BuildDirect.com Technologies Inc. ($BILD)

All right. Let's begin. Hello, everyone, and welcome to BuildDirect's Q1 2026 Financial Results Conference Call. My name is Bob, and I'll be your moderator for today. BuildDirect trades on the TSX under the ticker symbol BILD, that's BILD and on the OTCQB on a ticker symbol BD-CTF, that's BD-CTF. Joining me on the call are Shawn Wilson, CEO; and Kerry Biggs, CFO of BuildDirect. Before we begin, I would like to remind everyone that certain statements made during this call may constitute forward-looking information within the meaning of applicable securities laws. These statements are based on management's current expectations and are subject to risks and uncertainties. Please refer to the detailed forward-looking statements and advisories in today's earnings deck and press release. If you have any questions during the call, please send them in using the Zoom Q&A function at the bottom of your screen or e-mail them to [email protected]. We'll address these questions during the Q&A session. A replay of this call will be available approximately 24 hours after the conclusion and will be posted on the IR section of our website at ir.builddirect.com. I would now like to turn the call over to Shawn Wilson, CEO of BuildDirect, please go ahead, Sean.

Thank you, Bob, and great, everyone. Thanks for joining us today. Q1 was a quarter that reflected the strategy we've been executing against. While the broader home improvement market continues to evolve, we deliver strong margin retention generated positive operating cash and most importantly, continue to advance our footprint expansion initiatives. The last 12 months, we've completed 3 accretive acquisitions, the Orlando Pro Center rain custom wood in February and tile outlets of America, which just closed. As a story this quarter, while the market compresses valuations, we're using a strengthened balance sheet to scale, to build and operating leverage for the recovery. As you'll see in today's materials, Q1 revenue was $14.6 million, down 2% year-over-year, reflecting a softer industry-wide demand. But importantly, we held gross margin at 40.2%, generated $1.55 million in positive operating cash flow and strengthened our cash position. Working capital improved by $4.7 million year-over-year. Post centers represented 72% of total revenue in the quarter, our largest segment by scale and the platform we're building around. That same pro center platform is what makes our M&A program work gives every acquisition a place to plug in, to integrate and to immediately benefit from sourcing, technology and back office leverage. I'll now hand over to Kerry to walk through the detailed financial results.

Yes. Thanks, Shawn, and good afternoon, everyone. Let me walk you through the quarter here. As Shawn noted, Q1 was $14.6 million of sales compared to $15.1 million in Q1 2025, so a decrease of 3.3%. And which we view as fairly positive given the macroeconomic environment that the company is in. Gross margin came in at 40.2%, a 110 basis points below the very strong 41.3% margin we delivered in Q1 of 2025. Again, as Shawn noted, we did generate positive operating cash flow of $0.55 million, a good result for the quarter given the demand backdrop. Looking at the segment breakdown E-commerce contributed $3.9 million of the quarterly revenue and a 52% gross margin, while the Pro centers contributed $10.7 million at a 35.9% gross margin. So together, our omnichannel model continues to deliver structurally higher margins than a peer retail comparable. Turning to the consolidated summary. Year-over-year revenue was down 3.3% to $14.6 million. Gross profit was $5.9 million versus $6.2 million the prior year and gross margins noted was 40.2 versus $41.3 million. Adjusted EBITDA for the quarter was a modest loss in the range that we previewed in our May 12 press release, driven primarily by lower segment volume, partially offset by the margin discipline that we note. At the segment level, both businesses generate a positive adjusted EBITDA. The e-commerce segment at $0.12 million and the ProCenters at $0.62 million for combined operational segment adjusted EBITDA. Pre-corporate costs came in at $0.74 million. So the story is consistent quarter after quarter. The underlying segments are profitable. Platform overall is generating cash and the balance sheet is positioned for capital deployment, which we did subsequent to quarter end. Moving on to the next slide. The e-commerce segment. Revenue, as I said, was $3.9 million, down 8.1% from $4.2 million in Q1 of 2025, reflecting a slightly softer category demand in early 2026. Gross margin actually expanded 10 basis points to 52% this quarter, supported by disciplined pricing and a core product mix assortment. Operating expenses came in at $1.9 million on lower marketing and discretionary spend and segment adjusted EBITDA, as noted, was $0.12 million compared to $0.15 million in Q1 of 2025. The key story for the quarter for e-commerce is the integration of the Grain platform, which was the asset purchase we closed in early February. Grain ads a marketplace platform with major U.S. retailer channels and we expect revenue contribution to accelerate as we move through the year in this segment. We're also routing more fulfillment through our Pro center network, especially grain, which will -- we expect to further support our margin efficiency. On the next slide, the Pro center segment. This remains obviously our largest segment in our M&A integration platform. Revenue for the segment was $10.7 million, down 1.4% year-over-year. Gross margin was 35.9%, generating $3.85 million in gross profit. And the -- again, the segmented adjusted EBITDA was $0.62 million for the Pro Center segment. The Orlando Pro center we opened in Q1 of 2025 by the purchase of the the Yorkshire and anchor assets was our opening M&A step into the Florida market and the title outlets of America acquisition that we just closed on May 12, adds 3 new Florida showrooms in Tampa, Sarasota and Fort Myers, along with approximately $19.5 million of annual sales to our Florida Foundation. TOA expands our Florida footprint meaningfully and gives us regional density, which we did not have before. So with that, I'll just quickly hand it back to Shawn to walk through the footprint expansion in more detail here.

Thanks, Kerry. This is the single most important slide for understanding our strategy in today's presentation. In the last 12 months, BuildDirect has added 3 new platforms to our footprint. -- deliberately while the broader deploy market has been compressing. First, Orlando Pro Center, which is purchased in Q1 of 25. The infrastructure investment is complete, give us the new beachhead, and 1 of the most attractive in markets in the U.S. Second was grain in custom wood, which we closed in February of this year, which really brought an online to a marketplace platform, which all plugged into our U.S. retailer channels, approximately $6 million in 2025 sales adjusted EBITDA and roughly 4,000 identified annual cost synergies for logistics and warehousing consolidation. Really third, America, which we're very excited about our recently closed and brings 3 established Florida showrooms approximately, as Kerry mentioned, $19 million in sales and really an experienced operating team with a meaningful expansion into the tile category, which is a category that is relatively net new for us will be very accretive for us across our business. The net purchase iteration was approximately $3.7 million funded retire with cash on hand, and we expect TOA to be accretive to adjusted EBITDA over time, believe it can progress to our long-term targeted adjusted EBITDA and operating profile of 10% to 15%. The North America for market is fragmented. And as we mentioned maintimes before, many regional operators are facing real macro pressure and limited scale that creates accretive entry points for not better like us that has the platform, the sourcing network, digital marketing capabilities in our integration playbook. We intend to keep on using this window. Kerry?

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

Yes. Thanks, Terry. So looking at Q2 and the back half of '26, we do expect industry demand to remain soft until macro conditions improve, specifically until interest rates moderate, and help the turnover recovers. It's a huge driver for the flowing industry. input cost pressure from tariffs and logistics slightly to remain elevated. Our response is straightforward. We continue to operate existing business with discipline, defending margin, generating cash and integrating what we've acquired. We continue to deploy capital into accretive M&A while the market it gives us cyclical valuations and opportunities. We expect demand recovery as macro headwinds at ease and want the platform to be meaningfully larger and denser when the recovery arrives. This leads me to really our 3 priorities, and we're focused on the balance of this year. First, the TOA integration with a clear playbook, corporate and back office consolidation, real estate optimization, supply and sees an integration to our technology platform. We expect this work to drive margin improvement and operating leverage as we play out the year. Second, with the grain integration and e-commerce scale -- the full integration of the grain is underway, and we expect revenue contribution to accelerate and the cost synergies identified at the announced and are tracking the plan. Third, we had a list of active active of targets, and we're going to continue to work through those and progress them. And our focus stays where it's been before, deep value, cash flow positive businesses that fit our ProCenter platform that we can buy at compressed valuations. We to put a fine point on our job in this part of the cycle is to use BuildDirect's balance sheet platform and our execution to compound our footprint and density while there's set out. That definitely Q1 was the TOA close, both represent. Lastly, with that, I'll turn it back over to Bob for any questions.

Thank you, Sean. Kerry. We'll now open the floor for questions. Questions will be taken in the order received. As a reminder, if you have any questions during the call, please send them in using the Zoom Q&A function at the bottom of your screen or e-mail them to irbilddirect.com. So a question we received here. You completed 3 acquisitions in the last 12 months. How do you view about direct acquisition pipeline today? And do you believe the current environment remains rich with similar opportunities?

Yes. I'll take that one, Kerry, if I'm anything to it afterwards. -- feel free -- so yes, I mean, if anything, I'm extremely optimistic. There definitely are a lot of great opportunities out there. The latest acquisition in Florida, really kind of speaks to what we are looking for and what's available. And I would say, for us, definitely have a good feel for doing deals that make sense on both sides, team retention strategies and also being able to very quickly integrate and tap into the key value drivers on the hard synergy side. is also great. If you kind of think about it in really basic practical way. So for example, TOA in Florida had a great legacy in the tile business, which is a considerable part of the flooring business, our other operations were not in. And you have foot traffic just flowing in. And then with that, you have adjacent categories, things like final plank wood carpet, so on and so forth, the area rugs that were not part of that product mix. The flooring industry is not only fragmented when it comes to operators. There's also a lot of fragmentation that happens at the category level. So you have businesses that specialize in, let's say, wood, for example, and others that specialize in tile and we're able to bring that together. Along with that, there's a very important Pro focus for us. And we get asked a lot, why do you buy -- why would a customer buy from you guys versus buying from Florida core. So I'll give you a specific soundbite standing in the Fort Myers location a couple of days ago, 1 of our major pros who literally works out of the location. They occupy 1 of our 1 of our stations in the back to work with customers, and they buy from us because we understand the product, we understand the installation. We don't mix up dialogues. It's the full service. We helped their customer decide the design support is real. And it's a great flow for a Pro who's operating their own small business selling to better referral customers on the installation side. So we're able to take that complexity complexity away that type of specialty service, especially in an age of automation is highly important, very practical and help solve real problems for Pros versus going into competitors that have large buildings, lots of product, but lack that expertise to be able to help the customer and help a Pro with their projects. That's really where we are focused on why we call all of our locations, grow centers -- and so for us, we feel really good about the opportunities out there. And yes, I really haven't been have been pretty excited before, but more so now for sure.

Sounds good. And then the next question here is regarding TOA in green, which you mentioned in the presentation, what should investors be watching over for the next few quarters as these acquisitions are integrated.

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

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

Thanks all.