iFabric Corp.

All right, good morning, good afternoon, depending on where you're dialing in from. Thanks for joining us today. We have an update with iFabric, who just reported their Q1 numbers earlier this week. So with me today, I have Hilton Caron, CEO, Hilton Price, CFO, and Giancarlo Beavis, COO. I don't think we're going to work off a presentation, but as always, this session will contain public statements. If you'd like to know more about those, you can find them on the presentation on the company's website. There will be a Q&A section, so feel free to enter any questions you have in the Q&A box. And I'm just going to read a quick little disclaimer. So as announced in the press release, Yesterday, the company is undertaking a short-form prospectus offering. Due to Canadian securities laws and regulatory quiet period, management is strictly from discussing the proposed financing, the offering terms, or the specific use of proceeds. Therefore, the remarks today will focus entirely on the recently released financial results and will not be taking any questions regarding the offerings. So apologies that we can't get into that until after the close, but those are the rules. With that out of the way, I'll turn the mic over to Hilton to talk a little bit about the quarter.

Thank you. Good afternoon, everyone. Thanks for joining us. As I normally preface my discussion, I just want to advise everybody that if you did a fairly comprehensive press release on the quarterly results and financial position, which you can find on our website, together with the financial statements and the MD&A. And you can also find those on CDAR+. They're available at both places. So I'm going to focus, as I normally do, on what I consider the important aspects of the results in our financial position to help you get a better understanding of where we're at and what we achieved in Q1. So starting with the revenue, that came in at $27.5 million compared to $7.1 million in 2025. And that was slightly ahead of the guidance we provided previously, which was $20 to $25 million. an absolute record for the company. I think I should smile. I'm often accused of not smiling enough, but that makes me smile. Looking at revenues by division, Intelligent Fabrics, $23.6 million compared to $5.8 million last year. Intimate Apparel, excuse me. Sorry about that. Intimate apparel, $3.9 million compared to $1.3 million. Both records, huge records for the divisions. In terms of the main drivers for revenues, Intelligent Fabrics, we had new scrubs and footwear programs, plus we saw some expansion of existing programs as well as organic growth in our core lines. For the intimate apparel division, we saw the launch of our new brand, Unish, to replace the prior Maidenform brand. So we had to repopulate all the stores that are major clients, in particular Coles and Target. Also, we saw the launch of a new major intimacy program at Walmart U.S. and we're hoping that's going to do well. Next item I'd like to do with is inventory. We're carrying 16.9 million in inventory at the end of the quarter, and that may appear high, but generally we normally carry about four to six months' worth of inventory. We actually employ three full-time analysts to track sales trends and sell-throughs and which products are doing well and which products are doing less well. However, even with this, sell-through rates on new programs are a guess at best. So when we have as many new programs as we have now, we tend to bring in a bit more inventory than we need because if we run out of inventory, that's an absolute momentum breaker. So we'd rather carry a bit more. Our goods are not fashion items, so there's no real chance of them being stranded with any of these products. It just may take a little bit longer to sell, but it's all good inventory. And actually, I see with the sparking oil prices, I'm expecting that fabric prices are going to go up. A lot of the fabrics we use are polyester based, so investment into inventory might have been even a wiser move if that happens. The next item is accounts receivable. We're sitting with $25.5 million in the book, obviously related to the revenues for the quarter. Our collection cycle is normally around 75 days, so that would be in line with that. And when you're dealing with the likes of Walmart, Costco, the collections tend to run like clockwork. If we have any doubt as to the creditworthiness of a new customer or client, we'll obtain credit insurance. So, in fact, very little risk actually attaches to our book. Growth margin. The quarter came in at 33%, which is up from the 26% in the prior quarter. Definitely headed in the right direction. My target for the year would be 35% or just north of 35%. So we seem to be moving towards that. And the real driver there of the margin is the high proportion of intelligent fabric sales, which do carry a lower margin than intermittent apparel. Intermittent apparel is the highest gross margin earner in the business. There was also a small impact from tariffs. We had to see that mid-February or towards the end of February, they were struck down In fact, we've got a claim pending to recover around $850,000 in tariffs that we paid to the date that the tariffs were declared no longer in effect. So I don't know how long that's going to take. I haven't recognized that as an asset from the books. I've taken a cautious approach and will recognize any recoveries in income as and when we receive the cash. Selling and admin costs, there was a $1.5 million increase there, and that's mainly attributable to variable costs, royalties, commissions and the like. Some small cost increases in our base overhead, but I think I mentioned a while back that above $35 million, I expected a large proportion of the margin to drop to the bottom line, and the $5.7 million in adjusted EBITDA in this quarter bears that out. In fact, in terms of variable costs, I just cashed a cheque to Ruth for $1 million for royalties paid on Ruth's product sales to Costco. Our current ratio is a healthy 2 to 1 at the end of the quarter. When I calculate the current rate, I exclude a term loan, which is actually the mortgage in our building, which is shown as current, unfortunately, even though it's a term loan. In terms of a banking agreement, it's also a demand loan, so when that happens, we need to classify as current, even though we'll only pay the minimum payments during the course of the year. So I skew that, and as I said, the ratio is 2 to 1, which I believe is fairly healthy. Four deposits for purchasing down to $1.3 million compared to $6 million peak. Obviously, Friday's product is coming in in the short term, but I would expect a buildup of that amount again as we begin the process of ordering. for the year end programs expect, well Q4 is normally one of our massive or bigger quarters, so it takes a while to put things into production, order the goods, design everything, so we'll see a build up in deposits over the course of the year. And the last item I would deal with is operating debt. We were carrying $9.3 million in operating debt at the end of the quarter. And with our earnings converting to cash and the collection of our receivables, I would expect that to be paid down at a fairly rapid rate. I suppose with the capital raise now in effect, that's moot. I think that's all I really have to say. Questions?

Thanks, Hilton. I don't see any questions coming. Oh, there are a couple. Give me a second here. All right. So did the higher volume of intimate apparel revenue this quarter have a positive impact on gross margin in the quarter? If so, could you indicate by how much?

Absolutely. Again, I mean, It's mixed related, and we had a massive amount of intelligent fabric sales in that quarter. I don't have the exact number, if I was to give a number off the top of my head, I would say one to two points. Two points. At least two points.

Okay, and could you quantify the Q126 revenue for us again? Is it largely in fulfilling the 1,000 additional Walmart stores? Did it include some of the $8 million related to the Brutes contract? How much is related to the fulfillment of the Walmart stores?

I defer to John Connor.

Yeah, so Q1 obviously had some of those additional 1,000 stores going into Walmart. It also was an expansion contract. Of our leak-proof program within Walmart USA, it was the addition of the new Walmart program in the intimate side of the business as well. And then obviously the relaunch of our Nudist brand and the other two major retailers being Kohl's and Target. So it was kind of a mix of all of it. To address the roots part, yes, part of it was in Q1, but also part of it was in Q4. So it was a mix of all of those different things in Q1.

And what's the status of Walmart adding more stores? Do you have an update on that?

I mean, I'm not sure that that's something we're allowed to speak about at this point for future business given our quiet period. So I'll defer to that as my response.

I'll just jump in now very quickly and say I know people would like a lot of forward-looking, you know, what we've got planned. But we are, as John Carlos said, in a quiet period because of the raise, and the raise has not – bless you – the raise has not been – has not closed. So, we've been cautioned by Council to really try to stick to this review as the review of Q1. We will have another webinar. We'll gladly have another webinar once the raise is closed so that we can talk with a lot more clarity about future plans that we will, that obviously we raised the money for. So, once it's done, we will circle back to everyone and have another webinar and address I just hope that people appreciate the fact where we are today.

Understood. I am going to have to skip a couple of those questions then. This one maybe you can answer. What's the expected quarterly revenue cadence? I mean, historically Q1 and Q4 are your seasonally strongest quarters. Would you expect that?

Yeah, that again is forward looking. I think we should avoid We should leave that for the next webinar. Let's try and hold something shortly after the capital raise to deal with those kind of courses.

Okay. What are your payment terms with Walmart and Costco?

Our payment terms generally run from around 60 to 90 days at the longest. Generally 60 days before we collect. It will extend out to 75 by the nature of our clients. computer systems, etc., etc., and the time that it takes for goods to hit their warehouse. So the terms are between 60 and 90, and our average collection period is around 75 days.

And were there any one-time items impacting the adjusted EBITDA margin in Q1?

Yes, tariffs was one, and I think we had a couple hundred thousand in the residual cost of transitioning to from the made-in-form license to our own brand. We were setting through residual product. John Carter, what are the costs worthy on the transition?

There's a handful, a little bit of markdown, not a great deal.

Oh, markdown is the one, yeah. Yeah. Yeah, yeah. It wasn't an overly material figure. It was about $150 or $200. And I would guess you're right. The vast majority of that would have been markdowns.

Okay. And the level of deposits has fallen sharply. Previously, deposits were used to suggest the coming two quarters revenue.

I think just to hold this point before, if our inventory is up already, I would suggest that that might indicate that we've been priming the pump already. So deposits might be down, but inventory is at an all-time high, so.

Got it. And what's the principal market for your new and nudish line?

I would say both. And it expands not only the traditional solution bra and bra accessory market, but expands into our leak-proof product, into some sleepwear product, and then traditional intimates as well.

Yeah, the maiden form license restricted us in what we could do, and I think the unburdening is the fact that now we can do a lot more with our license, and it opens up new areas for us. Again, we'll discuss that at the follow-up webinar, and we'll provide more color on that.

Okay. I think the rest of the questions that I have are all forward-looking. I'm assuming you can't talk about the leaching study?

No, other than... If things are moving ahead, I don't know that we can give any other further color on that at this stage. But it is moving ahead.

Okay. And here's Polyester prices have seen sharp increases due to the spread of Hermes. Have you seen any price changes for your material?

No, and I think, again, to Hilton's previous point is that even having this inventory in place has been a benefit to us, but we're not seeing that. And we do do some polyester, but not a lot of it is polyester. We're into some other fabrications as well. So we've been able to avoid it to a large degree.

Okay. Okay. um you can answer congrats on a fantastic quarter and start to the year numbers um anything you want to add that we didn't cover that we can cover uh i know i know people are looking for forward statements and as i said we will have a webinar um you know if there is a a a dip from one quarter to another

That's by no means an indication of a soft order. I think that the business is still in unbelievable shape and really everything is pointing forward in a very nice manner. And, you know, it's really positive. So I think that there's really no alarm bells in any way, shape or form. And as I said, let's get through this raise and then we'll be able to get more color on that going forward.

Yeah, me exactly.

Thanks, Giancarlo. I was saying, yeah, thank you so much for your time. I think you're scheduled to close, is it June 4th?

Well, I think closing is around, yeah, sometime in the first week of June, so very soon thereafter we think, please, we'll schedule something to go forward.

Okay, great. Well, thanks for your time. Thanks to the audience members for your questions um sorry but we'll get to them as soon as we can thanks everyone and have a good day