Richelieu Hardware Ltd.

Good afternoon, ladies and gentlemen, and welcome to Reshow Your Hardware Third Quarter Results Conference Call. At this time, all participant lines are in the listen-only mode. Following the presentation, we will conduct a question-and-answer session, which will be restricted to analysts only. And if at any time during this call you require immediate assistance, please press star zero for the operator. Note that the call is being recorded on October 6, 2022. Bonjour, Mesdames et Messieurs, et bienvenue au résultat du troisième trimestre de quincaillerie et richelieu. Présentement, vos lignes sont en boîte d'écoute seulement. Suite à la présentation, nous allons procéder à une période de questions et réponses qui sera restreinte aux analystes seulement. Si vous avez besoin d'assistance au cours de l'appel, appuyez sur étoile 0. Veuillez prendre note que cet appel est enregistré le 6 octobre 2022. J'aimerais maintenant céder la parole à M. Richard Lord,

Good afternoon, ladies and gentlemen, and welcome to this year's conference call for the third quarter and first nine months of fiscal 2022. With me is Antoine Auclair, CFO. As usual, note that some of today's issues include forward-looking information, which is provided with the usual disclaimer, as reported in our financial findings. In line with previous periods, we achieved a strong third quarter with a 26.7% increase in total sales to which our Canadian market segment contributed as well as our U.S. manufacturer market where we realized a sharp rise of 51% in U.S. dollar of which 32% came from acquisitions. an EBITDA increase of 23.8%, with an EBITDA margin of 16.7%, and a net earnings per share increase of 18.8%. This performance helped drive our total sales for the nine months up 29.1% to $1.3 billion, and net earnings per share increased by 27.3% to $2.19. We ended the period with a sound financial position, including a return on average equity of 24.1%. RicherU has always been careful to maintain an accurate ability to react and adapt to market conditions, which contributes to our sound financial track record over the years. Furthermore, we are driven by a combination of key strengths, including the efficiency of our business model, specially designed to meet the needs of our Canadian and U.S. customers and anticipate their expectations through our obsession with service and our resolute focus on innovation. The diversification of our market segment is also a great strength, and we continue to have strong leverage with our acquisition in North America, where 80 have been completed since 1988. In this regard, we recently concluded a fourth acquisition of the financial year in Anjou, Quebec. We also signed three agreements in principle for two acquisitions in Canada and one in the U.S. Together, these four transactions should add approximately $23 million in annual sales. I will now hand over to Antoine for a review of the quarterly results and the financial situation.

Thanks, Richard. Third quarter sales reached $472.9 million, up 26.7%, of which 15.8% from internal growth and 10.9% from acquisitions. At comparable exchange rates to last year, sales increase would have been 24.9%. In Canada, sales amounted to $279.6 million, up 14.8%, mostly from internal growth. Our sales to manufacturers reached $228 million, up 15.7%, of which 14.5% from internal growth and 1.2% from acquisitions. As for the hardware retailers, sales stood at $51.6 million, up 11.2%, entirely from internal growth. In the U.S., sales grew to $150 million in U.S. dollars, up 43.7%, 15.3% from internal growth, and 28.4 from acquisition. Sales to manufacturers reached 141 million in U.S. dollar, up 50.7 percent, 18.7 percent from internal growth, and 32 percent from acquisitions. The hardware retailers and renovation superstores market sales reached 9.1 million. In Canadian dollar, total sales in the U.S. reached 193.3 million, an increase of 48.9% and representing 41% of our total sales. For the first nine months, sales reached 1.3 billion, up 29.1%, of which 16.2 from internal growth and 12.9% from acquisitions. In Canada, sales reached 801 million, up 116.5 million, or 17%, of which 12.8% from internal growth and 4.2% from acquisitions. Sales to manufacturers reached 650.7 million, up 98.2 million, or 17.8%. Sales to hardware retailers and renovation super stores reached 150.5 million, compared to 132.2 million, up 13.8%. In the U.S., sales amounted to $426.1 million in U.S. dollars, up 49.2%, of which 20.3% from internal growth and 28.9% from acquisitions. They reached $544.1 million in Canadian dollars, up 52.2%, accounting for 40.4% of our total sales. Sales to manufacturers totaled $393.6 million, an increase of $143.9 million, or 57.6%, of which 24.8% from internal growth, and 32.8% from acquisitions. Sales to hardware retailers and renovation superstores were down 9.7% compared to last year. Third quarter EBITDA reached 79.2 million, up 15.2 million, or 23.8% over last year, resulting from increased sales. Gross margin declined slightly due to acquisition, and the EBITDA margin stood at 16.7% compared to 17.1% last year. For the first nine months, EBITDA reached $210.8 million, up 29.2%. As for EBITDA margin, it stood at 15.7% compared to 15.6% last year. Third quarter net earnings attributable to shareholders totaled $46.4 million, up 19.6%. Net earnings per share were $0.83 basic and $0.82 diluted compared to $0.69 basic and diluted last year, an increase of 20.3% and 18.8% respectively. For the first nine months, net earnings attributable to shareholders reached $123.4 million, up 27.1%. Diluted net earnings per share stood at $2.19 compared to $1.72, up 27.3%. Third quarter cash flow from operating activities before net change in working capital amounted to $60.9 million or $1.08 per share, an increase of 23.5%, resulting primarily from net earning growth. Net change in non-cash working capital used cash flow of $58.2 million, mainly reflecting increased inventories of $92.6 million, resulting from higher demand, cost of supply increase, and reduced delivery delays from AGI. Change in accounts receivable and other items represented cash inflow of $34.4 million. Consequently, operating activities represented a cash inflow of $2.7 million. For the first nine months, cash flow from operating activities before net change in working capital were up 28.9%, totaling $162 million, or $2.91 per share. Net change in non-cash working capital balances used cash flow of $202 million, primarily representing changes in inventory that use cash flows of $190.9 million and accounts receivable and other items use cash flow of $11.1 million. Consequently, operating activities use cash flow of $37.9 million compared to a cash inflow of $90.3 million last year. For the third quarter, financing activities use cash flow of $17.2 million compared to $18 million last year. Dividend-paged paid to shareholders of the corporation amounted to $7.3 million compared to $3.9 million in the same period of 2021. For the first nine months, financing activities used cash flow of $46.9 million compared to $41.8 million in 2021. Dividends paid to shareholders amounted to $21.8 million compared to $15.5 million last year. During the first nine months, we invested $59.2 million for the two-digit acquisitions made in the first quarter and $16.8 million for the purchase of equipment to maintain and improve operational efficiency, as well as investment in IT infrastructure and network extension projects. We continue to benefit from a healthy and solid financial position with a working capital of $525.7 million for a current ratio of 2.8 to 1 and an average return on equity of 24.1%.