Supremex Inc.

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Supremex Inc. Second Quarter 2025 Earnings Conference Call. At this time, all participants are in 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, August 7th, 2025. I will now turn the call over to Martin Goulet of NBC Capital Market Advisors. Please go ahead.

Thank you, Operator. Good morning, ladies and gentlemen, and thank you for joining this discussion of Supremex's financial and operating results for second quarter end of June 30th, 2025. The press release reporting these results was published earlier this morning via the Gold Newswire News Services. It can also be found in the Investors section on the company's website at www.supremex.com, along with the MD&A and financial statements. These documents are 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, as well as Silvana Reyes, Interim CFO. With that, I invite you to turn to slide 37 of the presentation for an overview of the second quarter, and I turn the call over to Stuart.

Thank you, Martin, and good morning, everyone. After a promising first quarter and another strong performance in our packaging segment, two items tripped up what would have been a decent quarter, particularly in light of the current uncertainty with U.S.-Canada trade relations and ongoing labor tensions at Canada Post. The two items I referenced were an untimely and precipitous drop in volume with a single U.S. direct mailer and a largely non-cash foreign exchange loss primarily attributed to U.S. affiliates indebtedness to the Canadian parent that does not accurately reflect operations in the quarter. We will discuss these items in greater detail momentarily. While those two items took some of the wind out of our sails on three exciting developments post-quarter end, first, we unlocked significant value for shareholders by concluding sale-leaseback transactions on two owned properties. In doing so, we have significantly strengthened our balance sheet by extinguishing virtually all of our debt and put ourselves in a favorable position to continue to reward shareholders appropriately while still being able to execute our strategy. Supporting this statement, given our solid financial position and being mindful of our commitment of returning funds to shareholders, many whom have been patient as we build the company for sustained success, the Board of Directors declared a special dividend of $0.50 per share and We also concluded two small acquisitions, one in each segment, that will be tucked into our existing footprint. More on the M&A shortly, but before looking at the operations in detail, I'd like to address the loss on foreign exchange that impacted profitability in the quarter by $1.4 million and created a negative swing of $1.5 million versus the comparative Q last year. To the casual observer, a so-called loss of this magnitude may indicate operational volatility associated with our U.S. operations, and it would be difficult to square with our past assertion that the P&L is naturally hedged, so it merits further insight. The natural hedge is created when only a portion of our revenues come from U.S., and a substantial portion of company-wide raw materials are procured in U.S. dollars or tied to the U.S. dollar. It is true that as a portion of revenues from U.S. operations increases, that natural hedge comes under pressure, but that hedge remains largely intact with the current weighting of revenues and purchases. The vast majority of the $1.4 million loss on foreign exchange was reported this quarter is balance sheet oriented and attributed to the revaluation of U.S. intercompany receivables held by the Canadian entity as a result of the decline in value of the US greenback in the quarter, primarily in April. I think it's important that we understand this dynamic and recognize that it's largely non-cash and non-indicative of operational performance or the volatility of operations based on foreign exchange. With that out of the way, let's look back at the quarter operationally, beginning with our envelope business. Not that softness from quarter to quarter should be a surprise, given the secular decline in the industry, but the 3% volume reduction doesn't adequately reflect the underlying performance of the envelope segment. As I said earlier, one direct mail client, one U.S. direct mail client, delivered volume reduction in excess of the company-wide 3.1% decline reported, and what made it even more challenging is that the direct mail price per thousand tends to exceed the average, so the volume decline also drives an average selling price decline. To be more precise, and I go to this level of detail to provide context, the month of April was the real challenge. But activity with the customer roared back in May and June, with volumes being in excess of the Q2 2024 average, and Q3 is promising. While we were unable to overcome April, it is important to know that exclusive of this customer, volume was actually up 2% in the quarter. well ahead of secular decline, the uncertainty around Canada Post, and volume that was pre-purchased by U.S. customers in Q1 as a result of the U.S. tariff threat. Unfortunately, the lower volume reported impacted absorption and combined with weaker pricing affected profitability more than the benefits from our rationalization in Greater Toronto Area last year and gains made by the implemented procurement strategies. While nobody is happy with a reported 3% decline in volume, after four, that's right, four consecutive quarters of envelope volume growth, we believe the underlying fundamentals are solid and have confidence in Supremex's ability to overcome the headwinds and drive volume to the plants to maintain high levels of utilization and absorption in a highly efficient network. And speaking of networks, strength and efficiency, The Supremex network got stronger through the acquisition of Envelope Laurentide, a well-established envelope manufacturer servicing predominantly eastern Canada and generating approximately $10 million in sales. Envelope Laurentide is a broad product offering with accounts and volume that will be completely new to Supremex and, importantly, a stable of trained employees, many of which will join the Supremex team. This acquisition shapes up as a perfect tuck in for us with a myriad of synergies. We informed employees on day one that we would produce in the Laurentide facility for five weeks and cease production on August 15th and integrate volume within our existing network in Quebec, Ontario, and even Western Canada where they have a small customer base. As I said, we enjoyed volume growth for four consecutive quarters and took a minor step back in Q2 but added to our platform in July. The Supremex envelope business has proven to be resourceful and resilient, and we are confident in our ability going forward. Turning to the packaging business, we are pleased with continued top-line performance in the second quarter with double-digit revenue growth and strong showings from our folding carton and e-commerce activities. Adjusted EBITDA was up 7.5% from the same period last year, but at 13% of revenues, that we're still not where we expect to be and are actively seeking improvement in absorption and synergies within our network, particularly the paragraph operations. While demand was soft at paragraph, it was particularly strong for our e-commerce fulfillment solutions where a mix of new customer wins and greater volume from existing customers produced impressive revenue growth. In Folding Carton, we continue to see volume recovery from channels related to discretionary consumer spending in the health and beauty segment, augmented by new business wins from current and reactivated customers, and sustained momentum in the at-home food channel, the latter of which will take more prominent role going forward following the acquisition of TransGraphique in early July. This business, located north of Montreal, is a provider of Folding Carton packaging solutions mainly for the in-home consumption market. Albeit small with annual revenues of approximately $5 million, it has a strong position that is constrained by capacity limitations with a number of well-known in-home food providers, which should help us make further inroads in food grade packaging where we see solid growth prospects. We operated in the TransGravique facility for two weeks after close until their annual two-week summer shutdown, and transferring employees reported to their new location this week upon their return. Most of the sales will transfer to the Lachine facility, which is not operating at full capacity, and we have sold or will sell the main manufacturing equipment to partially fund the acquisition. This low-cost transaction will improve absorption and allow us to grab more efficiencies and synergies. With that, I'll turn the call over to Silvana for a review of the financial results.