ADENTRA Inc.

Good morning. My name is Josh, and I will be your conference operator today. I would like to welcome everyone to the Edentra second quarter 2025 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, simply press star, then the number one on your telephone keypad. To withdraw your question, please press the star button followed by the number two. With me on the call are Rob Brown, Edentra's president and CEO, and Fez Kormily, vice president and CFO. Edentra's Q2 2025 earnings release, financial statements, MDNA, and other quarterly filings are available on the investor section of our website at www.edentragroup.com. These statements have also been filed on Edentra's profile on Cedar Plus at www.cedarplus.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 that are based on management's current expectations and beliefs, which may prove to be incorrect. Actual results could differ materially from these described in these forward-looking statements. Please refer to the text and the dentist's earnings, press release, and financial filings for discussion of the risks and uncertainties associated with these forward-looking statements. All dollar figures referred 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 thank you for joining us today. We delivered strong results in the second quarter, demonstrating the resilience of Edentra's business model in what continues to be a challenging environment. Residential construction remains soft, and macro uncertainty, particularly around the U.S. trade landscape, continues to weigh on sentiment. Despite that backdrop, we delivered sales of 597 million, adjusted EBITDA of 54 million, and adjusted EPS of 88 cents. Sales were up nearly 9% compared to last year, with the increase driven by the contribution from Wolf Distributing, which we acquired last summer. On an organic basis, sales held steady, Modest volume declines were offset by pricing gains. It's encouraging to see product pricing gradually recover after a prolonged period of deflation in 2023 and early 2024. Given our price pass-through model, higher prices generally translate into stronger revenue and gross profit, notwithstanding changes in market demand. We also saw improvement in gross margin both year over year and sequentially, reflecting effective pricing and procurement execution. And on the cost side, we continued to manage the business with discipline. Organic operating expenses were up less than 1%, which is well below inflation. Cash flow from operations was solid, at 33.9 million, and we returned 11.2 million to shareholders during the quarter through dividends and share repurchases. Since March, we've repurchased more than 680,000 shares, representing roughly 3% of shares outstanding, at an average price of Canadian $28 per share. Our leverage ratio ended the quarter at 3.0 times up from 2.4 times at the start of the year. That reflects the typical inventory build we see in the first half of the year as we prepare for the seasonally stronger summer and fall construction season. We expect inventory to come down in the second half, which, when combined with cash flows from operations, should bring leverage back into the mid-twos range by year end and position us well for 2026. On the M&A front, we've completed seven acquisitions over the past five years, representing over $1.2 billion in pro forma revenue. These transactions have expanded our reach, diversified our product offering, and increased our exposure to higher margin categories. Wolf, which we acquired at the end of July last year, has enhanced our presence in the US Midwest, introduced new specialty products, and strengthened our position with pro dealer customers. Turning to trade, approximately 14% of our product mix is now subject to country-specific tariffs at an average duty rate of 16%. The US Section 232 investigation into wood products remains ongoing, and depending on the outcome, an additional 20% of our product mix could ultimately be affected. That said, we've shown we can navigate this environment. Our price pass-through model allows us to preserve margins, and our sourcing network, which spans over 30 countries, gives us the flexibility to shift supply as we need to. We also benefit from strong domestic vendor relationships, which helps when customers prefer US sourced products. Finally, we had a positive outcome on the outstanding CVD and AD trade matter in the second quarter, resulting in a 9.7 million net recovery in operating expenses and an expected refund of 23.9 million in previously paid duties. While new CVD and AD investigations are underway, this relates to a smaller portion of our supply chain, and we do not expect a material financial impact from it. With that, I'll turn the call over to Fez to take you through the financials in more detail.

Fez? Thanks, Rob, and good morning, everyone. Let me walk you through our financial performance for the second quarter. And just a quick reminder, we report in US dollars. Total sales came in at $597.1 million, up 8.7% from the same period last year. That growth was largely driven by the contribution from Wolf Distributing, which we acquired at the end of July 2024. On the organic side, sales were flat. Pricing was up 2.3%, but that was offset by slightly lower volumes. Looking at the regional performance, in the US, sales grew 9.3%, reaching $551.6 million. That includes a $48.6 million contribution from Wolf. Organically, we saw price gains of 1.9%, which were offset by a 2.2% decline in volumes. In Canada, sales were Canadian $63.1 million, up 2.8%, with pricing up 3.6% and volumes down slightly. Gross profit was $130.1 million, an increase of 9.1%, and gross margin came in at 21.8%, up slightly from last year. That reflects both the benefit of higher pricing and strong execution on the procurement side. We also saw a 3.9% reduction in operating expenses. which came in at $88.6 million. That includes a $9.7 million recovery of trade duties, which helped offset the $5.5 million in expenses related to wealth and a small $0.6 million increase in organic operating costs. Adjusted EBITDA grew to $54.3 million, up 12% from Q2 of last year. That improvement was driven by the stronger gross profit and continued cost discipline across the business. Net income for the quarter was $22.1 million or $0.89 per share, up nearly 30% year-over-year. On an adjusted basis, net income was $21.9 million or $0.88 per share, compared to $1.03 last year. The year-over-year decline on an adjusted basis was due to higher interest and tax expense. Operating cash flow was 33.9 million compared to 23.8 million in Q2 of last year. That increase was driven by higher EBITDA and lower tax payments, partially offset by a 7.5 million investment in working capital. This investment is typical for this time of year as we build inventory ahead of the summer and fall construction season. We expect working capital to decline in the second half as inventory is sold through and converted to cash. We ended the quarter with net debt to EBITDA of three times, and we expect that number to come down closer to mid twos by year end as inventory days improve. We continue to have ample flexibility under our 600 million revolving credit facility, which we extended to 2030 earlier this year. Lastly, we remain disciplined and how we deploy capital. On August 6, the board approved a 15 cent quarterly dividend. And during Q2, we returned 11.2 million to shareholders through dividends and share buybacks. Since March, we repurchased more than 680,000 shares, representing roughly 3% of shares outstanding, at an average price of Canadian $28 per share, which we believe is meaningfully appreciated for our shareholders. With that, I'll turn things back to Rob to discuss our outlook. Rob?