Supremex Inc.

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Supremex, Inc. first quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question and answer session. To join the question queue, you may press star, then 1 on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star, then 0. Before turning the meeting over to management, please be advised that this conference call will contain statements that are forward-looking and subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated. I would like to remind everyone that this conference call is being recorded on Thursday, May 9th, 2024. I will now turn the call over to Martin Goulet of NBC Capital Markets Advisors. Please go ahead.

Thank you. Good morning. And thank you for joining this discussion of Supremix's financial and operating results for the first quarter ended March 31st, 2024. The press release reporting these results was published yesterday after markets closed. It can also be found in the investors section of the company's website at www.supremix.com, along with the MD&A and financial statements. These documents will be available on CEDAR Plus as well. A presentation supporting this conference call has also been posted on the website. Let me remind you that all figures expressed on today's call are in Canadian dollars unless otherwise stated. Presenting today will be Stuart Emerson, President and CEO of Supremex, as well as François Bolduc, Chief Financial Officer. With that, I invite you to turn to slide 40 of the presentation for an overview of the first quarter, and I turn the call over to Stuart.

Thank you, Martin, and good morning, everyone. We are encouraged with our first quarter performance, which is highlighted by sequential increases in adjusted EBITDA and net earnings when compared to the fourth quarter of last year. While finance likes to compare the period reported with the corresponding one the prior year, businesses like ours that have little seasonality can utilize a sequential view to gauge performance. This is even more valid in this quarter as our markets continue to recover from the market corrections that followed the extremely strong performances of 2022, and in particular, a record Q1 2023 that was clearly unsustainable. So, while our Q1 2024 results do trail those of last year, Q1 was the best performance in the last four quarters, and as I just said, it marked substantial improvements on several fronts from the fourth quarter of 2023. Let's first look at our envelope business. Revenue was up nearly $3 million from the previous quarter. Looking at the markets we serve, demand from bills and statements, our largest segment, is still working through some inventory, but it is about where it should be considering the industry's secular decline and generally remains fairly stable from quarter to quarter. The direct mail market appears that it may have bottomed, but the fundraising vertical remains quite lethargic given the squeeze on discretionary income. With direct mail gradually returning, our Royal Envelope operations gain momentum in the quarter. And looking ahead, we have confidence that, despite the unfavorable backdrop of high interest rates and inflation, direct marketers, fundraisers, and charities can't remain on the sidelines indefinitely and out of a marketing channel that has a proven ROI. And we expect these channels to gradually gain momentum. The wholesaler and reseller verticals, a significant portion of our U.S. volume, remains quite soft. This softness is tied largely to general economic conditions for small businesses in the U.S. and the residential effects of excess inventory, particularly if compared to Q1 of last year. While volumes remain well below what we would call normal levels, like the other segments, we are seeing a gradual return to normalcy. As you would expect in a market that has a stable supply in so-called normal times, the reduction in demand has put pressure on price, but our team has done a very good job of selling our value proposition and maintaining price as evidenced by the margins generated by our envelope activities. The envelope segment EBITDA surpassed the 20% threshold this quarter, a feat only accomplished during the irrational exuberance period of 2022 and Q1 2023. This speaks highly about the quality of our teams, our discipline, ability to control costs, and our customer network. Speaking of networks, ours got a little bigger last week with the acquisition of Forest Envelope, a regional specialty envelope manufacturer located in the greater Chicago area. I have previously mentioned that we would be opportunistic buyer of envelope companies and this transaction fits that description to a T. We will tuck in the acquired activities into our existing Chicagoland footprint and told the acquired employees that we will cease manufacturing within the Forest operations within 45 days. At this point, we are evaluating what equipment, if any, and how many employees will transfer. We are working feverishly on retaining the customers from the transaction and expect to grow a share of wallet with several, while simultaneously improving the utilization and absorption within the existing facilities and reaping other synergies. Turning to packaging. Like the envelope business, activity remains soft, especially for markets whose business is more closely tied to discretionary spending and the ebbs and flows of the economy. In folding carton, operations have incrementally improved over the past couple of quarters, and in Q1, our primary issue was largely around utilization and absorption. Volume from core customers in the health and beauty and the over-the-counter pharma verticals has been very choppy. The combination of up and down demand and a continued tight labor pool has made it difficult to align costs with revenue and attain the required levels of absorption. We continue to believe that some of the pressures on CPG will eventually ease, but it's been challenging the last few quarters. To combat this, in the short and medium term, our focus has been on cost control and penetration of the at-home food market, where we continue to make good progress. The e-commerce packaging space has been a bright spot in early 2024. Like the packaging segment overall, e-commerce in general has been soft as consumers grapple with the effects of high interest and inflation. However, in our case, our unique product offerings and some good work by our sales teams have allowed us to penetrate new accounts and ride a wave of growth within others. We continue to position the packaging segment for long-term success. Our assets are first class. We've refocused and right-sized the business units, and we've reorganized to bring decision-making closer to the action and to foster operating efficiencies and synergies across our operations. At this point, we require sales volume to leverage the improved operations and structure, but we are encouraged by our continued progress and are confident we are in a much better position to capitalize on our business development efforts and growth as the broader market and consumer confidence improves. With that, I'll turn the call over to Francois for a review of the financial results.