Dorel Industries Inc.

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Doral Industries' third quarter 2025 results conference call. At this time, all participants are in listen-only mode. Following the presentation, we will conduct a question and answer session. To join the question queue, you may press star then 1 on your telephone keypad. Should you need assistance during the conference call, you may reach an operator by pressing star then 0. Before turning over the meeting to management, Please be advised that this conference call will contain statements that are forward-looking and subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated. I would like to remind everyone that this conference call is being recorded today, November 10, 2025. I would like to turn the conference over to Martin Schwartz, President and CEO. Please go ahead.

Thank you. Well, good morning and thank you all for joining us for Daryl's third quarter earnings call for the period ended September 30th, 2025. With me today are Jeffrey Schwartz, CFO, and Jason Kwasnick, Vice President of Finance. We'll take your questions following our comments. Please note that all figures mentioned during this call are in U.S. dollars. The third quarter ended with a significant agreement with new financial partners that will fund our strategic agenda in accelerating the growth of the juvenile segment and executing the repositioning of the home segment. The lack of liquidity prior to these arrangements seriously impeded our ability to develop and bring new products to market. This was most acute in the home segment, but as the quarter progressed, it also delayed key product development initiatives in juvenile, a problem that has now been resolved. This internal challenge was compounded by external pressures, particularly in the US, where tariff uncertainty and higher retail price points are creating a slowing retail environment. Despite this, the REL Juvenile delivered a quarter characterized by stable revenue and strong international performance, led by our European operations, offset softness in the US. These results again demonstrated the strength of our global footprint and our commitment to building a more agile and competitive business. The rail home progressed on its restructuring plan, including the ending of manufacturing operations, further workforce and footprint reductions, and aggressive inventory liquidation. As always, Jeffrey will walk you through our results, but first I want to add some color to our press release of Friday, starting with the juvenile segments. In many ways, the third quarter was like our second. After a very strong start in the first quarter, sales slowed in the U.S., fundamentally due to the uncertainty being created by tariffs. And as in the second quarter, our international footprint allowed us to offset the challenges in the U.S., and strong revenue growth in our other markets offset the U.S. results. As of today, this uncertainty continues to exist with almost weekly pronouncements on potential tariff rate changes. But one thing is almost certain is that tariffs will not disappear, even if less erratic in their implementation. Higher input costs are almost certainly unavoidable on imports going forward. Higher prices are in the marketplace and retail velocity is slowing. This is true in both our juvenile and home segments. But with challenges come opportunities, and we did not allow the situation to slow our product development and market activation activities. We also have the benefit of domestic manufacturing in our best-in-class car seat facility in Columbus, Indiana, which is proving to be an advantage. One of the largest car seat production sites globally, the facility produces approximately 3 million units annually, supporting nearly 30% of the U.S. market. By leveraging local source materials and maintaining a strong U.S. presence, we can manage cost effectively, respond swiftly to market demands, and support American jobs. The strategic focus enables Doral Juvenile to provide families with safe, high-quality products while navigating ongoing trade policy and supply chain challenges. Let me now turn to some of the exciting developments across our brands and markets in the quarter. The marquee event of the quarter was our global preview at the Cologne Juvenile Show. This event brought together our teams from across regions to showcase new innovations and strengthen customer relationships. The event featured the global debut of Little Seeds Nursery Furniture brand and the introduction of Maxi-Cosi Slide Pro family, including the advanced Slide Tech 2 system. With contributions from all markets, the event fostered cross-regional collaboration and reinforced the REL Juvenile's commitment to innovation, connection, and global growth. We started several unique marketing initiatives in the quarter, including a nationwide brand awareness campaign on Reach TV, the largest in-airport television network in the U.S., present in over 70 airports. The campaign featured video content promoting three of our global brands. We also promoted our Made in Indiana initiative that highlights our domestic production, airing every hour and during live NFL game coverage. With an estimated reach of 30 million travelers, this initiative significantly boosted brand visibility among a highly engaged audience. And now for Darrell Holmes. As we announced last quarter, we are completely transforming the home segment as we look to reverse the losses of the last three years. This transformation is built on four key pillars. Elimination of domestic manufacturing, a reduced product line focused on the most profitable items and categories, a smaller distribution footprint, and full integration of back office activities into our juvenile segment. We are actively delivering on these initiatives, and as of today, we have accomplished the following. We ceased manufacturing in our Cornwall, Ontario facility. We exited two major leased warehouse spaces in California and Montreal, moving into much smaller space in juvenile-run facilities. We reduced our non-manufacturing headcount from 470 to 240, and we reduced third-quarter operating expenses by over 40% year over year. We did not see the benefits of all these actions in the third quarter, but we will see more in the fourth quarter and really more in 2026. We continue to work on exiting product categories that are now considered non-core, and this allowed us to exit these large facilities in California and Montreal. The next phase is to move inventory in our East Coast facility and our Michigan location as we drive to a footprint that matches our new business model. As I said last quarter, the work being done by our North American teams to make this happen has been incredible, including those of our team members who will be leaving us. As I said last quarter, I want to reiterate my appreciation for their commitment to helping Durrell move forward. During all this change, our sales, marketing, and product development teams continue to actively work on the new Durrell homes. We have a lot of exciting new products that we were unable to bring to market thus far this year as we work through our liquidity issues. I will let Jeffrey update you on how our new structure will allow us to move forward, but from a product development perspective, we can now work more actively with our supplier partners to bring these products to market. In October, we attended the annual High Point Furniture Show in North Carolina. Several of our top customers attended, and we shared our go-forward vision and several new items across our remaining product categories, and they were extremely well-received. I will now ask Jeffrey to review the financials.

Jeffrey? Thank you, Martin. Just before discussing the results, just want to reiterate some things about the new facility that Doral has because it really is – probably the most important thing that's happened to the company in a while. So as we announced on September 29th, we're all entered into a new financing agreement for the group of lenders led by the affiliates of TCW Asset Management that includes senior secured credit facilities in the amount of $310 million U.S. That consists of $175 million senior secured asset-based revolving credit facility, of which we borrowed $110 million, and a $135 million term loan facility. Also announced, we entered into an agreement with the Alberta Investment Management Corporation, INCO, for a private placement of preferred shares issued for the total amount of $75 million U.S. The company used the proceeds from the new credit facilities and preferred shares to repay Doral's previous senior secured debt LENDERS AND TO PAY FOR CERTAIN RESTRUCTURING COSTS IN THE DOREL HOME SEGMENT AND FOR WORKING CAPITAL PURPOSES. THE NEW CREDITED FACILITIES AND THE PROCEEDS FROM THE PREFERRED SHARES RECAPITALIZED DOREL'S FINANCIAL POSITION AND THE COMPANY NOW EXPECTS TO BE WELL POSITIONED TO ADVANCE THE STRATEGIC AGENDA, PARTICULARLY AN ACCELERATION OF THE GROWTH OF THE JUVENILE SEGMENT AND EXECUTING THE REPOSITIONING OF THE DOREL HOME BUSINESS. From a revenue standpoint now, the third quarter, Doral's revenue decreased by $55.7 million, or 15.7%. The revenue decline was in the Doral home area, with juvenile becoming, was essentially flat. As announced on June 30th, the Doral home operation was substantially reduced in size through the international market. intentional reduction of active SKUs that are now considered non-core. In addition, sales declined versus last year due to product availability issues, as well as customers holding orders due to the uncertainties of tariffs. So the revenue decline in the U.S., as Martin mentioned, began in the second quarter and was due to the Uncertainty that tariffs have brought to the marketplace, this general consumer product issues in which price points again are upside down, but probably more important is it doesn't, the changing in tariffs doesn't give the retailers an opportunity to strategically plan their product lines to meet the right and appropriate price points. All of this is just causing some chaos in the marketplace, and we're sort of seeing that in softer demand. I'm going to skip over any discussion of general gross profits and margins and stuff like that, because on the home side, there was an incredible amount of noise, as you can imagine. I'll just talk about some of the reasons for the noise, but It doesn't really help us in looking, analyzing any go-forward numbers based on the home results. The general operating loss was $25.7 million compared to a loss of $11.1 million the year before. If we exclude restructuring costs, the adjusted operating loss decreased by $1.1 million to $8.1 million. Financing expenses increased by 10.6 during the quarter compared to last year. The increase is mainly explained by the loss of extinguishment on debt in the amount of 9.7 million during the quarter. If we look at home, like I said, our home business declined by 40%, you know, in sales. due to the restructuring and the exiting of many SKUs and product categories. Even within that, we had product availability issues due to liquidity issues that were pretty acute in the third quarter. Many suppliers had moved us to a COD level, and we weren't necessarily able to get everything we needed. In addition, as I talked about before, we've got the problems of the uncertainty of the tariff rates, which affected strategic planning on both our customers and our site as well. Skipping over again all the gross margins, I just want to, again, find people what was done and when in Q3. So we shut down the, at the end of the quarter, we shut down the manufacturing facility in Cornwall and unfortunately had to give up quite a bit of severance and write down inventory and equipment, which some of that was done in Q2. But as you can imagine, as you wind down a facility, your efficiencies are horrible, and we had significant losses because of that. We exited our distribution warehouse in California at the end of September. which again necessitated an aggressive stance to move out of the inventory. We are exiting the Montreal facility, or it did exit the Montreal facility on October 31st of this year, but we again ran a sort of shrunken facility, expensive lease and other areas there that just caused massive inefficiencies. So that's behind us. as is the distribution of California warehouse. We did an inventory write-down of $11 million in the quarter, and we did have severance in the quarter of $4.3 million. So, again, we've talked about all this severance. We've talked about a lot of this stuff for a number of months now, but we didn't see any of the relief really in Q3. We had some employees not with us anymore, but generally we had all the facilities, we had all the overhead, and that was all put into Q3. We're going to start to see some relief in Q4. I'll move over to Juvenile, which had a flat quarter from a sales perspective. A little bit disappointing. We did have a weak August, although our business did rebound significantly in September last allowing us to have a reasonably decent quarter. The revenue declines, there were revenue declines in the U.S. and Brazilian market. The revenue declines were offset by improvements in other markets. So Europe, again, is experiencing some very nice organic revenue growth in most of their countries. And then we've had areas like Australia, Canada, Chile, our export markets. We're seeing significant growth in those markets as well. A lot of it is led by our Maxi Cozy brand, which is our premium brand, and that seems to be going very well. Gross profits in the quarter decreased by 1.6 million or 2.6%. The margin was 27.8 as it decreased to 50 basis points from last year. It's primarily due to the lower sales volume in the U.S., which is, again, caused by tariffs in that area. The operating profit is $4.9 during the quarter compared to $7.2, but if we exclude the structured cost, the operating profit decreased by only $1.4 million to an adjusted profit number of $6.6. With that, I will pass that back to Martin.