Richelieu Hardware Ltd.

Good afternoon, ladies and gentlemen, and welcome to the four-quarter results call. At this time, all lines are in the list . Following the presentation, we will conduct a question and answer session. If at any time during this call you require needed assistance, please message the operator. Note that this call is being recorded on January 15th, 2026. Bonjour, mesdames, messieurs, et bienvenue au résultat du deuxième trimestre 2025, le quinquennat richelieu. Présentement, vos lignes sont en cours de couture seulement. Suite à la présentation, nous allons procéder à une série de questions et réponses qui seront restreintes aux annales seulement. Si vous avez besoin d'assistance au cours de l'appel, appuyez sur le toit le zéro. Veuillez prendre note que cet appel est enregistré le 15 janvier 2026. J'aimerais maintenant soulever la parole à M. Richard Lange, président et chef de la direction. La parole est à vous.

Merci, thank you. Good afternoon, ladies and gentlemen, and welcome to RicherU's conference call for the fourth quarter and the year ended November 30th, 2025. With me is Antoine Auclair, CFO and COO. 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. Overall, we delivered a strong fourth quarter with good progress in our main market segments. We also closed three new acquisitions during the year, building on the six acquisitions completed earlier in the fiscal, two in Canada, and four in the U.S. For the quarter, sales increased by 7.3% to $511 million. EBITDA increased by 9.1%, Diluted earnings per share increased by 4.5%, and cash flow from operations reached 68.7 million, including a $30 million reduction in inventory. These results highlight the strength of our model and our operating discipline. The fourth quarter was active on the acquisition front. We closed Ideal Security in September, FinMac Lumber and in October. Ideal Security, located in the Greater Montreal area, distributes specialized hardware products for doors and window market, and serves hardware retailers and innovation superstore market, as well as online retail platform. Finn McEmberg is a specialized wood product distributor based in Winnipeg, serving Western Canada. Klasson Grounds, based in Ontario, strengthens our offering with a wide range of letter, number, sign and mailboxes, key links and key cutting machines for the hardware retailers and the Renovation Superstore market. We are very pleased with this acquisition, partially with Ideal and Klasson, which expand our issue portfolio of private brands for the retailers and Renovation Superstore market to 10. These acquisitions reinforce our position in this key market segment and support our one-stop-shop strategy, supported by our distribution centers in Calgary for Western Canada customers, Kitchener for Eastern Canada, and Chicago for the U.S. market. Private brands and exclusive products remain an important differentiator for the showroom. A significant proportion of our sales is generated through these offerings, which support customer satisfaction and loyalty while reinforcing our competitive positioning and margin profile. The strong fourth quarter rose total sales for the year to 1.96 billion, up 7.2%. Even though for the year increased by 6.2%, and cash flow from our position reached $202 million. We closed the year with a positive cash position, almost no debt, and a working capital of $622 million, which means a solid and healthy financial position and a not-sending balance sheet. I will now ask Councilman to review the financial highlights for the quarter and the year ended, November 30th, 2025.

Thanks, Richard. Our fourth quarter sales reached 511 million, up 7.3%. Sales to manufacturers stood at 459.9 million, up 9.1%, with 5.9% from internal growth and 3.2% from acquisitions. In the hardware retailers and renovation superstores market, sales were down 6.4%. In Canada, sales amounted to $282 million, up $6.8 million, or 2.5%. Sales to manufacturers reached $241 million, an increase of 4.6%. In the retailer's market, sales totaled $41 million, down 10.7% this quarter, mainly due to timing differences. On a year-to-date basis, sales are in line with last year. In the U.S., sales totaled $164 million in U.S. dollars, up 12.3%. Sales to manufacturers reached $157 million in U.S. dollars, up 12.9%, including 8.8% internal growth, mainly driven by price increases. In the retailer's market, sales were up 1.4%. Total sales in U.S. reached $229 million in Canadian dollars, an increase of 13.9%, representing 45% of total sales. Total sales for 2025 reached $1.96 billion, an increase of 7.2%, of which 3.2% from acquisition and 4% from internal growth. Sales to manufacturers reached $1.7 billion, up 8%, of which 4.4% from internal growth and 2.6% from acquisitions. Sales to hardware retailers grew by 1.6%. In Canada, sales totaled 1.1 billion, up 2.2%, primarily driven by acquisitions. Sales to manufacturers amounted to 897 million, up 2.8%. Sales to hardware retailers and renovation superstores were 175 million, essentially flat compared with last year. In the U.S., Sales amounted to $638 million in U.S. dollars, up 10.9%, of which 5% from internal growth and 5.9% from acquisition. They reached $893 million in Canadian dollars, up 13.9%, accounting for 45% of total sales. Sales to manufacturers reached $604 million in U.S. dollars, an increase of 11.1%, and sales to hardware retailers were up by 7.8%. Fourth quarter EBITDA amounted to 59.2 million compared to 54.3 million in the fourth quarter of 2024, up 9.1%. Our gross margin remained stable and the EBITDA margin stood at 11.6% compared to 11.4% in the same period last year. Fourth quarter net earnings attributable to shareholders totaled 25.6 million compared with 24.4 million last year. Diluted net earnings per share were $0.46 compared with $0.44 last year, an increase of 4.5%. For the year, net earnings reached $86 million, or $1.55 per diluted share, compared with $1.53 last year, an increase of 1.3%. Fourth quarter adjusted cash flow from operating activities was $48.3 million, or $0.87 per share. Net change in non-cash working capital balances represented a cash inflow of $20.4 million, driven by a $30.1 million reduction in inventories. Consequently, we generated $68.7 million in cash flow from operating activities, compared with $27.2 million in the fourth quarter of 2024. For a year, operating activities generated a cash inflow of $202.4 million, compared with $133.6 million last year. Over the year, we paid $34 million in dividend, representing a payout ratio of 37.5%. We also repurchased common share for $16 million, including $13 million in the fourth quarter. In total, we returned $15 million to shareholders this year. Investing activities used cash flow of $62 million, including $47.1 million for nine business acquisitions completed this fiscal year. and $15.2 million primarily for the purchase of equipment aimed at maintaining and improving operational efficiency.

I now turn it over to Richard. Thank you, Antoine. I am proud to note that over the past 13 months, we completed 10 acquisitions in Canada and in the U.S., representing approximately $100 million in additional sales. And our most recent acquisition, completed at the year-end, would bring the total cost to 100 acquisitions so far that Rishabh has made in its complete history. Specially, this most recent acquisition includes three mechanical American distribution centers located in Portland, Oregon, Seattle, and Spokane, Washington. These centers are already integrated into our IT system, and the Seattle operation has already been moved to our current Seattle distribution center. This transaction reinforces our distribution network, enhances local expertise, and expands our product and service offering to better serve our customers. As a result, we now operate five locations across the Pacific Northwest region. In the current environment, our business model continues to demonstrate its resilience and flexibility, enabling us to respond with agility to our customer needs and protect our margins. Looking ahead, our two primary goal drivers, innovation and acquisition, position us well for continued profitable growth and further consolidate our leadership in North America. We are committed to ongoing investment in innovation to strengthen our offering and value-added services and we actively pursue acquisition opportunities. Thanks, everyone, and I'll be happy to answer your questions.

Thank you, sir. Ladies and gentlemen, if you don't have any questions, please press power followed by 1 on your touch-tone phone. You will then hear a prompt at your hand and choose your student baseline from the polling process. Please press power followed by 2. And if you need to speak at all, please lift the handset first before pressing any keys. Go ahead and press power 1 now if you have any questions. And the first question will be from Javier Patel at CIBC Capital Markets. Please go ahead.

Hi. Good afternoon. Richard, could you comment on the sort of organic growth rates you've seen in Q1 so far and any notable differences between Canada and the U.S.?

Yeah, what we're seeing in Q1 so far is a flat sale for the hardware to return as market. And we are in the mid, I would say, something around 5% regarding the growth for the manufacturer's market. So basically, we're satisfied with the start of the year. We don't know what's going to happen in the months to come, but so far, so good.

And then when you think about how the U.S. versus Canadian business is going, any differences there? I know last quarter you were pointing to Ontario being softer.

We see a bit more growth in the U.S., a couple of percent growth, additional.

Okay, great. Antoine, I wanted to ask about the EBITDA margins. It looks like they ticked up to 11.6% in Q4. How should we think about the margin trajectory for Q1 and full year 26?

Yeah, the last two quarters were positive versus the previous year, so that's a That trend should continue, but keep in mind that usually the Q, the first quarter of the year is the lowest of the fiscal year due to seasonality. But we should continue to see improvement in the EBITDA margin. Of course, it all depends on the type of acquisition that we'll be able to land, but same-store sales, we should be able to generate more EBITDA. And having a bit more rigor in the markets will definitely help as well.

And then thinking on a full year basis, I mean, for the last two years, it looks like you've kind of averaged close to 11%. I know you've been quite acquisitive, so that's kind of short-term drag, but do you think you can drive further margin growth in 26?

We should be slightly more at 11%.

Okay, great. That's all I have for now. I'll turn it over. Thanks.

Thanks. Next question will be from Zachary Evershed of National Bank. Please go ahead.

Good afternoon, everyone. Congrats on the quarter. Thank you. Could you go into a little bit more detail on the pullback that we saw in sales to retailers during the quarter, please?

I think the flat sales for the retailer, I think it's what we see with the Home Depot and Lowe's in the U.S., whatever they're forecasting, they're forecasting flat sales. And in Canada, we see that the market is more negative. We speak to our customers and their sales are down for the first quarter. So, the issue is doing well because we keep reintroducing products into the source. We have new products coming with the with Rona that are getting into their stores, so they're going to generate sales in the months to come. We have the same thing with home hardware and home depot in Canada. And in the U.S., fortunately, we have regained the business that we had lost with Lowe's. So basically, the delivery will stop only at the end of the second quarter and third quarter. But basically that will bring another $10 to $12 million sales in the U.S. So I think we have only good news for the retailers. It's only a matter of the market being, as we speak, flat. But eventually I think the market is going to start to move again.

And, Zach, the main reason for the Canadian retail sales down in the fourth quarter, and that's why we said that – Overall, the year is flat, but in the fourth quarter, it's because of one customer that didn't place orders for seasonal sales. So it's not a big deal, so it's only a timing issue. So we remain positive for the retail market.

Gotcha. And do you think there's a catch-up in Q1 for those seasonal sales, or that's just foregone?

No, I would say on a yearly basis, there's a catch-up, but just a question of timing.

Understood. Thanks. And your inventory reduction this quarter was pretty far ahead of the schedule you outlined last quarter. What's driving the improvement in working capital there?

It's pretty much aligned with what we said at the beginning of the year, Zach. So, of course, it's difficult to be perfectly timed during that. during the quarters, but that's what we were expecting. I think I mentioned a year ago that we would be expecting between 20 and 30 million reduction in inventories. That's what we achieved. We achieved 33 million this year, so that was positive. Hopefully, we will still be able to generate a bit more reduction in 2026, not as big as that, but we'll continue to be actively working and improving and optimizing our inventory situation. And also, I'm I'm glad to see the CapEx that is now down, come down to a more maintenance-level phase of CapEx. So we've had a few big years in terms of CapEx investment. So now we spent $15 million. It's 0.08% of our sales. So that's more in line with historical data prior to COVID. So we're glad that it's back to normal.

And as a result, I think in 2026, the cash flow generation is going to be strong.

Excellent call. Thank you. What are your customers saying about the pause on the additional tariffs on furniture and cabinets?

They're very happy, but they already have to live with the first 25% that is already imposed. So basically, I think our Canadian customers that are selling in the U.S. are losing sales as we speak. They're reducing the number of employees and everything else. They still continue to buy from Richelieu, but some buy less, but some buy more because they used to buy from overseas certain products now that they buy from Richelieu. So basically, we should see an equilibrium of the sales to that type of customers. And the second phase, I think save, I would say, I don't know how to say it, but you really save They're 20, 26 years, even though they're already negatively affected by the first 25%. But if that second 25% applies next year, I think it could be very, very, it could be basically a disaster for the customers that export to the U.S. But we don't have that many customers that export to the U.S., but it's still a substantial business. But as a result of that, though, we should recapture some business on the U.S. side because the customers that are capturing This market also we show you customers in the U.S.

Got you. Thanks. And then how are you feeling about the M&A pipeline for 2026? You just came off of a year of almost $100 million in 2025, starting off with an acquisition subsequent to the quarter. Where do you think you'll end this year?

We'll continue with what we've told you guys a year and a half ago. We're still at 100 million a year, so that's what we're working on. The pipeline is healthy, both sides of the borders, so no change there.

Gotcha. Thanks. I'll turn it over. Thank you.

Thank you. And at this time, if you allow, we have some other questions registered. Please proceed.

Thanks to everyone for listening. And so if you have any more questions, do not hesitate to call myself or Antoine. We're here in the office. Thank you very much and have a good afternoon.

Thank you, sir. Ladies and gentlemen, this does conclude the conference call for today. Once again, thank you for attending. And at this time, we ask that you please disconnect your lines.