. Just if you can give us some thoughts on what to expect from the Investor Day, that'll be helpful. Well, the idea again, as I said, will be to bring more awareness around the water issues generally speaking. Not only talk about H2O itself but talk about because it's the World Water Day, talk about the general issues out there related to water scarcity, the new approach to water. You know, try to break up taboos also about water reuse, because I think it's part of our mission as well to create awareness about the technologies out there. Even though there's tons of challenges related to water, the good news is that there are technologies out there that can be used and applied to make a better planet. This is what we're going to talk about, generally speaking and try to have a keynote speaker along these lines. Okay, that's great. Looking forward to that. Thank you. Yep. Your next question comes from Troy Sun from Laurentian Bank Securities. Please go ahead. Good morning, gentlemen. Good morning. Maybe just a—I guess a two-part question on potential M&A here. In terms of maybe sourcing the prospects here internationally and also conducting due diligence work, I'm just trying to get a sense of how things are looking now versus say maybe 12 months ago with, you know, the level of travel restrictions globally that you're seeing across the geography. Secondly, maybe just on also the sellers' expectation, aspect as well as, you know, obviously in recent months, things have really cooled down in some areas of the market. I'm just curious to see what you're seeing on your side there, please. Thank you. Well, in terms of acquisitions, I mean, we still have definite targets, very clear targets out there of tuck-ins as we have said before. This is what we wanna go after. As we said, there are two essential areas that we're looking at. Operations and maintenance we just did two. We're looking also to complement and add more products and components to our specialty products platform. Let's put it this way. These are the things that we'll be looking at, and also additional technologies. I don't think that, you know, in terms of game plan or strategy we have seen change. Yes, there was some restriction in the traveling, not allowing us to travel as we wanted to, but through the relationships, through the contacts we have within the industries globally, I think we have been able to still strive and make moves and progress on different fronts, these acquisition targets. We remain confident that, you know, in the next couple of months, we'll be in a position to come back to the market with great news on expansion and new acquisitions. I think in terms of sellers, most of what we see out there have the same motivation. We see business owners in general, you know, getting older, looking for exit strategy, or we're looking for companies that are small size and looking for a platform to further grow their business because they have some kind of limitation. If they join and come along with H2O, we can, you know, provide them instantaneously access to a large distribution network internationally, which by the way, took us years to develop. Within a few months then, they can expand their business very rapidly and efficiently. These are kind of things that we're looking at. We're still confident that we'll be able to come up with great news in the coming months. For sure. That's super helpful. Thank you. Maybe just, I guess a follow-up question on your previous comment on funding your growth strategy without diluting the shareholders. I would assume that's predicated upon your ability to generate free cash flow. Obviously appreciate Marc's earlier comment on, you know, the puts and takes on working capital there. Just trying to get a sense on how should we be thinking about the, I guess, the free cash flow generation potential for the business over the long term, especially versus peers. Are there any, I guess, low-hanging fruits that you have identified in terms of improving on, you know, your cash collection and DSO and, you know, those metrics there? That's a good question, especially compared to the peers, 'cause our peers are less, maybe sometimes diversified than us. If we look to the O&M, I mean, as I explained, it's a question of timing. Generally operation and maintenance, we collect within 20 days after the invoice is issued. In this case, you know, we have some you know, 40 days-ish. That's kind of resolved. That represents 50% of our revenues. In terms of, as I said, inventory, we you know, we will focus on try to reduce the inventory level, but I think that the investment has been made. How will we recoup that eventually is, you know, for us, was a bit of a defense play in order to preserve the gross profit margin coming from our products. By it being able to supply ourselves more efficiently and even by bringing in-house some powder production, this is what we're doing in the U.K. right now. This also is part of the increase of the inventory that we see. We'll be able to preserve more gross profit margin, generate more free cash flow. There's a bit of investment there in CapEx and inventory, but this is for a relatively short term return on investment. How to see free cash flow is maybe there's a bump here right now, but I think it should stabilize as it was maybe 12 months ago. That's what I expect to see. I don't wanna give too much details because I've never disclosed that. Obviously, I have a good crystal ball that I've tracked very efficiently, and that's only what I can say right now. Great. At this point, you know, we need to keep in mind that by nature, our business, generally speaking, is not very CapEx intensive. Yeah. I mean, you know, to grow the business for us right now is. I mean, as Marc said, we are by decision, by design, investing a little bit more into our inventory. We're making also investments that were not done before in both into our chemical plants in California and the U.K. As you know or imagine, you know, the margins that we make on both of these business lines are extremely profitable. The return on investment expected on these investments that we're doing is quite good. There's always, as Marc said, a timing of things, you know. In December, when you take a picture on December 31 and looking at your receivables versus your payables, and it's not perfect. We're confident that within the next six months, by the end of our fiscal year, June thirtieth, things will go back to normal. At this point, you know, in terms of dilution for acquisitions, our strategy is still the same. I mean, we're aggressively growing the company, but most importantly, we don't wanna go above, you know, the threshold, let's say, of 2.5 to three times, you know, debt to EBITDA kind of ratio. This is what we feel comfortable at this point. Also the key is paying the right price when you make the acquisition on day one. This is where you make your money, making an acquisition at the right price. This is why we wanna stay disciplined also in approaching our transactions, not overpaying, companies at really high multiple, but take advantage of buying smaller companies at affordable price, not over-leverage, and rapidly integrate them to create value. Great. That's super helpful color there. Maybe just one last quick housekeeping item for Marc. In terms of the CapEx, any I guess early projection for the year for that item? You know, historically, CapEx has always been, I say, between 1%-2%. This year, with the investment we're making in the U.K. and in California, it might be closer to the 2%-ish, you know, in terms of monetization. We wanna remain disciplined and preserve that, you know, CapEx, unless there is an investment that would have a return on a return, but we would explain then, you know, that there would be probably revenues coming with it and stuff. But in terms of CapEx, really, and reinvestment into our facility or like the insourcing investment we're doing in the U.K. right now, you know, will be preserved or maintained between that 1%-2%. Okay. Of the revenue. Great. Makes sense. 1%-2% of the revenue. Yep. Thank you. Yeah, that's it for me. Thank you. Welcome. There are no further questions at this time. I will turn the call back over to the presenters for closing remarks. Very well. Thank you very much for attending the call, and we look forward to catch up with you. Stay tuned for more details on the World Water Day, where H2O is going to get listed on the TSX in Toronto. Thank you very much. Have a great day. Bye-bye. Bye-bye. This concludes today's conference call. You may now disconnect.