Supremex Inc.

packaging activities, new business wins from existing customers, and revenue from the acquisition of TransGraphic acquired in July 2025. Moving to slide 15, adjusted EBITDA totaled $9.9 million or 13.2% of revenue, up from $8.8 million or 12.6% of revenue in last year's first quarter, and up sequentially from $9.1 million or 12.5% of revenue in the fourth quarter of 2025. Envelope adjusted EBITDA was $8.4 million or 16.6% of revenue versus $8.3 million or 17.2% of revenue last year. Sequentially, it was up from $7.8 million or 15.9% of revenue in the fourth quarter. The improvement mainly reflects the favorable impact of higher volume on the absorption of fixed costs, which more than offset the effect of lower average selling prices. Packaging and specialty products generated adjusted EBITDA of 3.7 million, or 15.4% of revenue, up from 3.3 million, or 15% of revenue last year, and up sequentially from 3.2 million, or 13.2% of revenue in the fourth quarter. The year-over-year increase is essentially due to the effect of higher volume on the absorption of fixed costs. Finally, corporate unallocated costs totaled 2.3 million compared to 2.8 million last year, mostly due to lower professional fees. Turning to slide 16, adjusted net earnings for the quarter were 1.9 million or 8 cents per share versus 2.2 million or 9 cents per share last year. Please note that this year's tax rate was higher due to the non-recognition of 0.8 million in income tax benefits. Otherwise, adjusted net earnings would have been about half a million above last year's. Moving to cash flow on slide 17. Net cash flows from operating activities were negative 0.8 million as opposed to positive $7 million last year. The variation mainly stems from working capital requirements this year, primarily due to the settlement of income taxes arising from last year's sale leaseback transaction, as opposed to a working capital release last year. As a result of lower operating cash flow, free cash flow was negative $1.8 million in Q1, 2026, versus positive $6.8 million a year ago. Turning to slide 18, net debt stood at $4.1 million as at March 31st, 2026, up slightly from $1 million three months ago, mainly due to the working capital requirements described a moment ago. As a result, our ratio of net debt to adjusted EBITDA was 0.13 times versus 0.03 times at the end of Q4 2025. Our strong financial position leaves us with significant flexibility to finance our operations, our future investments, including acquisitions, as well as to continue returning funds to shareholders. During the quarter, we repurchased more than 57,000 shares for a consideration of $0.2 million. Finally, the Board of Directors declared a quarterly dividend of $0.05 per common share payable on June 18, 2026, to shareholders of record at the close of business on June 4th, 2026. I'll now turn the call back to Stuart for the outlook.

Hey, great. Thanks, Norm. As I said at the beginning, we're pleased with our results and are cautiously optimistic about the outlook. This may not always be linear, but we have planted enough seeds over the past several quarters to believe that we have positioned ourselves to continue to grow earnings. Operationally, our sustained focus on productivity improvement and right-sizing our footprint continues to pay off. Meanwhile, our sales teams are leveraging our capabilities by driving volume growth to expand our reach in key markets and further support absorption. Financially, our near debt-free balance sheet provides exceptional flexibility to advance our business plan and deliver sustainable, long-term, profitable growth. Having completed four tuck-in acquisitions over the last 10 months, our appetite for M&A remains strong. We will continue pursuing tuck-in opportunities that leverage our existing footprint while increasingly evaluating more substantive targets in the packaging space. Finally, we remain committed to reward our shareholders with regular quarterly dividend payments and use excess cash flow to repurchase our shares. This concludes our prepared remarks and we are now ready to answer your questions.

Thank you. We will now begin the question and answer session. To join the question queue, you may press star then 1 on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then 2. First question comes from Donangelo Volpe from Beacon Securities. Please go ahead.

Hey, good morning, guys. Congratulations on the Q1 results. Just looking at, I guess, the optimization efforts in Indianapolis, can you guys provide some color on the timing and phasing of this through 2026 and how that potential margin flow-through looks through the remainder of the year?

So, hey, Donangelo. Thanks for the question. So, yes. So, maybe just to back up a little bit, the Indianapolis envelope facility served us really well for the 10 years when we were making our foray into the Midwest U.S. It was a great platform. Over time, we talked in the past about older equipment, less efficient. Over time, about 70% of its production or sales were being produced in Canada, leaving it with only about 30%. As we acquired the Royal Envelope platform in Chicago two hours away, it became less strategic for us. So we closed January, at the end of January, ceased production the same day of the announcement. And we're just wrapping up the remediation and cleanup and expect to be out of the facility by the end of June, at which time the fixed costs will reduce significantly. On an annualized basis, we think it's about $1.5 million worth of savings, and it's relatively linear once we get past the end of June.

Okay. Thanks for the detail there. And then I guess pivoting over to the packaging side, you guys referenced strong folding carton momentum with large multinational CBG customers. I'm just wondering if you're seeing broader wallet share opportunities with those customers across different packaging formats.

Sorry, you cut out a little bit there for me. Can you repeat that question?

Yeah, no problem. So you guys referenced strong folding cart momentum with large multinational CPG customers. I'm just wondering if you're seeing broader wallet share opportunities with those customers across different packaging formats.

The opportunity exists across the other products within packaging and related products, but we haven't really experienced share wallet growth in that space. The move to improve our label platform is really designed to take advantage of the exact question you're asking. Most of the growth has been share a wallet, but within the folding carton space itself. As we bring the label assets together and the label capabilities, we now have high-end digital label printing as well as the Flexo offset. We think that's really the time we can... you know, leverage the spend sort of cross-sell. But to date, it's largely been within the folding cart sector.

Yeah, and it's going to, I mean, the label acquisition is going to facilitate those conversations with our CPG customers. So we'll continue to see some of that as we move forward. It's just perhaps not as immediate as you would think. Okay.

Okay, thank you. And then just talking on the label acquisition, I understand 3 million in annual revenue. Can you just provide some color on what the EBITDA profile was for the company, pre-synergies?

In the mid-teens.

Okay, thank you. And then final one for me, and I'll pass the line, I guess just on the financials, looking at the operating cash flow was negative despite kind of the EBITDA growth you guys experienced this year. I guess beyond the one-time tax payment, just wondering how investors should be looking at working capital intensity as packaging becomes a larger share of revenue moving forward.

The working capital intensity shouldn't shift very much. we expect it to kind of stay at the same level, if not decline ever so slightly as we move out in time as revenue grows.

I could maybe just give a little more color from an operations standpoint. Envelope tends to be more finished goods, intents, and packaging, folding carton and e-commerce particularly, tend to be a little bit more raw material intensive. So as one's coming down and the other is growing, it should balance out. And the reason for that predominantly on the raw material side is the supply chain is much more offshore than it is domestic in packaging.

Okay. Thanks for answering all my questions, guys. Congratulations on the quarter. I'll hop back in the queue.

Great. Thanks, Don Angelo. Thank you, Operator, and thank you to everybody for joining us this morning. We invite you to join our annual meeting of shareholders to be held at 11 o'clock this morning. If you're in Montreal, we're downtown, and we look forward to speaking to everyone again on our next quarterly call. Thank you. Have a great day.

This brings a close to today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.