Richelieu Hardware Ltd.

Good afternoon, ladies and gentlemen. First of all, I have to apologize for my voice. I have a cold, so please, I will try to do my best to handle that speech. And welcome to Pressure Use Conference Call for the first quarter ended February 29, 2024. With me is Antoine Leclerc, CFO. As usual, know that some of today's issues include forward-looking information, which is provided with the usual disclaimer, as reported in our financial findings. Our financial year began with a good first quarter. We pursued our acquisition strategy, closing two new acquisitions, followed by a third one on March 27. We achieved a good level of sales equivalent to the first quarter of 2023, which is appreciable since first quarter sales last year continued to benefit from favorable market conditions. This result reflects a significant contribution of our acquisitions and market development initiatives. Supported by our strategies of value-added service, innovation, and market segment diversification, it should be remembered that the first quarter is always the weakest period of the year. Legating our first quarter margins, they were affected by two main factors. The lower gross margin and the startup period of centers expanded in 2023. Despite the significant reduction in our inventory over the past year, we still have certain inventories purchased at higher price than current costs. The sale of these products at market price has had a negative impact on our gross margin. We expect the situation to be resolved as these products are reordered. Secondly, as already announced, with several of our distribution centers underwent expansion and modernization projects in 2023, including our new Calgary Center, which went operational last December. The startup and development of these centers, in addition to being impacted by current market conditions, have also affected our margins downwards. We are actively working on these expanded and modernized centers in order to accelerate their startup and market development. As for acquisition, we are very pleased with the three businesses we have acquired since the beginning of the year. Olympic Forest Products is a distributor of specialized lumber and paddle products with the distribution centers in Arian, Ontario. And Rapid Start is a distributor of specialty hardware with the distribution center in Whitman, Ohio. On March 27, we completed the acquisition of Allegheny Flywood, a distributor of specialty panels and decorative surfaces, which operates distribution centers in Pittsburgh and downtown Pennsylvania, as well as in Cleveland, Ohio. In addition to contributing approximately $6 million to annual sales, these three transactions add new customers, complementary products, and expertise, and strengthen our presence in this market. I now hand over to Antoine Thanks, Richard.

First quarter sales reached $407 million, up 1%, a 0.4% internal decrease, offset by 1.4% growth through acquisitions. Sales to manufacturers stood at $350 million, up 1.6%, mostly from acquisitions. In the hardware retailers and renovation superstores market, we achieved sales of $57.3 million, down $1.6 million, or 2.7%. In Canada, sales amounted to $232 million, similar to last year. Sales to manufacturers reached $188 million, and hardware retailers and renovation superstores' market sales stood at $44.5 million, down 2%. In the U.S., sales grew to $130 million in U.S. dollars, up 1.7%, 1.1% from internal growth, and 0.6% from acquisitions. They reached $175 million in Canadian dollar, an increase of 1.6%, and represented 43% of total sales. Sales to manufacturers reached $120 million in U.S. dollar, up 2.2%, 1.7% from internal growth, and 0.5% from acquisitions. The hardware retailers and renovation superstores market, sales were down 4% from the corresponding quarter of 2023. First quarter EBITDA reached $40.4 million, down $8.7 million, or 17.7% over the first quarter of 2023. The lower growth margin and our 2023 expansion projects being in startup phase in the current market condition affected the EBITDA margin downwards. As a result, the EBITDA margin was 9.9% this quarter. First quarter net earnings attributable to shareholders totaled $15.2 million, down 35.7%. Diluted net earnings per share was $0.27 compared to $0.40 last year. First quarter cash flow from operating activities before net change in non-cash working capital balances was $35 million or $0.62 per share. The net change in non-cash working capital used cash flow of $34 million, mainly reflecting the increase in inventories and the decrease in accounts payable and accrued liabilities over while accounts receivable and other items represented a cash inflow of $1.2 million. As a result, operating activities provided a cash inflow of $0.5 million compared to a cash inflow of $18.8 million last year. We paid dividends of $8.4 million to shareholders, and we invested $15.5 million, including $7.4 million for two business acquisitions and $8 million in CapEx, of which $3.5 million relating to expansion projects. At the end of the quarter, the financial situation was healthy and solid with working capital of $623.4 billion and almost no debt.

I now turn it over to Richard. Thank you, Antoine. In conclusion, our priorities are to pursue our innovation and business acquisition strategies, develop synergies with our acquisitions, control costs, and develop strategic markets. We continue to build on our strengths, our team, our value-added service with logistics tailored to customer needs, Our financial solidity and our efficient network enables us to extend our coverage in the North American market more and more. With our ability to adapt to changing market conditions, we continue to seize and create opportunities while remaining service, innovation, and result-oriented. Thanks, everyone. I would be happy to answer your questions.