Jewett-Cameron Trading Company

Good afternoon, and welcome to the Jewett Cameron Trading Company third quarter fiscal year 2026 financial results conference call. All participants will be in listen-only mode. Please note, this event is being recorded. I would now like to turn the conference over to Robert Bloom with Litham Partners. Please go ahead.

Robert Bloom Great. Thank you very much, and thank you all for joining us today to discuss Jewett Cameron's operational and financial results. for the fiscal 2026 third quarter and nine-month period ended May 31, 2026. With us on the call representing the company today are Chad Summers, Jewett Cameron's chief executive officer, and Mitch Van Domelen, the company's chief financial officer. At the conclusion of today's prepared remarks, we will address questions that have been submitted to the company. Before we begin with prepared remarks, please note that statements made by the management team of Jewett Cameron during the course of this conference call may contain forward-looking statements within the meaning of U.S. securities laws. Forward-looking statements describe future expectations, plans, results, or strategies and are generally preceded by words such as may, future, plan, will, should, expected, anticipates, or similar words. Listeners are cautioned that such statements are subject to a multitude of risks and uncertainties that could cause future circumstances, events, or results to differ materially from those identified in the forward-looking statements as a result of various factors and other risks identified in the company's 10-K for the fiscal year ended August 31, 2025, the 10-Q for the period ended May 31, 2026, and other filings made with the Securities and Exchange Commission. An audio recording and webcast replay for today's conference call will also be available online on the company's investor relations page. With that said, let me turn the call over to Chad Summers, Chief Executive Officer for Jewett Cameron. Chad, please proceed.

Good afternoon, and thank you for joining us today. To set the stage for today's call, let me first walk you through a few high-level financial and operational themes from the quarter and nine-month period. I will then discuss updates on the key initiatives we have been executing throughout fiscal 2026, including our focus on core metal fencing, operational realignment, Cash Conversion, Inventory Monetization, and our Ongoing Strategic Efforts. After that, Mitch will review the financials in more detail, and I will come back to wrap things up and address any questions that have been submitted. So, to start things off, reported revenue declined year over year in the third quarter, but the headline comparison does not tell the whole story. The decline was driven primarily by the absence of more than $3 million dollars and Low Margin Sales from the Cedar Fencing Supply Agreement that was discontinued in the fall of 2025. We made progress again in the underlying business. The progress was led by metal fencing, where we saw improved quarterly traction across Adjust-A-Gate, Fit-Right, Lifetime Steel Post and Perimeter Patrol. We believe that performance reflects the continued benefit of our in-store display programs, core product expansion and a sharper commercial focus on the products where Jewett Cameron has strong brand equity and differentiation. Greenwood also delivered another strong quarter, while PET remained soft as consumer discretionary spending stayed pressured. We also made significant progress improving the balance sheet and liquidity. Through the first nine months of fiscal 2026, inventory was reduced substantially, cash increased accounts payable and accrued liabilities declined and bank indebtedness was reduced. Sequentially, from Q2 to Q3, line of credit borrowings declined materially as receivables were collected and excess inventory was converted into cash. Mitch will provide the specific balance sheet and cash flow details, but the larger point is that cash conversion is central to how we are positioning the company through this operating environment. Margins remain under pressure. We saw stabilization from earlier in fiscal 2026 as customers accepted initial tariff-related price increases. Stabilization does not mean margins have returned to pre-tariff levels, and most fence categories remain below historical norms. Mitch will cover the gross margin results and tariff refund accounting in more detail, but tariffs, higher product costs, shipping, and logistics remain significant headwinds. So, while the quarter still reflects a difficult business environment, we believe it also reflects progress in the areas that matter most right now, strengthening the balance sheet, converting inventory into cash, reducing borrowings, continuing to sharpen our focus on core metal fencing, and positioning the company to exit fiscal 2026 with a more sustainable, long-term business model. Let's turn to an update on how the initiatives we outlined earlier in the year are progressing. The broader headwinds impacting the business have not gone away. Tariff uncertainty continues to pressure costs and disrupt purchasing behavior. Product and logistic costs remain elevated and consumers continue to be cautious in discretionary categories. At the same time, we believe the actions we are taking are simplifying the company and strengthening the foundation of the business. At the center of our strategy remains our core metal fencing business, which continues to be our largest and most important product category. We are focused on products where we have established brands, differentiated designs, strong retail relationships and clear opportunities to improve the lives of professionals and do-it-yourselfers working on fence and outdoor projects. During the third quarter, metal fencing delivered year-over-year growth on a quarterly basis across Adjust-A-Gate, Fit-Right, Lifetime Steel Post and Perimeter Patrol. We see that as an important marker of progress because it demonstrates that the core business is responding to the actions we have taken around merchandising, in-store display programs, and focused product expansion. Our display programs continue to support consumer engagement by putting the solution in front of the customer at the point of purchase, which is particularly important in categories where consumers may not fully understand the benefit until they see the product in context. On a year-to-date basis, The comparison remains mixed because of the challenging start to the fiscal year and the broader market environment. Adjust-a-Gate remains down year-over-year on a year-to-date basis, while FitRite and Lifetime Steel Post are up, and Perimeter Patrol is approximately flat. We view the quarterly improvement as encouraging. Our focus remains on consistent execution, additional store penetration where appropriate, better merchandising, and disciplined expansion of our core product lineup. Lifetime Steel Post remains an important part of that strategy. We continue to believe there is a compelling value proposition in offering a longer-lasting steel post solution for wood fencing applications. Adjust-A-Gate and FitRite also remain core to our fencing platform with patented and trademarked products that solve common installation and durability challenges for both professionals and homeowners. Perimeter Patrol provides another growth opportunity in portable security and temporary fence applications. The important point is that we are concentrating resources on areas where Jewett Cameron has product differentiation, retail relevance, and opportunities to build a stronger business over time. We are also evaluating improvements to existing products and complementary offerings from third parties that could broaden the line without adding unnecessary complexity. Operational efficiency and cash conversion remain major priorities. During the second quarter, we made substantial progress selling through excess cedar fencing inventory and liquidating certain slow-moving pet inventory. During the third quarter, that progress translated to stronger balance sheet as receivables were collected, inventory balances continued to decline, and cash was used to reduce borrowings under our credit line. The balance sheet improvement was meaningful. We reduced inventory significantly from fiscal year-end levels, reduced bank indebtedness from both the end of Q2 and fiscal year-end, and increased cash from earlier in the fiscal year. In the environment we are operating in, balance sheet flexibility is essential. The excess CDER inventory was tying up capital and creating storage costs. The slow-moving PED inventory was creating similar issues. Converting those positions into cash even where certain inventory had to be sold at or below cost allowed us to reduce borrowings, reduce complexity, and redeploy the organization toward the core products that we believe can drive the business going forward. We also continue to reduce costs. Wages and employment benefits declined 21% year over year in the third quarter and 22% for the first nine months of fiscal 2026. Year to date as a whole, Wages and benefits are down more than $1 million. We remain committed to reducing annual operating expenses as we continue to align the cost structure with the current revenue base and our core product focus. Selling, general, and administrative expenses were higher year-to-date because of professional fees related to outside consultants assisting with our strategic plan, and we expect those services to continue through the remainder of fiscal 2026 as we work through this realignment. A few comments on PET and Greenwood. PET remains soft. Consumers continue to restrain discretionary spending, especially in non-consumable categories such as crates, kennels, and containment products. Our Lucky Dog brand continues to have a solid reputation in PET containment, and our focus is on the core products that have the strongest demand profile while continuing to reduce exposure to older, slow-moving inventory. Greenwood was a clear positive again this quarter. Demand from transit customers continues to recover from post-pandemic lows and Greenwood is also benefiting from higher sales from non-transit customers. We are pleased with the performance, but as we have said previously, Greenwood remains part of the broader strategic review as we concentrate the company around fence and outdoor products. As previously announced, Management, and the Board continue to evaluate a variety of strategic options for the company, as well as for individual operating segments and assets that prioritize overall value. This is not a one-quarter exercise. It is an ongoing process intended to simplify the company, unlock value from non-core assets, and support the core growth strategy. Those efforts include completing the monetization of remaining excess non-core inventory while exploring collaborative alliances, business partnerships, and potential divestitures in best-monetized non-core assets and business lines. Potential areas under review include greenwoods, selective pet assets, the wood fencing business, and certain real estate assets, including the former Seed property and the Innovation Studio property. For normal disclosures, strategic options under consideration may include mergers, acquisitions, divestitures, joint ventures, and other business collaborations and partnerships that could involve specific assets or business lines of the company. We engage in preliminary discussions with third parties from time to time regarding a variety of potential transactions. There can be no assurance that these discussions will result in definitive agreements or completed transactions, and the company does not intend to provide further updates unless and until a definitive agreement is reached. Turning to the broader environment, the macro backdrop remains difficult. Across the home improvement market, large retailers continue to describe a market shaped by consumer uncertainty, housing affordability pressure, and a challenging housing macro. For Jewett Cameron, that shows up in a few ways. consumers are more selective with discretionary projects, retailers are cautious with inventory commitments, and the ability to recover higher product and logistic costs through pricing remains limited. Tariffs remain one of the most significant issues affecting our business. As most are aware, the U.S. Supreme Court invalidated the tariffs that were applied under the International Emergency Economic Powers Act, or IEEPA for short, During the quarter, we filed claims for refunds of tariffs paid under IEEPA, and a portion of those claims has been accepted, while other amounts remain in process or may be appealed. Mitch will provide the specific amounts and accounting treatments in a moment. We will continue to pursue available refunds where appropriate, but potential refunds represent only a small portion of the overall tariffs we have paid and continue to pay. The larger issue is that most of the tariffs affecting our imported steel and aluminum products remain in place. The Section 232 tariffs were not affected by the IEEPA ruling, and subsequent changes to Section 232 tariff rules have continued to create complexity and cost pressure. In some cases, the new rules have increased the amount of tariff due, while in other cases, certain product classifications have improved. the tariff burden applicable to our product imports has increased slightly compared to our pre-February 2026 costs. In addition to tariffs, higher fuel-related shipping and logistics costs continue to pressure margins. Our ability to quickly pass on these costs to customers is limited and we do not expect pricing actions to immediately restore historical margin levels. We have seen some stabilization from earlier in the year as customers accepted initial tariff-related price increases, but most expense categories remain below historical margin norms. That is why we continue to focus on discipline pricing, reducing complexity, cash conversion, and product categories where we have stronger differentiation. As we look ahead, our objectives remain clear. To exit fiscal 2026 with a business model that is sustainable over the long term, focused on our strongest product categories supported by disciplined operations and positioned to unlock value from non-core assets where appropriate. While the environment remains complex, we believe the progress made during third quarter reinforces the direction we are taking. Let me now turn the call over to Mitch for additional comments.