Q3 2026 Richelieu Hardware Ltd Earnings Call

October 8, 2026

Speaker #4: Good morning, ladies and gentlemen, and welcome to the Richelieu Hardware third quarter results conference call. At this time, all lines are in listen-only mode.

Operator: Good morning, ladies and gentlemen, and welcome to the Richelieu Hardware Q3 Results Conference Call. At this time, all lines are in 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 star zero for the operator. Also note that this call is being recorded on 8 October 2026.

Speaker #4: 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 star zero for the operator.

Speaker #4: Also note that this call is being recorded on October 8, 2026. Bonjour, mesdames et messieurs, et bienvenue aux résultats du troisième trimestre 2026 de Quincaillerie Richelieu.

Speaker #4: 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 #4: Si vous avez besoin d'assistance au cours de l'appel, veuillez appuyer sur l'étoile et zéro. Veuillez aussi prendre note que cet appel est enregistré. Le 8 octobre 2026.

Speaker #4: J'aimerais maintenant céder la parole à Monsieur Richard Lord, président et chef de la direction. La parole est à vous.

Speaker #2: Merci. Thank you. Good morning, ladies and gentlemen, and welcome to Richelieu's conference call for the third quarter and first nine months ended August 31, 2026.

Richard Lord: Merci. Thank you. Good morning, ladies and gentlemen, and welcome to Richelieu's conference call for the Q3 and first 9 months ended 31 August 2026. With me is Antoine Auclair, CFO and COO. As usual, note that some of today's issue include forward-looking information, which is provided with the usual disclaimer as reported in our financial filings. Our Q3 was marked by strong growth and strategic expansion, once again demonstrating the strength of our business model and our ability to capitalize on new opportunities. We are particularly proud of the acquisition of The Penrod Company, the largest in our history, which we completed on 1 September. Following the acquisition of Solutions Acoustiques and Winnec in Canada during the Q3.

Speaker #2: 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 #2: Our third quarter was marked by strong growth and strategic expansion, once again demonstrating the strength of our business model and our ability to capitalize on new opportunities.

Speaker #2: We are particularly proud of the acquisition of Panarod, the largest in our history, which we completed on September 1st. This follows the acquisition of Solution Acoustic and Winech in Canada during the third quarter.

Speaker #2: So far this year, our acquisition strategy has positioned us for sound future growth with a total of five acquisitions, adding $145 million in annual sales.

Richard Lord: So far this year, our acquisition strategy has positioned us for sound future growth with a total of 5 acquisitions, adding CAD 145 million in annual sales, expanding our market expertise, diversifying our specialized customer base, and providing significant additional network coverage in strategic markets. Our sustained investment in innovation, our various private label brands, our diversified market segment, and our distinctive service offering, including richelieu.com, provide us with competitive advantages that help us remain competitive in an uncertain economy. During the quarter, sales reached CAD 562 million, with growth across all market segments in Canada and in the US, including initial shipments to our major US retail customers. Our US operation continued to be a key driver in our growth. In Canadian dollars, our US sales accounted for 46.6% of total sales for the quarter.

Speaker #2: Expanding our market expertise diversifying our specialized customer base and providing significant additional network coverage in strategic markets. Our sustained investment in innovation of various private labeled brands of diversified market segment and our distinctive service offering including richelieu.com provide us with competitive advantages that help us remain competitive in an uncertain economy.

Speaker #2: During the quarter, sales reached 562 million with growth across all market segments in Canada and in the US, including initial shipments to a major US retail customers.

Speaker #2: Our U.S. operation continues to be a key driver in our growth. In Canadian dollars, our U.S. sales accounted for 46.6% of total sales for the quarter. Sales to manufacturers in the U.S. now represent 49% of our total sales to manufacturers.

Richard Lord: Sales to manufacturers in the US now represent 49% of our total sales to manufacturers, highlighting the strength of our presence in this market. EBITDA was up 15% to CAD 65 million, supported by sales growth and favorable impact of a CAD 3 million refund of US tariff, representing about 60 basis points to our EBITDA margin of 11.7%. Let's take a look at our most recent acquisitions. Completed in Q3, Solutions Acoustiques, based in the Montreal area, is renowned for its standard decorative and high-performance acoustic solutions, a growing market. Winnec operates three distribution centers for specialized hardware in the Greater Toronto area. On 1 September, we completed the acquisition of The Penrod Company's hardware division, adding annual sales of $60 million and seven distribution centers across the US.

Speaker #2: Highlighting the strength of our presence in this market. EBITDA was up 15% to 65 million supported by sales growth and favorable impact of a 3 million refound of US tariff.

Speaker #2: Representing about 60 basis points to our EBITDA margin of 11.7%. Now, let's take a look at our most recent acquisitions. Completed in the third quarter, Solution Acoustic, based in the Montreal area, is renowned for its standard decorative and high-performance acoustic solutions.

Speaker #2: A growing market, and Winech, which operates three distribution centers of specialized hardware in the Greater Toronto Area. On September 1st, we completed the acquisition of the Panarod Company's hardware division, adding annual sales of $60 million in US dollars and seven distribution centers across the US.

Speaker #2: For us, this is an outstanding opportunity to strengthen our position with our diversified customer base of door manufacturers, architects, residential and commercial contractors, and specialty distributors.

Richard Lord: For us, this is an outstanding opportunity to strengthen our position with a diversified customer base of door manufacturers, architects, residential and commercial contractors, and specialty distributor. I will now ask Antoine to review the financial highlights for the quarter and the first nine months.

Speaker #2: I will now ask Antoine to review the financial highlights for the quarter and the first nine months.

Speaker #3: Thanks, Richard. In the third quarter, sales reached $562 million, up 12.6%, or $62.8 million, driven by 10% internal growth and a 2.6% contribution from acquisitions.

Antoine Auclair: Thanks, Richard. In Q3, sales reached CAD 562 million, up 12.6% or CAD 62.8 million, driven by 10% internal growth and a 2.6% contribution from acquisitions. At comparable exchange rate, sales growth would have been 11.3%. In Canada, sales totaled CAD 300 million, up 10.2%, with strong growth from all regions. Sales to manufacturers amounted to CAD 252 million, up 11.4%, while sales to the hardware retailers totaled CAD 48 million, up 4.6%. In the US, sales reached $187 million, up 12.9%. Sales to manufacturers reached $172 million, up 9.3%, with 7% from internal growth. In the hardware retailers and renovation superstores market, sales reached CAD 14.7 million, up 86.1%, mainly reflecting initial deliveries to a major customer in the US. In Canadian dollars, total sales in the US reached CAD 262 million, up 15.4% over last year and accounting for 46.6% of total sales.

Speaker #3: At comparable exchange rates, sales growth would have been 11.3%. In Canada, sales totaled $300 million, up 10.2%, with strong growth from all regions. Sales to manufacturers amounted to $252 million, up 11.4%, while sales to hardware retailers totaled $48 million, up 4.6%.

Speaker #3: In the US, sales reached 187 million in US dollars up 12.9%. Sales to manufacturers reached 172 million in US dollars up 9.3% with 7% from internal growth.

Speaker #3: In the hardware retailers and renovation superstores market, sales reached $14.7 million, up 86.1%, mainly reflecting initial deliveries to a major customer in the US.

Speaker #3: In Canadian dollars, total sales in the US reached $262 million, up 15.4% over last year and accounting for 46.6% of total sales. For the first nine months, total sales reached nearly $1.6 billion, up 7.2%, of which 4.6% resulted from internal growth and 2.6% from acquisition.

Antoine Auclair: For the first nine months, total sales reached nearly CAD 1.6 billion, up 7.2%, of which 4.6% resulted from internal growth and 2.6% from acquisition. In comparable exchange rate, sales growth would have been 7.9%. In Canada, sales reached CAD 841 million, up 6.5%, including 4.5% internal growth and 2% from acquisition. Sales to manufacturers totaled CAD 704 million, up CAD 47.7 million or 7.3%. Sales to hardware retailers and renovation superstores were CAD 136.8 million compared to CAD 132.9 million, up 2.9%. In the US, sales amounted to $518 million, up 9.4%, with 3.3% from internal growth and 6.1% from acquisitions. They reached CAD 717 million, up 8%, accounting for 46% of total sales. In US dollars, sales to manufacturers totaled $485 million, an increase of $37.5 million or 8.4%, driven by 5.3% internal growth and 3.1% from acquisitions.

Speaker #3: At comparable exchange rates, sales growth would have been 7.9%. In Canada, sales reached $841 million, up 6.5%, including 4.5% internal growth and 2% from acquisitions.

Speaker #3: Sales to manufacturers totaled $704 million, up $47.7 million or 7.3%. Sales to hardware retailers and renovation superstores were $136.8 million, compared to $132.9 million, up $2.9 million.

Speaker #3: In the US, sales amounted to 518 million in US dollars up 9.4% with 3.3% from internal growth and 6.1% from acquisitions. They reached 717 million in Canadian dollars up 8% accounting for 46% of total sales.

Speaker #3: In US dollars, sales to manufacturers totaled $485 million, an increase of $37.5 million, or 8.4%, driven by 5.3% internal growth and 3.1% from acquisitions.

Speaker #3: Sales to hardware retailers and renovation superstores amounted to $33 million, which represents an increase of $6.9 million, or 26.4%, with 20.1% coming from internal growth and 6.3% from acquisitions.

Antoine Auclair: Sales to hardware retailers and renovation superstores amounted to CAD 33 million, which represents an increase of CAD 6.9 million or 26.4%, with 20.1% coming from internal growth and 6.3% from acquisitions. Q3 EBITDA reached CAD 65.5 million, up CAD 8.5 million or 14.8% from last year. EBITDA margin was 11.7% compared to 11.4% last year. The slight increase reflects the impact of the reimbursement of tariffs, which represent CAD 3 million and was recorded as a reduction of cost of goods sold. Excluding this reimbursement, EBITDA margin would have been 11.1%. For the first nine months, EBITDA totaled CAD 164.8 million, up 6.5%, with the EBITDA margin at 10.6%. Q3 net earnings attributable to shareholders reached CAD 29.2 million, up 22.4%, while diluted net earnings per share increased 23.3% to CAD 0.53 from CAD 0.43 last year.

Speaker #3: Third quarter EBITDA reached 65.5 million up 8.5 million or 14.8% from last year EBITDA margin was 11.7% compared to 11.4% last year. The slide increase reflects the impact of the reimbursement of tariffs which represent 3 million and was recorded as a reduction of cost of goods sold.

Speaker #3: Excluding this reimbursement, EBITDA margin would have been 11.1%. For the first nine months, EBITDA totaled $164.8 million, up 6.5%, with the EBITDA margin at 10.6%.

Speaker #3: Third quarter net earnings attributable to shareholders reached $29.2 million, up 22.4%, while diluted net earnings per share increased 23.3% to $0.53 from $0.43 last year.

Speaker #3: Excluding the reimbursement of tariff, EPS would have been $0.49, representing a 14.1% increase from last year. For the first nine months, net earnings attributable to shareholders reached $66.9 million, up 11%.

Antoine Auclair: Excluding the reimbursement of tariff, EPS would have been CAD 0.49, representing a 14.1% increase from last year. For the first nine months, net earnings attributable to shareholders reached CAD 66.9 million, up 11%. Diluted net earnings per share increased to CAD 1.21 compared to CAD 1.08 last year, up 12%. Q3 cash flow from operating activities before net change in non-cash working capital reached CAD 54.5 million, up 13.5% from CAD 48.1 million last year. The change in non-cash working capital represented a cash inflow of CAD 4.8 million, primarily driven by a CAD 24.7 million change in accounts payable while accounts receivable inventories and other items used CAD 19.9 million in cash. As a result, operating activities generated a cash inflow of CAD 59.4 million for the quarter.

Speaker #3: Diluted net earnings per share increased to $1.21, compared to $1.08 last year, up 12%. Third-quarter cash flow from operating activities, before net change in non-cash working capital, reached $54.5 million, up 13.5% from $48.1 million last year.

Speaker #3: The change in non-cash working capital represented a cash inflow of $4.8 million, primarily driven by a $24.7 million change in accounts payable, while accounts receivable, inventories, and other items used $19.9 million in cash.

Speaker #3: As a result, operating activities generated a cash inflow of $59.4 million for the quarter. For the first nine months, cash flow from operating activities represented a cash inflow of $95.9 million compared to $133.6 million last year, when cash flows benefited from a significant reduction in inventory levels.

Antoine Auclair: For the first nine months, cash flow from operating activities represented a cash inflow of CAD 95.9 million compared to CAD 133.6 million last year when cash flows benefited from a significant reduction in inventory levels. For Q3, financing activities represented a cash inflow of CAD 36.9 million in cash compared to a cash outflow of CAD 25.4 million last year, primarily reflecting the addition of a long-term debt of CAD 62.4 million. For the first nine months, financing activities used cash flow of CAD 21.7 million compared to CAD 70.1 million in 2025. In the first nine months, we invested CAD 45.8 million, including CAD 31.7 million for four business acquisitions and CAD 14.1 million primarily for equipment required to maintain and improve operational efficiency, including IT equipment. We continue to maintain a strong balance sheet with working capital of CAD 702 million and a working capital ratio of 3.2:1. I now turn it over to Richard.

Speaker #3: For the third quarter, financing activities represented a cash inflow of $36.9 million compared to a cash outflow of $25.4 million last year.

Speaker #3: Primarily reflecting the addition of a long-term debt of 62.4 million. For the first nine months, financing activities used cash flow of 21.7 million compared to 70.1 million in 2025.

Speaker #3: In the first nine months, we invested $45.8 million, including $31.7 million for four business acquisitions and $14.1 million primarily for equipment required to maintain and improve operational efficiency, including IT equipment.

Speaker #3: We continue to maintain a strong balance sheet, with working capital of $702 million and a working capital ratio of 3.2 to 1. I now turn it over to Richard.

Speaker #2: Thank you, Antoine. In conclusion, I want to highlight the $15 million strategic investment we announced in September at our Drummondville facility. This project, which is already underway, will more than quadruple the warehouse footprint, increasing it from 40,000 to 180,000 square feet by spring 2027.

Richard Lord: Thank you, Antoine. In conclusion, I want to highlight the CAD 15 million strategic investment we announced in September at our Drummondville facility. This project, which is already underway, will more than quadruple the warehouse footprint, increasing it from 40,000 to 180,000 square feet by spring 2027. It will support our future growth in the Centre-du-Québec region and beyond. The economic outlook remains uncertain, but we continue to move forward with confidence. Throughout our history, we have used periods like these to strengthen Richelieu and prepare for market recovery. We are taking the same approach today: investing in innovation, expanding our market presence, and pursuing acquisition. This environment also creates opportunity for us to bring strong businesses into Richelieu network. We have the financial strength, the team, and the experience to act on these opportunities. We intend to keep moving forward and build on the momentum we have created.

Speaker #2: It will support our future growth in the center of the Quebec region and beyond. The economic outlook remains uncertain, but we continue to move forward with confidence.

Speaker #2: Throughout our history, we have used periods like these to strengthen Richelieu and prepare for market recovery. We are taking the same approach today: investing in innovation, expanding our market presence, and pursuing acquisition.

Speaker #2: This environment also creates opportunities for us to bring strong businesses into the Richelieu network. We have the financial strength, the team, and the experience to act on these opportunities.

Richard Lord: This environment also creates opportunity for us to bring strong businesses into Richelieu network. We have the financial strength, the team, and the experience to act on these opportunities. We intend to keep moving forward and build on the momentum we have created. Thanks, everyone. We will now be happy to answer your questions.

Speaker #2: We intend to keep moving forward and build on the momentum we have created. Thanks, everyone. We'll now be happy to answer your questions.

Richard Lord: Thanks, everyone. We will now be happy to answer your questions.

Speaker #1: Thank you. Ladies and gentlemen, if you do have any questions at this time, please press star, followed by one, on your touchtone phone. You will then hear a prompt that your hand has been raised.

Operator 2: Thank you. Ladies and gentlemen, if you do have any questions at this time, please press star followed by one on your touch-tone phone. You will then hear a prompt that your hand has been raised, and if you should wish to decline from the polling process, please press star followed by two. If you are using a speakerphone, you will need to lift the handset first before pressing any keys. Your first question will be from Hamir Patel at CIBC. Please go ahead.

Operator: Thank you. Ladies and gentlemen, if you do have any questions at this time, please press star followed by one on your touch-tone phone. You will then hear a prompt that your hand has been raised, and if you should wish to decline from the polling process, please press star followed by two. If you are using a speakerphone, you will need to lift the handset first before pressing any keys. Your first question will be from Hamir Patel at CIBC. Please go ahead.

Speaker #1: An issue should wish to decline from the polling process, please press star followed by two. And if you're using a speakerphone, you will need to lift the handset first before pressing any keys.

Speaker #1: Mesdames et messieurs, si vous avez des questions, veuillez s'il vous plaît appuyer sur l'étoile suivie du 1. And your first question will be from Amir Patel at CIBC.

Speaker #1: Please go ahead.

Speaker #3: Hi, good morning. Congrats on the strong quarter. Richard, you know you pointed to in the prepared remarks pricing driving the majority of the double digit organic comps.

Hamir Patel: Hi, good morning. Congrats on the strong quarter. Richard, you pointed to, in the prepared remarks, pricing driving the majority of the double-digit organic comps. How much was pricing to the organic growth percentage, and would you expect that tailwind to persist for the next three quarters?

Speaker #3: How much was pricing to the organic growth percentage and would you expect that tailwind to persist for the next three quarters?

Speaker #2: Thank you. The pricing represented about 40% of the organic growth, and that will be—I don't see that for the quarters to come. I think the pricing adjustment that had to be made because of the tariff, that's already behind us.

Richard Lord: I think the pricing represented about 40% of the organic growth. I do not see that for the quarters to come. I think the pricing adjustment that has to be made because of the tariff, that is already behind us. There could be more pricing in the future. But that would be because of price increases from our suppliers, which we try to control at our best. But basically, in the near future, we see the pricing situation to be stable.

Speaker #2: There could be more pricing, you know, in the future, but that will be because of price increases from our suppliers, which we try to control at our best.

Speaker #2: But basically, in the near future, we see the pricing situation to be stable.

Speaker #3: Okay, great. And Richard, are you able to share how your sales comps in September fared for both manufacturers and retailers?

Hamir Patel: Okay, great. Richard, are you able to share how your sales comps in September fared for both manufacturers and retailers?

Speaker #2: Oh yes, because I'm also—I think it's interesting to mention the different market segments by product segment. Let's say, in the kitchen cabinet industry, our sales in Canada increased by 5.3%, and in the US, 4.8%.

Richard Lord: Oh, yes. I think it's interesting to mention the different market segment by product segment. Let's say the kitchen cabinet industry. Our sales in Canada increased by 5.3%, and in the US, 4.8%. That's the kitchen cabinet industry. That means that the consumers continue to do some renovation because that market is related mainly to the residential market. We know that the construction is down. I guess what we see is that the sales increase is mainly due to the people doing some renovation, which is a very good market for Richelieu. The commercial renovation is also very strong in Canada with an increase of 11%, while it is an increase of 5.5% in the US. Other specialized market, including the closet industry, our sales in Canada increased by 10.5%, while it has increased by 21% in the US. It's very encouraging to see that.

Richard Lord: Yes. I think it's interesting to mention the different market segment by product segment. Let's say the kitchen cabinet industry. Our sales in Canada increased by 5.3%, and in the US, 4.8%. That's the kitchen cabinet industry. That means that the consumers continue to do some renovation because that market is related mainly to the residential market. We know that the construction is down. I guess what we see is that the sales increase is mainly due to the people doing some renovation, which is a very good market for Richelieu. The commercial renovation is also very strong in Canada with an increase of 11%, while it is an increase of 5.5% in the US. Other specialized market, including the closet industry, our sales in Canada increased by 10.5%, while it has increased by 21% in the US. It's very encouraging to see that.

Speaker #2: The kitchen cabinet industry—so that means that consumers continue to do some renovation, because that market is related mainly to the residential market.

Speaker #2: So basically, we know that construction is down. So I guess what we see is that the sales increase is mainly due to people doing some renovation, which is a very good market for Richelieu.

Speaker #2: The commercial renovation is also very strong in Canada, with an increase of 11%, while it is an increase of 5.5% in the US. Other specialized markets, including the closet industry, saw our sales in Canada increase by 10.5%, while they increased by 21% in the US.

Speaker #2: It's very encouraging to see that. Again, the closet industry is mainly related to residential renovation. The door and window market will increase by 5% in Canada, 8% in the US. Residential furniture is interesting to mention; we see that this is a difficult market, but we see the customers of those market segments buying more from Richelieu instead of importing their own goods from overseas.

Richard Lord: Again, the closet industry is mainly related to the residential renovation. The door and window market will increase by 5% in Canada, 8% in the US. Residential furniture is interesting to mention. We see that this is a difficult market, but we see the customer of those market segment buying more from Richelieu instead of importing their own goods from overseas because the tariff affect their sales. They buy less. They don't import directly from Asia anymore. That brings some business to Richelieu. Office furniture is also encouraging in Canada with our sales increased by 10%, while it's flat in the US. Basically, all our market segment by different industry that we serve, it's very positive to realize that there is some business there, and Richelieu keeps moving by adding salespeople in the US. We try to keep the market moving.

Speaker #2: Because, you know, the tariff affects their sales, so they buy less and don't import directly from Asia anymore. So that brings some business to Richelieu.

Speaker #2: So, office furniture is also encouraging in Canada, with our sales increasing by 10%, while it's flat in the US. So basically, all our market segments by different industries that we serve are very positive. We realize that there is some business there, and Richelieu keeps moving by adding salespeople in the US. We try to keep the market moving; we don't stand still because the market is uncertain.

Richard Lord: We don't stand still because the market is uncertain.

Speaker #4: And Amir, if we look at the business as we speak, since the beginning and ending of the quarter, we're seeing internal growth of around 3 to 4% as we speak.

Antoine Auclair: Amir, if we look at the business as we speak since the ending of the quarter, we are seeing internal growth of around 3% to 4% as we speak.

Antoine Auclair: Hamir, if we look at the business as we speak since the ending of the quarter, we are seeing internal growth of around 3% to 4% as we speak.

Speaker #3: Okay, great. Thanks, Antoine. Just to clarify, I guess all the breakdown Richard provided was for the third quarter.

Hamir Patel: Okay, great. Thanks, Antoine. Just to clarify, I guess all the breakdown Richard provided was for Q3.

Speaker #4: Yeah. Yeah, exactly.

Antoine Auclair: Yeah, exactly.

Speaker #3: Okay. And then, Antoine, just thinking about even the margins—look, if you exclude the tariff refunds that came in, we're around 11.1% in Q3. What are you expecting to run out the year for Q4? And given the macro backdrop, how do you see the setup for 2027?

Hamir Patel: Okay. Antoine, just thinking about EBITDA margins, look like if you exclude the tariff refunds, they came in around 11.1% in Q3. What are you expecting to round out the year for Q4? Given the macro backdrop, how do you see the setup for 2027?

Speaker #4: I'm seeing pretty much the same thing as the similar quarter in Q4 regarding the EBITDA margins. So we're around 11%, and we're also working to maintain this 11% over the course of 2027.

Antoine Auclair: I'm seeing pretty much the same thing as similar quarter in Q4 regarding the EBITDA margin, so around 11%. We're working also to maintain this 11% over the course of 2027.

Speaker #3: Okay. So, to drive margin expansion next year, did you really need the macro backdrop to improve?

Hamir Patel: Okay. To drive margin expansion next year, do you really need the macro backdrop to improve?

Speaker #4: Yeah, we would need a more rigorous market. So sales growth it's good but it's nothing real volume will definitely help to improve this EBITDA margin.

Antoine Auclair: Yeah, we would need a more rigorous market. Sales growth is good, but it's nothing. Real volume will definitely help to improve this EBITDA margin.

Speaker #3: Okay, great. And just one last question I had with respect to the Penrod deal. I guess the closing date was in Q4?

Hamir Patel: Okay, great. Just the last question I had, with respect to The Penrod Company deal, I guess the closing date was in Q4. Can you speak to the valuation multiple that you paid there and how the EBITDA margins of that particular target would compare to the base business, maybe relative to historical acquisitions?

Speaker #3: Could you speak to the valuation multiple that you paid there, and how the EBITDA margins of that particular target would compare to the base business—maybe relative to historical acquisitions?

Speaker #4: Yeah, Penrod's EBITDA margin is similar to Richelieu, and we've paid a bit more than what we usually do, but we're confident that it's a strategic acquisition for us. We've paid around seven times EBITDA.

Antoine Auclair: Yeah, The Penrod Company's EBITDA margin is similar to Richelieu, and we have paid a bit more than what we usually do, but we are confident that it is a strategic acquisition for us, and we have paid around 7 times EBITDA.

Speaker #3: Okay, great. That's all I had. I'll turn it over. Thanks.

Hamir Patel: Okay, great. That is all I had. I will turn it over. Thanks.

Speaker #2: Thank you.

Antoine Auclair: Thank you.

Speaker #1: Once again, ladies and gentlemen, please press star one if you have any questions. Thank you. Next, we'll be Nathan Poe at National Bank. Please go ahead, Nathan.

Operator 2: Once again, ladies and gentlemen, please press star 1 if you have any questions. Thank you. Next will be Nathan Po at National Bank. Please go ahead, Nathan.

Operator: Once again, ladies and gentlemen, please press star 1 if you have any questions. Thank you. Next will be Nathan Po at National Bank. Please go ahead, Nathan.

Speaker #5: Good morning, everyone. Thank you for taking my question. My first question is about the EBITDA margins. Without the $3 million tariff refund, Q3 margins compressed year over year. What was driving the operating expenses line?

Nathan Po: Good morning, everyone. Thank you for taking my question.

Antoine Auclair: Good morning.

Nathan Po: My first question is about the EBITDA margins. Without the CAD 3 million tariff refund, Q3 margins compressed year-over-year. What was driving the operating expenses line? Normally with strong organic growth, like what you have posted this quarter, we would expect pricing on products and freight to be more margin accretive.

Speaker #5: Because normally, with strong organic growth like what you've posted this quarter, we'd expect pricing on products and freight to be more margin accretive.

Speaker #4: Yeah, you have to consider that we're passing the tariff as a dollar. So we're not taking any margin on those tariffs. So even though the price increases there, we're not gaining any additional margin there.

Antoine Auclair: Well, you have to consider that we are passing the tariff as a dollar. We are not taking any margin on those tariffs. Even though the price increase is there, we are not gaining any additional margin there. In total, this has a diluting impact on the margin, not in dollars, but in percentage. I think that after Q3, this should be behind us. Now the higher cost products are in, the tariffs impact are included in our average costing as well. That should be behind us starting Q4 and moving forward.

Speaker #4: So, in total, this has a diluting impact on the margin—not in dollars, but in percentage. But I think that after Q3, this should be behind us.

Speaker #4: So now the higher-cost products are in, and the tariffs' impact is included in our average costing as well. So that should be behind us starting Q4 and moving forward.

Speaker #5: Okay, thank you for the clarification there. And on the major U.S. initial shipments, how much of that rollout was completed in Q3, and perhaps how much is left for Q4?

Nathan Po: Okay, thank you for the clarification there. On the major US initial shipments, how much of that rollout was completed in Q3, and perhaps how much is left for Q4?

Speaker #4: Okay, so basically, the initial sales to this major customer have been around $7 million US in the third quarter. And on a yearly basis, we're talking about approximately $10 million US on a yearly basis.

Antoine Auclair: Okay, so basically the initial sales to this major customer, it is around $7 million US in the third quarter. On a yearly basis, we are talking about approximately $10 million US on a yearly basis. Now the recurring sales will start in the course of the fourth quarter, and after it is going to be business as usual for this major customer, and we are talking about $10 million annually. So approximately $2.5 million per quarter.

Speaker #4: So now the recurring sales will start in the course of the fourth quarter and after it's going to be business as usual on for this major customer.

Speaker #4: And we're talking about $10 million annually, so approximately $2.5 million per quarter.

Speaker #5: Okay, thank you very much for that color. Regarding the manufacturer’s organic growth—noticeably strong—can you break down the drivers of that? Perhaps, were there any non-recurring benefits to that quarter? And then, perhaps—yeah, no, that's it.

Nathan Po: Okay. Thank you very much for that color. Regarding the manufacturer's organic growth, notably strong. Can you break down the drivers of that? Perhaps, were there any non-recurring benefits to that quarter? That is it. Just manufacturer's organic growth.

Speaker #5: Just manufacturers organic growth.

Speaker #4: Yeah, not necessarily non-recurring. I think that it's been a strong quarter and in all region. And if we look at the if we look at the industrial business and the different region in Canada, so 9% growth in the east, Ontario it was plus 7.8%.

Antoine Auclair: Yeah. Not necessarily non-recurring. I think that it has been a strong quarter in all region. If we look at the industrial business in the different region in Canada, so 9% growth on the East. Ontario, it was +7.8%, so this is encouraging. In Western, around 8% growth in the industrial business. Like Richard said, around 40% of this is price, around the rest is volume. So we are encouraged by this performance. As I said earlier, if we look at September and the beginning of October, we are seeing 3% to 4% growth today.

Speaker #4: So this is encouraging, and Western saw around 8% growth in the industrial business. Like Richard said, around 40% of this is price; the rest is volume.

Speaker #4: So that's we're encouraged by this performance but as I said earlier, so if we look at September and the beginning of October, we're seeing like 3 to 4% growth today.

Speaker #2: And basically, what Richelieu is doing—we create the movement in the market. We are adding salespeople, and our sales or website is second to none; it's contributing largely to our sales increase as well.

Antoine Auclair: Basically what Richard is doing, we create the movement in the market. We are adding salespeople. Our website is second to none. It is contributing largely to our sales increase as well. Basically, all the means that we can find to reach the customers, to be close to the customers, service the customer well, and communicate well with the customers. We are investing in those segments in order to be close to our customers and getting the orders.

Speaker #2: So, basically, we use all the means that we can find to reach the customers, to be close to the customer service, to the customer, and to communicate well with the customers. We're investing in those segments in order to be close to our customers and getting the orders.

Speaker #5: Thank you. And for the comment on early September, October, internal growth, does that still match up with the commentary on 40% price and the rest of those volumes, or how does that break out?

Nathan Po: Thank you. For the comment on early September, October internal growth, does that still match up with the commentary on 40% price and rest as volumes, or how does that break out?

Speaker #4: Yeah, pretty much.

Antoine Auclair: Yeah, pretty much.

Speaker #5: And last one for me: with U.S. mortgage rates at a three-year high, can you tell us how customers and their order books are looking right now?

Nathan Po: Last one for me. With US mortgage rates at a three-year high, can you tell us how customers and their order books are looking right now?

Speaker #2: Well, customers are still busy because as I mentioned earlier in this meeting, I think the renewation markets remains healthy, not strong, but healthy. People that need to a new kitchen cabinet, a new closet, whatsoever.

Richard Lord: Well, customers are still busy because as I mentioned earlier in this meeting, I think the renovation market remains healthy. Not strong, but healthy. People that need a new kitchen cabinet, a new closet, whatsoever. I think people that have money, they do not hesitate to make those projects. If you remember, during the pandemic, people could not find a contractor to do their work. Now it is easier to find the contractors, to find kitchen cabinet manufacturers, and find furniture as well. Basically, the market is also favorable for the people that have money to spend in order to maintain their houses. That does apply to the commercial renovation market as well. When we see a growth of 11% in Canada, this is very strong. It is because of the commercial projects. The airports, the restaurants, and hotels are doing renovation. They are obliged to.

Speaker #2: I think people that have money, they do not hesitate to make those projects. And if you remember, during the pandemic, people could not find a contractor to do their work.

Speaker #2: So now it's easier to find a contractor to find a kitchen cabinet manufacturers and find furniture as well. So basically the market is also favorable for the people that have money to spend in order to maintain their houses that does apply to the commercial renovation market as well.

Speaker #2: When we see a growth of the 11% in Canada, this is very strong. It's because of the commercial projects, the airports, the restaurants, and hotels are doing renovation.

Richard Lord: When we see a growth of 11% in Canada, this is very strong. It is because of the commercial projects. The airports, the restaurants, and hotels are doing renovation. They are obliged to. They have to keep their place clean, and we see the tourists in Montreal and in Toronto and other areas of Canada as well. So the hotels, I think, are doing very good business, and they keep renovating.

Speaker #2: They're obliged to. They have to keep their place clean. And we see the tourists in Montreal and in Toronto and other area of Canada as well.

Richard Lord: They have to keep their place clean, and we see the tourists in Montreal and in Toronto and other areas of Canada as well. So the hotels, I think, are doing very good business, and they keep renovating.

Speaker #2: So the hotels keep, you know, I think are doing very good business and they keep renovating.

Speaker #5: Great to hear. Oh, and sorry, one last question. I noticed that last quarter, we were talking about how the eastern market in Canada was a bit challenging, with a specific callout to Ontario.

Nathan Po: Great to hear. Sorry, one last one. I noticed that last quarter we were talking about how the Eastern market in Canada was a bit challenging, specific call-out to Ontario.

Speaker #5: But you pointed out some pretty strong growth—it seems like an inflection this quarter. What was driving that?

Richard Lord: Yeah.

Nathan Po: You pointed out some pretty strong growth. Seems like an inflection this quarter. What was driving that?

Speaker #2: Well, the sales in Ontario increased by 7.8%, but we have to admit that the quarter of last year was not very good. So, basically, it's a jump over something that was not very good last year.

Richard Lord: Well, the sales in Ontario increased by 7.8%, but we have to admit that the Q4 of last year was not very good. So basically, it is a jump over something that was not very good last year. But what we are happy to see, though, is that the Ontario market seems to have reached the bottom of the barrel, so the thing cannot be worse. I see in the months to come that the business is going to pick up.

Speaker #2: So but what we have what we're happy to see though is that, you know, the Ontario market seems to have reached the bottom of the barrel.

Speaker #2: So, the situation cannot be worse, and I see in the months to come that the business is going to pick up.

Speaker #4: Yeah, hopefully this is a trend. So we'll see that that's a good that's a good quarter. So we'll see if this continues. But like Richard said, we're comparing ourselves with low comparables.

Antoine Auclair: Yeah, hopefully, this is a trend.

Richard Lord: Yeah, hopefully.

Antoine Auclair: That is a good quarter, so we will see if this continues. But like Richard said, we are comparing ourselves with low comparables. But we will see. Hopefully, this will continue, but we do not know yet.

Speaker #4: So, we'll see. Hopefully, this will continue, but we don't know yet.

Speaker #5: Okay, thank you very much. I will turn it over.

Nathan Po: Okay. Thank you very much. I will turn it over.

Speaker #4: Thank you.

Richard Lord: Thank you.

Antoine Auclair: Thank you.

Speaker #1: I think, at this time, Michel, we have no other questions registered. Please proceed.

Operator 2: At this time, Monsieur Lord, we have no other questions registered. Please proceed.

Operator: At this time, Monsieur Lord, we have no other questions registered. Please proceed.

Speaker #2: There are no more questions. Thanks again. It's always a pleasure for us to talk with you. You can phone us at your convenience. Thank you.

Richard Lord: There is no more questions. Thanks again. It is always a pleasure for us to talk to you. You can phone us at your convenience. Thank you. Have a good day.

Speaker #2: Have a good day.

Speaker #1: 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 line.

Operator 2: 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 line.

Operator: 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 line.