ADENTRA Inc.

Good morning. My name is Andrew, and I will be your conference operator today. I would like to welcome everyone to the Edentra third quarter 2024 results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. To ask a question during this time, please press star, then the number one on your telephone keypad. To withdraw your question, please press the pound key. With me on the call are Rob Brown, Edentra's President and CEO, and Fez Karmali, Vice President and CFO. Edentra's Q3 2024 earnings release, financial statements, MD&A, and other quarterly filings are available on the investor section of our website at edentragroup.com. These statements have also been filed on Edentra's profile on CDARplus at cdarplus.ca. I want to remind listeners that management's comments during this call may include forward-looking statements. These statements involve various known and unknown risks and uncertainties, and are based on management's current expectations and beliefs, which may prove to be incorrect. Actual results could differ materially from those described in these forward-looking statements. Please refer to the text in a denture's earning press release and financial filings for a discussion of the risks and uncertainties associated with these forward-looking statements. All dollar figures referred to today are in U.S. dollars unless stated otherwise. I would now like to turn the call over to Rob Brown.

Good morning, everyone, and welcome to our third quarter earnings call. Thank you for joining us today. We're pleased to report that our disciplined approach to executing our business strategy has delivered solid results this quarter. Before we begin, please note that all figures mentioned today are in U.S. dollars and less otherwise indicated. Despite slower activity in some end markets, we achieved solid third quarter results by remaining aligned with our strategic priorities. Consolidated sales rose by 1.8% to $568.8 million, with the recent acquisition of Wolf Distributing Contributing $31.4 million, and helping to offset a 3.7% decline in organic sales. Organic sales volumes in the third quarter experienced a modest 1% year-over-year decrease, reflecting softer demand conditions. However, we were encouraged by a shift in product pricing trends. The prolonged price deflation of the past two years began to ease this quarter, with a year-over-year decline of 3%, the smallest rate of deflation experienced in the last five quarters. We also achieved a slight increase in average product prices compared to Q2 2024. As a reminder, we acquired Wolf for $130 million on July 29, expanding our geographic reach and product offering with complimentary millwork locations in the Midwest, branded outdoor living products, and enhanced access to the attractive ProDealer channel. This acquisition positions us well to meet demand in the new residential and repair and remodel markets, contributing approximately $164 million in annual run rate sales. Wolf's addition also brings us closer to our destination 2028 goals of achieving 3.5 billion in annual run rate revenue, a 10% adjusted EBITDA margin, and a 12% return on invested capital. Turning to profitability, we achieved a strong gross margin of 21.3%, a testament to our strategic initiatives aimed at building a resilient and more profitable business. The drivers of this margin improvement include the acquisition of higher gross margin businesses, a focus on growing our sales of higher margin ready to install products, both through organic efforts and M&A, the benefits of our global sourcing program, and strategic asset management and pricing driven by data analytics and digital tools. Operating expenses remain stable on an organic basis reflecting our consistent focus on cost control. However, additional expenses from Wolf and softer sales reduced our operating leverage, leading to a 7.2% year-over-year decrease in adjusted EBITDA to $48 million in Q3. We saw strong cash conversion this quarter, with approximately 80% of adjusted EBITDA converting to operating cash flow before changes in working capital. This cash generation enabled us to end the quarter with a leverage ratio of 2.5 times comfortably within our target range. Looking ahead, we expect solid cash flow generation in the fourth quarter, allowing for continued debt repayment and positioning us to pursue further acquisition opportunities from our robust M&A pipeline. Additionally, we increased our quarterly dividend to 15 cents per share, effective for the next dividend date on January 31st, 2025. With that, I'll turn the call over to Fez for a closer look at our Q3 financial results. Fez?

Thanks, Rob, and good morning, everyone. Please note that comparisons used are to the same period in the prior year, And a reminder that figures discussed are in U.S. dollars unless otherwise stated. With the quarter ended September 30, total sales rose by $10.1 million to $568.8 million, primarily driven by our acquisition of Wolf, which contributed $31.4 million. This helped offset a $20.5 million, worth 3.7% decline in organic sales, reflecting a 3% decrease in product prices and a 1% volume decrease. In the US, sales grew by $8.4 million to $524.9 million, driven by Wolf's contribution, despite a 3% decrease in product prices and a 2% decrease in volume. In Canada, sales increased by Canadian $3.3 million Canadian 59.9 million, supported by a 10% volume increase, partly offset by a 4% decrease in product prices. Gross profit for the quarter was 121.4 million, up 3.1 million, or 2.6% from Q3 2023, with a gross margin percentage of 21.3% reflecting the positive impact of our strategic initiatives, which Rob touched on earlier in the call. Operating expenses were reduced to $96.7 million, a $4.2 million or 4.1% decrease, largely due to the non-recurrence of $15.5 million in accrued trade duties from the prior year. This was partially offset by costs related to Wolf's acquisition, integration, and inflationary adjustments in compensation and benefits. Adjusted EBITDA for the quarter was $48 million, down 7.2% from $51.8 million in Q3 2023, primarily due to increased operating expenses, which were partly offset by higher gross profits. Our cash flow performance highlights the strength of our business model. In Q3, we converted $48 million in adjusted EBITDA into $38.6 million of operating cash flow before changes in working capital, an 80% conversion rate. Additionally, working capital reductions generated another $27.4 million. This strong cash generation helped to fund the Wolf acquisition while keeping our balance sheet solid. We closed the quarter with a pro forma leverage ratio of 2.5 times and over $400 million of availability on our revolving credit facilities. Our capital priorities remain prudent balance sheet management, growth through acquisitions and organic investments, and shareholder returns through dividends. Overall, our results reflect strong progress against our strategic priorities, with recent acquisitions and disciplined cost management helping us to achieve consistent results, despite the softer market conditions experienced during Q3. With that, I'll turn it back to Rob. Rob.