BuildDirect.Com Technologies Inc.

Hi, everyone. We're just waiting for more people to log into the call. We'll begin shortly. All right, that's it again. Hello, everyone, and welcome to BuildDirect's Q1 2026 Financial Results Conference Call. My name is Bob, and I'll be your moderator for today. BuildDirect trades on the TSX-V on the ticker symbol B-I-L-D, that's B-I-L-D, and on the OTCQB under ticker symbol B-D-C-T-F, that's B-D-C-T-F. Joining me on the call are Sean Wilson, CEO, and Kerry Vicks, CFO of BuildDirect. Before we begin, I would like to remind everyone that certain statements made during this call may constitute forward-looking information within the meaning of applicable securities laws These statements are based on management's current expectations and are subject to risk and uncertainties. Please refer to the detailed forward-looking statements and advisories in today's earnings deck and press release. If you have any questions during the call, please send them in using the Zoom Q&A function at the bottom of your screen or email them to ir.doldirect.com. We'll address these questions during the Q&A session. A replay of this call will be available approximately 24 hours after the conclusion and will be posted on the IRS section of our website at ir.billderick.com. I would now like to turn the call over to Sean Wilson, CEO of Bill Derrick. Please go ahead, Sean.

Thank you, Bob, and greetings, everyone. Thanks for joining us today. We went with a quarter that reflected the strategy we've been executing against. While the broader home improvement market continues to evolve, we deliver strong margin retention, animated positive operating cash, and most importantly, continue to advance our footprint expansion initiatives. Last 12 months, we've completed three accretive acquisitions. The Orlando Pro Center, Brain Custom Wood in February, and Powell Outlets of America was just closed. That is the story of this quarter. While the market compresses valuations, we're using a strengthened balance sheet to scale, to build an operating leverage for the recovery. As you'll see in today's materials, Q1 revenue was $14.6 million, down 3% year-over-year, reflecting a softer industry-wide demand. But importantly, we held gross margin at 40.2%, generated $0.55 million in positive operating cash flow, and strengthened our cash position. Working capital improved by $4.7 million year-over-year. Cost centers represented 72% of total revenue in the quarter, our largest segment, by scale and the platform we're building around. That same pro center platform is what makes our M&A program work. It gives every acquisition a place to plug in, to integrate, and to immediately benefit from sourcing, technology, and back office leverage. I'll now hand over to Kerry to walk through the detailed financial results.

Yeah, thanks, Sean, and good afternoon, everyone. Let me walk you through the quarter here. Sean noted Q1 was uh 14.6 million uh of sales compared to 15.1 million uh in q1 2025 so a decrease of 3.3 percent um which we view as as fairly positive given the uh macro uh economic environment that uh that the company is in uh gross margin came in at 40.2 percent uh 110 basis points below the very strong 41.3% margin we delivered in Q1 of 2025. Again, as Sean noted, we did generate positive operating cash flow of 0.55 million, a good result for the quarter given the demand backdrop. Looking at the segment breakdown, e-commerce contributed 3.9 million of the quarterly revenue. and a 52% gross margin, while the Pro Centers contributed $10.7 million at a 35.9% gross margin. So together, our omni-channel model continues to deliver structurally higher margins than a pure retail comparable. Turning to the consolidated summary, year-over-year revenue was down 3.3% to $14.6 million. Gross profit was 5.9 million versus 6.2 million the prior year, and gross margins noted was 40.2 versus 41.3. Adjusted EBITDA for the quarter was a modest loss in the range that we previewed in our May 12th press release, driven primarily by lower segment volume, partially offset by the margin discipline that we note. At the segment level, both businesses generated a positive adjusted EBITDA. The e-commerce segment at 0.12 million and the pro centers at 0.62 million for combined operational segment adjusted EBITDA. Pre-corporate costs came in at 0.74 million. So the story is consistent quarter after quarter. The underlying segments are profitable. Platform overall is generating cash and the balance sheet is positioned for capital deployment, which we did subsequent to quarter end. Moving on to the next slide, the e-commerce segment revenue, as I said, was 3.9 million, down 8.1% from 4.2 million in Q1 of 2025, reflecting a slightly softer category demand in early 2026. Gross margin actually expanded 10 basis points to 52% this quarter, supported by disciplined pricing and a core product mix assortment. Operating expenses came in at $1.9 million on lower marketing and discretionary spend, and segment-adjusted EBITDA, as noted, was $0.12 million, compared to $0.15 million in Q1 of 2025. The key story for the quarter for e-commerce is the integration of the Grain platform, which was the asset purchase we closed in early February. Grain adds a marketplace platform with major U.S. retailer channels. and we expect revenue contribution to accelerate as we move through the year in this segment. We're also routing more fulfillment through our Pro Center network, especially grain, which will be expected to further support our margin efficiency. On the next slide, the Pro Center segment, this remains obviously our largest segment in our M&A integration platform. Revenue for this segment was $10.7 million, down 1.4% year-over-year, Gross margin was 35.9%, generating $3.85 million in gross profit. And, again, the segment of the JustiDiva that was $0.62 million for the ProCenter segment. The Orlando ProCenter we opened in Q1 of 2025 by the purchase of the Yorkshire and Anchor assets was our opening M&A step into the Florida market. And the Tile Outlets of America acquisition that we just closed on May 12th has three new Florida showrooms in Tampa. Sarasota and Fort Myers, along with approximately 19 and a half million of annual sales to our Florida foundation to expand our Florida footprint meaningfully and gives us regional density, which we did not have before. So with that, I'll just quickly hand it back to Sean to walk through the footprint expansion in more detail here.

Thanks, Gary. This is the single most important slide for understanding our strategy in today's presentation. In the last 12 months, BuildDirect has added three new platforms to our footprint, deliberately, while the broader foreign market has been compressing. First, Orlando Pro Center, which is purchased in Q1 of 25. The infrastructure investment is complete. It gives us a new beachhead in one of the most attractive foreign markets in the U.S. Second was grain, Kessler Wood, which we closed in February of this year. which really brought an online floating marketplace platform, which will be able to be plugged into our U.S. retailer channels. Approximately $6 million in 2025 sales, $300,000 in adjusted EBITDA, and roughly $400,000 identified annual cost energy for logistics and warehousing consolidation. You know, really third, I talked about America, which we're very excited about, recently closed, and TOA brings three established Florida showrooms, approximately, as Terry mentioned, $19 million in sales, and really an experienced operating team with a meaningful expansion to the tile category, which is a category that is relatively net new for us and will be very accretive for us across our business. The net purchase consideration was approximately $3.7 million, funded entirely with cash on hand, and we expect TOA to be accretive to adjust it even over time, believing it can progress to our long-term target to adjust it even with an operating profile of 10% to 15%. The North American point market is fragmented, and as we mentioned many times before, many regional operators are facing real macro pressure and limited scale. That creates a creative entry point for an operator like us that has the platform, the sourcing network, digital marketing capabilities, and our integration playbook. We intend to keep on using this window.

Okay. Yeah. Just next slide, moving on to the balance sheet liquidity. At March 31st, 2026, we held $7.2 million in cash and cash equivalents, up $3.7 million from Q1 2025. Networking capital was $7.2 million at the end of this quarter, up $4.7 million year over year. And total assets stood at $36 million, up just over $9 million from a year ago. On the working capital side, accounts receivable was $3.3 million. Accounts table was $6.5 million, down from $7.2 million the prior year, reflecting healthier payment cycles. And the RBC revolving credit facility was drawn at $3.3 million. Obviously, this working capital was set aside for M&A dry powder. And obviously, we used that to fund the TOA acquisition with entirely cash on hand to cash-free, debt-free accounts. leaving us with a strong, healthy balance sheet to continue to support these businesses. So with that, I'll hand it back to Sean for our outlook in some of our 26 priorities.

Thanks, Perry. So looking at Q2 in the back half of 26, we do expect the industry demand to remain softer until macro conditions improve, specifically until interest rates moderate and how the turnover recovers. It's a huge driver for the polling industry. Input cost pressure from tariffs and logistics likely remain elevated. Our response is straightforward. We continue to operate existing business with discipline, defending margin, generating cash, and integrating what we've acquired. We continue to deploy capital into a creative M&A where the market really gives us, you know, single evaluations and great opportunities. We expect demand recovery as macro headwinds ease. We want the platform to be meaningfully larger and denser when that recovery arrives. This leads me to really our three priorities. We're focused on the balance of this year. First, the TOA integration with a clear playbook, corporate and back office consolidation, real estate optimization, supply chain efficiency, the integration to our technology platform. We expect this work to drive margin improvement and operating leverage as we plan out the year. Second, with the grain integration and e-commerce scale, The full integration of grain is underway, and we expect revenue contribution to accelerate, and the cost energy is identified at the announce center or tracking the plan. Third, we have a list of active targets, and we're going to continue to work through those and progress them. And our focus stays where it's been before, deep value, cash flow, of positive businesses that fit our pro center platform. We can buy at compressed valuations. And we have to put a fine point on it. Our job in this part of the cycle is to use BuildDirect's balance sheet platform and our execution to compound our footprint and density while others sit it out. That's what Q1 was. The TOA closed. Both represent. Lastly, with that, I'll turn it back over to Bob for any questions.

Thank you, Sean and Kerry. We'll now open the floor for questions. Questions will be taken in the order received. As a reminder, if you have any questions during the call, please send them in using the Zoom Q&A function at the bottom of your screen or email them to ir.builddirect.com. So a question we received here, you've completed three acquisitions in the last 12 months. How do you view Bottle Direct's acquisition pipeline today and do you believe the current environment remains rich with similar opportunities?

Yeah, I'll take that one, Kerry, if I'm adding anything to it afterwards. Feel free. So, yeah, I mean, if anything, I'm extremely optimistic. There definitely are a lot of great opportunities out there. The latest acquisition in Florida really kind of speaks to what we are looking for and what's available. And I would say, you know, for us, you know, definitely have a good feel for, doing deals that make sense on both sides, team retention, the strategies, and also being able to very quickly integrate and tap into the key value drivers on the hard synergy side is also great. If you kind of think about it in a really basic, practical way, so, for example, TOA in Florida had a great legacy in the tile business, which is a considerable... part of the flooring business or other operations we're not in. And you have foot traffic just flowing in, and then with that you have adjacent categories, things like vinyl plank, wood, carpet, so on and so forth, area rugs that were not part of that product mix. The flooring industry is not only fragmented when it comes to operators, there's also a lot of fragmentation that happens at the category level. So you have businesses that specialize in let's say wood, for example, and others that specialize in tile, we're able to bring that together. Along with that, there's a very important pro focus for us, and we get asked a lot, hey, why would a customer buy from you guys versus buying from Florida Corp? So I'll give you a specific soundbite. Standing in the Fort Myers location a couple days ago, one of our major pros who literally works out of the location, they occupy one of our one of our faces in the back to work with customers. And they buy from us because we understand the product, we understand the installation, we don't mix up die lots. It's a whole service. We help their customer decide the design support's real. And it's a great flow for a pro who's operating their own small business, selling to their referral customers on the installation side. So we're able to take that complexity complexity away, that type of specialty service, especially in an age of automation, is highly important, very practical, and helps solve real problems for pros versus going to competitors that have large buildings, lots of product, but lack that expertise to be able to help the customer and help a pro with their projects. That's really where we are focused and why we call all of our locations pro centers, And so for us, we feel really good about the opportunities out there. And, yeah, I really haven't been, you know, I've been pretty excited before, but, you know, even more so now for sure.

That's good. And the next question here is regarding TOA and green, which you mentioned in the presentation. What should investors be watching next? over for the next few orders as these acquisitions are integrated?

Yeah, so I would say a couple things, you know, so we'll talk through category expansion. It's definitely, you know, it's an example of a hard synergy. So, you know, privately speaking, we have the locations today. You have your project assortment there, and there are net new categories that we're adding to those locations, as I mentioned. That will be done. So, you know, really the confirmation points on the category standards within those locations, the same thing applies to grain. So, for example, that company had a really good marketplace presence with big box retail, so that's great. We, in addition to that, were able to add in a lot of SKUs on our existing profile as well as expand to other partnerships. And so we simply don't, you know, PR specific company names. But, you know, just big box retail, servicing those segments. And as those deals flow through, that's what I've been looking at and really where the hard synergies on the growth side come from.

Doesn't seem we have any more questions. So I'd like to thank everyone again for joining this call. A replay and the full conference call presentation will be available on our IR website, and we look forward to speaking with you again next quarter. This concludes today's call, and have a great day.