Good morning, ladies and gentlemen, and welcome to the H2O Innovation Q2 FY 2023 financial results conference call. At this time, all participant lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require needed assistance, please press star zero for the operator. Note that this call is being recorded on Tuesday, February 14th, 2023. I would like to turn the conference over to Frédéric Dugré and Marc Blanchet. Please go ahead. Yes, thank you very much. Good morning, everyone. My name is Marc Blanchet, CFO of H2O Innovation. This call will be held in English, but I'll just say a brief word in French to our French audience. 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, President and CEO of H2O Innovation, is joining me today for the call, which duration is approximately 30 minutes from now. During this call, Fred will be giving an update on the business and present highlights of the second quarter ended December 31, 2022. I will be presenting the financial results right after Fred's presentation. Please take a moment to read the forward-looking statement on page two and the non-IFRS financial measure on page three of the presentation. I now hand over the call to Fréd. Thank you, Marc, and thank you for joining the call today on this Valentine's Day. We couldn't be prouder of our results and performance for the second quarter of our fiscal year 2023, particularly considering the current economic backdrop and high inflation and bottlenecks on the overall supply chain. At H2O Innovation, growth is present in every business line and in every aspect of our business. This is evidenced by record-high revenues of $63.9 million, supported by 27% organic growth leading to a 30% increase of our adjusted EBITDA. Cash flow from operations was also robust at $6.6 million in the quarter, a significant improvement from the previous quarters also in line with our strategic objectives to convert EBITDA to free cash flow. Our team is executing its business plan and exceeding its objectives. H2O has built a North American platform to address a massive and growing market, and continues to monetize the platform with repeat and new business from both industrial and municipal customers. With 90% of our current revenues by nature, our business model is resilient and more predictable financially. Combined with a consolidated backlog of $206 million, which has increased 63% year-over-year, strong market drivers and high recurrent revenues, we feel confident that our pace of growth will continue in the coming quarters. While maintaining our growth trajectory, we remain committed to improve our EBITDA margin above 10% as per our three-year plan. For this second quarter, we posted an adjusted EBITDA of $6.5 million, up 30% from Q2 in previous fiscal year. With such results, we're showing that we're growing our EBITDA faster than our revenues, which also demonstrate the scalability of our business. The measures we took to mitigate both price increase in raw materials and inflation in wages are starting to reflect positively on our gross profit margin as well as on our EBITDA margin. On an LTM basis, our revenues have increased to CAD 224 million, representing almost a 45% increase from previous twelve months. On a five-year basis, our compound annual growth rate stand at 17.4%, including acquisition and organic growth. The adjusted EBITDA on an LTM basis reached CAD 21.7 million, an increase of 40.7% compared to the previous twelve months. What is remarkable is that over the last five years, the adjusted EBITDA has increased by 31.7% on a CAGR basis, showing our dedication to scale up the business and grow the bottom line faster than our revenues. Moving to slide number five, let's review the business activity for each of our business pillars, starting with the Operation & Maintenance. Our O&M team continues to deliver. Not only we have been able to secure new O&M projects, but we have been able to renew multiple existing O&M contracts. During the second quarter, we renewed four O&M contracts in the state of Texas, New Hampshire, New York, and one in the province of Alberta. As per the press release issued last week, this renewal in Alberta consists of operation and maintenance of 11 water treatment plants, but also two wastewater treatment systems, including 28 sewage lift station, sorry, for the Kananaskis Provincial Park. This is a second five-year mandate awarded to the company from this customer. At the end of the second quarter, we have been awarded a three-year contract for the water facility located in Texas. This expansion in Texas should enable us to make better use of our existing resources in Texas, thus leverage also more a back office cost structure. The combination of contract renewals and new contracts has enabled us to push the O&M backlog to $160 million, representing an increase of 75% year-over-year. It's important to recall that our O&M backlog doesn't include evergreen contracts located in the state of Texas and New York, which represent about 30% of the overall revenues coming from the operation and maintenance. All these efforts are reflected into the financial performance of the O&M group. On an LTM basis, the O&M revenues stood at CAD 106 million compared to CAD 87.5 million, representing an increase of 21.7%. The acquisition of JCO and EC completed in December 2021, combined with the addition of 16 new O&M contracts and 14 renewals in the last twelve months, contributed to post this important growth. Over the same period, the EBITDA has moved from CAD 10.5 million to CAD 12.6 million, showing an increase of 20%. In the coming quarters, we will continue working on the renewing our O&M projects and capture CPI adjustments to improve our gross profit margin and EBITDA margin. Moving to page number 6. Let's have a look at the highlights of our water technology and services business pillar. The WTS team remains extremely busy working on an impressive number of projects. In the second quarter alone, we commissioned three projects, including an important water reuse plant for the city of Morro Bay in California. We also delivered five new projects. Among those, we delivered two mobile ultrafiltration units for a mining customer in northern Ontario. These units, as shown on the picture on the left, are necessary to manage the level of water contained in leachate ponds on the site in order to avoid any overflow in the environment of the contaminated water. On top of executing our backlog, our WTS team was successful in securing seven new water treatment projects totaling $17.6 million. Now, three of them are for municipal applications and four other are dedicated to industrial applications. This diversification is in line with our strategy to focus on industrial customers to further grow the business, allowing us to capture more recurrent revenues originating from the aftermarket service and consumable sales. These new bookings, pushed by the WTS backlog, pushed WTS backlog to a new high of $56.1 million at the end of Q2, representing a 38% increase compared to Q2 in previous fiscal year. With such backlog, we're expecting revenues to continue to grow in the coming fiscal year. These new projects added to our backlog are realized with price reflecting the latest material and wage increases. For these reasons, we're confident seeing an improvement in our margins in the coming quarters. As you can see through the pictogram, our existing activity for the WTS pillar remain high, and our engineering and fabrication teams are extremely busy. We are expecting the teams to remain busy for multiple quarters, driven by the robust backlog that we have. In the coming quarters, we should observe an increase into our revenue recognition as the projects will move from the engineering phase to the fabrication phase, where usually most of the revenues are being recognized. On an LTM basis, WTS revenues reach almost CAD 46 million, representing an 8.2% increase compared to the last fiscal year. Pressure on margins remain our number one challenge for this business pillar due to the fixed price contracts that we have. Over the same period, the EBITDA has increased proportionally by also 8.3%. Let's look at page seven on performance of our specialty business pillar. The second quarter showed an impressive growth of specialty products revenues of 73%, where 48% was generated by the organic growth. The remaining portion of the growth originated from the acquisition of Leader Evaporator, completed on June 30th, 2022. The organic growth is clearly driven by the high demand we're experiencing from our specialty products, the strength of our large distribution network, and the growing interest of the end user for green chemistry and eco-friendly water treatment solutions. As per the chart on the right-hand side, our LTM specialty products revenues reached almost $72 million at the end of December, sorry, 2022. This represent an increase of 31.6% compared to our previous fiscal year. LTM EBITDA stood at CAD 18.1 million, up CAD 4.6 million, or the equivalent of 34% compared to the previous fiscal year. In October, we were able to validate the interest of our distributors, solidify by business relationship, and introduce new products to 100 distributors from 75 different countries during our Distributors Summit hosted in Bilbao, Spain. This three-day event was a unique opportunity to validate our growth opportunities and market drivers in various geographies. The general outcome is that the desalination market will remain strong with modest growth, while the water reuse market will accelerate significantly across the globe in the coming years. We're also proud to announce that our Piedmont business line secured its largest coupling order for 1 million cubic meter per day, a new project in Saudi Arabia. This project will further expand our reference list of projects in the Middle East and may allow us to introduce complementary specialty products to the same customer. During the second quarter, we delivered our new PiPerLink product to a 150,000 cubic meter per day seawater desalination plant in Morocco. This product is still at its infancy, and we hope that this new installation will generate more commercial traction for this revolutionary product within the global desalination industry. Our maple division is now entering the peak of the maple season, which usually takes place between January to March, which also corresponds to our third quarter. During this period, most of the maple farming equipment are delivered to our customers, creating an increase into our revenues and a reduction into our inventory of finished goods. In parallel, the integration of Leader Evaporator continues to progress well, and many cost synergies opportunities are being identified and should impact positively the company in the coming quarters. We're also excited about the delivery of our first Hypermash system into a microbrewery in California. As shown on the picture on the bottom left, our expertise in sugar concentration acquired through the years will now help the brewery industry to increase their production yield by reducing their waste of raw material and their evaporation time, translating into energy and water savings. As we mentioned in our three-year plan, this represents one of the key strategic initiatives to transform our maple farming equipment business into an agri-food and irrigation business line. I will now pass it on to Marc, our CFO, who will review and discuss the financial performance of our company during the second quarter. Thank you, Fred. Now let's move on slide nine. Before going over the result of the second quarter, I would like to go over the result of the last 12 months compared to the previous 12 months. I always say that we must look at our results on a LTM basis to capture the long-term evolution of the business. Our effort made over the last 12 months to focus on increasing organic growth allowed us to increase our LTM organic revenue growth from 6.6% to 26.3%. Our revenue on an LTM basis reached CAD 224 million, compared to CAD 155 million for the previous period. We invested in growth initiatives to achieve the 10% organic revenue growth objective provided in the three-year strategic plan. To achieve this objective, we hired sales resource and invested in SG&A to generate and support this growth. Those investment have been successful since the target has been largely exceeded. This explains the increase in SG&A compared to previous LTM. The ratio over revenue is lower, from 18.1% to 17.4%, showing the scalability of our business model as revenues continue to grow. Net earnings reached CAD 4.4 million compared to CAD 3.2, an increase of CAD 1.2 million. The adjusted EBITDA increased to CAD 21.7, compared to CAD 15.4 in the previous 12-month period. The adjusted EBITDA over revenue is lower at 9.7%, compared to 10% the previous period. The reduction in percentage is explained by the investment in SG&A to generate growth and the reduction of the gross profit margin due to the business mix. The fact that we can rely on three business pillars is the strength of H2O Innovation. It allows us to be able to count on different source of revenue and thus reduce the risk of volatility of the EBITDA. On slide 10, I'd like to go over the revenue, to go over the results and especially the highlights of Q2. The main highlight is the significant revenue growth. We are reporting revenue of CAD 63.8 million, compared to CAD 42 million in Q2 2022. This represents an increase of CAD 21.8 million or 52%. 27% is coming from organic growth and 20% from acquisition of, related to JCO EC, both acquired in December 15, 2021, and Leader Evaporator acquired on June 30, 2022. The adjusted EBITDA also improved by 70% and represents 10.1% of the revenue compared to Q2 last year. adjusted EBITDA reached CAD 6.4 million this second quarter, compared to CAD 3.7 million last year, which was 9% of the revenue. The percentage of SG&A over sales has decreased compared to Q2 last year. Investment made in sales and business development are paying off since revenue are still growing faster than the SG&A ratio. As for gross profit margin, it has increased, reaching 26.6% compared to 26.4% last year, despite high inflation on material costs and pressure on salaries, which demonstrates effective price realization. This second quarter, we realized CAD 6.6 million of cash flow from operating activity. The fast organic growth of the previous quarter pulled on working capital, but we're starting to improve the conversion cycle of these investments. In addition, we wanna highlight the important increase of our consolidated backlog. It's up by almost 63%, and it provides us with good visibility on revenue for the upcoming quarters. Page 11, we present some P&L highlights of Q2. On that slide, I'd like to bring your attention on the table on the right. I wanna address the FX rate variation impact on the revenue, given the opposite fluctuation of certain currencies. We're doing business in Canadian dollar and reporting in Canadian dollar, but we have a lot of revenue in USD, and some revenue in British pound and in euro. For this second quarter, all these effects have been, in fact, a positive impact of CAD 2.3 million or 5.4% on revenue. The USD exchange rate was favorable, partly offset by the pound and the euro. On this quarter, each 100 point base of USD CAD variation had an impact of CAD 450,000 on the revenue, only CAD 25,000 on the EBITDA. The pound had an impact of CAD 33,000 on revenue and only CAD 8,000 on the EBITDA. Now I'll go over the financial results by each business line. Let's start with operation and maintenance on slide 12. For the O&M business pillar, revenue for Q2 stood at $28.9 million, compared to $19.7 million last year, representing an increase of $9.2 million or 47%. 14% of this growth is organic, and it's generated from important scope expansion and new projects secured in the previous quarters. 24% is coming from the acquisition of EC and JCO, which were acquired Q2 2022. Operation and Maintenance EBITDA reached $3.1 million, compared to $2.1 million for the same quarter last year, representing an increase of $1 million or 49%, and represents a slight increase in percentage over revenue. Even though the EBITDA percentage slightly increased, our gross profit margin in percentage remains stable. To create a safe and attractive environment for our workforce and to create value for our customer by offering them a talented team, we decided to establish a minimum wage of $15 an hour for all for all employees, which was done during Q1 2023. Since over 70% of our employees are working from this business pillar, the operation and maintenance gross profit margin and EBITDA are more sensitive to factor related to workforce. In most of the O&M contracts, we're entitled to increase the annual fee based on Consumer Price Index, on CPI. Such annual fee increases are being effective with our customer as each contract reaches its annual contractual adjustment date. We will continue to achieve price realization in the upcoming quarters. Not only in Q3, but as we move forward in time, we continue to address that issue and increase prices. At the end of the quarter, the operation maintenance backlog stood at CAD 150 million compared to CAD 85.5 last year. This is an increase of 75%. I would also like to bring to your attention that contracts in Texas and in the States of New York are evergreen contracts and are not included in the backlog. Now let's move to WTS, Water Technology and Services, on slide 13. WTS revenue improved by 29%, which is all organic from service activities and capital equipment projects. WTS EBITDA stood at CAD 1 million compared to CAD half a million last year, which is an increase of CAD half a million or 100%. The increase is mainly due to the improvement of the gross profit margin explained by higher percentage of revenues coming from service activities, combined with price adjustment clause based on inflation, that we were able to negotiate with some of our contracts or some of our projects. SG&A, selling and general expenses were higher, primarily due to new hiring of sales resources, higher labor costs and commissions, as well as resumption of travel and our participation to trade show and conferences. The WTS backlog stood at CAD 56 million compared to CAD 40 million last year, which is an increase of 38%. As Fred explained earlier, the backlog is well balanced between industrial and municipal project and provide excellent visibility on revenue for the upcoming quarters, keeping the focus on industrial projects, which are characterized by better gross profit margin. Now let's move to specialty products, page 14. Specialty products had a very strong performance from all business line for this quarter. Revenue stood at CAD 23.9 compared to CAD 13.8. It's an increase of CAD 10 million or 73%, and 48.3% of this is organic. It's 48% organic growth. The acquisition growth is coming from Leader Evaporator, which is at 25.8% or CAD 3.6 million. The FX rate variation had a net negative impact of only $100,000, mainly coming from the British pound and the euro. The EBITDA stood at CAD 5.8 million compared to CAD 3.9 million, representing a dollar increase of CAD 1.8 million, a decrease in%, mainly explained by the deterioration of the gross profit margin. The gross profit margin stood at 41.8% compared to 46.4%. This decrease is mainly due to business mix within the business pillar and the increase of cost of raw material. We compare to last year, revenue coming from maple business line were higher and have average gross profit margin lower than the specialty chemicals. That's the main variance of one of the main variants of the when we talk about business mix. Price increase and procurement strategy have been implemented in the recent quarters, which should impact favorably the margin in the upcoming quarters. The SG&A increased by CAD 1.7 million. The main reason are the hiring of sales resource, pressure on salaries in connection with the inflation, the resumption of travel combined with acquisition of Leader. However, the SG&A ratio over revenue remains stable. Let's move to page 15, slide 15. Financial position, we will look at certain information there, certain working capital items. First, the account receivable, they increased by 18.5% since June 30, which is in connection with the revenue growth, and 5.8% of this increase is due to FX variation. If we look at the inventory level, it increased by 21% since June. Foreign exchange explained 3.5% of this variation. Inventory increased to respond to the continuing high consumer demand as shown by our revenue growth. We're still maintaining high level inventory combined with the seasonality trend of the maple business line for the upcoming season. As Fred explained, just a few minutes ago, this inventory is made of product that will be delivered to customers in the Q3 and Q4 based on order in hand. For this reason, we should see a decrease into the maple inventory in the next two quarters as we will get into the high season of the maple syrup production. Accounts payable increased by CAD 1.6 million or 7%, mainly due to the fixed rate impact of CAD 1.9 million and timing of payment to suppliers. Regarding its contingent consideration, the decrease is related to the partial payment related to GMP acquisition that occurred during Q1. Page 16, cash flow. On page 16, I wanna highlight the fact that cash flow from operating activities generated $6.6 million for the second quarter of fiscal year compared to a use of $3.3 million last year. As I highlighted earlier, the fast organic growth from the previous quarter pulled on the working cap, we're starting to improve the conversion cycle of these investments. This last quarter, we also invested $3.1 million of CAPEX. Most of these investments are equipment required to execute new operation maintenance contracts. Therefore, they are what we call growth CAPEX. On slide 17, the net debt. As you can see, the evolution of the net debt, we show here the evolution of the net debt since second quarter of 2022. As of December 31, 2022, the net debt, which includes contingent consideration, stood at CAD 53.5 million compared to CAD 50.3 on June 30, representing a CAD 3.2 million increase due to cash flow. sorry, that's... It's a decrease due to cash flow use in investing and financing activities. No, sorry. Representing a CAD 3.2 million increase due to cash flow use in investing and financing activity. Essentially interest payment and CAPEX for the new O&M contract. This wrap up the presentation of the financial results. I'll now hand the call back to Fred for conclusion remarks. Thank you, Marc. In conclusion, on slide 17, I wanna bring back our three-year growth plan slide that we presented at our annual general meeting of shareholders in December. Looking out at the sales pipeline, rich in diversifying municipal and industrial opportunities, at the strength of our distribution network for specialty products, our recurring revenues now accounting for about 90% of our turnover, our consolidated backlog of CAD 206 million, and the compelling market drivers of the water industry, we envision continuation of strong organic growth with a focus on margin improvement in the coming three years. For these reasons, we are tightening our revenue targets for the coming years. As previously announced at the AGM, we're increasing our revenue midpoint targets to CAD 234 million for this current fiscal year, CAD 260 million and CAD 215 million... CAD 315 million for 2023, 2024 and 2025 respectively. While growing revenues, we remain equally focused in improving our adjusted EBITDA margin above 11% in the coming three years. Our roadmap still calls for margin improvements and optimization of our cash flow conversion. Multiple initiatives are pursued in order to mitigate the impact of high inflation in raw material and wages. Moving to slide 18, the drivers of the water industries are now undeniable. Population growth, aging infrastructure, more stringent regulatory measures, water scarcity, aging workforce, and companies' objective to become more water positive. These factors continue to grow our sales and will certainly generate a lot of opportunities for our business lines moving forward. Even stakeholders outside the water industries are shifting their mindset towards water. Sound and responsible water management is becoming a means to mitigate risk in manufacturing to meet sustainable goals, thus becoming more ESG-oriented. For example, in the second quarter, we announced that our entire $65 million credit facility and revolver that we have at National Bank has now been officially recognized as a Blue Loan according to the IFC and World Bank standards. Let's recall that this is the first of its kind for the National Bank, but also I'm sure for many other Canadian banks. Finally, with 108 M&A transactions completed in 2021 and 2022, we can conclude that the water sectors remain very active and also attractive for investors. Indeed, the average transaction size was around $530 million, with an average revenue multiple of 2.9 times and an EBITDA multiple of 15 times. Even larger transactions, such as the latest one announced by Xylem acquiring Evoqua, is proposing a transaction valuation greater than 20 times EBITDA. We have confidence in our strategy as we have the right resources and access to multiple opportunities to maintain our growth momentum while also minimizing our risk and improving our profitability. Our business model is very unique with high recurrent revenue, representing an important financial differentiator, but also a strategic focus to maximize customer retention and long-term value creation. Thank you. I will now turn it back to the operator for the Q&A session. Thank you, sir. Ladies and gentlemen, if you do have any questions, please press star followed by one on your touchtone phone. You will then hear a three-tone prompt acknowledging your request. If you would like to withdraw from the question queue, please press star followed by two. If you're using a speakerphone, we do ask that you please lift the handset before pressing any keys. Please go ahead and press star one now if you have any questions. Your first question will be from Michael Glen at Raymond James. Please go ahead. Oh, hey, good morning. Fred, can you just maybe dig into a bit what's going on with the desalination market in the Middle East? Like, you're having some very good performance there. Like, where does your distribution sit in that part of the world? Can it grow more from current levels? What's sort of the growth outlook there for projects? As I said in the call, the Specialty Products Group, which combine, you know, the Piedmont product line, but also our specialty chemical line, is working now more effectively together. What used to be, a couple of years ago, different business lines and working like more and more into silos, are now working more effectively together on giving regions. Not only we have increased the number of distribution points and agents and representation, but they work more effectively between the components business and the chemical business. That's one strategic aspect of it. This is creating more sales, more tractions, more visibility on customers and more sales synergies. The other aspect, if you look at the market itself, we have experienced excellent growth, and we think that this growth will continue because the desalination market is still calling for massive infrastructure investment into that sector. What I will say is new to us and what we have learned from the feedback we collected from our last marketing event we did, is that we will see now an acceleration into water reuse for this region of the world, for the Middle East. So far, the water reuse was mostly in Southeast Asia and Australia and United States, obviously. But not yet we have seen significant projects for water reuse in the Middle East, which we think will generate what I will call, you know, the second wave of massive investment into infrastructure in that area of the world. This is why I think we're very well positioned to capture this coming growth because of the experience we have in water reuse in North America, but also because we have the right distribution network and the right products. Can you give like, the facility expansion that you did over in the U.K., does that tie in? Like, is that still ramping production? Yeah. I'm just trying to tie in how that expansion is helping add to your organic growth. Yes, tremendously. The expansion, at first was also to add capabilities to make powder. Before we were making our cleaners. We have two categories of specialty chemicals. We have essentially the antiscalants, and we have a family of cleaners that we use to clean the membrane periodically. The cleaners are in two formats, either they're liquid or they're in powder form. We were before outsourcing the production of this powder through a third-party blender. We decided to expand and integrate that vertically to have a better control on the cost structure, to reduce the lead time and leverage this overall capacity to be able to produce more and better control our cost. This was launched at the end of last fiscal year, and now we're ramping up the production and we're getting tremendous traction because obviously the powder format is easier to export. It reduced freight cost. It's more green. It's easier to manipulate and to store and so on. Overall, as an ESG team, it's a very attractive product for customers. Is there a way for the quarter or on a trailing-twelve basis to say, like, what% of your revenue would be from desalination specifically? We don't extract it specifically because many, I mean, same products will go to different, you know, applications. It might go to desalination, to water reuse. It's hard to know because sometimes we're a little bit blind because the distributors won't necessarily tell us where this is going, where is the final delivery of the final of the product. We can see and we appreciate overall, you know, an increase in our sales, which is also in line with the growth that we're observing into the desalination market. The beauty of a product, I would say, is that it serves the OpEx expenses. Not only it's for construction of new plants, but all the chemicals are used for existing plants, right? The more we have our chemical installed and used, the more, you know, we should see recurring revenue also down the road. Okay. Thanks for taking the questions. Thank you, Michael. The next question will be from Endri Leno at National Bank. Please go ahead. Oh, hey, good morning. Thanks for taking my question and congrats on the great quarter. I have a few questions. The first one, I wanted to ask, I mean, I'll continue a little bit in terms of when it comes to the production and the facility in the U.K.. Can you talk about the production capacity there, Fréd? I mean, do you have room to expand production, or would you need to invest more to meet all the demand that you expect to see? Well, we still have room to expand. Right now, just to give you an example, we're working with one shift production, so we could further expand this into by increasing the capacity with additional work shifts. This is one. We're still on the look to evaluate the possibility of making some of our chemicals that we make in California to make it as well in U.K.. This will be a second investment. We're not talking about millions and millions of dollars of CAPEX investments. If anything, it will be in the range of half a million to $1 million to increase capacity. Nothing huge, but something that we believe could enable us to have a better control on margins, reduce freight, reduce some taxation depending on where the product is made, because there's a lot that goes into the country of origin where the product is made. We're trying to optimize this for the benefit of our customers, but also for the benefit of our margins. Okay. That, that's great to hear. Thank you. The next question I wanted to ask is that I was looking at your headcount between Q1 and Q2, and it looks like it increased by about 4%. I just wanted to ask there, are you in a good place from a headcount perspective? Was that in response to the projects that you've won? Or is it just kind of more kind of, you know, forward hiring so that you can drive and you can win more projects? Well, what we're trying to not hire too much in advance. I would say most of the hire ex- was coming from contractual additions that we had at the end of December. If you remember, we announced this new contract that we got in Texas that happened at the start of that, officially happened in mid-December. Operation and maintenance contract, I mean. This in itself created a little bump into the headcount. But yeah, so far, I mean, we're good as we speak. I mean, we're trying to balance, you know, this in a proper way between our capacity to produce and manufacture surveys on the backlog and again, the O&M, you know, growth that we're experiencing. Okay. Great. Next question, I have is that, you spoke when you talked about WTS and, you know, how that segment of the contracts in there are well balanced between municipal and industrial. The question I would ask is that there's been an increased focus in North American manufacturing. Are you seeing an increase in industrial RFPs, especially in WTS, but perhaps even in SP? Are you able to bid higher, or is it still pretty competitive out there? Well, definitely, I mean, the overall manufacturing industrial activity has significantly increased for us. Also, we're still into a competitive environment. I mean, don't take me wrong. I mean, we still need to be successful. Overall, I would say that when we bid an industrial opportunity, we are usually a smaller amount of people because it's usually under invitation. Instead of, let's say, being four or five bidders that you may see on municipal area, well, you may end it up by being two or three in industrial sector. Usually, industrial customers will also, you know, take into account more the value engineering and the value proposition that you will have, where you can show either energy savings, a smaller footprint, allowing them to reduce into construction costs. All these advantages or quote-unquote, "easier" to promote to an industrial customers than it is usually to a municipal customers, allowing us to capture, you know, better margins. Okay. Great. Thank you. The last one for me, and I'll pass over the line, is just I just wanted to clarify on the three-year growth plan, do those revenue targets include assumptions for new acquisition, or is it only organic? Organic only. Well, no, the. The upper bracket. The upper bracket. It's a bracket. The bracket includes acquisition. The lower part of the bracket is organic, the upper part is acquisition. It includes some acquisition. Into a tracking format again. Okay, great. Thank you, guys. Appreciate it. Good quarter again. Congrats. Thank you. Thank you. Thank you. As a reminder, ladies and gentlemen, if you have any questions, please press star followed by one on your touchtone phone. Your next question will be from Naji Baydoun at iA Capital Markets. Please go ahead. Hi, good morning. I just wanted to go back to Texas. You've had some great success in the state there. Maybe you can just give us a bit more color on sort of the markets and what's the potential growth outlook for specifically for O&M. Well, I mean, it's a nice project that we got from a utility owners. The utility market in Texas is growing quite fast. We see a lot of infusion of money to utility companies buying assets, refurbishing assets that are not necessarily in best condition, but they're investing money to these assets to upgrade them. Because of their nature of their business model, which is essentially owning the assets, we are, you know, providing them the support to operate these assets properly and efficiently. This is a market that we have seen and enjoy growth over the last couple of quarters. We are still foreseeing this as a revenue growth for us in the coming quarters as we continue to grow relationship with these utility owners. The MUD business in itself is good, steady, will still be opportunistic, you know, there and there, you know, to keep growing what we have. What I would say our focus now within the MUD business is really to optimize what we have in terms of sales, revenue generation, but also margins within there. We think that there are, you know, multiple operational efficiencies that we can capture and this is our focus right now. Great. That's really clear. Thank you. Just on JCO and EC, it's been a bit over a year now. I'm wondering if you can just maybe give us an update on cross-selling that's happening there, any other sort of integration initiatives that you think you should be or that you will be focusing on for this year, or do you think kind of the business plan has already been executed? In terms of synergies, I would say that JCO and EC, this group in the state of New York, they were the first to materialize sales synergies with the WTS group. They have been embracing that concept very rapidly early on in the, in the acquisition story, generating leasing of equipment, capital equipment upgrades of their customers and a couple of expansion there. This worked very nicely, and we have small successes that we're now promoting internally, and this is nicely snowballing, if I can say it this way, with other customers in the area. In terms of integration, there's still a lot of optimization, of efficiency we can capture. You need to keep in mind that when we're doing these tuck-ins and acquisition tuck-ins, they're still small companies, and they're becoming part of the bigger group in H2O. There's a lot of investment that needs to be done from a back office perspective, from standardization of benefits, from standardization of best practices. This is what we're currently going through, but also helping them, I mean, to provide a better and more consistent service across the board, which we're now expanding and making sure that we renew. Our focus, as I said to Texas, is now to optimize what we have currently, work from the basis of customer we have, try to promote as much as we can, you know, cross-selling opportunities, which we're doing. Yeah, and expand, you know, from where we are and optimize, you know, through operational excellence, to improve margins. That's our focus. That's great, color. Just a couple of quick questions. If we look at the margin improvement roadmap that you provided, would you say what's kind of the remaining levers that you've yet to really push on? Like, where is the most of the upside gonna come from going forward? As Marc said, we're going to capture CPI adjustments in O&M because we had no choice but to give increases, raise wages increases to our employees at first. As we come to anniversary date of our contracts, we are pushing for CPI adjustments. This is one. Operational efficiency, as I said, in Olean, in the state of New York, following the acquisitions there, is definitely a priority. We have still pushed to a number of distributors, a number of customers, price increases for chemicals, which will continue to reflect in the coming quarters. That's it. Essentially, you know, we have a pretty good roadmap on how we're going to improve margins on price and on execution of O&M. That's, that's good. Thank you. Thank you. Just one final quick question on the net debt position seems to be relatively stable here in the last few quarters. Obviously you have a sort of a plan to get that number down. Any specific deleveraging targets, say, you know, through the end of fiscal 2023? Yes. Nothing disclosed, I mean, I haven't provided any guidance, but how can I help you with that one? I mean, as I said in the call, we'll continue to convert, you know, the working capital into cash. That's really the main focus as you. I mean, if you look at the last 12 months, working cap has increased significantly. It was a bit of a defense, but also, turned out to be a good offense strategy, allowed us to grow significantly. Working cap, you know, we wanna bring them in line with revenue. I think they were a bit offset. If you do that cash conversion to bring it back in line with historical, I think we should be able to, it will help you a bit. There's been some CAPEX for new operation maintenance contracts. This is a bit of a more of a question mark, depending of what will we win. If we win jobs that requires a lot of CAPEX, maybe that has a bit of a fluctuation in terms of the in the net debt. If it will also generate eventually EBITDA. It's not. Yeah. I don't wanna provide more guidance. It's tough for me to say, just play with your model, Machine. I'm sorry. No, no, that's understandable. That helps. That helps. Thank you very much for the details and congrats on a great quarter. Thank you. The next question will be from Michael Glen at Raymond James. Please go ahead. Hey, guys. Can you provide an update? I think you've been over time seeking a finance partner to help with some of your industrial market penetration, someone to take on and help you help finance some of that work. Can you give an update as to where that stands? Is there anything on the horizon to get something across the line there? Nothing really in the short term, short term horizon. Yeah, we're in conversation with many different financial partners to help our industrial customers to grow their own business. You know, there's a lot of indeed a lot of funds that are like infrastructure funds that are interested in investing and trying to deploy capital into infrastructure. Indeed, some of them have approached us. You know, we've never entered to that at this point. Okay. Is there specifically something that's holding you back from like what are some of the big items there that you'd like to see Frédéric to proceed with something along those lines? Because it seems like it would be something that would help with your organic growth? Well, if there's anything, it would be more for the, for some of the equipment that we lease to some of our customers. It happens that we're like a, in the mining sector, we do have assets that we lease to industrial customers for a period of time. This may apply to that end of the sector if there's like a third party, a financial partner interested in financing these assets, these mobile assets. Yeah, I mean, we're not, we're not going to look for a solution and specifically, you know, or an equity financing or that for this, you know. Okay. Fréd, you highlighted the large industry merger in the presentation. Like when you think of your business, where it's positioned, how does a merger of that magnitude, how does that impact H2O Innovation's business? In the overall picture, in terms of us being in the water space, I think it's great to see the convictions and the confidence that Veolia has towards, you know, Evoqua and buying this company at good valuations. It means that certainly they're not looking at it for the next quarter only in the next two years, but they're definitely looking at it to grow this platform. Veolia has, you know, the looks to buy, you know, Evoqua for a number of years. You know, they already presented a bid, you know, several years ago. It's consistent and it shows the vision they have to grow the business. I guess it was a similar intention also of Veolia with Suez when they came up with this monster transaction. Now, for us on a daily basis, I don't think it's going to change a lot, you know, for us. Our business model is pretty unique. I mean, a good example is that, you know, Veolia and Evoqua are not into operation and maintenance. They're not really into chemicals, specialty chemicals. If anything, I mean, we could do more business together than compete each other. They're suppliers of us. Yeah. We're supplying to them, they're supplying to us on different parts and components and equipment. I don't foresee that as a, as a threat at all. Okay. Thanks for the follow-ups. Thank you. Next question will be from Gabriel Leung at Beacon Securities. Please go ahead. Good morning. Thanks for taking my questions. Good morning. Just a couple of follow-ups. Good morning. Just a couple of follow-ups. First, I apologize if I missed this, but did you quantify the size, the coupling order and the specialty that helped with the outperformance, first off? Secondly, would you expect some, I guess, downward variability in specialty revenues in the current quarter? Do you think that might be offset by the strength in the maple business? Can you repeat? It was not clear. Like the first part of the question, Gabe, if we quantified what? Sorry, the coupling order, that helped to drive. The coupling order. Okay. We did not because obviously we, you know, it was a contract that was negotiated one-to-one with the customer. You know, the industry is a small world, everyone knows where these couplings are going and what, which plant. We haven't disclosed the price and the magnitude of the specific orders. Let's say that it is the single largest coupling orders that we ever had, you know, for a project of this magnitude. The second part. Gabe, can you remind me the second part? Yeah. No, I'm just curious, just given that, just given the contribution from that order in fiscal Q2, would you expect some potential downward variability to the specialty revenues in fiscal Q3? Or do you think that might be offset by the strength in the maple business? No. The strength of the maple business will definitely impact the Q3 as planned, as it is, you know, as per the seasonality of the business. This large coupling orders will be more delivered in magnitude between the fourth quarter and the first quarter of the following year, according to the schedule that we have with the customer. Got you. No, it's helpful. Secondly, maybe as a follow-up to that, can you talk a little bit about the, I guess the pipeline and some of the opportunities you're seeing, within the Middle East, specifically as it relates to the specialty business, both, you know, in terms of coupling and for chemicals, you know, what you see, being the potential impact for H2O over the next several years? Well, for us in the next several years, we still have a very positive outlook for for that particular business, for the specialty products, both the chemicals and the component business. This is why we have decided to further expand into product innovation, expanding our sales people as well. If you remember a year ago, we added, you know, sales people covering this geography in Dubai, in Saudi, in Southeast Asia as well. We believe fundamentally into that market, and it's not going to be only for one or two or several quarters, but will be more on a long-term basis. The new component, as I explained earlier, is now the fact that we should see now a step up towards water reuse in the coming years for in the Middle East area, which wasn't there several years ago. This could create additional opportunities for us for new products, for expansion in sales, and so on. Gotcha. Maybe one last question. You know, clearly the company's been extremely successful as evidenced by the growth in revenues and bookings. I'm curious, you know, given the increased scale of your business, given all the industry M&A, have you actually seen your close rates or success rates on deals increase in the last little while? I'm just curious to see what your experience has been. On which deals? M&A deals or? No, just, I mean, any deals that require an RFP. I'm just curious to see if your, if the close rates or success rates have improved just given the increased scale of your business and just given all the M&A that's happened within the industry itself? Yes, in multiple ways. I would say yes, because we have been growing the references, so the name of our company, you know, got recognition now on several plans. This is important. Receiving the trust and the endorsement of large customers in the Middle East, for example, is very important. Having been able last year and be able to renew the supply for the single largest desalination plant in Taweelah is an important milestone, and that brings a lot of eyes and interest and endorsement from the industry. This helps us to secure more projects. The other factor also is that it seems that we have switched gears a lot in terms of interest to green chemistry and eco-friendly solutions, which we have for several years. We have been making this green antiscalant without phosphate for a great number of years. Now with this ESG trend, with the cost of freight that has completely exploded, our customers are now paying more attention, and they're looking for solutions to mitigate that. This is where the SpectraGuard that we make, which is a super concentrated formulation at 11 times, is reducing significantly the cost of freight, the cost of warehousing and all that. This is a new criteria that our customers are looking at now. This is enabling us to further close new sales and new opportunities and more bookings. All these differentiators add up to our ability to generate more sales from the time. It's not different, yeah, as I said, it's not different for WTS either. It's a combination of innovation, differentiators, general recognition, endorsement from large customers, and good execution on our end across the board. 23 years in making, by the way. No, for sure. No, that's great. Thanks for all the feedback and congrats on all the progress. Thank you. Next question will be from Liam Bergevin at Desjardins Capital Markets. Please go ahead. Hi. Good morning. Congrats for the great results. Thank you, Liam. I just had a question on the O&M and specialty product pricing. For the O&M segment, would you be able to provide, maybe an update on the proportion of contracts that remains to be adjusted for inflation? I... Well, I'll jump in. First, it's about 60% of the revenues that are part of the backlog and have renewal dates on an annual basis. Some others are evergreen contracts and don't have like a one-off big adjustments. It's a continuous discussion. It's tough to come up to say, "Hey, we've only reached, I don't know, 25% or 40% and more is coming." Also the fact that there is inflation, well, we saw the numbers again this morning. That discussion that occurred maybe three months ago will occur again in nine months with the certain customers, you know, where we increased last year and then I don't wanna say we're chasing our tail, but, you know, it's a continuous effort that will need to be addressed. Even though I would disclose you a%, I don't think it will provide a good guidance. We don't disclose the number, and I can tell you that our teams are doing continuous efforts in order to improve those adjustments related to inflation on month-to-month basis. Great. Thanks. For the Specialty Products, if we see pressures in raw materials abate further, how would you say your pricing strategy is going to be affected? Well, we need to look at it, you know, in per business line. Let's start with the chemicals. There's essentially two sides to the chemical business, the one that are phosphate-based and the one that are not phosphate-based. Phosphate increased more significantly than the raw material we use to make the non-phosphate-based. The exposure and the price increases wasn't the same. Because we have this differentiator of product that is green without phosphate, we haven't suffered the same price escalation or price increases into our raw materials than most of the other companies out there. We have still pushed price increases to our customers, and we still continue to do it. Let's say that our portfolio of products was more resilient than other ones. Our strategy to in-source the fabrication of the powder was also another defensive strategy that allow us to somehow protect and preserve the margin, which we still, you know, try to push forward and expand, you know, moving forward. On the coupling side, let's say on the other components, fiberglass products that we have, the couplings, it's more steel related, let's say, in the side of the couplings. In this case, you know, we're fluctuating, and we're having price adjustments regularly to reflect that into our, protect the margin. The fiberglass is about the same. We're following more easily this and adjusting it constantly because we have fixed price contracts. When we bid on couplings, when we bid on filter housing, it's specific price for specific projects. There's more like accuracy between, you know, the project we do and the margins we protect. Great. Thanks again. Congrats again on the good results. Thank you, Liam. Next question is from Yuri Lynk at Canaccord Genuity. Please go ahead. Good morning, guys. Good morning, Yuri. Morning. I jumped on a little late, so I don't know if this was covered, but was the revenue associated with the large coupling order, was that recognized in the quarter or it's gonna be recognized in Q3 and Q4? No, it's not. It's not recognized. It's bookings that we got. It will impact mostly Q4 and the following Q, next fiscal year, Q1. Okay. Q4, Q1. Okay. Just switching gears to M&A. I mean, the multiples that you flagged in your deck, kind of 15-20x on that recent industry M&A. I mean, is that what you guys are seeing? I mean, that's kind of a little bit in excess of where you're trading. Is M&A tougher for you guys now or you're seeing something different in the market? Well, there's a factor related to size that also calls for this multiple valuation, I would say. It's obviously we're starting to look and we have looked in the past of larger transactions. This is where we got a lot of competitors from the private equity scene and other strategic buyers to push upwards this multiple to 13, 14, 15 very rapidly, and we have tried that in the past. However, if we're trying to stay disciplined and looking for smaller transactions, what we call as tuck-ins, I would say transactions of revenue size, company of revenue size between, let's say, anything between 5 million-20 million, this is where we could see more multiple, you know, below, let's say, the 10 times that we can have access to. There's a matter of timing, there's a matter of size. This is why for us, you know, the tuck-in strategy has been good because it allow us to bring opportunities at lower multiples. That's fair. Are you comfortable doing tuck-in acquisitions with the balance sheet where it is now? Well, as we said, I mean, we're not in a hurry. Right now, our priority is really to push to maximize cash conversion from our EBITDA, integrate properly the company to maximize efficiency of the operation, operational excellence, deleverage. All these actions will create sufficient cash that will be applied to the balance sheet to deleverage it and yeah, and position us again to reload and do these tuck-ins, you know, moving forward. That's fair. Last one for me, maybe for Marc. You had a CAD 2.8 million FX gain that was backed out of the cash flow. How did that impact the income statement? Where is that on the income statement? It's a conversion, so it's a non-cash. Well, is it which one are you referring to? Is it the one in the cash flow? Yeah. It's the one I talked about? The one I talked about is a translation from the different currency into Canadian dollars. Okay. It's not in EBITDA. No. As I said, you might have missed that part, but I did raised it. For the impact of the FX for this quarter, and you can see that on slide 11. The, you know, there's an impact of $2.3 million. On the EBITDA, each 100 points has an impact of $450,000 on the revenue and $25K on the EBITDA. The impact on the EBITDA is, you know, it's minimum. It's minimal because most of it is naturally hedged. I mean, we're quite naturally hedged. Most of our expenses are in USD, even though the revenues would be in USD and the revenues out of the U.K. also have some expenses over there. The variances may be most of them are due to the fact that most of the admin costs are in Canadian dollars. I don't know if it helps to understand, it's mostly a conversion. When we convert for, on a consolidated purpose, the U.S. financial statements or the financial statements of the U.S. subsidiary, then you have those impact there. Okay. It's a cash effect. Okay. I'll leave it there. Thanks. Great. Thank you. At this time, we have no other questions registered. Please proceed with your closing remarks. Well, thank you very much for attending the call. We look forward to catch up with you on Q3 in mid-May. Thank you very much. Have a great day. Bye-bye. Thank you. Ladies and gentlemen, this does indeed conclude the conference call for today. Once again, thank you for attending. At this time, we do ask that you please disconnect your lines.