Adecco Group AG — Call Transcript 2026

Good morning. Welcome to the ADENTRA Fourth Quarter and Full-Year 2025 Results Conference Call. All lines have been placed on mute to prevent background noise. After the speaker's remarks, there will be a question and answer session. With me on the call today are Rob Brown, ADENTRA's President and Chief Executive Officer, and Faiz Karmally, Vice President and Chief Financial Officer. ADENTRA's earnings release, financial statements, and MD&A for the year ended December 31, 2025 are available on the investor section of our website and on SEDAR+. Before we begin, I'd like to remind listeners that management's comments may include forward-looking statements. Actual results could differ materially due to risks and uncertainties outlined in our filings. All dollar figures mentioned today are in U.S. dollars unless otherwise stated. I will now turn the call over to Rob Brown. Please go ahead. Thanks, operator, and good morning, everyone. I'll start with a few comments on our performance in 2025 and the progress we made across our strategic priorities. Faiz will then walk through the fourth quarter financial results in more detail, and I'll return at the end to discuss current trends and our outlook. Looking back on 2025, I'm pleased with how our team executed in what remained a relatively muted construction environment. Residential activity across North America continued to face headwinds, particularly from affordability challenges tied to mortgage rates and limited housing inventory. Against that backdrop, our focus remained firmly on the things we can control, operating excellence, margin discipline, and strong cash generation. That approach once again allowed ADENTRA to deliver steady results. For the year, sales increased to CAD 2.25 billion, representing 3% growth compared to 2024, while adjusted EBITDA rose to CAD 187.9 million. Pricing conditions also stabilized during the year after a period of deflation across several product categories, removing a headwind which helped support our performance. Importantly, the business continued to generate strong cash flow. We produced over CAD 160 million in operating cash flow, which allowed us to strengthen our balance sheet while continuing to return capital to shareholders. During the year, we bought back 3.5% of our outstanding shares while returning CAD 29.5 million to shareholders through dividends and share repurchases. At the same time, we continued to reduce leverage, finishing the year at 2.2 times net debt to EBITDA, which positions us well as we look forward toward future growth opportunities. The consistency of these results reflects the strength of ADENTRA's platform. Today, we operate 81 distribution facilities across North America, connecting more than 2,500 suppliers with over 60,000 customers. We're a vital part of the supply chain, bridging the gap between manufacturers who produce large volumes of specific products and customers who require credit, small volumes of many products, and often delivered on a just-in-time basis. Our model builds on this core function in the supply chain by combining strong local operating brands with centralized capabilities that provide purchasing power, shared services, and digital infrastructure. This creates a sustainable competitive advantage. During 2025, we continued to build on our platform in several important ways. First, supply chain excellence remained a focus. Our sourcing network now spans more than 30 countries, giving us flexibility to manage trade dynamics while continuing to provide customers with a superior suite of products. Supply chain excellence includes stringent compliance, the success of which was underscored by our recovery of $25.5 million of trade duties, including interest, following the successful outcome of the U.S. Department of Commerce trade case related to hardwood plywood products from Vietnam. Second, we continued to invest in digital capabilities across the organization. Our digital sales platform is increasingly embedded in our operating model, providing customers with 24-hour access to inventory and automated quoting tools while supporting more than 20% of our annual sales. Third, acquisition-driven growth remains a core part of our long-term strategy. During 2025, we continued integrating Woolf Distributing, which we acquired in 2024. The business contributed $159 million in revenue during the year, expanded our presence in the U.S. Midwest, and strengthened our exposure to specialty outdoor living products and the pro dealer customer channel. Overall, the progress we made during the year further reinforced the competitive advantages of our platform and the strength of our operating model. With that overview, I'll now turn the call over to Faiz to review the financial results in more detail. Faiz? Thanks, Rob, and good morning, everyone. As a reminder, all dollar figures mentioned today are in U.S. dollars unless otherwise indicated. For the three months ended December 31, 2025, ADENTRA generated sales of $517.5 million, a decrease of 2.5% compared to Q4 2024. The decline was primarily attributable to lower volumes, partially offset by improved product pricing. In the U.S., fourth quarter sales were $477.9 million, down 2.4% year-over-year, reflecting a 4.7% decline in volumes that was partially offset by a 2.2% increase in product prices. In Canada, sales totaled CAD 55.2 million, representing a 3.3% decrease year-over-year, also primarily driven by lower volumes with modest pricing improvements. Despite the softer demand environment, our margin profile remains strong. Fourth quarter gross margin was $114.4 million, representing 22.1% of sales, an improvement from 21.7% in the prior year quarter. This reflects the continued effectiveness of our procurement discipline and pricing strategy. Operating expenses totaled $94.7 million, essentially flat compared to the prior year. The slight increase reflects higher costs associated with leased premises, which were largely offset by a favorable adjustment related to contingent consideration from the Woolf acquisition. Adjusted EBITDA for the quarter was $43.7 million, up 3.7% year-over-year, demonstrating the resilience of our operating model even in softer market environment. On a reported basis, net income was $32.1 million or $1.32 per share, compared to $8.4 million in the prior year quarter. The increase was primarily driven by lower finance expense relating primarily to foreign exchange gains in the quarter and the recognition of deferred tax assets related to an internal restructuring completed during the fourth quarter. On an adjusted basis, adjusted EPS for the quarter was CAD 0.67, an increase of CAD 0.16 compared to CAD 0.51 in Q4 2024. Turning to cash flow, we generated CAD 41.9 million of operating cash flow before changes in working capital, and working capital reductions contributed an additional CAD 57.8 million, bringing total operating cash flow for the quarter to CAD 99.6 million. The working capital release reflects our seasonal inventory normalization in the second half of the year, reflecting the slower winter construction period. From a balance sheet perspective, we ended the year with a net debt to EBITDA leverage ratio of 2.2 times, well within our target range and providing significant financial flexibility heading into 2026. Our capital allocation priorities remain unchanged. We continue to focus on maintaining a strong balance sheet, investing in organic growth initiatives, pursuing accretive acquisitions, and returning capital to shareholders through dividends and opportunistic share repurchases. With that, I'll turn the call back over to Rob. Rob? Thanks, Faz. As we look forward to 2026, we continue to approach the near-term environment with measured caution. Elevated U.S. mortgage rates and limited housing inventory remain key challenges for affordability, and geopolitical tensions and evolving trade policies continue to contribute to macroeconomic uncertainty. In the first two months of the year, sales were down approximately 2% compared to the same period in 2025, partly reflecting the impact of unfavorable winter weather to start the year. At the same time, we are encouraged by several potential developments that could improve the environment over time. Interest rates began easing during 2025, and government policy initiatives aimed at increasing housing affordability and supply could support residential construction demand in the years ahead. Over the longer term, the underlying fundamentals of the housing market remain intact. Structural housing undersupply in North America, favorable demographic trends, and an aging housing stock continue to support long-term demand for the products we distribute. Within that context, ADENTRA remains well-positioned. Our platform is diversified across geographies, products, and customer channels, and we continue to benefit from our national footprint, strong supplier relationships, and global sourcing capabilities. Our scalable operating model allows us to maintain margin discipline during softer periods while also positioning the business to capture operating leverage as volumes recover. Looking ahead, we will continue executing within our full value, full cycle value creation framework, focusing on operational excellence, disciplined capital allocation, and accretive acquisitions in our large and highly fragmented market. We believe this approach will allow us to continue generating strong returns on invested capital and long-term growth for our shareholders. With that, we'll open the line for questions. Operator? Thank you, sir. 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 acknowledging your hand has been raised. If you would like to decline from the polling process, please press star followed by two. If you're using a speakerphone, you will need to lift the handset first before pressing any keys. Please go ahead and press star one now if you have any questions. Your first question will be from Kyle McPhee at ATB Capital Markets. Please go ahead, Kyle. Hello, everyone. First one for me, just on your OpEx for Q4, it was down meaningfully. You know, I've looked through all the moving pieces like premises costs being up a bit, that favorable impact of the Woolf contingent consideration change that flowed through your OpEx. After adjusting for all this, it looks like you still had additional OpEx declines. That's probably, you know, your ongoing cost optimization. That is what I wanna confirm. Have you been ratcheting down the OpEx levels to match the top line environment you are facing? Are these cuts that we can see implied in these Q4 results durable, you know, throughout 2026, maybe even more on the come? Hey, Kyle. It's Faiz here. Good morning. I can take that one. You're right. When you peel back the noise, operating expenses were down a little more than if you were comparing to the pace we were at the trailing couple quarters. There's two things there. One, that's just acknowledging the slower volumes that we had in Q4, right? Some of that is just some variable costs coming in lower because top line volumes were lower in the fourth quarter than the previous quarters. Some of that is also what you described, which is we have made some proactive changes to our cost base. We've talked about this previously, particularly around warehouse space. We have less warehouse space today than we did a year ago, as an example. We've done some things around headcount as well. I would describe those things as durable, but they're just part of the story. As you head into 2026, we will be facing some inflationary increases on larger pieces of our expenses, which, as you know, are gonna be really premises and people costs. That's going to be around leasing costs for our 80 facilities that we lease and inflationary type increases in certain places around wages and benefits. That might be in the order of magnitude, low single digit, like you know, it might be 2% this year. That's the color I would offer you. Got it. Okay. You know, aside from lease premises costs going up, like, is there an opportunity to eliminate more of your warehouses based on your kind of lease maturity schedule throughout the year? Is that in the cards at all? That's something we're always looking to do. We've got 80 leases, and in terms of expiry, they're laddered. Every year you're gonna have a handful come up that you're going to make decisions around whether it's to renew it or to take less or more leasing space. We'll look at that. I think we did a lot in 2025 in terms of, you know, if you look at the warehouse count, again, this time a year ago it was more like 86, now we're 81. I think we've done things there to rightsize for the pace that we are expecting in 2026. If that's different, we'll have opportunities to look at that, as you mentioned. Got it. Okay. Appreciate the color. I'll pass the line for now. Thanks. Thank you. Next question will be from Frederic Tremblay at Desjardins Capital Markets. Please go ahead, Frederic. Thanks. Good morning. I'm just curious if, you know, given the current environment that we're in, are you seeing or are you expecting a meaningful customer rotation within your good, better and best offerings? I guess I'm just trying to better understand if customers, you know, moving to lower price items is a possibility, and if so, the kind of impact we should expect from, you know, on a margin perspective from that, if any. Hey, morning, Frederic. It's Rob. Yes, possibly. I wouldn't call it out as some big substantial shift. However, we always do have what you said, which is options at different price points for people to participate in any given product set. We've seen a little bit of that, which is reflective also in margin. But I think it's not a thesis that I would, you know, overly focus on. It's just part of the overall mix, and there's going to be some moving around within that mix from time to time. But it's not a kind of real theme that we're seeing or talking about here. Got it. Thanks for that. Just on the trends so far in Q1, you mentioned sales being down 2% in the first two months of the year. Just wondering if you could maybe break that down a little more. You know, we saw pricing in Q4 being positive. Was that still the case in Q1 and therefore your volumes are down more than 2%? Just to the extent that you can comment on just the pricing and volume trends within that 2% decline. A few points. More volume than price. We've not really seen a pullback in the pricing, so this is more volumetric. Then as we also discussed in the release, there were some weather-related impacts in January, February. I think we all tracked the big storm. We don't typically talk a whole bunch about weather, but it was a prolonged event that did cost us some sales days geographically in some parts of the network. January and February are also, as we know, just the entry points into the year. They tend to be the seasonally slowest. We'll have to see how things transpire through the balance of the quarter through March, which is a longer sales period if you count the number of days and gets closer to entering into that spring selling season. I think we have to stay tuned a little bit on that. Great. Thanks for taking the questions. I'll get back in the queue. Thank you. Next question will be from Nikolai Goroupitch at CIBC Capital Markets. Please go ahead, Nikolai. Hi. Following the announcement of the preliminary antidumping and countervailing duties on hardwood and plywood imports from China, Indonesia, and Vietnam, do you expect these measures to drive up product prices of domestic products? There's always some interrelatedness between what's going on in import markets and domestic markets. I would say, however, that, you know, those outcomes were, well telegraphed and understood that that would probably be the case, and there's already been, appropriate supply chain shifts. We don't view them as those announcements as something that's gonna meaningfully shift markets. Okay, I see. Thanks. I guess given the volatile market conditions, could you highlight specific areas of strength and weakness across various product categories within the business? We're always selling the mix. I mean, that's the value of distribution. We're not, you know, particularly power focused on any one category. When we're going to a customer, it's with a wide variety of products on that. The overall product set tends to move not perfectly aligned, but generally in lockstep with one another. I wouldn't call out any specific product categories that are underperforming or outperforming. I would just go back to the earlier comment that I had to Frederic's question around no big movements in pricing that we're seeing so far in 2026. Okay, that makes sense. Thank you. I'll turn it over. Thank you. Ladies and gentlemen, a reminder to please press star one if you do have any questions at this time. Thank you. Next, we will hear from Zachary Evershed at National Bank Capital Markets. Please go ahead, Zachary. Good morning, everyone. Congrats on the quarter. Hey, Zach. Good morning. Morning. Just circling back on the pressure around good, better, best, you know, minor, but gross margins were great despite that. Were there any one-timers that helped boost gross margins above that 22% level, or is that fairly sustainable outside of guidance for Q1 here? Yeah, the only thing that always moves around a little bit more in Q4 is we end up doing our full year true-up on vendor rebates. That was a little bit of a tailwind to the margin in the quarter. Other than that, it was normal course SEC. Gotcha. Thanks. With the reduction in tariff rates as we switch to Section 122, do you think there's gonna be any pressure on pricing in the next few months? No. Not really. Nothing we would call out materially. I think the Section 122 you saw has eased the burden a little bit in terms of the proportion of our goods that are subject to tariffs and the weighted average rate that's also attached to them. I think it gives us enough certainty to plan the business over the upcoming period. The whole trade landscape remains a little bit of a moving target, but this is where our import supply line can shine 'cause we can pivot between various supply sources, both country and vendor, and kind of be nimble to if the goalposts do move, that we continue to have very good product options for our customers. We've seen that so far, and we'll continue to bring that to market. Nothing specific around the 122 imposition that I think is going to move markets around here in the short term. Gotcha. Thanks. On your digital sales platform, it's supporting over 20% of annual sales. Is that trending upward generally? It is, yeah. When you've got, you know, the $2.25 billion U.S. sales base, when you add some dollars that you're rather excited about, sometimes it doesn't turn into a big percentage immediately. The overall trend, month-over-month and quarter-over-quarter is for continued penetration of sales through that channel, and that's been very encouraging. We continue to kind of twist the dials on how to utilize our digital sales platform even better. Good call. Thanks. Question on your corporate restructuring and tax recovery. Can you unpack the maneuver there for us? What's your steady-state tax rate now? Hey, Zach, it's Faiz here. Unpacking it, we can probably chat after the call, and I can give you more detail. It was quite complex, as you saw we outlined in the note. At a high level, the way I would describe it is in the fourth quarter, we did some things internally to actually simplify our structure, our internal structure. The rationale for that was really, and this may sound familiar, about a year ago, a little more than that, we had changes in certain tax rules, both Pillar Two, which is a global tax regime that Canada has adopted, and then, Canadian specific rules around the deductibility of interest expense. In response to those changes, it made sense for us to simplify our structure in the fourth quarter. In simplifying our structure, we were able to unlock certain benefits that previously were unavailable to us, in terms of tax benefits that, for lack of a better term, were previously stranded. That's really what you're seeing here is the recognition of those. Those are expected to be one time. That's also why in our MD&A, you would have noticed we pull those out of the adjusted numbers because we don't expect that to be recurring. I would just mention before I talk about the tax rate, that is still $50 million of benefit we're going to get, even though it's an adjusted number. We're very pleased with the outcome there. In terms of the effective tax rate, the way I would describe that is if you normalize for the kind of one-time tax noise, there were some other things too, but this was the main thing that you're keen on here, Zach. If you took the one-time items out of the tax noise this year, we would have been very close to the statutory rate of about 27%. Again, notwithstanding any one-time items in 2026, and I don't foresee any at this point, I would say you should expect around 27% as the effective rate for 2026. Appreciate that. Thank you. Just one last one. Bit of an uptick in CapEx in the quarter. What did that go towards, and what are your plans for 2026? Yeah. On the quarter, it can move around a little bit just depending on timing of spend. If you look at the CapEx on a full-year basis, I think it's right in our wheelhouse, as we describe it typically. Again, as you go through the year, you can have a couple of quarters where it's lesser and then a quarter where it's a little more. Standing back, looking at the full year, that met our expectations around what we were going to spend on CapEx. The nature of the spend, Zach, is exactly what you think. It's maintenance CapEx in our different operations. Nothing unusual to report there. And then for twenty-twenty six. Same expectation. It's gonna be in that kind of $10 million-$12 million range. You shouldn't expect anything different than that. Wonderful. Thanks. I'll turn it over. Thank you. Next is Kyle McPhee at ATB Capital Markets. Please go ahead, Kyle. Just a follow-up on some of the color you gave on the gross margin performance. You mentioned the vendor rebate true up was a minor impact. I mean, how minor are we talking? Can you quantify it for us? Well, here's maybe a way I'll describe it. I'm not sure I want to call out the number, Kyle, but the way to think about it is, if you looked at our gross margin percentage in Q4 and compared it to Q4 of last year, it wasn't that different. Q4 of 2024 was also a stronger performance. Part of that was also for the same reason. When we get to the end of the year, that's when you do your final accounting on rebates. We take a bit of a conservative approach on estimates for obvious reasons. Some of them are just cliff in nature. You need to hit a threshold before you get them. They're very meaningful. If you look at our Q4 performance relative to the other three quarters, we were more like mid 21s% ±, and then Q4 was a 22%. I would describe a lot of that as driven by the rebates. If you're trying to think of our gross margin percentage on a normalized basis for 2024, I think the mid 21s% would be fair. Maybe that's how I would put some guardrails around it for you, Kyle. Got it. Okay. That was one of the moving pieces in gross margin. I see you got your pricing gains to successfully offset the kinda cost of inventory inflation related to tariffs. Was there other tactics you were utilizing as well to deliver the gross margin performance? Like, were you shifting around your supply chains and sourcing by region to optimize that way as well? Was that a meaningful moving part? I would describe that as normal course that we're always doing that. I wouldn't say there's, you know, so many basis points of advantage or disadvantage around that. We are very nimble with the supply chain to provide the most effective sourcing for customers in the market environments that we've got. I would say that the overall approach to margin remains the same, which is we are increasingly putting more data analytics behind how we price. We are being more disciplined around the utilization of price listing that is fine-tuned very regularly across the entire business. We continue to look at businesses from an acquisition perspective that can be net helpers generally on gross profit margin. Then what you said, our, you know, our import business generally contributes very, very well to our margin profile. That, that's a strategy that you've heard about for a number of years now that's continuing and is providing support above the numbers that you see in terms of our long-term value creation framework and your expectations how we can run the company from a gross profit perspective. Got it. Okay. Last one from me, different topic. I see you're active on the NCIB fourth quarter in a row. It's a nice incremental source of value creation, but you're not massively active on the NCIB. You know, in the way you have the capacity to be. Should I read this as ADENTRA has a much better use of capital, you know, very near term, you know, probably in the form of M&A. Maybe you're close to resuming your M&A playbook in a meaningful way. You know, your balance sheet leverage position certainly seems to support funding of deals internally now. Is my read through on timing here anywhere close to accurate? No, I think you're bringing a very good perspective. Look, the inorganic growth and our track record in M&A is a real important part of the corporate growth opportunity that we see here. We intend to be back in the market active on M&A. We did a very good deal, as you know, in 2024 with Woolf Distributing that took our leverage up to closer to the higher end of our normal range. Now we spent last year generating CAD 160 million of cash flow that's brought that leverage back down to the lower end of our range and sets us up really well to go out in the market and buy businesses, to the extent we find ones that are a good fit. In that regard, you know, we've got an active pipeline. We've got fully staffed M&A capability with a full-time senior VP of acquisitions who's out there making sure that we've got good corporate opportunities. So the NCIB is a nice kind of participating feature. We were able to take some shares off the table, which is very accretive to shareholders last year without spending a lot of money on it and without moving our leverage up in any meaningful way. So that's how you should think about the balance. The, you know, primary focus is growing the business through M&A, and now we've got the balance sheet to go out in the market and do that in the coming year. We're working hard on that. Okay. Appreciate the comments. Thank you. Thank you. Next question will be from Jonathan Goldman at Scotiabank. Please go ahead, Jonathan. Hey, good morning, Rob and Faiz. Thanks for taking my questions. Maybe just, Hey, Jon. Good morning, guys. The outlook, how many fewer selling days did weather impact in January and February? Is like the total 2% decline quarter-to-date solely due to weather? I guess I'm just trying to parse out here, if we were to compare days versus days on a like-for-like basis, would sales have been up year-over-year? No, I know what you're trying to do. Yeah. I think it's, we're gonna leave it a little bit fuzzy because just to be honest, Jonathan, it's always an estimate around weather impacts. We don't actually usually mention it at all, but it was meaningful this time. It affected a portion of the 80 location network. Some were closed for a couple of days, some for a day and a half, you know. Some had residual hangover if customers were open or not. It's hard to put an exact pin in the numbers. What we chose to do was just say, "Hey, factually this is where we're at through January and February. By the way, there was a big old storm that had an impact in that." I think we just need to stay tuned to the end of the quarter and see where things settle. That's a fair comment. I guess maybe also relatedly, have you seen any change in end market demand given all the macro stuff in the housing market, or is things kind of stable-ish from where we were in Q4? I mean, there's seasonal impacts between Q4 and Q1. You know, Q1 is obviously gonna be a stronger quarter from a sales perspective, activity-wise than Q4. You know, keeping in mind that seasonal impact, of course, I would describe the market is still continuing to be fairly steady, stable. You know, we can make good money in this market and even if we are still in what I would describe as closer to trough conditions, we're really well positioned if there is a pickup. But in the meantime, we can provide very good returns to shareholders. You know, we hope as we move through the year that we see some loosening in the housing market that gets activity levels to a higher base. We don't need that. We can continue to do our thing and execute our strategy and put good numbers on the board. Okay. Fair enough. I guess one last one, Faiz, maybe a housekeeping one. Working cap expectations for 2026. If Q1 could be a little lower in terms of volume or sales, can we expect maybe working cap to be down a bit year-over-year? No. You should expect the same pattern you've seen in previous years where December is a low point. We do build inventory through the first half of the year in anticipation of a stronger spring and summer period. This is sequential, right? My comments are sequential. Relative to where we were in December, spring and summer will be stronger. It's a question of how much is our anticipation. You will see some inventory build through the first half of the year. Again, if sales pace is more muted, you should expect that to come out in the back half of the year like it did last year. When you get to the end of the year, if sales pace again has been more muted, you shouldn't expect much of an investment for the full year in inventory, which means we would be paying down meaningful portions of debt again, like we did last year. That's what you should expect in terms of pattern of working capital through the year in the environment we know today. Like on a year-over-year basis. Like full-year, to full-year, we're thinking maybe flat. Yeah. I mean, if you know, the market is saying not much is gonna happen for the year. If you track along with that should be your expectation that when you get to the end of the year, we shouldn't have put a lot of dollars into working capital. That was the case for us last year. It was the case the year before as well. That's really a feature of our business model. In years where it is a bit slower, we can control working capital in this way, and we can generate a lot of very good cash flows. That should be the expectation in this environment. Yes. Understood. Thanks for taking my questions. I'll get back in queue. No problem. Thank you. At this time, Mr. Brown, it appears we have no other questions registered. Please proceed. Okay. Thanks, Sylvia, for hosting the call today, and thanks everybody who dialed in and appreciate all the questions. If you've got follow-ups, please do reach out to Faiz Karmally and I. We're very accessible. Be happy to take your call and address your questions. With that, we'll say hope everybody has a great day. 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 do ask that you please disconnect your line.

Speaker 6: Good morning. Welcome to the ADENTRA Fourth Quarter and Full-Year 2025 Results Conference Call. All lines have been placed on mute to prevent background noise. After the speaker's remarks, there will be a question and answer session. With me on the call today are Rob Brown, ADENTRA's President and Chief Executive Officer, and Faiz Karmally, Vice President and Chief Financial Officer. ADENTRA's earnings release, financial statements, and MD&A for the year ended December 31, 2025 are available on the investor section of our website and on SEDAR+. Before we begin, I'd like to remind listeners that management's comments may include forward-looking statements. Actual results could differ materially due to risks and uncertainties outlined in our filings. All dollar figures mentioned today are in U.S. dollars unless otherwise stated. I will now turn the call over to Rob Brown. Please go ahead. Good morning. good morning Welcome to the ADENTRA Fourth Quarter and Full -Year 2025 Results Conference Call. welcome to the adentra fourth quarter and full -year 2025 results conference call All lines have been placed on mute to prevent background noise. all lines have been placed on mute to prevent background noise After the speaker's remarks, there will be a question and answer session. after the speaker's remarks there will be a question and answer session With me on the call today are Rob Brown, ADENTRA's President and Chief Executive Officer, and Faiz Karmally, Vice President and Chief Financial Officer. with me on the call today are rob brown adentra's president and chief executive officer and faiz karmally vice president and chief financial officer ADENTRA's earnings release, financial statements, and MD&A for the year ended December 31, 2025 are available on the investor section of our website and on SEDAR+. adentra's earnings release financial statements and md&a for the year ended december 31 2025 are available on the investor section of our website and on sedar+ Before we begin, I'd like to remind listeners that management's comments may include forward-looking statements. before we begin i'd like to remind listeners that management's comments may include forward-looking statements Actual results could differ materially due to risks and uncertainties outlined in our filings. actual results could differ materially due to risks and uncertainties outlined in our filings All dollar figures mentioned today are in U.S. dollars unless otherwise stated. all dollar figures mentioned today are in u.s dollars unless otherwise stated I will now turn the call over to Rob Brown. i will now turn the call over to rob brown Please go ahead. please go ahead

Speaker 7: Thanks, operator, and good morning, everyone. I'll start with a few comments on our performance in 2025 and the progress we made across our strategic priorities. Faiz will then walk through the fourth quarter financial results in more detail, and I'll return at the end to discuss current trends and our outlook. Looking back on 2025, I'm pleased with how our team executed in what remained a relatively muted construction environment. Residential activity across North America continued to face headwinds, particularly from affordability challenges tied to mortgage rates and limited housing inventory. Against that backdrop, our focus remained firmly on the things we can control, operating excellence, margin discipline, and strong cash generation. That approach once again allowed ADENTRA to deliver steady results. Thanks, operator, and good morning, everyone. thanks operator and good morning everyone I'll start with a few comments on our performance in 2025 and the progress we made across our strategic priorities. i'll start with a few comments on our performance in 2025 and the progress we made across our strategic priorities Faiz will then walk through the fourth quarter financial results in more detail, and I'll return at the end to discuss current trends and our outlook. faiz will then walk through the fourth quarter financial results in more detail and i'll return at the end to discuss current trends and our outlook Looking back on 2025, I'm pleased with how our team executed in what remained a relatively muted construction environment. looking back on 2025 i'm pleased with how our team executed in what remained a relatively muted construction environment Residential activity across North America continued to face headwinds, particularly from affordability challenges tied to mortgage rates and limited housing inventory. residential activity across north america continued to face headwinds particularly from affordability challenges tied to mortgage rates and limited housing inventory Against that backdrop, our focus remained firmly on the things we can control, operating excellence, margin discipline, and strong cash generation. against that backdrop our focus remained firmly on the things we can control operating excellence margin discipline and strong cash generation That approach once again allowed ADENTRA to deliver steady results. that approach once again allowed adentra to deliver steady results For the year, sales increased to CAD 2.25 billion, representing 3% growth compared to 2024, while adjusted EBITDA rose to CAD 187.9 million. Pricing conditions also stabilized during the year after a period of deflation across several product categories, removing a headwind which helped support our performance. Importantly, the business continued to generate strong cash flow. We produced over CAD 160 million in operating cash flow, which allowed us to strengthen our balance sheet while continuing to return capital to shareholders. During the year, we bought back 3.5% of our outstanding shares while returning CAD 29.5 million to shareholders through dividends and share repurchases. For the year, sales increased to CAD 2.25 billion, representing 3% growth compared to 2024, while adjusted EBITDA rose to CAD 187.9 million. for the year sales increased to cad 2.25 billion representing 3% growth compared to 2024 while adjusted ebitda rose to cad 187.9 million Pricing conditions also stabilized during the year after a period of deflation across several product categories, removing a headwind which helped support our performance. pricing conditions also stabilized during the year after a period of deflation across several product categories removing a headwind which helped support our performance Importantly, the business continued to generate strong cash flow. importantly the business continued to generate strong cash flow We produced over CAD 160 million in operating cash flow, which allowed us to strengthen our balance sheet while continuing to return capital to shareholders. we produced over cad 160 million in operating cash flow which allowed us to strengthen our balance sheet while continuing to return capital to shareholders During the year, we bought back 3.5% of our outstanding shares while returning CAD 29.5 million to shareholders through dividends and share repurchases. during the year we bought back 3.5% of our outstanding shares while returning cad 29.5 million to shareholders through dividends and share repurchases At the same time, we continued to reduce leverage, finishing the year at 2.2 times net debt to EBITDA, which positions us well as we look forward toward future growth opportunities. The consistency of these results reflects the strength of ADENTRA's platform. Today, we operate 81 distribution facilities across North America, connecting more than 2,500 suppliers with over 60,000 customers. We're a vital part of the supply chain, bridging the gap between manufacturers who produce large volumes of specific products and customers who require credit, small volumes of many products, and often delivered on a just-in-time basis. Our model builds on this core function in the supply chain by combining strong local operating brands with centralized capabilities that provide purchasing power, shared services, and digital infrastructure. This creates a sustainable competitive advantage. During 2025, we continued to build on our platform in several important ways. At the same time, we continued to reduce leverage, finishing the year at 2.2 times net debt to EBITDA, which positions us well as we look forward toward future growth opportunities. at the same time we continued to reduce leverage finishing the year at 2.2 times net debt to ebitda which positions us well as we look forward toward future growth opportunities The consistency of these results reflects the strength of ADENTRA's platform. the consistency of these results reflects the strength of adentra's platform Today, we operate 81 distribution facilities across North America, connecting more than 2,500 suppliers with over 60,000 customers. today we operate 81 distribution facilities across north america connecting more than 2,500 suppliers with over 60,000 customers We're a vital part of the supply chain, bridging the gap between manufacturers who produce large volumes of specific products and customers who require credit, small volumes of many products, and often delivered on a just-in-time basis. we're a vital part of the supply chain bridging the gap between manufacturers who produce large volumes of specific products and customers who require credit small volumes of many products and often delivered on a just-in-time basis Our model builds on this core function in the supply chain by combining strong local operating brands with centralized capabilities that provide purchasing power, shared services, and digital infrastructure. our model builds on this core function in the supply chain by combining strong local operating brands with centralized capabilities that provide purchasing power shared services and digital infrastructure This creates a sustainable competitive advantage. this creates a sustainable competitive advantage During 2025, we continued to build on our platform in several important ways. during 2025 we continued to build on our platform in several important ways First, supply chain excellence remained a focus. Our sourcing network now spans more than 30 countries, giving us flexibility to manage trade dynamics while continuing to provide customers with a superior suite of products. Supply chain excellence includes stringent compliance, the success of which was underscored by our recovery of $25.5 million of trade duties, including interest, following the successful outcome of the U.S. Department of Commerce trade case related to hardwood plywood products from Vietnam. Second, we continued to invest in digital capabilities across the organization. Our digital sales platform is increasingly embedded in our operating model, providing customers with 24-hour access to inventory and automated quoting tools while supporting more than 20% of our annual sales. Third, acquisition-driven growth remains a core part of our long-term strategy. During 2025, we continued integrating Woolf Distributing, which we acquired in 2024. First, supply chain excellence remained a focus. first supply chain excellence remained a focus Our sourcing network now spans more than 30 countries, giving us flexibility to manage trade dynamics while continuing to provide customers with a superior suite of products. our sourcing network now spans more than 30 countries giving us flexibility to manage trade dynamics while continuing to provide customers with a superior suite of products Supply chain excellence includes stringent compliance, the success of which was underscored by our recovery of $25.5 million of trade duties, including interest, following the successful outcome of the U.S. supply chain excellence includes stringent compliance the success of which was underscored by our recovery of $25.5 million of trade duties including interest following the successful outcome of the u.s Department of Commerce trade case related to hardwood plywood products from Vietnam. department of commerce trade case related to hardwood plywood products from vietnam Second, we continued to invest in digital capabilities across the organization. second we continued to invest in digital capabilities across the organization Our digital sales platform is increasingly embedded in our operating model, providing customers with 24-hour access to inventory and automated quoting tools while supporting more than 20% of our annual sales. our digital sales platform is increasingly embedded in our operating model providing customers with 24-hour access to inventory and automated quoting tools while supporting more than 20% of our annual sales Third, acquisition-driven growth remains a core part of our long-term strategy. third acquisition-driven growth remains a core part of our long-term strategy During 2025, we continued integrating Woolf Distributing, which we acquired in 2024. during 2025 we continued integrating woolf distributing which we acquired in 2024 The business contributed $159 million in revenue during the year, expanded our presence in the U.S. Midwest, and strengthened our exposure to specialty outdoor living products and the pro dealer customer channel. Overall, the progress we made during the year further reinforced the competitive advantages of our platform and the strength of our operating model. With that overview, I'll now turn the call over to Faiz to review the financial results in more detail. Faiz? The business contributed $159 million in revenue during the year, expanded our presence in the U.S. the business contributed $159 million in revenue during the year expanded our presence in the u.s Midwest, and strengthened our exposure to specialty outdoor living products and the pro dealer customer channel. midwest and strengthened our exposure to specialty outdoor living products and the pro dealer customer channel Overall, the progress we made during the year further reinforced the competitive advantages of our platform and the strength of our operating model. overall the progress we made during the year further reinforced the competitive advantages of our platform and the strength of our operating model With that overview, I'll now turn the call over to Faiz to review the financial results in more detail. with that overview i'll now turn the call over to faiz to review the financial results in more detail Faiz? faiz

Speaker 1: Thanks, Rob, and good morning, everyone. As a reminder, all dollar figures mentioned today are in U.S. dollars unless otherwise indicated. For the three months ended December 31, 2025, ADENTRA generated sales of $517.5 million, a decrease of 2.5% compared to Q4 2024. The decline was primarily attributable to lower volumes, partially offset by improved product pricing. In the U.S., fourth quarter sales were $477.9 million, down 2.4% year-over-year, reflecting a 4.7% decline in volumes that was partially offset by a 2.2% increase in product prices. In Canada, sales totaled CAD 55.2 million, representing a 3.3% decrease year-over-year, also primarily driven by lower volumes with modest pricing improvements. Despite the softer demand environment, our margin profile remains strong. Thanks, Rob, and good morning, everyone. thanks rob and good morning everyone As a reminder, all dollar figures mentioned today are in U.S. dollars unless otherwise indicated. as a reminder all dollar figures mentioned today are in u.s dollars unless otherwise indicated For the three months ended December 31, 2025, ADENTRA generated sales of $517.5 million, a decrease of 2.5% compared to Q4 2024. for the three months ended december 31 2025 adentra generated sales of $517.5 million a decrease of 2.5% compared to q4 2024 The decline was primarily attributable to lower volumes, partially offset by improved product pricing. the decline was primarily attributable to lower volumes partially offset by improved product pricing In the U.S., fourth quarter sales were $477.9 million, down 2.4% year-over-year, reflecting a 4.7% decline in volumes that was partially offset by a 2.2% increase in product prices. in the u.s fourth quarter sales were $477.9 million down 2.4% year-over-year reflecting a 4.7% decline in volumes that was partially offset by a 2.2% increase in product prices In Canada, sales totaled CAD 55.2 million, representing a 3.3% decrease year-over-year, also primarily driven by lower volumes with modest pricing improvements. in canada sales totaled cad 55.2 million representing a 3.3% decrease year-over-year also primarily driven by lower volumes with modest pricing improvements Despite the softer demand environment, our margin profile remains strong. despite the softer demand environment our margin profile remains strong Fourth quarter gross margin was $114.4 million, representing 22.1% of sales, an improvement from 21.7% in the prior year quarter. This reflects the continued effectiveness of our procurement discipline and pricing strategy. Operating expenses totaled $94.7 million, essentially flat compared to the prior year. The slight increase reflects higher costs associated with leased premises, which were largely offset by a favorable adjustment related to contingent consideration from the Woolf acquisition. Adjusted EBITDA for the quarter was $43.7 million, up 3.7% year-over-year, demonstrating the resilience of our operating model even in softer market environment. On a reported basis, net income was $32.1 million or $1.32 per share, compared to $8.4 million in the prior year quarter. Fourth quarter gross margin was $114.4 million, representing 22.1% of sales, an improvement from 21.7% in the prior year quarter. fourth quarter gross margin was $114.4 million representing 22.1% of sales an improvement from 21.7% in the prior year quarter This reflects the continued effectiveness of our procurement discipline and pricing strategy. this reflects the continued effectiveness of our procurement discipline and pricing strategy Operating expenses totaled $94.7 million, essentially flat compared to the prior year. operating expenses totaled $94.7 million essentially flat compared to the prior year The slight increase reflects higher costs associated with leased premises, which were largely offset by a favorable adjustment related to contingent consideration from the Woolf acquisition. the slight increase reflects higher costs associated with leased premises which were largely offset by a favorable adjustment related to contingent consideration from the woolf acquisition Adjusted EBITDA for the quarter was $43.7 million, up 3.7% year-over-year, demonstrating the resilience of our operating model even in softer market environment. adjusted ebitda for the quarter was $43.7 million up 3.7% year-over-year demonstrating the resilience of our operating model even in softer market environment On a reported basis, net income was $32.1 million or $1.32 per share, compared to $8.4 million in the prior year quarter. on a reported basis net income was $32.1 million or $1.32 per share compared to $8.4 million in the prior year quarter The increase was primarily driven by lower finance expense relating primarily to foreign exchange gains in the quarter and the recognition of deferred tax assets related to an internal restructuring completed during the fourth quarter. On an adjusted basis, adjusted EPS for the quarter was CAD 0.67, an increase of CAD 0.16 compared to CAD 0.51 in Q4 2024. Turning to cash flow, we generated CAD 41.9 million of operating cash flow before changes in working capital, and working capital reductions contributed an additional CAD 57.8 million, bringing total operating cash flow for the quarter to CAD 99.6 million. The working capital release reflects our seasonal inventory normalization in the second half of the year, reflecting the slower winter construction period. The increase was primarily driven by lower finance expense relating primarily to foreign exchange gains in the quarter and the recognition of deferred tax assets related to an internal restructuring completed during the fourth quarter. the increase was primarily driven by lower finance expense relating primarily to foreign exchange gains in the quarter and the recognition of deferred tax assets related to an internal restructuring completed during the fourth quarter On an adjusted basis, adjusted EPS for the quarter was CAD 0.67, an increase of CAD 0.16 compared to CAD 0.51 in Q4 2024. on an adjusted basis adjusted eps for the quarter was cad 0.67 an increase of cad 0.16 compared to cad 0.51 in q4 2024 Turning to cash flow, we generated CAD 41.9 million of operating cash flow before changes in working capital, and working capital reductions contributed an additional CAD 57.8 million, bringing total operating cash flow for the quarter to CAD 99.6 million. turning to cash flow we generated cad 41.9 million of operating cash flow before changes in working capital and working capital reductions contributed an additional cad 57.8 million bringing total operating cash flow for the quarter to cad 99.6 million The working capital release reflects our seasonal inventory normalization in the second half of the year, reflecting the slower winter construction period. the working capital release reflects our seasonal inventory normalization in the second half of the year reflecting the slower winter construction period From a balance sheet perspective, we ended the year with a net debt to EBITDA leverage ratio of 2.2 times, well within our target range and providing significant financial flexibility heading into 2026. Our capital allocation priorities remain unchanged. We continue to focus on maintaining a strong balance sheet, investing in organic growth initiatives, pursuing accretive acquisitions, and returning capital to shareholders through dividends and opportunistic share repurchases. With that, I'll turn the call back over to Rob. Rob? From a balance sheet perspective, we ended the year with a net debt to EBITDA leverage ratio of 2.2 times, well within our target range and providing significant financial flexibility heading into 2026. from a balance sheet perspective we ended the year with a net debt to ebitda leverage ratio of 2.2 times well within our target range and providing significant financial flexibility heading into 2026 Our capital allocation priorities remain unchanged. our capital allocation priorities remain unchanged We continue to focus on maintaining a strong balance sheet, investing in organic growth initiatives, pursuing accretive acquisitions, and returning capital to shareholders through dividends and opportunistic share repurchases. we continue to focus on maintaining a strong balance sheet investing in organic growth initiatives pursuing accretive acquisitions and returning capital to shareholders through dividends and opportunistic share repurchases With that, I'll turn the call back over to Rob. with that i'll turn the call back over to rob Rob? rob

Speaker 7: Thanks, Faz. As we look forward to 2026, we continue to approach the near-term environment with measured caution. Elevated U.S. mortgage rates and limited housing inventory remain key challenges for affordability, and geopolitical tensions and evolving trade policies continue to contribute to macroeconomic uncertainty. In the first two months of the year, sales were down approximately 2% compared to the same period in 2025, partly reflecting the impact of unfavorable winter weather to start the year. At the same time, we are encouraged by several potential developments that could improve the environment over time. Interest rates began easing during 2025, and government policy initiatives aimed at increasing housing affordability and supply could support residential construction demand in the years ahead. Over the longer term, the underlying fundamentals of the housing market remain intact. Thanks, Faz. thanks faz As we look forward to 2026, we continue to approach the near-term environment with measured caution. as we look forward to 2026 we continue to approach the near-term environment with measured caution Elevated U.S. mortgage rates and limited housing inventory remain key challenges for affordability, and geopolitical tensions and evolving trade policies continue to contribute to macroeconomic uncertainty. elevated u.s mortgage rates and limited housing inventory remain key challenges for affordability and geopolitical tensions and evolving trade policies continue to contribute to macroeconomic uncertainty In the first two months of the year, sales were down approximately 2% compared to the same period in 2025, partly reflecting the impact of unfavorable winter weather to start the year. in the first two months of the year sales were down approximately 2% compared to the same period in 2025 partly reflecting the impact of unfavorable winter weather to start the year At the same time, we are encouraged by several potential developments that could improve the environment over time. at the same time we are encouraged by several potential developments that could improve the environment over time Interest rates began easing during 2025, and government policy initiatives aimed at increasing housing affordability and supply could support residential construction demand in the years ahead. interest rates began easing during 2025 and government policy initiatives aimed at increasing housing affordability and supply could support residential construction demand in the years ahead Over the longer term, the underlying fundamentals of the housing market remain intact. over the longer term the underlying fundamentals of the housing market remain intact Structural housing undersupply in North America, favorable demographic trends, and an aging housing stock continue to support long-term demand for the products we distribute. Within that context, ADENTRA remains well-positioned. Our platform is diversified across geographies, products, and customer channels, and we continue to benefit from our national footprint, strong supplier relationships, and global sourcing capabilities. Our scalable operating model allows us to maintain margin discipline during softer periods while also positioning the business to capture operating leverage as volumes recover. Looking ahead, we will continue executing within our full value, full cycle value creation framework, focusing on operational excellence, disciplined capital allocation, and accretive acquisitions in our large and highly fragmented market. We believe this approach will allow us to continue generating strong returns on invested capital and long-term growth for our shareholders. With that, we'll open the line for questions. Operator? Thank you, sir. Structural housing undersupply in North America, favorable demographic trends, and an aging housing stock continue to support long-term demand for the products we distribute. structural housing undersupply in north america favorable demographic trends and an aging housing stock continue to support long-term demand for the products we distribute Within that context, ADENTRA remains well-positioned. within that context adentra remains well-positioned Our platform is diversified across geographies, products, and customer channels, and we continue to benefit from our national footprint, strong supplier relationships, and global sourcing capabilities. our platform is diversified across geographies products and customer channels and we continue to benefit from our national footprint strong supplier relationships and global sourcing capabilities Our scalable operating model allows us to maintain margin discipline during softer periods while also positioning the business to capture operating leverage as volumes recover. our scalable operating model allows us to maintain margin discipline during softer periods while also positioning the business to capture operating leverage as volumes recover Looking ahead, we will continue executing within our full value, full cycle value creation framework, focusing on operational excellence, disciplined capital allocation, and accretive acquisitions in our large and highly fragmented market. looking ahead we will continue executing within our full value full cycle value creation framework focusing on operational excellence disciplined capital allocation and accretive acquisitions in our large and highly fragmented market We believe this approach will allow us to continue generating strong returns on invested capital and long-term growth for our shareholders. we believe this approach will allow us to continue generating strong returns on invested capital and long-term growth for our shareholders With that, we'll open the line for questions. with that we'll open the line for questions Operator? Thank you, sir. operator? thank you sir

Speaker 6: 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 acknowledging your hand has been raised. If you would like to decline from the polling process, please press star followed by two. If you're using a speakerphone, you will need to lift the handset first before pressing any keys. Please go ahead and press star one now if you have any questions. Your first question will be from Kyle McPhee at ATB Capital Markets. Please go ahead, Kyle. Ladies and gentlemen, if you do have any questions at this time, please press star followed by one on your touchtone phone. 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 acknowledging your hand has been raised. you will then hear a prompt acknowledging your hand has been raised If you would like to decline from the polling process, please press star followed by two. if you would like to decline from the polling process please press star followed by two If you're using a speakerphone, you will need to lift the handset first before pressing any keys. if you're using a speakerphone you will need to lift the handset first before pressing any keys Please go ahead and press star one now if you have any questions. please go ahead and press star one now if you have any questions Your first question will be from Kyle McPhee at ATB Capital Markets. your first question will be from kyle mcphee at atb capital markets Please go ahead, Kyle. please go ahead kyle

Speaker 4: Hello, everyone. First one for me, just on your OpEx for Q4, it was down meaningfully. You know, I've looked through all the moving pieces like premises costs being up a bit, that favorable impact of the Woolf contingent consideration change that flowed through your OpEx. After adjusting for all this, it looks like you still had additional OpEx declines. That's probably, you know, your ongoing cost optimization. That is what I wanna confirm. Have you been ratcheting down the OpEx levels to match the top line environment you are facing? Are these cuts that we can see implied in these Q4 results durable, you know, throughout 2026, maybe even more on the come? Hello, everyone. hello everyone First one for me, just on your OpEx for Q4, it was down meaningfully. first one for me just on your opex for q4 it was down meaningfully You know, I've looked through all the moving pieces like premises costs being up a bit, that favorable impact of the Woolf contingent consideration change that flowed through your OpEx. you know i've looked through all the moving pieces like premises costs being up a bit that favorable impact of the woolf contingent consideration change that flowed through your opex After adjusting for all this, it looks like you still had additional OpEx declines. after adjusting for all this it looks like you still had additional opex declines That's probably, you know, your ongoing cost optimization. that's probably you know your ongoing cost optimization That is what I wanna confirm. that is what i wanna confirm Have you been ratcheting down the OpEx levels to match the top line environment you are facing? have you been ratcheting down the opex levels to match the top line environment you are facing Are these cuts that we can see implied in these Q4 results durable, you know, throughout 2026, maybe even more on the come? are these cuts that we can see implied in these q4 results durable you know throughout 2026 maybe even more on the come

Speaker 1: Hey, Kyle. It's Faiz here. Good morning. I can take that one. You're right. When you peel back the noise, operating expenses were down a little more than if you were comparing to the pace we were at the trailing couple quarters. There's two things there. One, that's just acknowledging the slower volumes that we had in Q4, right? Some of that is just some variable costs coming in lower because top line volumes were lower in the fourth quarter than the previous quarters. Some of that is also what you described, which is we have made some proactive changes to our cost base. We've talked about this previously, particularly around warehouse space. We have less warehouse space today than we did a year ago, as an example. Hey, Kyle. hey kyle It's Faiz here. it's faiz here Good morning. good morning I can take that one. i can take that one You're right. you're right When you peel back the noise, operating expenses were down a little more than if you were comparing to the pace we were at the trailing couple quarters. when you peel back the noise operating expenses were down a little more than if you were comparing to the pace we were at the trailing couple quarters There's two things there. there's two things there One, that's just acknowledging the slower volumes that we had in Q4, right? one that's just acknowledging the slower volumes that we had in q4 right Some of that is just some variable costs coming in lower because top line volumes were lower in the fourth quarter than the previous quarters. some of that is just some variable costs coming in lower because top line volumes were lower in the fourth quarter than the previous quarters Some of that is also what you described, which is we have made some proactive changes to our cost base. some of that is also what you described which is we have made some proactive changes to our cost base We've talked about this previously, particularly around warehouse space. we've talked about this previously particularly around warehouse space We have less warehouse space today than we did a year ago, as an example. we have less warehouse space today than we did a year ago as an example We've done some things around headcount as well. I would describe those things as durable, but they're just part of the story. As you head into 2026, we will be facing some inflationary increases on larger pieces of our expenses, which, as you know, are gonna be really premises and people costs. That's going to be around leasing costs for our 80 facilities that we lease and inflationary type increases in certain places around wages and benefits. That might be in the order of magnitude, low single digit, like you know, it might be 2% this year. That's the color I would offer you. We've done some things around headcount as well. we've done some things around headcount as well I would describe those things as durable, but they're just part of the story. i would describe those things as durable but they're just part of the story As you head into 2026, we will be facing some inflationary increases on larger pieces of our expenses, which, as you know, are gonna be really premises and people costs. as you head into 2026 we will be facing some inflationary increases on larger pieces of our expenses which as you know are gonna be really premises and people costs That's going to be around leasing costs for our 80 facilities that we lease and inflationary type increases in certain places around wages and benefits. that's going to be around leasing costs for our 80 facilities that we lease and inflationary type increases in certain places around wages and benefits That might be in the order of magnitude, low single digit, like you know, it might be 2% this year. that might be in the order of magnitude low single digit like you know it might be 2% this year That's the color I would offer you. that's the color i would offer you

Speaker 4: Got it. Okay. You know, aside from lease premises costs going up, like, is there an opportunity to eliminate more of your warehouses based on your kind of lease maturity schedule throughout the year? Is that in the cards at all? Got it. got it Okay. okay You know, aside from lease premises costs going up, like, is there an opportunity to eliminate more of your warehouses based on your kind of lease maturity schedule throughout the year? you know aside from lease premises costs going up, like is there an opportunity to eliminate more of your warehouses based on your kind of lease maturity schedule throughout the year Is that in the cards at all? is that in the cards at all

Speaker 1: That's something we're always looking to do. We've got 80 leases, and in terms of expiry, they're laddered. Every year you're gonna have a handful come up that you're going to make decisions around whether it's to renew it or to take less or more leasing space. We'll look at that. I think we did a lot in 2025 in terms of, you know, if you look at the warehouse count, again, this time a year ago it was more like 86, now we're 81. I think we've done things there to rightsize for the pace that we are expecting in 2026. If that's different, we'll have opportunities to look at that, as you mentioned. That's something we're always looking to do. that's something we're always looking to do We've got 80 leases, and in terms of expiry, they're laddered. we've got 80 leases and in terms of expiry they're laddered Every year you're gonna have a handful come up that you're going to make decisions around whether it's to renew it or to take less or more leasing space. every year you're gonna have a handful come up that you're going to make decisions around whether it's to renew it or to take less or more leasing space We'll look at that. we'll look at that I think we did a lot in 2025 in terms of, you know, if you look at the warehouse count, again, this time a year ago it was more like 86, now we're 81. i think we did a lot in 2025 in terms of you know if you look at the warehouse count again this time a year ago it was more like 86 now we're 81 I think we've done things there to rightsize for the pace that we are expecting in 2026. i think we've done things there to rightsize for the pace that we are expecting in 2026 If that's different, we'll have opportunities to look at that, as you mentioned. if that's different we'll have opportunities to look at that as you mentioned

Speaker 4: Got it. Okay. Appreciate the color. I'll pass the line for now. Thanks. Got it. got it Okay. okay Appreciate the color. appreciate the color I'll pass the line for now. i'll pass the line for now Thanks. thanks

Speaker 6: Thank you. Next question will be from Frederic Tremblay at Desjardins Capital Markets. Please go ahead, Frederic. Thank you. thank you Next question will be from Frederic Tremblay at Desjardins Capital Markets. next question will be from frederic tremblay at desjardins capital markets Please go ahead, Frederic. please go ahead frederic

Speaker 2: Thanks. Good morning. I'm just curious if, you know, given the current environment that we're in, are you seeing or are you expecting a meaningful customer rotation within your good, better and best offerings? I guess I'm just trying to better understand if customers, you know, moving to lower price items is a possibility, and if so, the kind of impact we should expect from, you know, on a margin perspective from that, if any. Thanks. thanks Good morning. good morning I'm just curious if, you know, given the current environment that we're in, are you seeing or are you expecting a meaningful customer rotation within your good, better and best offerings? i'm just curious if you know given the current environment that we're in are you seeing or are you expecting a meaningful customer rotation within your good better and best offerings I guess I'm just trying to better understand if customers, you know, moving to lower price items is a possibility, and if so, the kind of impact we should expect from, you know, on a margin perspective from that, if any. i guess i'm just trying to better understand if customers you know moving to lower price items is a possibility and if so the kind of impact we should expect from you know on a margin perspective from that if any

Speaker 7: Hey, morning, Frederic. It's Rob. Yes, possibly. I wouldn't call it out as some big substantial shift. However, we always do have what you said, which is options at different price points for people to participate in any given product set. We've seen a little bit of that, which is reflective also in margin. But I think it's not a thesis that I would, you know, overly focus on. It's just part of the overall mix, and there's going to be some moving around within that mix from time to time. But it's not a kind of real theme that we're seeing or talking about here. Hey, morning, Frederic. hey morning frederic It's Rob. it's rob Yes, possibly. yes possibly I wouldn't call it out as some big substantial shift. i wouldn't call it out as some big substantial shift However, we always do have what you said, which is options at different price points for people to participate in any given product set. however we always do have what you said which is options at different price points for people to participate in any given product set We've seen a little bit of that, which is reflective also in margin. we've seen a little bit of that which is reflective also in margin But I think it's not a thesis that I would, you know, overly focus on. but i think it's not a thesis that i would you know overly focus on It's just part of the overall mix, and there's going to be some moving around within that mix from time to time. it's just part of the overall mix and there's going to be some moving around within that mix from time to time But it's not a kind of real theme that we're seeing or talking about here. but it's not a kind of real theme that we're seeing or talking about here

Speaker 2: Got it. Thanks for that. Just on the trends so far in Q1, you mentioned sales being down 2% in the first two months of the year. Just wondering if you could maybe break that down a little more. You know, we saw pricing in Q4 being positive. Was that still the case in Q1 and therefore your volumes are down more than 2%? Just to the extent that you can comment on just the pricing and volume trends within that 2% decline. Got it. got it Thanks for that. thanks for that Just on the trends so far in Q1, you mentioned sales being down 2% in the first two months of the year. just on the trends so far in q1 you mentioned sales being down 2% in the first two months of the year Just wondering if you could maybe break that down a little more. just wondering if you could maybe break that down a little more You know, we saw pricing in Q4 being positive. you know we saw pricing in q4 being positive Was that still the case in Q1 and therefore your volumes are down more than 2%? was that still the case in q1 and therefore your volumes are down more than 2% Just to the extent that you can comment on just the pricing and volume trends within that 2% decline. just to the extent that you can comment on just the pricing and volume trends within that 2% decline

Speaker 7: A few points. More volume than price. We've not really seen a pullback in the pricing, so this is more volumetric. Then as we also discussed in the release, there were some weather-related impacts in January, February. I think we all tracked the big storm. We don't typically talk a whole bunch about weather, but it was a prolonged event that did cost us some sales days geographically in some parts of the network. January and February are also, as we know, just the entry points into the year. They tend to be the seasonally slowest. We'll have to see how things transpire through the balance of the quarter through March, which is a longer sales period if you count the number of days and gets closer to entering into that spring selling season. I think we have to stay tuned a little bit on that. A few points. a few points More volume than price. more volume than price We've not really seen a pullback in the pricing, so this is more volumetric. we've not really seen a pullback in the pricing so this is more volumetric Then as we also discussed in the release, there were some weather-related impacts in January, February. then as we also discussed in the release there were some weather-related impacts in january february I think we all tracked the big storm. i think we all tracked the big storm We don't typically talk a whole bunch about weather, but it was a prolonged event that did cost us some sales days geographically in some parts of the network. we don't typically talk a whole bunch about weather but it was a prolonged event that did cost us some sales days geographically in some parts of the network January and February are also, as we know, just the entry points into the year. january and february are also as we know just the entry points into the year They tend to be the seasonally slowest. they tend to be the seasonally slowest We'll have to see how things transpire through the balance of the quarter through March, which is a longer sales period if you count the number of days and gets closer to entering into that spring selling season. we'll have to see how things transpire through the balance of the quarter through march which is a longer sales period if you count the number of days and gets closer to entering into that spring selling season I think we have to stay tuned a little bit on that. i think we have to stay tuned a little bit on that

Speaker 2: Great. Thanks for taking the questions. I'll get back in the queue. Great. great Thanks for taking the questions. thanks for taking the questions I'll get back in the queue. i'll get back in the queue

Speaker 6: Thank you. Next question will be from Nikolai Goroupitch at CIBC Capital Markets. Please go ahead, Nikolai. Thank you. thank you Next question will be from Nikolai Goroupitch at CIBC Capital Markets. next question will be from nikolai goroupitch at cibc capital markets Please go ahead, Nikolai. please go ahead nikolai

Speaker 5: Hi. Following the announcement of the preliminary antidumping and countervailing duties on hardwood and plywood imports from China, Indonesia, and Vietnam, do you expect these measures to drive up product prices of domestic products? Hi. hi Following the announcement of the preliminary antidumping and countervailing duties on hardwood and plywood imports from China, Indonesia, and Vietnam, do you expect these measures to drive up product prices of domestic products? following the announcement of the preliminary antidumping and countervailing duties on hardwood and plywood imports from china indonesia and vietnam do you expect these measures to drive up product prices of domestic products

Speaker 7: There's always some interrelatedness between what's going on in import markets and domestic markets. I would say, however, that, you know, those outcomes were, well telegraphed and understood that that would probably be the case, and there's already been, appropriate supply chain shifts. We don't view them as those announcements as something that's gonna meaningfully shift markets. There's always some interrelatedness between what's going on in import markets and domestic markets. there's always some interrelatedness between what's going on in import markets and domestic markets I would say, however, that, you know, those outcomes were, well telegraphed and understood that that would probably be the case, and there's already been, appropriate supply chain shifts. i would say however that you know those outcomes were well telegraphed and understood that that would probably be the case and there's already been appropriate supply chain shifts We don't view them as those announcements as something that's gonna meaningfully shift markets. we don't view them as those announcements as something that's gonna meaningfully shift markets

Speaker 5: Okay, I see. Thanks. I guess given the volatile market conditions, could you highlight specific areas of strength and weakness across various product categories within the business? Okay, I see. okay i see Thanks. thanks I guess given the volatile market conditions, could you highlight specific areas of strength and weakness across various product categories within the business? i guess given the volatile market conditions could you highlight specific areas of strength and weakness across various product categories within the business

Speaker 7: We're always selling the mix. I mean, that's the value of distribution. We're not, you know, particularly power focused on any one category. When we're going to a customer, it's with a wide variety of products on that. The overall product set tends to move not perfectly aligned, but generally in lockstep with one another. I wouldn't call out any specific product categories that are underperforming or outperforming. I would just go back to the earlier comment that I had to Frederic's question around no big movements in pricing that we're seeing so far in 2026. We're always selling the mix. we're always selling the mix I mean, that's the value of distribution. i mean that's the value of distribution We're not, you know, particularly power focused on any one category. we're not you know particularly power focused on any one category When we're going to a customer, it's with a wide variety of products on that. when we're going to a customer it's with a wide variety of products on that The overall product set tends to move not perfectly aligned, but generally in lockstep with one another. the overall product set tends to move not perfectly aligned but generally in lockstep with one another I wouldn't call out any specific product categories that are underperforming or outperforming. i wouldn't call out any specific product categories that are underperforming or outperforming I would just go back to the earlier comment that I had to Frederic's question around no big movements in pricing that we're seeing so far in 2026. i would just go back to the earlier comment that i had to frederic's question around no big movements in pricing that we're seeing so far in 2026

Speaker 5: Okay, that makes sense. Thank you. I'll turn it over. Okay, that makes sense. okay that makes sense Thank you. thank you I'll turn it over. i'll turn it over

Speaker 6: Thank you. Ladies and gentlemen, a reminder to please press star one if you do have any questions at this time. Thank you. Next, we will hear from Zachary Evershed at National Bank Capital Markets. Please go ahead, Zachary. Thank you. thank you Ladies and gentlemen, a reminder to please press star one if you do have any questions at this time. ladies and gentlemen a reminder to please press star one if you do have any questions at this time Thank you. thank you Next, we will hear from Zachary Evershed at National Bank Capital Markets. next we will hear from zachary evershed at national bank capital markets Please go ahead, Zachary. please go ahead zachary

Speaker 8: Good morning, everyone. Congrats on the quarter. Good morning, everyone. good morning everyone Congrats on the quarter. congrats on the quarter

Speaker 7: Hey, Zach. Good morning. Hey, Zach. hey zach Good morning. good morning

Speaker 8: Morning. Morning. morning Just circling back on the pressure around good, better, best, you know, minor, but gross margins were great despite that. Were there any one-timers that helped boost gross margins above that 22% level, or is that fairly sustainable outside of guidance for Q1 here? Just circling back on the pressure around good, better, best, you know, minor, but gross margins were great despite that. just circling back on the pressure around good better best you know minor but gross margins were great despite that Were there any one-timers that helped boost gross margins above that 22% level, or is that fairly sustainable outside of guidance for Q1 here? were there any one-timers that helped boost gross margins above that 22% level or is that fairly sustainable outside of guidance for q1 here

Speaker 7: Yeah, the only thing that always moves around a little bit more in Q4 is we end up doing our full year true-up on vendor rebates. That was a little bit of a tailwind to the margin in the quarter. Other than that, it was normal course SEC. Yeah, the only thing that always moves around a little bit more in Q4 is we end up doing our full year true-up on vendor rebates. yeah the only thing that always moves around a little bit more in q4 is we end up doing our full year true-up on vendor rebates That was a little bit of a tailwind to the margin in the quarter. that was a little bit of a tailwind to the margin in the quarter Other than that, it was normal course SEC. other than that it was normal course sec

Speaker 8: Gotcha. Thanks. With the reduction in tariff rates as we switch to Section 122, do you think there's gonna be any pressure on pricing in the next few months? Gotcha. gotcha Thanks. thanks With the reduction in tariff rates as we switch to Section 122, do you think there's gonna be any pressure on pricing in the next few months? with the reduction in tariff rates as we switch to section 122 do you think there's gonna be any pressure on pricing in the next few months

Speaker 7: No. Not really. Nothing we would call out materially. I think the Section 122 you saw has eased the burden a little bit in terms of the proportion of our goods that are subject to tariffs and the weighted average rate that's also attached to them. I think it gives us enough certainty to plan the business over the upcoming period. The whole trade landscape remains a little bit of a moving target, but this is where our import supply line can shine 'cause we can pivot between various supply sources, both country and vendor, and kind of be nimble to if the goalposts do move, that we continue to have very good product options for our customers. We've seen that so far, and we'll continue to bring that to market. No. no Not really. not really Nothing we would call out materially. nothing we would call out materially I think the Section 122 you saw has eased the burden a little bit in terms of the proportion of our goods that are subject to tariffs and the weighted average rate that's also attached to them. i think the section 122 you saw has eased the burden a little bit in terms of the proportion of our goods that are subject to tariffs and the weighted average rate that's also attached to them I think it gives us enough certainty to plan the business over the upcoming period. i think it gives us enough certainty to plan the business over the upcoming period The whole trade landscape remains a little bit of a moving target, but this is where our import supply line can shine 'cause we can pivot between various supply sources, both country and vendor, and kind of be nimble to if the goalposts do move, that we continue to have very good product options for our customers. the whole trade landscape remains a little bit of a moving target but this is where our import supply line can shine 'cause we can pivot between various supply sources both country and vendor and kind of be nimble to if the goalposts do move that we continue to have very good product options for our customers We've seen that so far, and we'll continue to bring that to market. we've seen that so far and we'll continue to bring that to market Nothing specific around the 122 imposition that I think is going to move markets around here in the short term. Nothing specific around the 122 imposition that I think is going to move markets around here in the short term. nothing specific around the 122 imposition that i think is going to move markets around here in the short term

Speaker 8: Gotcha. Thanks. On your digital sales platform, it's supporting over 20% of annual sales. Is that trending upward generally? Gotcha. gotcha Thanks. thanks On your digital sales platform, it's supporting over 20% of annual sales. on your digital sales platform it's supporting over 20% of annual sales Is that trending upward generally? is that trending upward generally

Speaker 7: It is, yeah. When you've got, you know, the $2.25 billion U.S. sales base, when you add some dollars that you're rather excited about, sometimes it doesn't turn into a big percentage immediately. The overall trend, month-over-month and quarter-over-quarter is for continued penetration of sales through that channel, and that's been very encouraging. We continue to kind of twist the dials on how to utilize our digital sales platform even better. It is, yeah. it is yeah When you've got, you know, the $2.25 billion U.S. sales base, when you add some dollars that you're rather excited about, sometimes it doesn't turn into a big percentage immediately. when you've got you know the $2.25 billion u.s sales base when you add some dollars that you're rather excited about sometimes it doesn't turn into a big percentage immediately The overall trend, month-over-month and quarter-over-quarter is for continued penetration of sales through that channel, and that's been very encouraging. the overall trend month-over-month and quarter-over-quarter is for continued penetration of sales through that channel and that's been very encouraging We continue to kind of twist the dials on how to utilize our digital sales platform even better. we continue to kind of twist the dials on how to utilize our digital sales platform even better

Speaker 8: Good call. Thanks. Question on your corporate restructuring and tax recovery. Can you unpack the maneuver there for us? What's your steady-state tax rate now? Good call. good call Thanks. thanks Question on your corporate restructuring and tax recovery. question on your corporate restructuring and tax recovery Can you unpack the maneuver there for us? can you unpack the maneuver there for us What's your steady-state tax rate now? what's your steady-state tax rate now

Speaker 1: Hey, Zach, it's Faiz here. Unpacking it, we can probably chat after the call, and I can give you more detail. It was quite complex, as you saw we outlined in the note. At a high level, the way I would describe it is in the fourth quarter, we did some things internally to actually simplify our structure, our internal structure. The rationale for that was really, and this may sound familiar, about a year ago, a little more than that, we had changes in certain tax rules, both Pillar Two, which is a global tax regime that Canada has adopted, and then, Canadian specific rules around the deductibility of interest expense. In response to those changes, it made sense for us to simplify our structure in the fourth quarter. Hey, Zach, it's Faiz here. hey zach it's faiz here Unpacking it, we can probably chat after the call, and I can give you more detail. unpacking it we can probably chat after the call and i can give you more detail It was quite complex, as you saw we outlined in the note. it was quite complex as you saw we outlined in the note At a high level, the way I would describe it is in the fourth quarter, we did some things internally to actually simplify our structure, our internal structure. at a high level the way i would describe it is in the fourth quarter we did some things internally to actually simplify our structure our internal structure The rationale for that was really, and this may sound familiar, about a year ago, a little more than that, we had changes in certain tax rules, both Pillar Two, which is a global tax regime that Canada has adopted, and then, Canadian specific rules around the deductibility of interest expense. the rationale for that was really and this may sound familiar about a year ago a little more than that we had changes in certain tax rules both pillar two which is a global tax regime that canada has adopted and then canadian specific rules around the deductibility of interest expense In response to those changes, it made sense for us to simplify our structure in the fourth quarter. in response to those changes it made sense for us to simplify our structure in the fourth quarter In simplifying our structure, we were able to unlock certain benefits that previously were unavailable to us, in terms of tax benefits that, for lack of a better term, were previously stranded. That's really what you're seeing here is the recognition of those. Those are expected to be one time. That's also why in our MD&A, you would have noticed we pull those out of the adjusted numbers because we don't expect that to be recurring. I would just mention before I talk about the tax rate, that is still $50 million of benefit we're going to get, even though it's an adjusted number. We're very pleased with the outcome there. In simplifying our structure, we were able to unlock certain benefits that previously were unavailable to us, in terms of tax benefits that, for lack of a better term, were previously stranded. in simplifying our structure we were able to unlock certain benefits that previously were unavailable to us in terms of tax benefits that for lack of a better term were previously stranded That's really what you're seeing here is the recognition of those. that's really what you're seeing here is the recognition of those Those are expected to be one time. those are expected to be one time That's also why in our MD&A, you would have noticed we pull those out of the adjusted numbers because we don't expect that to be recurring. that's also why in our md&a you would have noticed we pull those out of the adjusted numbers because we don't expect that to be recurring I would just mention before I talk about the tax rate, that is still $50 million of benefit we're going to get, even though it's an adjusted number. i would just mention before i talk about the tax rate that is still $50 million of benefit we're going to get even though it's an adjusted number We're very pleased with the outcome there. we're very pleased with the outcome there In terms of the effective tax rate, the way I would describe that is if you normalize for the kind of one-time tax noise, there were some other things too, but this was the main thing that you're keen on here, Zach. If you took the one-time items out of the tax noise this year, we would have been very close to the statutory rate of about 27%. Again, notwithstanding any one-time items in 2026, and I don't foresee any at this point, I would say you should expect around 27% as the effective rate for 2026. In terms of the effective tax rate, the way I would describe that is if you normalize for the kind of one-time tax noise, there were some other things too, but this was the main thing that you're keen on here, Zach. in terms of the effective tax rate the way i would describe that is if you normalize for the kind of one-time tax noise there were some other things too but this was the main thing that you're keen on here zach If you took the one-time items out of the tax noise this year, we would have been very close to the statutory rate of about 27%. if you took the one-time items out of the tax noise this year we would have been very close to the statutory rate of about 27% Again, notwithstanding any one-time items in 2026, and I don't foresee any at this point, I would say you should expect around 27% as the effective rate for 2026. again notwithstanding any one-time items in 2026 and i don't foresee any at this point i would say you should expect around 27% as the effective rate for 2026

Speaker 8: Appreciate that. Thank you. Just one last one. Bit of an uptick in CapEx in the quarter. What did that go towards, and what are your plans for 2026? Appreciate that. appreciate that Thank you. thank you Just one last one. just one last one Bit of an uptick in CapEx in the quarter. bit of an uptick in capex in the quarter What did that go towards, and what are your plans for 2026? what did that go towards and what are your plans for 2026

Speaker 1: Yeah. On the quarter, it can move around a little bit just depending on timing of spend. If you look at the CapEx on a full-year basis, I think it's right in our wheelhouse, as we describe it typically. Again, as you go through the year, you can have a couple of quarters where it's lesser and then a quarter where it's a little more. Standing back, looking at the full year, that met our expectations around what we were going to spend on CapEx. The nature of the spend, Zach, is exactly what you think. It's maintenance CapEx in our different operations. Nothing unusual to report there. Yeah. yeah On the quarter, it can move around a little bit just depending on timing of spend. on the quarter it can move around a little bit just depending on timing of spend If you look at the CapEx on a full- year basis, I think it's right in our wheelhouse, as we describe it typically. if you look at the capex on a full- year basis i think it's right in our wheelhouse as we describe it typically Again, as you go through the year, you can have a couple of quarters where it's lesser and then a quarter where it's a little more. again as you go through the year you can have a couple of quarters where it's lesser and then a quarter where it's a little more Standing back, looking at the full year, that met our expectations around what we were going to spend on CapEx. standing back looking at the full year that met our expectations around what we were going to spend on capex The nature of the spend, Zach, is exactly what you think. the nature of the spend zach is exactly what you think It's maintenance CapEx in our different operations. it's maintenance capex in our different operations Nothing unusual to report there. nothing unusual to report there

Speaker 8: And then for twenty-twenty six. And then for twenty-twenty six. and then for twenty-twenty six

Speaker 1: Same expectation. It's gonna be in that kind of $10 million-$12 million range. You shouldn't expect anything different than that. Same expectation. same expectation It's gonna be in that kind of $10 million-$12 million range. it's gonna be in that kind of $10 million-$12 million range You shouldn't expect anything different than that. you shouldn't expect anything different than that

Speaker 8: Wonderful. Thanks. I'll turn it over. Wonderful. wonderful Thanks. thanks I'll turn it over. i'll turn it over

Speaker 6: Thank you. Next is Kyle McPhee at ATB Capital Markets. Please go ahead, Kyle. Thank you. thank you Next is Kyle McPhee at ATB Capital Markets. next is kyle mcphee at atb capital markets Please go ahead, Kyle. please go ahead kyle

Speaker 4: Just a follow-up on some of the color you gave on the gross margin performance. You mentioned the vendor rebate true up was a minor impact. I mean, how minor are we talking? Can you quantify it for us? Just a follow-up on some of the color you gave on the gross margin performance. just a follow-up on some of the color you gave on the gross margin performance You mentioned the vendor rebate true up was a minor impact. you mentioned the vendor rebate true up was a minor impact I mean, how minor are we talking? i mean how minor are we talking Can you quantify it for us? can you quantify it for us

Speaker 1: Well, here's maybe a way I'll describe it. I'm not sure I want to call out the number, Kyle, but the way to think about it is, if you looked at our gross margin percentage in Q4 and compared it to Q4 of last year, it wasn't that different. Q4 of 2024 was also a stronger performance. Part of that was also for the same reason. When we get to the end of the year, that's when you do your final accounting on rebates. We take a bit of a conservative approach on estimates for obvious reasons. Some of them are just cliff in nature. You need to hit a threshold before you get them. They're very meaningful. Well, here's maybe a way I'll describe it. well here's maybe a way i'll describe it I'm not sure I want to call out the number, Kyle, but the way to think about it is, if you looked at our gross margin percentage in Q4 and compared it to Q4 of last year, it wasn't that different. i'm not sure i want to call out the number kyle but the way to think about it is if you looked at our gross margin percentage in q4 and compared it to q4 of last year it wasn't that different Q4 of 2024 was also a stronger performance. q4 of 2024 was also a stronger performance Part of that was also for the same reason. part of that was also for the same reason When we get to the end of the year, that's when you do your final accounting on rebates. when we get to the end of the year that's when you do your final accounting on rebates We take a bit of a conservative approach on estimates for obvious reasons. we take a bit of a conservative approach on estimates for obvious reasons Some of them are just cliff in nature. some of them are just cliff in nature You need to hit a threshold before you get them. you need to hit a threshold before you get them They're very meaningful. they're very meaningful If you look at our Q4 performance relative to the other three quarters, we were more like mid 21s% ±, and then Q4 was a 22%. I would describe a lot of that as driven by the rebates. If you're trying to think of our gross margin percentage on a normalized basis for 2024, I think the mid 21s% would be fair. Maybe that's how I would put some guardrails around it for you, Kyle. If you look at our Q4 performance relative to the other three quarters, we were more like mid 21s% ±, and then Q4 was a 22%. if you look at our q4 performance relative to the other three quarters we were more like mid 21s% ± and then q4 was a 22% I would describe a lot of that as driven by the rebates. i would describe a lot of that as driven by the rebates If you're trying to think of our gross margin percentage on a normalized basis for 2024, I think the mid 21s% would be fair. if you're trying to think of our gross margin percentage on a normalized basis for 2024 i think the mid 21s% would be fair Maybe that's how I would put some guardrails around it for you, Kyle. maybe that's how i would put some guardrails around it for you kyle

Speaker 4: Got it. Okay. That was one of the moving pieces in gross margin. I see you got your pricing gains to successfully offset the kinda cost of inventory inflation related to tariffs. Was there other tactics you were utilizing as well to deliver the gross margin performance? Like, were you shifting around your supply chains and sourcing by region to optimize that way as well? Was that a meaningful moving part? Got it. got it Okay. okay That was one of the moving pieces in gross margin. that was one of the moving pieces in gross margin I see you got your pricing gains to successfully offset the kinda cost of inventory inflation related to tariffs. i see you got your pricing gains to successfully offset the kinda cost of inventory inflation related to tariffs Was there other tactics you were utilizing as well to deliver the gross margin performance? was there other tactics you were utilizing as well to deliver the gross margin performance Like, were you shifting around your supply chains and sourcing by region to optimize that way as well? like were you shifting around your supply chains and sourcing by region to optimize that way as well Was that a meaningful moving part? was that a meaningful moving part

Speaker 7: I would describe that as normal course that we're always doing that. I wouldn't say there's, you know, so many basis points of advantage or disadvantage around that. We are very nimble with the supply chain to provide the most effective sourcing for customers in the market environments that we've got. I would say that the overall approach to margin remains the same, which is we are increasingly putting more data analytics behind how we price. We are being more disciplined around the utilization of price listing that is fine-tuned very regularly across the entire business. We continue to look at businesses from an acquisition perspective that can be net helpers generally on gross profit margin. Then what you said, our, you know, our import business generally contributes very, very well to our margin profile. I would describe that as normal course that we're always doing that. i would describe that as normal course that we're always doing that I wouldn't say there's, you know, so many basis points of advantage or disadvantage around that. i wouldn't say there's you know so many basis points of advantage or disadvantage around that We are very nimble with the supply chain to provide the most effective sourcing for customers in the market environments that we've got. we are very nimble with the supply chain to provide the most effective sourcing for customers in the market environments that we've got I would say that the overall approach to margin remains the same, which is we are increasingly putting more data analytics behind how we price. i would say that the overall approach to margin remains the same which is we are increasingly putting more data analytics behind how we price We are being more disciplined around the utilization of price listing that is fine-tuned very regularly across the entire business. we are being more disciplined around the utilization of price listing that is fine-tuned very regularly across the entire business We continue to look at businesses from an acquisition perspective that can be net helpers generally on gross profit margin. we continue to look at businesses from an acquisition perspective that can be net helpers generally on gross profit margin Then what you said, our, you know, our import business generally contributes very, very well to our margin profile. then what you said our you know our import business generally contributes very very well to our margin profile That, that's a strategy that you've heard about for a number of years now that's continuing and is providing support above the numbers that you see in terms of our long-term value creation framework and your expectations how we can run the company from a gross profit perspective. That, that's a strategy that you've heard about for a number of years now that's continuing and is providing support above the numbers that you see in terms of our long-term value creation framework and your expectations how we can run the company from a gross profit perspective. that that's a strategy that you've heard about for a number of years now that's continuing and is providing support above the numbers that you see in terms of our long-term value creation framework and your expectations how we can run the company from a gross profit perspective

Speaker 4: Got it. Okay. Last one from me, different topic. I see you're active on the NCIB fourth quarter in a row. It's a nice incremental source of value creation, but you're not massively active on the NCIB. You know, in the way you have the capacity to be. Should I read this as ADENTRA has a much better use of capital, you know, very near term, you know, probably in the form of M&A. Maybe you're close to resuming your M&A playbook in a meaningful way. You know, your balance sheet leverage position certainly seems to support funding of deals internally now. Is my read through on timing here anywhere close to accurate? Got it. got it Okay. okay Last one from me, different topic. last one from me different topic I see you're active on the NCIB fourth quarter in a row. i see you're active on the ncib fourth quarter in a row It's a nice incremental source of value creation, but you're not massively active on the NCIB. it's a nice incremental source of value creation but you're not massively active on the ncib You know, in the way you have the capacity to be. you know in the way you have the capacity to be Should I read this as ADENTRA has a much better use of capital, you know, very near term, you know, probably in the form of M&A. should i read this as adentra has a much better use of capital you know very near term you know probably in the form of m&a Maybe you're close to resuming your M&A playbook in a meaningful way. maybe you're close to resuming your m&a playbook in a meaningful way You know, your balance sheet leverage position certainly seems to support funding of deals internally now. you know your balance sheet leverage position certainly seems to support funding of deals internally now Is my read through on timing here anywhere close to accurate? is my read through on timing here anywhere close to accurate

Speaker 7: No, I think you're bringing a very good perspective. Look, the inorganic growth and our track record in M&A is a real important part of the corporate growth opportunity that we see here. We intend to be back in the market active on M&A. We did a very good deal, as you know, in 2024 with Woolf Distributing that took our leverage up to closer to the higher end of our normal range. Now we spent last year generating CAD 160 million of cash flow that's brought that leverage back down to the lower end of our range and sets us up really well to go out in the market and buy businesses, to the extent we find ones that are a good fit. In that regard, you know, we've got an active pipeline. No, I think you're bringing a very good perspective. no i think you're bringing a very good perspective Look, the inorganic growth and our track record in M&A is a real important part of the corporate growth opportunity that we see here. look the inorganic growth and our track record in m&a is a real important part of the corporate growth opportunity that we see here We intend to be back in the market active on M&A. we intend to be back in the market active on m&a We did a very good deal, as you know, in 2024 with Woolf Distributing that took our leverage up to closer to the higher end of our normal range. we did a very good deal as you know in 2024 with woolf distributing that took our leverage up to closer to the higher end of our normal range Now we spent last year generating CAD 160 million of cash flow that's brought that leverage back down to the lower end of our range and sets us up really well to go out in the market and buy businesses, to the extent we find ones that are a good fit. now we spent last year generating cad 160 million of cash flow that's brought that leverage back down to the lower end of our range and sets us up really well to go out in the market and buy businesses to the extent we find ones that are a good fit In that regard, you know, we've got an active pipeline. in that regard you know we've got an active pipeline We've got fully staffed M&A capability with a full-time senior VP of acquisitions who's out there making sure that we've got good corporate opportunities. So the NCIB is a nice kind of participating feature. We were able to take some shares off the table, which is very accretive to shareholders last year without spending a lot of money on it and without moving our leverage up in any meaningful way. So that's how you should think about the balance. The, you know, primary focus is growing the business through M&A, and now we've got the balance sheet to go out in the market and do that in the coming year. We're working hard on that. We've got fully staffed M&A capability with a full-time senior VP of acquisitions who's out there making sure that we've got good corporate opportunities. we've got fully staffed m&a capability with a full-time senior vp of acquisitions who's out there making sure that we've got good corporate opportunities So the NCIB is a nice kind of participating feature. so the ncib is a nice kind of participating feature We were able to take some shares off the table, which is very accretive to shareholders last year without spending a lot of money on it and without moving our leverage up in any meaningful way. we were able to take some shares off the table which is very accretive to shareholders last year without spending a lot of money on it and without moving our leverage up in any meaningful way So that's how you should think about the balance. so that's how you should think about the balance The, you know, primary focus is growing the business through M&A, and now we've got the balance sheet to go out in the market and do that in the coming year. the you know primary focus is growing the business through m&a and now we've got the balance sheet to go out in the market and do that in the coming year We're working hard on that. we're working hard on that

Speaker 4: Okay. Appreciate the comments. Thank you. Okay. okay Appreciate the comments. appreciate the comments Thank you. thank you

Speaker 6: Thank you. Next question will be from Jonathan Goldman at Scotiabank. Please go ahead, Jonathan. Thank you. thank you Next question will be from Jonathan Goldman at Scotiabank. next question will be from jonathan goldman at scotiabank Please go ahead, Jonathan. please go ahead jonathan

Speaker 3: Hey, good morning, Rob and Faiz. Thanks for taking my questions. Maybe just, Hey, good morning, Rob and Faiz. hey good morning rob and faiz Thanks for taking my questions. thanks for taking my questions Maybe just, maybe just

Speaker 7: Hey, Jon. Hey, Jon. hey jon

Speaker 3: Good morning, guys. The outlook, how many fewer selling days did weather impact in January and February? Is like the total 2% decline quarter-to-date solely due to weather? I guess I'm just trying to parse out here, if we were to compare days versus days on a like-for-like basis, would sales have been up year-over-year? Good morning, guys. good morning guys The outlook, how many fewer selling days did weather impact in January and February? the outlook how many fewer selling days did weather impact in january and february Is like the total 2% decline quarter-to -date solely due to weather? is like the total 2% decline quarter-to -date solely due to weather I guess I'm just trying to parse out here, if we were to compare days versus days on a like-for-like basis, would sales have been up year-over-year? i guess i'm just trying to parse out here if we were to compare days versus days on a like-for-like basis would sales have been up year-over-year

Speaker 7: No, I know what you're trying to do. Yeah. I think it's, we're gonna leave it a little bit fuzzy because just to be honest, Jonathan, it's always an estimate around weather impacts. We don't actually usually mention it at all, but it was meaningful this time. It affected a portion of the 80 location network. Some were closed for a couple of days, some for a day and a half, you know. Some had residual hangover if customers were open or not. It's hard to put an exact pin in the numbers. What we chose to do was just say, "Hey, factually this is where we're at through January and February. By the way, there was a big old storm that had an impact in that." I think we just need to stay tuned to the end of the quarter and see where things settle. No, I know what you're trying to do. no i know what you're trying to do Yeah. yeah I think it's, we're gonna leave it a little bit fuzzy because just to be honest, Jonathan, it's always an estimate around weather impacts. i think it's we're gonna leave it a little bit fuzzy because just to be honest jonathan it's always an estimate around weather impacts We don't actually usually mention it at all, but it was meaningful this time. we don't actually usually mention it at all but it was meaningful this time It affected a portion of the 80 location network. it affected a portion of the 80 location network Some were closed for a couple of days, some for a day and a half, you know. some were closed for a couple of days some for a day and a half you know Some had residual hangover if customers were open or not. some had residual hangover if customers were open or not It's hard to put an exact pin in the numbers. it's hard to put an exact pin in the numbers What we chose to do was just say, "Hey, factually this is where we're at through January and February. what we chose to do was just say "hey factually this is where we're at through january and february By the way, there was a big old storm that had an impact in that." I think we just need to stay tuned to the end of the quarter and see where things settle. by the way there was a big old storm that had an impact in that." i think we just need to stay tuned to the end of the quarter and see where things settle

Speaker 3: That's a fair comment. I guess maybe also relatedly, have you seen any change in end market demand given all the macro stuff in the housing market, or is things kind of stable-ish from where we were in Q4? That's a fair comment. that's a fair comment I guess maybe also relatedly, have you seen any change in end market demand given all the macro stuff in the housing market, or is things kind of stable-ish from where we were in Q4? i guess maybe also relatedly have you seen any change in end market demand given all the macro stuff in the housing market or is things kind of stable-ish from where we were in q4

Speaker 7: I mean, there's seasonal impacts between Q4 and Q1. You know, Q1 is obviously gonna be a stronger quarter from a sales perspective, activity-wise than Q4. You know, keeping in mind that seasonal impact, of course, I would describe the market is still continuing to be fairly steady, stable. You know, we can make good money in this market and even if we are still in what I would describe as closer to trough conditions, we're really well positioned if there is a pickup. But in the meantime, we can provide very good returns to shareholders. You know, we hope as we move through the year that we see some loosening in the housing market that gets activity levels to a higher base. We don't need that. We can continue to do our thing and execute our strategy and put good numbers on the board. I mean, there's seasonal impacts between Q4 and Q1. i mean there's seasonal impacts between q4 and q1 You know, Q1 is obviously gonna be a stronger quarter from a sales perspective, activity-wise than Q4. you know q1 is obviously gonna be a stronger quarter from a sales perspective activity-wise than q4 You know, keeping in mind that seasonal impact, of course, I would describe the market is still continuing to be fairly steady, stable. you know keeping in mind that seasonal impact of course i would describe the market is still continuing to be fairly steady stable You know, we can make good money in this market and even if we are still in what I would describe as closer to trough conditions, we're really well positioned if there is a pickup. you know we can make good money in this market and even if we are still in what i would describe as closer to trough conditions we're really well positioned if there is a pickup But in the meantime, we can provide very good returns to shareholders. but in the meantime we can provide very good returns to shareholders You know, we hope as we move through the year that we see some loosening in the housing market that gets activity levels to a higher base. you know we hope as we move through the year that we see some loosening in the housing market that gets activity levels to a higher base We don't need that. we don't need that We can continue to do our thing and execute our strategy and put good numbers on the board. we can continue to do our thing and execute our strategy and put good numbers on the board

Speaker 3: Okay. Fair enough. I guess one last one, Faiz, maybe a housekeeping one. Working cap expectations for 2026. If Q1 could be a little lower in terms of volume or sales, can we expect maybe working cap to be down a bit year-over-year? Okay. okay Fair enough. fair enough I guess one last one, Faiz, maybe a housekeeping one. i guess one last one faiz maybe a housekeeping one Working cap expectations for 2026. working cap expectations for 2026 If Q1 could be a little lower in terms of volume or sales, can we expect maybe working cap to be down a bit year-over-year? if q1 could be a little lower in terms of volume or sales can we expect maybe working cap to be down a bit year-over-year

Speaker 1: No. You should expect the same pattern you've seen in previous years where December is a low point. We do build inventory through the first half of the year in anticipation of a stronger spring and summer period. This is sequential, right? My comments are sequential. Relative to where we were in December, spring and summer will be stronger. It's a question of how much is our anticipation. You will see some inventory build through the first half of the year. Again, if sales pace is more muted, you should expect that to come out in the back half of the year like it did last year. No. no You should expect the same pattern you've seen in previous years where December is a low point. you should expect the same pattern you've seen in previous years where december is a low point We do build inventory through the first half of the year in anticipation of a stronger spring and summer period. we do build inventory through the first half of the year in anticipation of a stronger spring and summer period This is sequential, right? this is sequential right My comments are sequential. my comments are sequential Relative to where we were in December, spring and summer will be stronger. relative to where we were in december spring and summer will be stronger It's a question of how much is our anticipation. it's a question of how much is our anticipation You will see some inventory build through the first half of the year. you will see some inventory build through the first half of the year Again, if sales pace is more muted, you should expect that to come out in the back half of the year like it did last year. again if sales pace is more muted you should expect that to come out in the back half of the year like it did last year When you get to the end of the year, if sales pace again has been more muted, you shouldn't expect much of an investment for the full year in inventory, which means we would be paying down meaningful portions of debt again, like we did last year. That's what you should expect in terms of pattern of working capital through the year in the environment we know today. When you get to the end of the year, if sales pace again has been more muted, you shouldn't expect much of an investment for the full year in inventory, which means we would be paying down meaningful portions of debt again, like we did last year. when you get to the end of the year if sales pace again has been more muted you shouldn't expect much of an investment for the full year in inventory which means we would be paying down meaningful portions of debt again like we did last year That's what you should expect in terms of pattern of working capital through the year in the environment we know today. that's what you should expect in terms of pattern of working capital through the year in the environment we know today

Speaker 3: Like on a year-over-year basis. Like full-year, to full-year, we're thinking maybe flat. Like on a year-over-year basis. like on a year-over-year basis Like full -year, to full- year, we're thinking maybe flat. like full -year to full- year we're thinking maybe flat

Speaker 1: Yeah. I mean, if you know, the market is saying not much is gonna happen for the year. If you track along with that should be your expectation that when you get to the end of the year, we shouldn't have put a lot of dollars into working capital. That was the case for us last year. It was the case the year before as well. That's really a feature of our business model. In years where it is a bit slower, we can control working capital in this way, and we can generate a lot of very good cash flows. That should be the expectation in this environment. Yes. Yeah. yeah I mean, if you know, the market is saying not much is gonna happen for the year. i mean if you know the market is saying not much is gonna happen for the year If you track along with that should be your expectation that when you get to the end of the year, we shouldn't have put a lot of dollars into working capital. if you track along with that should be your expectation that when you get to the end of the year we shouldn't have put a lot of dollars into working capital That was the case for us last year. that was the case for us last year It was the case the year before as well. it was the case the year before as well That's really a feature of our business model. that's really a feature of our business model In years where it is a bit slower, we can control working capital in this way, and we can generate a lot of very good cash flows. in years where it is a bit slower we can control working capital in this way and we can generate a lot of very good cash flows That should be the expectation in this environment. that should be the expectation in this environment Yes. yes

Speaker 3: Understood. Thanks for taking my questions. I'll get back in queue. Understood. understood Thanks for taking my questions. thanks for taking my questions I'll get back in queue. i'll get back in queue

Speaker 1: No problem. No problem. no problem

Speaker 6: Thank you. At this time, Mr. Brown, it appears we have no other questions registered. Please proceed. Thank you. thank you At this time, Mr. Brown, it appears we have no other questions registered. at this time mr brown it appears we have no other questions registered Please proceed. please proceed

Speaker 7: Okay. Thanks, Sylvia, for hosting the call today, and thanks everybody who dialed in and appreciate all the questions. If you've got follow-ups, please do reach out to Faiz Karmally and I. We're very accessible. Be happy to take your call and address your questions. With that, we'll say hope everybody has a great day. Okay. okay Thanks, Sylvia, for hosting the call today, and thanks everybody who dialed in and appreciate all the questions. thanks sylvia for hosting the call today and thanks everybody who dialed in and appreciate all the questions If you've got follow-ups, please do reach out to Faiz Karmally and I. if you've got follow-ups please do reach out to faiz karmally and i We're very accessible. we're very accessible Be happy to take your call and address your questions. be happy to take your call and address your questions With that, we'll say hope everybody has a great day. with that we'll say hope everybody has a great day

Speaker 6: 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 do ask that you please disconnect your line. Thank you, sir. thank you sir Ladies and gentlemen, this does indeed conclude your conference call for today. ladies and gentlemen this does indeed conclude your conference call for today Once again, thank you for attending, and at this time, we do ask that you please disconnect your line. once again thank you for attending and at this time we do ask that you please disconnect your line