Q3 2025 Richelieu Hardware Ltd Earnings Call

Speaker #1: Good afternoon, ladies and gentlemen, and welcome to the Richelieu Hardware third quarter results conference call. At this time, all lines are in the listen-only mode.

Operator: Good afternoon, ladies and gentlemen, and welcome to the Richelieu Hardware Q3 results conference call. At this time, all lines are in the listen-only mode. Following the presentation, we will conduct a question-and-answer session, which will be restricted to analysts only. If at any time during this call you require immediate assistance, please press *0 for the operator. Also note that this call is being recorded on October 9, 2025. Bonjour, mesdames et messieurs, et bienvenue aux résultats du troisième trimestre 2025 de Quincaillerie Richelieu. Présentement, vos lignes sont en mode d'écoute seulement. Suite à la présentation, nous allons procéder à une période de questions et réponses qui sera restreinte aux analystes seulement. Si vous avez besoin d'assistance au cours de l'appel, s'il vous plaît, appuyez sur l'étoile zéro. Veuillez prendre note que cet appel est enregistré le 9 octobre 2025. J'aimerais maintenant céder la parole à M.

Speaker #1: Following the presentation, we will conduct a question-and-answer session, which will be restricted to analysts only. If at any time during this call you require assistance, please press star zero for the operator.

Speaker #1: Also, note that this call is being recorded on October 9, 2025. Bonjour, mesdames et messieurs, et bienvenue aux résultats du troisième trimestre 2025 de Quincaillerie Richelieu.

Speaker #1: Présentement, vos lignes sont en mode d'écoute seulement. Suite à la présentation, nous allons procéder à une période de questions et réponses qui sera restreinte aux analystes seulement.

Speaker #1: Et si vous avez besoin d'assistance au cours de l'appel, s'il vous plaît, appuyez sur l'étoile zéro. Veuillez prendre note que cet appel est enregistré le 9 octobre 2025.

Speaker #1: J'aimerais maintenant céder la parole à Monsieur Richard Lord, président et chef de la direction. La parole est à vous.

Operator: Richard Lord, Président et Chef de la Direction. La parole est à vous.

Speaker #3: Merci. Thank you. Good afternoon, ladies and gentlemen, and welcome to Richelieu's conference call for the third quarter and first nine months ended August 31, 2025.

Richard Lord: Merci. Thank you. Good afternoon, ladies and gentlemen, and welcome to Richelieu Hardware Ltd.'s conference call for the third quarter and first nine months ended August 31, 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. We had a good third quarter with solid growth and expansion. All our results are on the rise, and we successfully pursued our acquisition strategy, closing two additional acquisitions following the quarter. Except for Ontario, all our market segments in Canada and the U.S. performed well, driving our total sales up 6.7%. Our sales in Canada increased by 2.9%, while in the U.S., they rose by 11.4% in U.S. dollars, accounting for 45% of total sales for the quarter.

Speaker #3: 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.

Speaker #3: We had a good third quarter, with solid growth and expansion. All our results are on the rise, and we successfully pursued our acquisition strategy.

Speaker #3: We closed two additional acquisitions following the quarter. Except for Ontario, all our market segments in Canada and the U.S. performed well, driving our total sales up 6.7%.

Speaker #3: Our sales in Canada increased by 2.9%, while in the US they rose by 11.4% in US dollars, accounting for 45% of total sales for the quarter.

Richard Lord: Sales climbed 6.5% in the manufacturer market and 8.6% in the retailers and renovation superstore market. Our margins improved slightly with EBITDA margin of 11.4% and diluted net earnings per share increased by 4.9% to $0.43. I would also point out that our operations generated cash flows of $82.7 million in the third quarter. This includes a $16.2 million reduction in inventories. We ended the period with a positive cash position of $12 million and a working capital of $632.7 million, which reflects a solid and healthy financial position and an outstanding balance sheet. I will now ask Antoine to review the financial highlights for the quarter and the first nine months.

Antoine Auclair: Thanks, Richard. In the third quarter, sales reached $499.2 million, up 6.7%, representing an increase of $31.5 million, equally driven by internal growth and acquisitions. In Canada, sales totaled $272 million, up 2.9% compared to last year, despite a decline in sales in Ontario, where the business environment is actually more challenging. Sales to manufacturers amounted to $226 million, up 1.9%, while sales to the hardware retailers totaled $46 million, up 8.5%, mainly due to timing differences, as year-over-year sales show a slight increase with the same period last year. In the U.S., sales grew to $165 million in U.S. dollars, up 11.4%. Sales to manufacturers reached $158 million in U.S. dollars, up 11.6%, with 7.3% coming from internal growth.

Antoine Auclair: This internal growth is mainly driven by price increases, partly due to new import tariffs, an increase that offsets the additional cost of the tariff, with no impact on gross profit dollars. In hardware retailers and renovation superstores market, sales reached $7.7 million, up 6.9%. In Canadian dollars, total sales in the U.S. reached $227 million, up 11.7%, and accounting for 45% of total quarterly sales. For the first nine months, total sales reached nearly $1.5 billion, up 7.2%, of which 4% resulted from internal growth and 3.2% from acquisitions. In Canada, sales reached $790 million, up 2.2%, primarily due to acquisitions. Sales to manufacturers totaled $657 million, up $14.2 million, or 2.2%. Sales to hardware retailers and renovation superstores were $132.9 million compared to $130.3 million, up 2%. In the U.S., sales amounted to $473 million in U.S.

Sales to manufacturers total $657 million, up $14.2 million or 2.2%.

Sales to hardware retailers and renovation superstores reached $132.9 million, compared to $130.3 million, representing an increase of 2%.

Antoine Auclair: dollars, up 10.4%, with half from internal growth and half from acquisitions. They reached $663 million in Canadian dollars, up 13.8%, accounting for 46% of total sales. In U.S. dollars, sales to manufacturers totaled $447 million, an increase of $42.6 million, or 10.5%, driven by 5% internal growth and 5.5% from acquisitions. Sales to hardware retailers and renovation superstores were up 7.9% compared to last year. Third quarter EBITDA reached $57 million, up $4.1 million, or 7.7% over last year. This increase reflects higher sales and effective cost management. Growth in EBITDA margins slightly improved with an EBITDA margin of 11.4%. For the first nine months, EBITDA totaled $154.7 million, up 5.1%, with EBITDA margins at 10.6%. Third quarter net earnings attributable to shareholders amounted to $23.9 million, up 5.2%.

Million in U.S. dollars up 10.4%, with a portion from internal growth and half from acquisitions.

The revenue reached $663 million in Canadian dollars, up 13.8%, accounting for 46% of total sales.

In U.S. dollar sales, manufacturers total $447 million.

An increase of 42.6 million, or 10.5%, driven by 5% internal growth and 5.5% from acquisitions.

Sales for hardware retailers and renovation at Super Source were up 7.9% compared to last year.

Third quarter, EBITDA reached $57 million, up $4.1 million or 7.7% over last year.

This increase reflects higher sales and effective cost management.

Growth and a bit that margins slightly improved within a bit of 11.4%.

For the first 9 months it did that total, 154.7 million up 5.1% with Emmitt. The margins at 10.6%,

Antoine Auclair: This increase mainly reflects higher EBITDA, partly offset by higher amortization and interest expenses resulting from new leases and lease renewals. Consequently, diluted net earnings per share was $0.43 compared to $0.41 last year, an increase of 4.9%, consistent with the improvement in overall profitability. For the first nine months, net earnings attributable to shareholders reached $60.3 million, down 1.8%. Diluted net earnings per share stood at $1.08 compared to $1.09 last year. Third quarter cash flow from operating activities before net change in non-cash working capital reached $48.1 million, up 12.5% from $42.7 million last year. Change in non-cash working capital contributed a cash inflow of $34.6 million, driven by a $16.2 million reduction in inventories. As a result, operating activities generated a cash inflow of $82.7 million for the quarter, reflecting higher net earnings and effective working capital management.

Third quarter, net earnings attributable, to shareholders amounted to 23.9 million up 5.2%.

This increase mainly reflects higher Aida, partly offset by higher amortization and interest expenses resulting from new leases and lease renewals.

Consequently, diluted net earnings per share were $0.43, compared to $0.41 last year, an increase of 4.9%, consistent with the improvement in overall profitability.

For the first 9 months, net earnings attributable to shareholders reached $60.3 million, down 1.8%.

Diluted net earnings per share stood at $18.00 compared to $0.019 last year.

Third quarter cash flow from operating activities before net change in non-cash working capital reached $48.1 million, up 12.5% from $42.7 million last year.

Change in non-cash working capital contributed a cash inflow of $34.6 million.

driven by a $16.2 million reduction in inventories.

As a result, operating activities generated a cash inflow of $82.7 million for the quarter, reflecting higher net earnings and effective working capital management.

Antoine Auclair: For the first nine months, cash flow from operating activities represented a cash inflow of $133.6 million compared to a cash inflow of $106.4 million last year. The increase highlights the business ability to generate consistent cash, supporting ongoing investment and shareholder returns. For the third quarter, financing activities used $25.4 million in cash, up from $18.4 million last year, mainly due to the repurchase of common share totaling $3.7 million. For the first nine months, financing activities used cash flow of $70.1 million compared to $76.1 million in 2024. In the first nine months, we invested $39 million, including $27.5 million for six business acquisitions and $11.5 million primarily for equipment required to maintain and improve operational efficiency. We continue to maintain an outstanding balance sheet with working capital of $632.7 million and a positive cash balance. I now turn it over to Richard.

For the first 9 months, cash flow from operating activities represented a cash inflow of $133.6 million.

Compared to a cash inflow of 106.4 Million last year.

The increased highlights the business ability to generate consistent cash supporting ongoing investment and shareholder returns.

For the third quarter financing activities, we used $25.4 million in cash, up from $18.4 million last year. This increase is mainly due to the repurchase of common shares totaling $3.7 million.

For the first 9 months, financing activities, use cash flow of 70.1 million compared to 7 6. 1 2 4.

24.

In the first 9 months, we invested, 39 million, including 27.5 million for 6, business acquisitions.

And $11.5 million, primarily for equipment required to maintain and improve operational efficiency.

We continue to maintain an outstanding balance sheet with working capital of 632.7 million and a positive cash balance.

Richard Lord: Thank you, Antoine. Subsequent to the quarter, we are pleased to have closed two acquisitions, namely Ideal Security on September 2 and Finmax Lumber on October 1. Specializing in outdoor products for doors and windows, Ideal Security is located in the Greater Montreal area and mainly serves Canadian and U.S. retailer markets. This adds up to our existing offering of eight different brand names already present in all retailers and renovation superstores served by Richelieu. It also reinforces our one-stop shop strategy for this market. Finmax Lumber is a distributor of specialized wood products operating in the Winnipeg area and covering Western Canada, where it serves a customer base consisting mainly of woodworkers, cabinet makers, and building material retailers, as well as renovation centers.

I now turn it over to Richard.

Thank you so much.

Subsequent to the quarter, we are pleased to have closed two acquisitions, namely Ideal Security on September 2nd and Finback Number on October 1st.

Specializing in upware products, for doors and windows. Ideal security is located in the greater Montreal area.

And mainly serves Canadian and US retailer Market.

this adds up to our existing offering of 8, different brand names, already present in all retailers and Renovations per Souls served by the

It also reinforced our one-stop shop strategy for this market.

Richard Lord: These two acquisitions add additional annual sales of $22 million and will therefore expand and diversify our offering in markets where we are already present, while creating new sales synergies. Together with the six acquisitions made in the first half, these represent $75 million in additional annual sales. To conclude, I would say that particularly in the current context of uncertainty related to market conditions, our business model is proving its robustness and flexibility. It also enables us to respond with agility to our customers' needs with our one-stop shop Canadian and U.S. network, protect our margins, and maintain our leadership position. In these circumstances, our customers will need to protect their cash flows and rely on a trusted supplier like Richelieu. We are continuing on this path with confidence and discipline and expect the end of the financial year with very solid results. Thanks, everyone.

Finback Number is a distributor of specialized wood products operating in the Winnipeg area and covering western Canada, where it serves a customer base consisting mainly of woodworkers, cabinet makers, building material detailers, as well as renovations and innovation centers.

offering in markets where we are already present while creating new sales synergies,

Together with the 6 AC equations made in the first half, this represents $75 million in additional annual sales.

To conclude, I would see that particularly in the current context of uncertainty related to Market condition, or business model is proving its robustness and flexibility.

It also enables us to respond with agility to our customers' needs with our one-stop shop Canadian and U.S. network.

product or margin and maintain our leaders, our leadership position

in this circumstances, our customer will need to protect their cash flows and rely on The Trusted supplier like Richard you

We are continuing on this path with confidence and discipline, and we expect solid results by the end of the financial year.

Richard Lord: We'll now be happy to answer your questions.

Operator: Thank you. Merci. Ladies and gentlemen, if you do have any questions, please press star followed by one on your touch-tone phone. You will then hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by two. If you're using a speaker phone, you will need to lift the handset first before pressing any keys. Please go ahead and press star one now if you do have a question. First, we will hear from Harmeer Patel at CIBC Capital Markets. Please go ahead.

Thank you, everyone. We are now happy to answer your questions.

Thank you merci.

Ladies and gentlemen, if you do have any questions, please press star, followed by 1 on your touchtone phone. You will then hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star, followed by 2. If you're using a speakerphone, you will need to lift the handset first before pressing any keys. Before we proceed, please go ahead and press star 1. Now, if you do have a question...

[Analyst]: Hi, good afternoon. Richard, are you able to share how your sales fared year over year in the month of October, and if there's any notable differences there, Canada versus U.S., manufacturers versus retailers?

First, we will hear from her Patel that's CIBC Capital markets. Please go ahead.

Hi uh, good afternoon.

Richard Lord: No, we're faring very well, comparable to last year. I think the market is not really strong, but with all the action that we have taken in the last few months, we see very good results, and we keep capturing more market share and increasing our sales to the same customers that we already have. I would say it's positive as we speak.

Richard are you able to uh share how your sales fared um year-over-year in the month of October and you know if there's any notable differences there Canada versus US manufacturers versus retailers.

No, we we are feeling very well, we're comparable to to last year. I think we the market is not really strong but we what what with all the action that we have taken in the last few months? We see very good results and we keep capturing more, more market, share and increasing our sales to the same customer that we already have. So, so basically I would say it's it's positive as we speak.

[Analyst]: Okay, maybe in line with the sort of 4% that you delivered in Q3?

Richard Lord: Yep, yep.

[Analyst]: Okay, great.

Richard Lord: Pretty much in line with what you've seen in the Q3 so far.

[Analyst]: Okay, great. Antoine, are you able to share how much is Ontario as a share of your total sales? I know it seems like you called that out as maybe the only region that was negative comps.

Okay, so maybe in line with the sort of 4% that you delivered in Q3. Yep. Yep, yep. Pretty much in line with what you've seen in the third quarter so far.

Okay, great. And Antoine, are you able to share how much Ontario, as a share of your total sales, represents? I know it seems like you called that out as maybe the only region that was negative comps.

Richard Lord: Ontario represents 18% of our total sales.

Yeah, all the time. You just a sec?

[Analyst]: Okay, great.

Richard Lord: And yeah.

What are your represent 18% of our, our total sales?

[Analyst]: Richard, I know I think it was Q2 of 2024, you had lost some business with a major U.S. retailer customer. Can you speak to maybe any ongoing efforts you have to either replace that business with other customers or potentially even regain share with that customer?

Great. And yeah.

Um, and then Richard, I know, I think it was Q2 of 2024 you had lost some business with a major U.S. retailer customer. Um, could you speak to maybe any ongoing efforts you have to either, you know, replace that business with other customers or potentially even regain it?

Richard Lord: First of all, we're still working with these customers in order to recapture that business. So far, the news is positive, but I don't want to feel like we depend on one customer. We have other projects in the U.S., many projects. It takes a long time to get conclusions on many of these projects, but we're working on many, many customers with many projects that could bring some good opportunity for us. If it's working okay, that's going to be a nice comeback of that business, but we don't only count on that.

Share with, uh, with that customer.

[Analyst]: Okay, great. That's all I have for now. I'll get back in the queue. Thanks.

First of all, we still working with this customers, you know, although to recapture that business so far the news are positive but I don't want to to feel like that we depend on 1 customers. If we, we have other projects in the US many projects, it takes a long. It's long due to get conclusion on on many of these projects. But we're working on many, many customers with the with many projects that could bring some good opportunity for us and and those is just would be if it if it's working. Okay, that's going to be a, a nice, uh, a nice comeback of that business, but we don't only call on that.

Richard Lord: Thank you.

Operator: Once again, ladies and gentlemen, if you do have any questions, please press star followed by one on your touchstone phone. Next question will be from Zachary Evershed at National Bank Capital Markets. Please go ahead.

Great. Uh, that's, uh, that's all I had for now. I'll get back in the queue. Thanks. Thank you.

Once again, ladies and gentlemen, if you do have any questions,

On your touch-tone phone.

[Analyst]: Good afternoon and congrats on the quarter.

Next question will be from Zachary Everett at National Bank Capital markets. Please go ahead.

Richard Lord: Good afternoon. Thanks, Zach.

Good afternoon and congrats on the quarter.

[Analyst]: Could you describe how much of your internal growth in the U.S. was the pricing pass-throughs related to the country's specific tariffs?

Good afternoon. Thanks Zach.

Richard Lord: Yeah, pretty much all of it is a price increase. Not necessarily most of it due to tariffs, but most of it is inflation.

Could you describe how much of your internal growth in the U.S. was related to the pricing pass-through? Was it connected to the country's specific tariffs?

Yeah, pretty much. Uh, all of it is, uh, price increase, not necessarily, uh, most of it due to tariffs, but most of it is inflation.

[Analyst]: Gotcha, thanks. When you say that the tariff pass-throughs have no impact on gross margin, are we talking about the gross margin % or that you're keeping gross profit dollars stable? Do you get operating leverage off of this?

Richard Lord: Yeah, dollars.

[Analyst]: Gotcha, thanks. So far this year, how do you think customer backlogs are translating to volumes for Richelieu Hardware Ltd.? Do you think that they're doing worse than you guys are, or that they're picking up and that you'll see those orders translate to your own sales soon?

And when you say that the tariff passes have no impact on gross margin, are we talking about the gross margin percentage or that you're keeping gross profit dollars? Stable. Do you get operating leverage off of this? Yeah, dollars.

Dollars. Gotcha. Thanks.

Richard Lord: I think our customers have a nice backlog. The book of orders is reasonable, nothing is booming. Our customers are busy for two or three months and they don't know after. We think that the renovation market will remain strong and basically we don't see any negative impact regarding the book of orders that our customers have on hand.

So for this year, how do you think customer backlogs are translating to volumes for RCH? Do you think that they're doing worse than you guys are, or that they're picking up and that you'll see those orders translate to your own sales soon?

Oh, I think your customers have a, they have a nice backlog. They they have a, you know, the book of orders is a is reasonable, but nothing is booming. So of course, are busy for 2 or 3 months and they don't know after. But we think that renovation Market will remain strong. And and, and, and basically, we, we don't see any negative impact regarding the, uh, the the, you know, the book of the orders that our customers have on hands.

[Analyst]: Perfect, thanks. If we look historically, Q4 is seasonally stronger than Q3 on the margin front. Is there anything that would stop that from being the case this year, or do you see Q4 rising versus the 11.4% you got in Q3?

Richard Lord: No, I think that the trend that you're seeing in Q3 should be pretty much similar in Q4.

Perfect. Thanks. And then, if we look historically, Q4 is seasonally stronger than Q3 on the margin front. Is there anything that would stop that from being the case this year, or do you see Q4 rising versus the 11.4% you got in Q3?

No, I think that, uh, I think that the, the trend that you're you're seeing in Q3 should, uh, should be pretty much similar in Q4.

[Analyst]: Understood, thank you. If we dial out to the macro, we did see the conclusion of the Section 232 investigation, and that resulted in tariffs on kitchen cabinets and vanities. In your view, what's the impact on Richelieu, your customers, and the overall market?

Understood, thank you.

Richard Lord: I like very much that question. I think we have a few information that we can share with you if you have a couple of minutes. First of all, it's important to mention, as you know, that Richelieu is on both sides of the border. If some business is switched from other countries and from Canada to the U.S., fortunately, we are very well established with the customer base that we have in the U.S. that could recapture that business. Regarding the sales to residential furniture, it's only 2.8% of our sales. The kitchen cabinet is higher, but for the residential furniture, it's only 2.8% of our business. We don't expect any negative impact regarding those sales. It might be even a positive impact. I will explain it a bit later on.

And then if we dial out to the macro, we did see, the conclusion of the section 232 investigation and that resulted in tariffs on kitchen cabinets, and bathroom vanities, uh, in your view, what's the impact on? If you showed your, your customers and the overall Market,

Richard Lord: The kitchen cabinet, the kitchen cabinet only represents, the kitchen cabinet exports to the U.S., it's only 12% of the kitchen cabinet being made in Canada, representing $400 million U.S. dollars. It's not a huge business, but it's substantial for Richelieu. It could represent, let's say, something like $35, $40 million of sales. What we see is that our customers are working to mitigate the impact of these, the impact of those additional costs in order to keep up with their sales. These guys are very smart. They have a way of reducing their costs and also they still benefit from the current exchange rate, which is good. Richelieu is very well positioned to support them in their effort to reduce their costs because we have many product categories at Richelieu.

I like very much that question. I think we have a few information that we can share with you if you have a couple of minutes. First of all it's important to mention as you know, that the show is on both sides of the border. So if some business is switch from other country and from Canada to the US, fortunately, we are very well established with with the customer base that we have. In the US that could recapture that business. So, and regarding the sales to residential Furniture, it's only 2.8% of our sales. Don't so the, but the, for the residential Furniture, it's only 2.8% of our business. So we don't expect any negative impact regarding those sale. It might be even a positive impact. I will explain a little bit later on the kitchen cabinet, uh, the the kitchen cabinet, only represents the kitchen cabinet exposed to the US. It's only 12% of the kitchen cabinet being made in Canada, representing 400 million US dollars. So it's, it's not a huge business, but it's it's, it's substantial for you. It took

Richard Lord: We have products that could reduce their costs and some of them, the bigger ones, sometimes they buy some products from overseas. They might have an advantage now as we speak to transfer some of those purchasing to Richelieu instead of buying overseas because then they protect their cash. They have a just-in-time inventory system with Richelieu and that could reduce their operating costs. Basically, there's not much negative. We just have to be careful and make sure that we manage well with our customers. In total, what we see is that U.S. imports for a value of $2 billion of kitchen cabinet, of which only $400 million come from Canada. There is $1.6 billion left that come from other countries. If some business is recaptured by a U.S. customer, it could be quite material. Regarding the furniture market, we've learned from a web report.

Could represent. Let's say something like a 3540 million dollar sales. But what we see is that our customers will are working to mitigate the impact of these of the impact on the of the those additional costs to in order to keep up with their sales. So this these guys are very smart they have way of reducing their cost and also they they still benefit from the the current exchange rate which is good and is very very well positioned to support them in their effort to reduce their cost because we have many product category to show you. We can we have product that could reduce their cost and some of them the the the the the bigger ones sometime they buy some product from overseas, they might not they might have an advantage now as we speak to transfer some of those purchasing to issue you instead of buying overseas because then they protect their cash. They they have you know just in time and eventually system which are you and that could reduce the operating cost.

So, so basically there's not not much negative, we just have to be careful and make sure that we manage well with our customers in in total. What we see is that us import for for, for a value of 2 billion dollar of kitchen cabinet of which only 400 million come from Canada. So, there is 1.6 billion left that come from other country. So if some business is recaptured by by Us customer, it could, it could be quite quite material.

Richard Lord: What's the name of the report, Antoine?

[Analyst]: It's called IBISWorld.

Richard Lord: IBIS World, which is the reference in the industry. You know, U.S. imports for $26 billion of furniture, of only $650 million come from Canada. That means there is $24 billion at least, $25 billion coming from other countries. We don't expect the U.S. market to switch to U.S. manufacturers. It will take time, but it might be some improvement in the U.S. manufacturing market because of that. Richelieu is well positioned to benefit from that as well. Our strength is really to be on both sides of the border with our extended product range that is unique in North America in order to support our customers and to make sure that we make the right move and benefit whatever is going to be benefited from both sides of the border.

Regarding the the furniture market we've learned from from the web reported. What's the name of the report that 1? It's called Ibis World Ibis World which is the reference in the industry. You know the US import for 26 billion dollar of furniture of only 650 million. Come from Canada.

So that means there is a billion in the U.S., $24 billion, at least $25 billion coming from other countries. So basically, we don't expect, you know, the U.S. market to switch to U.S. manufacturers. It will take time, but there might be some improvement in the U.S. manufacturing market because of that. So the issue is well-positioned to benefit from that as well.

[Analyst]: Excellent color. Thank you. Moving on to your inventory, there was a step up in obsolescence. Could you speak to what's driving that?

Excellent color. Thank you.

Uh, moving on to your inventory, there was a step up in obsolescence. Could you speak to what’s driving that?

Richard Lord: You've seen the reduction in inventory, Zach, during the quarter. We've been able to reduce inventory by $16 million in the quarter and still expecting a reduction. I would say that I'm hoping around $10 million more in terms of inventory reduction over the next few periods, helping us to generate $82 million from operation during the quarter.

But you've seen the, you've seen the reduction in the in the, in the inventory Zack and during the during the quarter. So, uh,

We've been able to reduce inventory by $16 million in the quarter and I'm still expecting a reduction, I would say that.

I'm hoping for around $10 million more in terms of, uh,

In terms of inventory reduction over the next few periods.

Helping us generate $82 million from operations during the quarter.

[Analyst]: Thank you. Does that come paired necessarily with additional inventory obsolescence?

Richard Lord: No, it's basically excess. We've been talking about it since over a year. We've been reducing last year inventory significantly. I've told you guys at the beginning of the year that we're expecting a reduction this year. It took two quarters to happen. Now it's happening. It should continue towards the next few periods.

Gotcha. Thank you. And does that come paired necessarily with additional inventory obsolescence?

Uh, know I would say it's basically excess. So it's we've been talking about it since, uh, since over a year. So we've been reducing last year, inventory, significantly. I've told you guys, uh, at the beginning of the year that they were expecting a reduction this year. It took 2 quarters to happen. So now it's a, it's it's, it's happening. So it should continue to towards the next few periods.

[Analyst]: Gotcha. Thanks. Just the last two, CapEx plans for next year and your M&A pipeline, how's it looking?

Gotcha, thanks then. Just the last two, uh, CapEx plans for next year and your M&A pipeline, how's it looking?

Richard Lord: M&A pipeline is still strong. We've closed eight acquisitions this year, as you've seen, and it's still very healthy on both sides of the border, Canada and the U.S. Regarding CapEx, the main investments are behind us. The last three years, you've seen the CapEx higher than expected because we were more in an investment mode than in a maintenance mode. We're back to a normal level of CapEx. We've spent $11 million so far. We should end the year around, I would say, $15, $16 million, regular maintenance CapEx. We've always said that maintenance CapEx is around 1% of sales. We're going to be slightly below that this year, and you should expect the same next year. We don't have major projects, and if we do, we'll tell you guys.

and,

[Analyst]: Beautiful. Thanks. I'll actually just sneak one last one in. I've noticed that Richelieu Hardware Ltd. is completing more panel and hardwood acquisitions recently, like the one in Winnipeg that you guys just announced. Are there any larger targets in that space that could be interesting?

M&a m&a, pipeline is still, uh, is still strong. So we've closed the aquisition this year as you as you've seen and it's, uh, it's still a very healthy in both side of the borders. So we can attend the US regarding capex, the the, the main Investments are behind us. So, the last 3 years, you've seen the capex higher than expected, because we were more in in investment mode than in maintenance mode, or back to a normal normal level of capex. So, we've spent 11 million so far. We should end the the, the year around. I would say the 15 16 million. So, regular maintenance, uh, maintenance capex. We always says, I said that uh, maintenance capex is is around 1% of, uh, of uh, of sales. So we're going to be slightly below that this year, and you should expect the same next year. So we don't have a major projects that. Uh, and if if we do, we'll uh, we'll tell you guys.

Beautiful. Thanks. And then I'll actually just sneak in one last one. I've noticed that the issue here is completing more panel and hardwood acquisitions recently, like the one in Winnipeg that you guys just announced.

Richard Lord: No, we are interested in that type of lumber. Don't forget that we don't sell 2x4 and 2x3. We sell only sophisticated wood for the purpose of woodworkers that do fine working jobs. These products are higher margin products, and they bring constant sales because mainly in Ontario and Western Canada, more than Quebec, we see people, the woodworkers, using more woods as well as what we call the lumber yards over there. It's a good market, and I like the market like many toolbars. For example, there's not many competitors there, and Richelieu, we've bought something that is really well positioned in this market. I'm very happy with that acquisition. We're going to continue to answer your question to buy such companies when they meet our criteria of EBITDA margin. I would say that the one that we acquired in Winnipeg, it's a 15% EBITDA margin, which is sustainable.

Are there any larger targets in that space? That could be interesting.

Richard Lord: I like that type of deal.

No, we are interested in that type of lumber, so don't they don't, don't forget that. We don't sell 2x 4 and 2 by 3. So we sell all these sophisticated wood for the purpose of Woodworkers that do a fine job. Find walking jobs. So basically, these products are how how your margin products and basically, the the, the the bring constant sales because there is mainly in, Ontario and western Canada, more than Quebec. We see people the Woodworkers using more Woods as well as the what we call the the lumber yards over there. So basically it's a good market and I like the market like many to, for example, it's a there's not many competitors there and they will show you what we've bought something. That is really well, positioned in this market. So basically, I'm very happy with that acquisition. So we're going to continue on, uh, to answer your question to to buy such company. When they, they meet our criteria of of, of a bit down margin. I would say that the 1 that we acquire in, in we pay something, it's a 15%, if it the margin. So basically,

Which is sustainable. So basically, I like that type of deal.

[Analyst]: Excellent color. Thank you so much. Really appreciate you guys answering my questions. I'll turn it over.

All right, thank you so much. I really appreciate you. I appreciate you guys answering my questions. I'll turn it over.

Operator: Next question is a follow-up from Harmeer Patel. Please go ahead.

Thank you.

[Analyst]: Hey, Richard, I just wanted to follow up on the M&A side. When you think about the pipeline, I know it can be lumpy, but is there a sort of annual revenue contribution that you'd expect going forward from acquisitions?

Next question is a follow-up from her Patel. Please go ahead.

Hey, Richard, I just wanted to follow up on the M&A side. When you think about the pipeline, and I know it can be lumpy, but is there a sort of annual revenue?

Uh, contributions that you'd expect going forward from acquisitions.

Richard Lord: We try to make $100 million worth of acquisitions every year. I don't know if we're going to reach that this year. We're going to be very close to. Basically, the contribution is positive. We usually buy companies sometimes that make little profit, but that we, when integrated to Richelieu Hardware Ltd., have a huge benefit. Ideal, for example, is a perfect example. We buy something that is already in the stores where we are already with our displays and everything else. They share a base of the product that we already have, so we can merge those product lines. We acquire very talented people that are very good at selling. They sell in the U.S. and they sell to Amazon. They have a substantial amount of sales to Amazon, and they have specialists in those types of sales. We like that very much.

Richard Lord: That acquisition, within the course after integration, it's going to take 18 months probably because we have to transfer the warehouses where they have a lease where they are. The purpose is to have our one-stop shop in Kitchener, Ontario, for all the retailers in Eastern Canada. Basically, the products are going to be transferred there as soon as we can to make sure that the customer might benefit of not only the one-stop shop, but the one delivery per eight different brand names of products. These moves are very, very positive, even though sometimes the amount of contribution is little in the year of the acquisition, but the potential for that type of business is great for the future of Richelieu Hardware Ltd. It does reinforce our market position, and it does prevent our competitors sometimes to get into the store that we're already servicing.

Richard Lord: Basically, the true purpose of the acquisition is to make sure that we consolidate Richelieu Hardware Ltd., we reinforce Richelieu Hardware Ltd., and we bring EBITDA margin as well as much as we can.

That selling with they sell in the US and they sell to Amazon. They have a substantial amount of sales to Amazon and they have specialists in in those type of sales. So so we like we like that very much so that that that that acquisition, you know, within the course after integration, you're going to take, you know, 18 months probably because we have to transfer the warehouses. We have is where they are. And the purpose is to have our 1 Stop Shop in Kitchener Ontario for all the retailers in Eastern Canada. So, basically, the product are going going to be transferred there as to as soon as we can, to make sure that the customer might benefit of the not only the ones shop, but the 1 for 8 different brand name of products. So basically these move are are very very positive even though sometimes the the amount of contribution is little, you know, in the year of the acquisition. But the potential for that type of of business is great for the future of the you and it don't, it does reinforce our Market position and it does prevent or competitor some time to get into the show that we already.

Servicing. So basically the the 2 purpose of the acquisition is to make sure that we consolidate show you. We reinforce the show you and we bring uh if the margin as well as much as we can.

[Analyst]: Fair enough. I appreciate the color there. Richard, when you think about the retailer business in Canada, I know Rona's got some ongoing investments. Maybe you could speak to the opportunities you see to drive further growth there.

Richard Lord: With all the retailers in Canada, we keep gaining market share because we have an excellent product offering that does answer the needs of the consumer as we speak. Managing space is a top priority for the retailers. Decorative is always the top priority, but we keep adding products in each of the stores. Rona is an excellent customer. That is a customer that buys something like, you know, it's less than 5% of our sales, but it's substantial. We work very well. They are very good partners, and we work very well with them as well as Home Depot. We keep adding products at Home Depot and other stores as well. Basically, the retailers' market is excellent for Richelieu Hardware Ltd. because we have so many products to sell to the pro business. There is a lot of products that are suitable for the consumers.

Okay, fair enough. Appreciate the color there. And, uh, Richard, when you think about the retailer business in Canada, I know, you know, Rona's got some ongoing investments. Maybe you could speak to the opportunity you see to drive further growth there.

With all the retailers in Canada. We keep gaining market share because we have an excellent product offering that do answer, the need of the consumer as we speak and because you know, let's say that, you know, managing space is is a top priority for the retailers. Decorative, otherwise, the top priority with, we keep adding products in each of the store is an excellent customer. That is a customer that buys something like a, you know, it's less than 5% of our sales, but it's it's substantial and we work very well. We, they are very good partners and we work very well with them as well as own people. We keep adding product at all the people and all other other work store as well. So, so basically,

Richard Lord: These products are suitable for the consumers as the products that we introduce to the retailers, you know, with the right prices and the right instructions so the product can be easily installed for consumers. I'm very positive for the long term that sales to outdoor retailers remain substantial, substantial in importance for our futures in terms of generating profit as well because we don't have two CFOs and five more accountants because we sell to retailers. The only variable cost applies to commission to salespeople and people that work in the warehouse. Basically, this is very beneficial.

The retailers Market is excellent for you because we have so many products to sell to the pro business. There is a lot of product that that are suitable for the consumers. This product is suitable for the consumers are the product that you introduced to the retailers when, you know, with the, with the right prices and and the, the, the right instructions. So the, the, the product can be easily installed for consumers, but I'm very positive that for the long term that the sales to, how do I retailers Remain the substantial, you know, a substantial in importance for our futures, in terms of generating profit as well, because we don't have 2 CFO

[Analyst]: Okay, great. Thanks, Richard. Just a final question I had, Antoine. It looks like, you know, if Q4 margins end up being comparable to Q3, you'd probably end the year close to 10.8% EBITDA margins. I think in 2024, you were at 11% EBITDA margins. Can you drive further margin growth in 2026 if the housing market does not improve? If it's the same housing outlook, is there enough levers to drive some additional margin expansion? Maybe you could, I don't know if you're able to quantify that sort of self-help that is within reach.

And the five, more contents because we sell, because we sell to retailers, only variable costs apply to commissions to salespeople and people that work in the warehouse. So basically, this is the benefit—very beneficial.

Okay, great. Uh, thanks, Richard. And just a final question. I had, um, I just want to, looks like, you know, with the, if Q4 margins end up being comparable to Q3, probably end the year close to 10.8%, even a margins. I think 2024 you were at, uh, 11% even a margins.

Richard Lord: I think the trend that you saw in the third quarter could continue in 2026 with the current market. Of course, to drive a significant increase in EBITDA, we would need a more vigorous market. Let's say that it remains like where we are today. I think the trend that you've seen in Q3 could continue next year.

Can you drive further? Margin growth in 26. If the housing market does not improve? If it's the same housing Outlook, is there enough? Levers to drive some additional margin expansion? And maybe you could, I don't know if you're able to quantify that uh sort of self-help that uh is Within Reach.

[Analyst]: Okay, great. In the mid-11s sort of range. That's all I had. I'll turn it over. Thanks.

I think the I think the trend uh that you you saw in the third quarter could continue in the in 2026 with uh with the current market, of course, to drive uh to drive a significant increase in in in the we would need a more vigorous uh vigorous Market. But let's see that it remains like where we are today. I think the trend that you've seen in, Q3 could continue next year,

Richard Lord: Thank you. Thank you, Harmeer.

Operator: Thank you. At this time, Mr. Lord, we have no other questions registered.

Okay, great. So sort of in the the mid 11s sort of range. Um great. Well that's that's all I had. I'll, I'll turn it over. Thanks. Thank you. Thank you.

Richard Lord: Thank you very much, all of you, for attending. We're already willing to receive your call if you want to contact us. Thank you very much.

Thank you. And at this time we have no other questions registered.

Operator: Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. At this time, we ask that you please disconnect your lines.

Do it. Thank you very much. All of you for attending. We are already willing to receive your call if you want to contact us. Thank you very much.

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

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