Richelieu Hardware Ltd.

Thank you. Good afternoon, ladies and gentlemen, and welcome to Richard Hughes' conference call for the third quarter and first nine months ended August 31, 2024. 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. Overall, we had a good third quarter where we achieved sales growth and maintained a healthy and solid financial position, considering the soft demand in the R&R and the new housing market. Total sales growth per quarter reached 1.9%, partially fueled by our strong performance in the U.S. manufacturer's market, where sales increased by 7.5% in U.S. dollar, driven by the significant impact of our acquisitions. As for the retailer and innovation superstore market, We continue to see lower sales compared to last year, mainly due to the price deflation and lower demand in this market. Our margins continue to be under pressure from temporary factors, as it was the case in previous quarters. Notably, the charge of inventory purchased at higher than current costs, lower selling prices for certain products, and operating expenses related to our expansion projects. During the quarter, we pursued our network optimization initiative by consolidating two of our centers in the New York area and on the west coast of Florida. And now, a little word to Antoine for the financial review of the quarter.

Thanks, Richard. In the third quarter, sales reached $407 million, up 1.9%. This growth was driven by a positive contribution from acquisition of 3.2%, partially offset by an internal decrease of 1.3%. In Canada, sales totaled $265 million, down 2%. This decline was mainly due to a 3.5% internal decrease, partially offset by a 1.5% positive contribution from acquisitions. Sales to manufacturers amounted to $222 million, up 0.5%, while sales to hardware retailers stood at $43 million, down 13.4%. In the U.S., sales grew to $148 million in U.S. dollars, up 4.8%. Sales to manufacturers reached $141 million, up 7.5%. In the hardware retailers and renovation superstore market, sales reached $7.1 million, down 3.1 million. In Canadian dollar, total sales in the U.S. reached $203 million, an increase of 7.5%. For the first nine months, total sales reached $1.4 billion, up 1.6%, of which 0.8% resulted from internal decrease, offset by 2.4% contribution from acquisitions. In Canada, sales reached $773 million, slightly down by 1%. This was driven by a 2.7% internal decrease, partially offset by 1.7% contribution from acquisitions. Sales to manufacturers totaled 642 million, up 5.3 million, or 0.8%. Sales to hardware retailers and renovation superstores were 131 million, compared to 143.9 million, down 9%. In the U.S., sales amounted to 429 million in U.S. dollar, up 4.3%, with 0.9% attributable to internal growth and 3.4% from acquisitions. They reached $583 million in Canadian dollar, up 5.3%, accounting for 43% of total sales. In US dollar, sales to manufacturers totaled $405 million, an increase of $23.4 million, or 6.1%, driven by 2.5% internal growth and 3.6% from acquisitions. Sales to hardware retailers and renovation to first stores were down 19.7% compared to last year. Third quarter EBITDA reached 53 million, down 8 million or 13.2% over last year. Growth and EBITDA margin remain under pressure due to temporary factors, including inventories at higher than current purchasing costs, lower selling prices for certain products primarily sourced from Asia, and the temporary impacts of consolidation and expansion initiatives. Consequently, the EBITDA margin stood at 11.3% compared to 13.3 last year. For the first nine months, EBITDA totaled 147.2 million, down 14.2%, with the EBITDA margin at 10.9% compared to 12.9 last year. Net earnings attributable to shareholders In the third quarter, it amounted to $22.7 million, down 23.9%, mainly due to amortization associated with new business acquisitions and expansion projects. Net earnings per share were $0.41 compared to 53 last year, a decrease of 22.6%. For the first nine months, net earnings attributable to shareholders reached $61.4 million, down 26%. Diluted net earnings per share stood at $1.9 compared to $1.47 last year. Cash flow from operating activities before net change in non-cash working capital were $42.7 million compared to $49.8 million last year. The net change in non-cash working cap items generated cash flow of $7.5 million. As a result, operating activities provided a cash inflow of $50.2 million in the quarter compared to a cash inflow of $104.8 million in 2023. For the first nine months, cash flows from operating activities represented a cash inflow of $106.4 million compared to a cash inflow of $198 million last year. For the third quarter, financing activities used cash flows of $18.4 million compared to $18.2 million last year. During the quarter, we paid lease obligation of $10.5 million and distributed dividends of $8.4 million. For the first nine months, financing activities used cash flow of $76.1 million compared to $58 in 2023, with the variance primarily attributable to common share repurchase amounted to $18.6 million this year compared to $800,000 last year. In the first nine months, we invested $42.4 million in including $17.6 million for three-business acquisition and $25.4 million primarily for investment related to our consolidation and expansion projects, including our new Calgary location and the purchase of equipment to maintain and improve operational efficiency. We continue to maintain a solid financial position with working capital of $632 million and a current ratio of 3.5 to 1, while holding almost no debt. I now turn it over to Richard.

Thank you, Antoine. We are pursuing our acquisition strategy as we sign agreement in principle in the third quarter in view of four new acquisitions, two in Canada and two in the U.S. We feel confident about achieving good future performances, considering that the current housing shortage in North America is offering a great potential of growth for the future, and that the R&R market is expected to recover in the coming months. We are committed to seize this opportunity. We benefit from a strong positioning with a robust network, unmatched offering, expert team, outstanding website, a distinctive service appreciated by customers in our diversified segments. And we have a solid innovative drive in all the growth sector of residential and commercial innovation. Thanks, everyone. We'll now be happy to answer your questions.