Richelieu Hardware Ltd.

Good afternoon, ladies and gentlemen, and welcome to Richelieu Hard Work second quarter results conference call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session, which will be restricted to analysts only. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on July 6, 2023. Bonjour, mesdames et messieurs, et bienvenue au résultat du deuxième trimestre de quinquennat Richelieu. Thank you. Merci.

Good afternoon, ladies and gentlemen, and welcome to Richard Hughes' conference call for the second quarter ended May 31st and first half of 2023. 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 filings. In the second quarter, we achieved good results and ended the period with a strong position, building on our major strengths, namely our multi-access value-added service concept, and our ongoing acquisition strategy. The comparison with the second quarter of 2022 shows a decrease in sales and earnings, but it should be remembered that the first half of 2022 was particularly favored by exceptional increases in our market context resulting from the pandemic. To put things in perspective, if we compare second quarter of 2023 to the same quarter in 2019, sales increased by 68% and EPS by 67%. During the quarter, we completed two acquisitions in the US, one in Oregon, Maverick Hardware in Eugene, the other one in Minnesota, Western Distributing in Monticello, two compatible specialty hardware distributors who extend and strengthen our presence in this market. That makes six acquisitions since the start of 2023, adding some $26 million in annual sales. In addition, we opened new distribution centers in Minneapolis and continue to make progress with our expansion and modernization projects at our Atlanta, Nashville, Seattle, and Pompano centers, which we expect to complete very soon. This will add some 500,000 square feet to our U.S. network. From a total of 115 interconnected distribution centers in North America, we now operate 62 in the U.S., which accounted for 42% of our total sales in the first half of 2023. Antoine will now review the financial highlights of the quarter and first half. Then I will conclude and we will make and we will take your questions.

Thank you, Richard. Second quarter sales reached 172.4 million, down 3.2%, of which 4.7% from internal decrease and 1.5% from acquisitions. It's important to note that in the second quarter of 2022, Fisherly had achieved exceptional internal growth of 16.1%, including a 22.7% increase in the U.S. In Canada, sales amounted to 279.5 million, down 4.3%, of which 6.4% from internal decrease, partially offset by a 2.1% positive contribution from acquisitions. Our sales to manufacturers reached $229.9 million, down 3%, and for the hardware retailers, sales stood at $49.6 million, down 9.8%. In the U.S., sales grew to $141.9 million in U.S. dollar, down 7.9%. Sales to manufacturers reached 131.3 million in U.S. dollar, down 7.2%. In the hardware retailers and renovation superstores market, sales reached 10.6 million. In Canadian dollar, total sales in the U.S. reached 192.6 million, a decrease of 1.6%. For the first half, sales reached 875.1 million, up 0.3%, of which 1.8% from internal decrease and 2.1% from acquisitions. In Canada, sales reached 510.4 million, down 11.2 million, or 2.1%, of which 3.9% from internal decrease and 1.8% from acquisitions. Sales to manufacturers reached 415.4 million, down 7.3 million, or 1.7%. Sales to hardware retailers and renovation superstores reached $95 million, compared to $98.9 million, down 3.9%. In the U.S., sales amounted to $269.6 million in U.S. dollar, down 2.4%, of which 4.8% from internal decrease and 2.4% from acquisitions. They reached $364.7 million in Canadian dollar, up 4%, accounting for 42% of total sales. Sales to manufacturers totaled $249 million, a decrease of $3.2 million or 1.3%, of which 3.9% from internal decrease and 2.6% from acquisitions. Sales to hardware retailers and renovation superstores were down 13.8% compared to last year. Second quarter EBITDA reached $61.5 million, down $16.3 million, or 21% over last year, resulting from lower sales and to overall operating expenses returning closer to pre-pandemic level, as well as additional external storage expenses due to temporary increased level of inventories. Gross margin remained stable, and the EBITDA margin stood at 13% compared to 16% last year. First half EBITDA reached $110.6 million, down 16%. As for the EBITDA margin, it stood at 12.6% compared to 15.1% last year. Second quarter net earnings attributable to shareholders totaled $30.7 million, down 25.6%, mainly due to amortization of right-of-use assets increased, resulting from new business acquisition and expansion projects, mainly in the U.S., as well as higher interest expense on bank overdraft. Net earnings per share were 55 cents compared to 84 cents last year, a decrease of 34.5%. First half net earnings attributable to shareholders reached 53.1 million, down 25.6%. Diluted net earnings per share stood at 95 cents compared to $1.37 last year. Cash flow from operating activities before net change in non-cash working cap balances was 48.4 million compared to 60.7 million last year. Net change in non-cash working capital items represented a cash inflow of 23.6 million. Excess inventory started to decline with a positive effect of 49.2 million. As a result, operating activities represented a cash inflow of 72 million in the quarter compared to a cash outflow of 3 million last year. For the first half, cash flows from operating activities represented a cash inflow of 88.4 million compared to a cash outflow of $40.5 million last year. For the second quarter, financing activities used cash flow of $15.4 million compared to $21.5 million last year. Dividends paid to shareholders of the corporation amounted to $8.4 million compared to $7.3 million in the same period of 2022. First half financing activities used cash flow of $35.1 million compared to $29.8 in 2022. Dividends paid to shareholders amounted to $16.7 million compared to $14.6 million last year. During the first half, we invested $34.3 million for six business acquisitions and $14.3 million for the purchase of equipment to maintain and improve operational efficiency, as well as for network expansion projects. We continue to benefit from a healthy and solid financial position, with a working capital of 586.2 million for a current ratio of 2.9 to 1 and an average return on equity of 18.2%. I now turn it over to Richard.