Operator

Good day and thank you for standing by. Welcome to the Mattr Second Quarter 2023
Results Webcast and Conference Call. [Operator Instructions] Please be advised that
today's conference is being recorded. There is a presentation that you can guide
yourself through during the call.

I would now like to hand the conference over to your speaker today, Meghan
MacEachern, Director of External Communications and ESG. Please go ahead.

Meghan MacEachern

Good morning. Before we begin this morning's conference call, I would like to take a
moment to remind all listeners that today's call includes forward-looking statements
that involve estimates, judgments, risks and uncertainties that may cause actual results
to differ materially from those projected. The complete text of Mattr's statement on
forward-looking information is included in Section 4.0 of the second quarter 2023
earnings press release and in the MD&A that is available on SEDAR and on the
company's website at mattr.com. For those join -- joining via webcast, you may follow
the visual presentation that accompanies this call.

I'll now turn it over to Mattr's President and CEO, Mike Reeves.

Michael Reeves

Good morning and thank you for attending our second quarter conference call. Today,
Megan and I are joined by our Senior Vice President of Finance and CFO, Tom Holloway.

During the second quarter, the company completed the process of rebranding itself as
Mattr, establishing a new corporate image that more fully reflects our capabilities, our
purpose, and our future. We now trade under the TSX ticker symbol MATR, and I'm
delighted to welcome you to our first earnings release under this new company brand.

The second quarter of 2023 saw Mattr continue to execute on its commitments to
elevate margins, lower volatility, and focus resources on high growth opportunities
serving industrial and critical infrastructure end markets. We moved closer to
concluding the strategic review of our Pipeline & Pipe Services segment, completing the
sale of several smaller businesses during Q2. The broader process continues to receive
significant focus and while we are not yet positioned to announce a transaction for our
core pipe coating business unit, favorable progress continues to be made, and we will
provide further details when there are material developments to report.
Turning to second quarter performance. The company delivered strong operating
results across all segments, committed capital to high return organic growth
opportunities, and continued its share repurchase activity. All three of our operating
segments reported meaningful revenue and adjusted EBITDA growth during the quarter
when compared to the prior year.

Our industrial and infrastructure focused businesses continue to benefit from

significant global investment in transportation, low emissions energy, electrification,
communications, and water related infrastructure. Our energy focused businesses are
also experiencing rising market demand with domestic and international sales of larger
diameter composite pipe expanding and pipe coating activity accelerating as offshore
pipeline infrastructure expansion continues its multi-year upcycle.

In parallel, we made further progress towards our 2030 environmental social and
governance aspirations and will release our 2022 ESG report later in the third quarter.
You'll see in this report that we continue to successfully deliver emissions reduction.
One example of this is our Rheinbach facility in Germany where we recently
implemented a heat recovery system, capturing heat from our hot water and
compressor systems and using that to heat the building. The site is now heated
exclusively through this recovered energy approach, lowering energy consumption,
lowering emissions, and reducing our exposure to potential future European energy
price volatility.

The hard work of recent years to substantially strengthen our balance sheet and our
cash generation profile positions us to pursue a disciplined high return capital allocation
strategy, balancing share buybacks with investment in high margin growth to generate
elevated returns for all stakeholders.

Consistent with our previously shared full year capital guidance, during Q2, the company
communicated additional details of its substantial growth capital investments into its
composite and connection technology segments. These investments into four new
operating sites will enhance production capacity, efficiency, and proximity to key
markets, lower risk by providing increased network redundancy and are expected to
accelerate mid and long-term revenue growth, elevate margin profiles, and deliver
attractive overall returns. The company also continued to be active under its previously
launch normal course issuer bid, which had extended and expanded late in Q2.

During the quarter, our team made good progress on the integration and growth of both
Kanata Electronic Services, which are Connection Technology segment acquired late in
2022, and Triton Stormwater Solutions, which are Composite Technology segment
acquired during Q1 of this year. With these businesses performing as expected, we
remain alert to additional strategically aligned attractively valued acquisition
opportunities, and have expanded our corporate development team in anticipation of a
gradual increase in highly disciplined inorganic value creation.

Moving to our previously announced strategic review process. Late in Q2, the company
completed the sale of its shore pipeline services, non-destructive testing business, and
its U.K. specialty coating business while entering into a definitive agreement to sell its
Sicilian pipe coating facility, a sale that is expected to close in Q3.

All of these businesses have previously been reported within the PPS segment and in
consolidation, these transactions will deliver gross proceeds of approximately $16
million for businesses that together contributed $55 million of revenue and an adjusted
EBITDA loss of $3.5 million over the prior 12 month period.

Looking a little closer at each of our segments. During Q2, Composite Technologies,
which was previously called Composite Systems and Houses our FlexPipe and Xerxes
businesses, delivered revenue growth of 11% and expanded adjusted EBITDA margin by
600 basis points compared to the same period last year, reaching new record levels of
quarterly performance for the segment. Sales of the company's spoolable composite
FlexPipe products moved sequentially higher with further acceleration of large diameter
product adoption and new customers onboarded in multiple operating basins.

Second quarter, FlexPipe performance benefited from above normal sales into
international markets, primarily the Middle East, which more than offset the impact of
breakup conditions in Canada. Shipments of Xerxes underground fuel storage tanks and
our full range of stormwater management products were robust during the second
quarter, stepping up from Q1 as ground conditions seasonally improved across much of
North America, enabling our customers to accelerate installation activity. Following the
acquisition of Tritons infiltration product line late in Q1, the company's water related
product line reached a new record level of quarterly revenue in Q2.

Our favorable long-term outlook for the market served by Composite Technologies
underpins our growth capital investments to increase capacity, improve efficiency and
lower lead times, including our commitment to establish two additional production sites
in the U.S., one for FlexPipe and one for Xerxes tanks, which were announced earlier this
year and are now well underway. Further details of these investments may be found in
the company's press release issued on April 26th.

Third quarter segment revenue is likely to be similar to the second quarter as ground
conditions remain favorable for Xerxes product installation and FlexPipe sales growth in
North America offsets international sales returning to more normal levels. As is typical
for the segment, we would expect revenue to move modestly down in the fourth quarter,
driven by seasonal effects. With a healthy long-term demand outlook across the
FlexPipe and Xxxi portfolio, we believe our Composite Technology segment is well-
positioned to continue its recent trend of delivering growth versus prior year periods.

The Connection Technology segment formerly called Automotive and Industrial, and
housing our ShawFlex and DSG Canusa businesses, delivered a particularly robust
quarter with 12% revenue growth versus the same quarter last year, and adjusted
EBITDA margins approaching 24%, a new segment record. In addition to continued
strong North American industrial and infrastructure demand across the segments
product portfolio and stable deliveries of heat shrink products into the European
automotive market, the quarter benefited substantially from shipments of premium
wiring cable into nuclear projects and a particularly significant aerospace delivery,
which is unlikely to recur this year.

We continue to anticipate year-over-year business growth across industrial and

infrastructure markets for both ShawFlex and DSG Canusa, particularly in North
America, as long cycle infrastructure investment continues spurred in part by U.S. and
Canadian government policies. Our outlook for DSG Canusa automotive demand during
the second half of 2023 remains similar to the first half as more favorable energy
dynamics in Europe are offset by the impacts of higher interest rates.

The company expects Connection Technologies revenue in the third and fourth quarters
to be higher than the same quarters of 2022. Q3 revenue is likely to move down from
Q2, reflecting non-recurrence of the large aerospace related wire and cable delivery,
which occurred during the first half of the year. Fourth quarter revenue is likely to move
modestly further down as normal year-end inventory lowering occurs within our
distributor network.

The company expects the remaining quarters of 2023 to yield segment adjusted EBITDA
similar to the same quarters of 2022, as revenue expansion is offset by incremental
costs incurred to spur future growth acceleration, including costs recognized in
advance of North American production facility relocation, investment, and expansion.

We remain vigilant to the potential impacts of European energy costs approaching the
winter heating season, and continue to take steps which lower the company's energy
needs and risk tied to this possible issue. Overall, we maintain a constructive view of
the long-term market trends, which impact the ShawFlex and DSG Canusa businesses,
and we will continue to invest growth capital to enhance our product offering, improve
our manufacturing capacity, elevate our production efficiency and lower lead times,
including the recently announced commitments to bifurcate, expand, and modernize our
North American production footprint. Further details of these investments may be found
in the company's press release issued on June 28th.
Lastly, and despite multiple business divestitures over the last 12 months, our Pipeline &
Pipe Services segment saw revenue rise by 73% compared to the second quarter of
2022, delivering an adjusted EBITDA margin of nearly 11% compared to a loss in the
prior year quarter. Sequentially, segment revenue and adjusted EBITDA moved up
compared to a previous expectation of modest declines. The strength was the result of
very robust coating activity in our Western Hemisphere organization, which live a
particularly high operational efficiency. Accelerating activity on the Yellowtail project in
Veracruz, Mexico, and commencing coating operations slightly earlier than previously
anticipated on the SGP project in Altamira, Mexico.

We are particularly pleased to see the benefits of substantial business optimization

activity over the last three years become increasingly visible in the adjusted EBITDA
leverage delivered by our pipe coating operations as revenues rise. Pipeline & Pipe
Services segment revenue and adjusted EBITDA during the second half of 2023 is
expected to be substantially higher than Q2, reaching prior cycle peak margin levels.

This outlook is driven by the timing of specific pipe coating projects and particularly
impacted by coating activity and related revenue recognition on the SGP project, which
will accelerate during the third quarter and reach peak levels during the fourth quarter.
At the end of the second quarter, the company had recognized approximately 5% of
total expected SGP project revenue and given operational efficiencies observed to date,
the company now expects SGP project coating and revenue recognition will largely be
completed by the end of Q1, 2024.

The combination of a substantial high quality backlog, elevated volumes of bid and
budgetary quoting activity, favorable energy fundamentals, and continued successful
new technology adoption positions the pipe coating business well for the current
upcycle.

Turning to consolidated 12 month backlog. At the end of Q2, the company's committed
backlog of work to be completed within the next 12 months was just under $1.16 billion,
a decrease of $152 million when compared to the prior quarter. The PPS segment
secured several new Latin American pipe coating projects during Q2. However, these
new awards and the movement of expected revenues from previously awarded pipe
coating projects into the forward 12-month window were more than offset by the
elimination of backlog tied to the SPS business, which was sold during Q2 and an
increased volume of pipe coating activity executed during the quarter, including the
Scarborough project in our Kabil, Indonesia facility, the Yellowtail Project in Veracruz,
Mexico facility, and the SGP project in Altamira, Mexico. Total backlog, which includes
committed work beyond 12 months, also moved down modestly at the end of Q2 versus
the prior quarter to $1.33 billion.
As execution of the SGP project accelerates during Q3 and then continues throughout
Q4 and Q1 of 2024, we anticipate the PPS segment and overall company 12-month and
total backlog values will lower further. Although, strength in bidding activity likely drives
a return to backlog growth as we move through 2024.

Mattr's bid number reflects the value of work where the company has issued a firm
price with proposed contract terms against an explicit scope of work with a defined
timeline for execution. At the end of Q2, the bid balance was nearly $1 billion, an
increase of $150 million when compared to the prior quarter, despite the removal of
bids related to the divested SPS business, as the volume of new bidding activity in our
Composite Technologies and PPS segments more than offset the movement of
projects from bid into backlog during the quarter.

Bidding activity remains strong across the energy spectrum and is a clear indicator that
customers are committed to moving forward with new and previously contemplated
onshore and offshore field developments in the face of favorable commodity prices and
growing global demand for natural gas. The quarter end bid number included $8 million
of conditional awards pending final investment decision, down from $168 million at the
end of Q1, as several projects crossed the final investment decision threshold during Q2
and moved into backlog.

Mattr's budgetary number reflecting the value of indicative pricing submitted to allow
customers to build a project budget ahead of formal procurement activities was just
over $2.1 billion at quarter end, down from $2.5 billion in the prior quarter, as SPS
related budgetary quotes were removed and the movement of projects from budgetary
into bid slightly exceeded new budgetary quoting during the quarter. This substantial
budgetary number further supports our expectations that energy related activity will
remain elevated for several years to come. It's important to note that the majority of
Mattr's 12-month backlog, total backlog, bid, and budgetary balances are attributable to
the PPS segment.

Tom will now walk through the company's second quarter financial highlights.

Tom Holloway

Thanks Mike. The second quarter's consolidated revenue was $400.6 million, 30.5%
higher than the $307 million in the second quarter of 2022. Adjusted EBITDA was $67.3
million, a 105.8% increase from the prior year second quarter, primarily attributed to
demand growth experience across the company's three reporting segments, including
the commencement of load-in and pipe coating activities for the SGP project, further
enhanced by continued margin expansion arising from favorable product and project
mix in the divestiture of lower margin businesses.
Turning to segment results. The Composite Technology segment revenue was $150.4
million, an 11% increase compared to the second quarter of 2022, and adjusted EBITDA
was $34.8 million, a 50% increase from the prior year second quarter. Both revenue and
adjusted EBITDA were record quarterly results for this segment.

These results reflect growth in demand for composite pipe products in North America
and internationally, including growth and demand for the company's larger diameter
pipe products. Additionally, the segment continues to experience robust demand for
underground fiberglass reinforced plastic tanks for liquid fuel and water management
systems.

Connection Technology segment revenue was $88.7 million, a 12% increase compared
to the second quarter of 2022 and adjusted EBITDA was $21 million, a 29% increase
from the prior year second quarter. The increase was driven by elevated demand for
wire and cable products from North American industrial markets, stemming from
ongoing infrastructure spending, including shipments into the aerospace and nuclear
markets. Additionally, continued demand for the company's heat shrink tubing products
in industrial markets and within the automotive sector further solidified the segment's
strong performance.

Pipeline & Pipe Services segment revenue was $161.6 million, a 73% increase compared
to the second quarter of 2022, primarily resulting from the successful execution of pipe
coating project activity, including the Scarborough project in the Kabil, Indonesia facility,
the Yellowtail project in the Veracruz, Mexico facility, and the commencement of load-in
and pipe coating of the SGP project in the Altamira, Mexico facility. This was partially
offset by lower activity in the Canadian facilities in the absence of revenue associated
with the SPS business sold mid-quarter and the Lake Superior Consulting business sold
in August of last year.

Adjusted EBITDA was $17.1 million, which compared to negative EBITDA recorded in
the prior year second quarter, reflecting the aforementioned higher revenue and more
profitable pipe coating project mix and the impact of higher activity on manufacturing
absorption.

Turning to cash flow in the quarter. Cash provided by operating activities in the second
quarter was $30.5 million, reflecting strong operational performance. This was offset by
an investment in working capital, which reflects the increased activity throughout the
company, including increases in inventory required for the Scarborough project in
Indonesia and the SGP project in Mexico.
Cash used in investing activities in the second quarter was $48.2 million, reflecting
$55.6 million of capital expenditures offset by $6.5 million received in cash from the
$8.9 million sale price from the divestiture of the Shaw Pipeline Services business.

During the second quarter, cash used in financing activities was $17.3 million, including
$5 million in debt repayments, $7.8 million in lease payments and $5.5 million in share
repurchases under the company's normal course issuer bid.

Net cash used in the second quarter of 2023 was $37.5 million. Based on the actions
completed and planned its diversified business, current order backlog and confidence in
the outlook, the company expects to generate sufficient cash flows and have continued
access to its credit facilities, subjects to covenant limitations to fund its operations,
working capital requirements, and capital program, including share buybacks.

As of June 30th, 2023, we had a cash balance of $124.5 million, debt of $182 million,
and $64.1 million of standard letters of credit. Our liquidity position has benefited from
the initiatives undertaken since 2020 with continued focus on reducing our operating
cost base, as well as repayment of $252.5 million of outstanding net long-term debt
since the start of 2021, including $5 million paid in the second quarter.

As of the end of the quarter, the company's net debt to adjusted EBITDA ratio was 0.54
times, significantly below our ceiling of 1.5 times. We also continue to purchase shares
under our normal course issuer bid and repurchased 405,000 common shares during
the quarter.

As mentioned earlier, the company spent $55.6 million in cash on capital expenditures,
including $4.1 million of outstanding payments to suppliers. Total capital expenditures
in the quarter were $59.7 million, of which $56.4 million were related to growth
expenditures. These are mostly related to infrastructure improvements to increase
production capacity in the Composite Technologies and Connections Technologies
segments and spend to support the SGP project. Looking ahead to the remainder of the
year, the company still expects to spend the $160 million to $180 million of capital
expenditures as previously communicated.

During the quarter, the company announced further details on this expected capital
spend, including two new Composite Technologies production facilities in the U.S., as
well as a new facility in the greater Toronto area, and one in the U.S. for the Connection
Technology segment, which will expand and replace its current North American
footprint. The investments in these lower risk, high return opportunities are expected to
create further revenue generating capacity of approximately $150 million and further
expand adjusted EBITDA margins once these facilities approach efficient utilization
levels.
We will continue to prioritize capital spend to drive growth in our most differentiated
high value materials based solutions in support of industrial and critical infrastructure
end markets, while ensuring that sufficient capacity is available to execute on our pipe
coating projects in our backlog.

The company continues to execute on the strategic actions that are intended to
enhance over time its margin and operating cash flow profile, lower overall volatility, and
deliver greater full cycle value to all stakeholders as our market leading technologies
enable responsible, sustainable renewal and enhancement of critical infrastructure.

Since early 2020, the company has successfully divested multiple non-core lower
margin businesses and other assets, including the sales of the SPS business and the
U.K. specialty pipe coating business that occurred in the second quarter. These efforts
have generated over $220 million of cash proceeds with the disposed businesses
generating an average trailing 12-month adjusted EBITDA margin of 6%, significantly
strengthening our balance sheet and margin profile, while lowering organizational
complexity.

In September of 2022, we announced our intention to achieve maximum stakeholder

value from a sale or other transaction of our Pipeline Performance Group that currently
forms the entirety of the company's Pipeline & Pipe Services reporting segment.

We have made great progress on this strategic review process through our successful
rebrand and through the sales of our Lake Superior Consulting oil field asset
management and Socotherm Argentina businesses, as well as our specialty coating
facility in Scotland. We remain fully committed to this initiative and our focus and
actively working towards its completion.

Proceeds generated by this transaction will be utilized to strengthen the company's

balance sheet organically and inorganically accelerate the profitable expansion of our
higher margin, less volatile composite in Connection Technology segment, and to return
capital to shareholders as conditions permit.

While the expected future removal of the Pipeline & Pipe Services segment from our
portfolio will substantially lower selling, general and administrative costs for the
company, as previously communicated approximately $8 million of financial and
corporate expenses that are currently being allocated to this segment are expected to
be absorbed back into the organization at that time. Upon closing a transaction, these
costs would likely be partially offset by proceeds from a transition services agreement
for several quarters, and the company will work to reduce its total corporate cost base,
reflecting its simpler business portfolio over time.
I'll now turn it back to Mike for some final comments.

Michael Reeves

Thank you, Tom. Over the last three years, we've taken significant steps to simplify our
organization, increase average margins, lower volatility, elevate cash flow, and
concentrate on a narrow range of high growth critical infrastructure oriented
businesses.

We remain committed to tightly controlling fixed costs, completing the strategic review
of our PPS segment and optimally deploying capital to drive high return growth. We
have substantially reduced outstanding debt, our returning cash to shareholders and
leaning into high value organic and inorganic growth opportunities, taking advantage of
our unique technology portfolio and strong long-term customer demand to deploy
significant growth capital and deliver elevated returns for our stakeholders.

Normal seasonal cycles will continue to drive some movement quarter-to-quarter.

However, the underlying trends for each of Mattrs' primary businesses are favorable and
expected to remain so for several years. Long duration North American critical
infrastructure activity remains robust, and fundamental energy demand drivers persist.

While we remain vigilant towards the potential impacts of geopolitical events, supply
chain risks and higher interest rates, our simplified portfolio of high value materials
based products has limited exposure to consumer discretionary spending, and we
believe has resilience in the face of recessionary forces.

We expect consolidated adjusted EBITDA in Q3, 2023 to rise substantially, driven

primarily by a significant increase in pipe coating activity, including elevated margin
contributions from the Southeast Gateway Pipeline project.

I'll now turn the call over to the operator and open it up for any questions you may have
for myself, Tom, or Megan.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question is going to come from the line of Aaron
MacNeil with TD Cowen.

Aaron MacNeil
I guess, the first one I've got is around sort of these moving expenses in the Connection
Technology segment. I'm just wondering, how long do you expect these to persist? Do
you expect them to change over time, and can you sort of give us a quarterly run rate?

Michael Reeves

Morning, Aaron. I think the way to think about that particular piece in of that business is
the facility relocation activities, which have us moving away from our very long-term
footprint in the Rexdale area of Toronto and now into two different facilities, one in Ohio
and one in Bourne, will certainly continue for much of 2024. I think we would expect
most of those moving expenses to be incurred certainly by early 2025.

There'll be some fluctuation quarter-to-quarter. At the end of the day, these are reported
at the time they are incurred. They're not smoothed over a period of quarters. So difficult
to give you a perfect run rate. But what I'd say is that what we'll see in the sec in the
second half of 2023 is likely to be a little less than we will see in 2024. And we will do
our very best to call them out as we report each quarter as we roll through.

Tom, would you add anything there?

Tom Holloway

Yeah. I think that's right, Mike. Aaron, I would say in Q3 and Q4, it's probably in the order
of less than $1 million each, and then in 2024, it ramps up a bit as the actual move
activity increases. So, those are very rough numbers. So not hugely material. That's how
I would probably think about it right now. It is moving around a little bit, of course, as
you can imagine.

Aaron MacNeil

In terms of the sort of pipeline performance or pipeline segment, are there any sort of
other odds and ends in there that you're looking to dispose of separate from a larger
transaction, or idle assets within the Pipeline Performance Group that you'd look to sell
separately? And if we were to use segment book value as sort of a proxy for a potential
transaction value, should we be thinking about reducing that -- our expectations since
you've sort of kind of sold off some of the odds and ends over the last couple quarters?

Michael Reeves

Yeah. No, look, great question. Thanks for asking. I suspect others on the call have
similar interests. So, the smaller pieces that we concluded the sales of in Q2, and I'll
include there, the Italian real estate footprint, which won't actually close until Q3, but
we're under a definitive agreement. We're effectively the last of what I'd call the
peripheral pieces of that segment. So, what's left in the PPS reporting segment is what
we would describe as the core pipe coating business.

When I look across the broader corporation, really the only other element we're still
working to divest is the real estate in Western Canada, which is multiple sites, but
largely concentrated in Nisku, which was left over when we sold the oil field asset
management business in the second half of last year. So that's still ongoing, and we
would hope to get some proceeds from that real estate over the course of the next 12
months.

I'll turn it to Tom to talk about valuation expectations on the remaining piece of the pipe
coaching business.

Tom Holloway

Yes. So, Aaron, I think if you at the net book value of the PPS segment remaining, it is
almost entirely that PPG core business. So, I don't think you need to reduce your
expectations from a cash perspective given -- the commentary we've given over the last
few quarters. So that being the floor would still remain a true comment for what is on
the books. The -- sorry -- the portion that Mike was referring to on the OAM Western
Canada assets is not included in that segment, just to be clear. So, there's no confusion
as to where that sits. That was in the Composite segment historically.

Operator

[Operator Instructions]. And our next question is going to come from the line of Yuri
Lynk with Canaccord Genuity

Yuri Lynk

What can we infer from PPS not being classified as held for sale at this point?

Michael Reeves

So, there are -- Yuri, as you know, there are probably pretty strict accounting rules as to
when that occurs. And one of them tends to be -- it's not a hard and fast rule, but tends
to be the signing of a definitive agreement. So, I think the thing you can infer is that we
have not signed a definitive agreement, and that's probably all you can really infer at this
point. But as we said, we're making really good progress, still very committed to it, and
hope to be able to say something relatively soon.

Tom Holloway
Yeah. And maybe I'll add here. I know that on our last earnings call, I set the expectation
that we would have something to communicate here by the time of this call, and it
proved that I was modestly optimistic and that's my fault, my apologies. But I would say
that you should not infer that the lack of an announcement as we sit here at this
moment in time suggests that anything is wrong.

Yuri Lynk

Just -- I mean, the quarter was obviously very strong in both go forward segments. I
think you did -- you enjoyed better utilization, especially in composite pipe and your tank
plants. Can you just talk about where utilization is versus last year, and how much room
there is to take it higher in these facilities? Because I'm just thinking, is there a point
between now and when your expansion plans are completed where you might be
capacity constrained in the interim?

Michael Reeves

Yeah. So, I think the obvious answer is clearly our utilization is higher now than it was at
this point last year. But I treated in two separate buckets. So, the FlexPipe business,
which as you'll recall, has historically operated from one single site in Calgary and still
does. That site certainly is more challenged when it comes to the ability to continue
ramping production than our tanks network, which is why we moved when we did, to
establish a second pipe production facility in the Dallas area, which we certainly expect
will come online as we look to the middle part of next year.

I think between now and then, there may be one or two challenges where we bump up
against production capacity in our Calgary site, but the team there have done an
extraordinary job of finding ways to e-count incremental production, and I have great
confidence that they'll continue to do that. But we definitely need to get this second
plant up and running in the middle part of next year to ensure that we are not
constrained in the longer term.

Tom Holloway

The other thing to remember is that we are in a -- I'd call it a transformation in that
business with the introduction of the larger diameter products, five-inch and six-inch.
They do take slightly different degrees of production time to make the same length
when you compare them to smaller diameter. So, we have to manage those things, but
at the same time, generally revenue and margin is higher for the larger diameter
products than it is for our legacy four-inch and smaller products. So, as these larger
diameter products become a bigger and bigger part of our revenue stream, obviously
they will continue to help propel that business upwards, really on all lines at the income
statement.

If we turn to the tanks business, we currently have six production sites, two in Canada,
four in the U.S. and as you know, we have initiated the construction of a seventh site in
South Carolina, which we also expect will come online in the middle part of next year.
We still have the ability to add additional shifts in some of our existing tank production
sites, so I am less concerned at our risk of being totally maxed out on the tank site
before the seventh site comes online. I would say though that labor is still tight in North
America and certainly in some of the areas where our sites sit. So, adding shifts, while it
sounds simple, does take quite amount of effort and a little bit of time. So, we're very
thoughtful there and working to stay ahead of it.

Operator

[Operator Instructions] And our next question is going to come from line of Adam
McBain with Cormark Securities.

Adam McBain

Great quarter. My questions have already been asked, but just have one on the
penetration rate of some of the larger diameter piping. Just curious, what percentage of
sales does this account for currently? And do you have sort of a target or goalpost
around mix, or where you'd like to see that end up somewhere down the line?

Michael Reeves

Yeah. That -- morning. I think when we look at the North American market in particular,
we think that the total addressable market for the larger diameter items are about the
same as the smaller diameter items that have made up our historic revenue base. So,
you would naturally assume that over time we'd like to get to a place where our revenue
stream matches the addressable market and is roughly 50-50. We're certainly not there.
We're north of 10% of the revenue is coming from large diameter, but not substantially
north of 10%.

Adam McBain

I'll jump back into the queue. Congrats again on the quarter.

Operator

[Operator Instructions] And our next question is going to come from the line of Tim
Monachello with ATB.
Tim Monachello

I guess, I will follow up on that last one. I think you guys had said there's about 10% for
the large diameter pipe, a couple quarters in a row here. Are you seeing that product line
grow substantially, or are you just seeing the small diameter pipe grow at a sort of a
similar pace?

Michael Reeves

Certainly, the large diameter is growing faster than the small diameter, Tim. So, I mean,
obviously, there's certain information I'd rather not put into the public domain for my
competitors to chew on. So, I have to be a little bit coy about relative share. But what I'd
say is that the relative share of our revenue, large diameter to small diameter has
certainly continued to grow over the last several quarters.

Tim Monachello

Is part of the reason that it's only 10% because the facility so that you have today are
more geared for the smaller diameter? And will the new facility add incremental
capacity for the large diameter in particular?

Michael Reeves

So, I'd say that the relative share of revenue, large to small diameter on the FlexPipe
side is driven entirely by the -- our commercial team and their ability to capture
opportunities with customers. It is not governed by our manufacturing. At the same
time, there's certainly some of our production equipment in Calgary that predates the
larger diameter product line and is not sized to produce that. So, not all of our
production activity in Calgary is suitable for large diameter. And certainly you can
assume that everything that we put into the Dallas facility will be sized appropriately to
cover the full spectrum of our product offering.

Tim Monachello

And then, just foster on that, do you still think that the five and six-inch diameter pipes
will represent a doubling of your total adjustable market? And I guess, does that mean
that you expect to get your 10% to grow to 50% over time?

Michael Reeves

Short answer, yes.

Tim Monachello
Next one, I just wanted to touch on -- you had a comment there that the stormwater
management product line reached a new record level revenue in Q, which is great. I
think -- I don't know how long ago this was, but I think you mentioned that you had
hoped that that would grow to the same size as the fuel business over the next five
years. Is that still the expectation?

Michael Reeves

It certainly is.

Tim Monachello

The rest of my questions have been answered, so thank you very much.

Michael Reeves

Great. Have a great day. Thank you.

Operator

[Operator Instructions] Our next question is going to come from the line of Zachary
Evershed with National Bank Financial.

Zachary Evershed

Congrats on the quarter. So, first couple on Connection Technologies. Any way to
position the segment to be exposed to more of those one-timers and what drives those?

Michael Reeves

So, I think, again, the short answer is yes. The team did an extraordinary job of capturing
some, very attractive opportunities over the course of the last 12 months. Nuclear is
perhaps a good example. If you look back two to three years, our nuclear revenue
generation was sporadic. Not necessarily material when it came from a revenue
perspective, but certainly very helpful on the margin side. And here we are two, three
years later and nuclear forms, certainly not a majority, but a very healthy portion of our
revenue stream are relatively consistent quarter-to-quarter, still at very, very nice
margins.

And I think that shows what can be done when you have the right team focused on the
right things with the right resources and the right support from the corporation. So, the
team there at Connections Technology have done a fantastic job on the nuclear side,
and we certainly expect to continue to grow in that sub-sector.
Aerospace and outer space is a relatively new market for us to penetrate. So, we're in
the early phases where I still think it will be relatively sporadic revenue, attractive
margins and over time, we would hope that the commercial team will have exactly the
same success there that they have on nuclear, make it a consistent source of revenue
and attractive margin generation. They're certainly focused on that. We have all the
confidence in the world and their ability to get there.

Zachary Evershed

And then to beat the dead horse, do you feel there's a risk of not selling PPS in 2023? Or
is the progress strong enough that it's essentially a lock for this year?

Michael Reeves

My lawyers would tell me that I cannot tell you there is a 100% certainty that we will sell
that business. I do not have any concerns. None of us are losing sleep over the ability to
get this transaction done.

Tom Holloway

In fact, the only thing I would point to is just the closing timeline's going to be driven by
regulatory approvals, and we've said that several times. So, it's difficult for us to --
assuming we sign a deal, it's difficult for us to give you a real exact timeline on whether
it closes this year or next. So, just throw that out there so that when you're thinking
about this, there is some risk to the timeline. But as Mike said, we're very committed to
this and making progress.

Zachary Evershed

Then one last one on Composite. The integration of Triton, how's that progressing to
becoming a one-stop shop within water management? And are you looking for
additional CapEx or maybe inorganic growth in that space right now?

Tom Holloway

Yeah. So, the Triton business is a little more than a quarter, full quarter, under our
control. And I'd say we've been very pleased with the progress that's been made. The
integration process has been smooth. The team members that have joined us from that
business have really embraced being part of our organization. And the product line is
performing exactly as we would've hoped at this point.

When we think about that business as part of the bigger hydro chain offering of
stormwater management products, it was crucial for us to bring that into our own
portfolio. So, very pleased we were able to do that. There are one or two other elements
of that hydro chain offering that we still rely on third parties for. So, obviously, continue
to look for opportunities to bring those additional items into our portfolio.

And I think from an organic investment perspective, Triton was not a particularly large
business when we acquired it. And as I've said earlier on this call, and multiple times
before, we have very high expectations for our water business, and its growth rate. So,
you shouldn't be surprised to see some organic growth capital go into the water
business, particularly around manufacturing activities as we roll through the next
several quarters. But nothing specific to communicate as we sit here right now.

Operator

[Operator Instructions] And our next question is going to come from the line of Ian
Gillies with Stifel.

Ian Gillies

With respect to some of the high margin sales that occurred in the quarter that were
kind of one-time in nature. I'm just curious, would these customers come back -- be
coming back yearly to buy these products, or is it something that would happen every
couple years? And I'm just curious on how to think about that as we move through, or a
longer dated forecast period.

Michael Reeves

Yeah. No, that's a fair question. So, the particular revenue and margin that we gained
from the aerospace order that we've noted, was spread over Q1 and Q2, although Q2 I
think saw more of the benefit than Q1, and was for a single customer for a single
specific project. I think that customer is a probably less frequent than once a year, but
more frequent than once every three years. There is obviously a growing population of
customers that we've either captured business with or are seeking to capture business
with, and I'm sure there'll be some variations in their cycle time.

But as I said earlier, what I expect as we sit here today is that the second half of the year
will not have a material benefit from additional large orders similar to the one we just
completed. But certainly we would expect to see 2024 have some benefits, and those
benefits ought to become more regular and more meaningful as we roll forward over the
next several years.

Ian Gillies
Moving to the auto exposure, there's obviously a threat of a big three auto strike coming
in mid-September. I'm just wondering kind of how you're preparing the business and the
event that occurs and perhaps how you're thinking about managing that strategically.

Michael Reeves

Yeah. So, the piece of our business that's exposed to automotive is the DSG Canusa
heat and cold shrink supply business, which is global. And automotive makes up about
a half of that revenue stream in that business. Our orders from customers tend to come
in approximately 90 days prior to fulfillment. And as I sit here today, we see no variation
of any substance in any part of the world in the ordering patterns of our automotive
customers. Obviously, things can change, but the next 90 days doesn't appear to have a
lot of variation in it.

In North America particularly, we have been very successful in penetrating non-

automotive end markets for that particular business. And so, certainly, if there were to
be any disruption of automotive manufacturing, we would expect to see some impact.
But in North America, automotive makes up a substantially less than a 50% of our
revenue stream in that business. So, I think the impacts would be fairly limited.

Ian Gillies

And then last one, with respect to the Composite Technology segment, particularly on
the pipe side, one of your peers is put out some pretty lofty goals for margin expansion
through the back half of the year. I'm just curious whether you think that's already
embedded in your business, or you expect to see some of those same trends?

Michael Reeves

Yeah. Obviously, I certainly wouldn't want to comment on anybody else's business. I

don't know the details of their business as well as I know mine. What I would say is that
we continue to expect larger diameter products to grow as a percentage of the overall
revenue base for that business. We continue to see opportunities for our total revenue
in that business to move upwards. And those two things combined would lead you to
the conclusion that margins should continue to move upwards.

I certainly would not say that we are perfectly optimized. We've got a very, very well run
business there, but there's always room for improvement, and we look to find those
opportunities every day. So, I think we are on a journey here. I think the margin within
that business is likely to skew upwards rather than downwards based on the factors I've
just described. And I think, as we start to dig in more detail into a full year 2024 budget
for that business, we will start to get a little bit more confident about where those
margins might be able to get to in that kind of timeframe.

Ian Gillies

I'll turn the call back over.

Operator

[Operator Instructions] Our next question is going to come from the line of Keith
Mackey with RBC Capital Markets.

Keith Mackey

Just curious about the atypical strength in international composite pipe sales. Can you
just describe a little bit more about what those were? And potentially how you think
about international markets from here? I know there's a lot already going on, but are --
what would it take for the international markets to become a compelling enough
opportunity to make maybe larger investment to service some of those markets?

Michael Reeves

Yeah. Good morning. International for FlexPipe, which specifically was the business
impacted there. The international procurement approach by our customers is a little
different than North America. In North America, our customers will place orders on a
weekly or monthly basis, depending on their outlook for their needs. Whereas most of
our international customers tend to work on full year or multi-year tender approaches.
So, it can be quite a long period of working to secure a tender win and then delivering
against that tender, which is exactly what we experienced in Q2, work that had been
effectively secured in prior periods was called off and we delivered it, so mostly to the
Middle East. And the timing was such that we had a little bit more revenue and
associated margin reported in Q2 than you would perhaps expect on average.

I think international continues to be a lumpy piece of our business just inherently

because of the way it's structured commercially. It's not yet a piece of our business that
is at a scale where I think we would seriously consider an investment in something like
a production facility. But I certainly think we can get there over time. I say I don't think
that's a 2024 kind of event, but perhaps 2025. We've got a very talented team. We are
adding to that team. They're having great success. The technology that we offer is
increasingly meeting the needs of international customers, both in terms of size and
temperature rating. So, as long as we can continue to execute well, I think we could
position ourselves for that international business to become a substantial part of our
revenue stream.
Keith Mackey

And just finally, for Tom on the buyback, can you just run us through a little bit more
about how we should be thinking about the level of buyback usage for the second half
of the year? I'm guessing, it might depend on what happens with the PPG business, but
what's like a steady base case and then maybe a bit of a confidence interval around
what we should be putting in our models for buybacks over the second half?

Tom Holloway

Yeah. Good question, Keith. I think the way I would think about it is the level of spending
you've been seeing in the last couple of quarters is probably about the run rate. Keeping
in mind that prices moved up a little bit, so there might be a little bit of creep if we kept
volumes the same. So, generally, I would say use the last couple quarters as a general
guide to modeling for that perspective. We intend to stay active. We're still very bullish,
of course, and think there's a long runway to go here with or without the sale, but
obviously we're going to get that sale done. So, that's how I position it, Keith.

Operator

Thank you. And I'm showing no further questions at this time, and I would like to hand
the conference back over to CEO, Mike Reeves, for any further remarks.

Michael Reeves

Thank you very much. And thank you everybody for joining us this morning and for your
continued interest in Mattr. We're looking forward to talking with you all again next
quarter and wish everybody a great day and a great weekend. Thank you.

Operator

This concludes today's conference call. Thank you for participating. You may now
disconnect.