Pet Valu Holdings Ltd. ($PET)

Greetings, welcome to Pet Valu Holdings Ltd. Annual General Meeting of Shareholders. [Operator Instructions] Shareholders and validly appointed proxy holders who logged into this meeting with their control numbers or user names via the Lumi platform can submit questions during the meeting online. To do so, please click on the messaging tab. You can type your question in the box at the top of the page, then click Submit. Please include your name with your questions so that you can be properly recognized. Participants by telephone are in listen only mode and are not able to ask questions. If you are a registered shareholder or a validly appointed proxy holder in listen-only mode and you wish to submit questions during the meeting, please log into the meeting via the Lumi platform with a control number or user name. Please note this conference is being recorded. I will now turn the conference over to your host, Chairman of Pet Valu Holdings Limited, Anthony Truesdale. Please go ahead, Mr. Truesdale.

Good afternoon. Welcome to the company's Annual General Meeting of Shareholders for 2026. We are conducting today's meeting as a virtual meeting. Our meeting will consist of a brief agenda of formal items, including the setting of the number of directors for the ensuing year, the election of directors, the appointment of our auditor and the advisory resolution on the company's approach to executive compensation. Following the formal business of the meeting, there will be a corporate presentation and a more general Q&A session. Catherine Johnston, Secretary of the company, will begin by describing how we will conduct the meeting, then I will take us through the official business portion of the meeting.

Thank you, Tony. Good afternoon, everyone. As the conference operator advised at the beginning of this meeting, if you have a question or wish to make an objection at any point, click on the messaging tab and type your question and confirm you are a registered holder of common shares of the company or a valid proxy holder. We will read the questions pertaining to the business of the meeting allowed at the appropriate time. along with the name of the person submitting the question so that all attendees can hear the inquiry. Tony or I will then address the question as we would during an in-person meeting. Although questions can be submitted throughout the meeting, I encourage you to submit your questions early and 1 at a time. They will be addressed at the appropriate time during the meeting. Only questions on topics relating to today's subject matter will be addressed. As Tony mentioned, there will be a more general Q&A session after the formal business of meeting is completed. If you have not already voted your shares and you intend to vote at this meeting, please note that the polls are now open, and you can vote on all matters. To vote, click on the voting tab on the Lumi platform. You'll be taken to an electronic ballot that you can fill out and submit online. Please note, the only attendees entitled to vote and submit questions or objections at this meeting are registered shareholders or duly appointed proxy holders who have logged in using their assigned control numbers or user names. We remind you that if you are a registered shareholder and you have already voted by proxy, unless you wish to change your vote, you do not need to vote again. Votes may be changed up to the time voting is closed. The poll will remain open until the Chair of the meeting declares voting on all matters closed. We will provide you with preliminary voting results for all resolutions at the end of the meeting. For specific tabulations, please see Pet Valu's report of voting results which will be posted to Pet Valu SEDAR+ profile after the meeting. A simple majority is required to approve matters voted on at this meeting. I will now hand it back to Tony.

Thank you, Catherine. I will act as Chairman of the meeting, and Catherine will act as Secretary of the meeting. Also joining us remotely are directors and members of senior management. is Waltenbury of Computershare Investor Services, the company's transfer registrar and dividend distribution agent will act as scrutineer of the meeting. I will now review the manner in which notice of this meeting was given. Notice of this meeting has been provided to all registered shareholders, to the directors of the company and to the company's auditor. . A copy of the affidavit as to such mailing has been provided by Computershare Investor Services, the company's transfer agent, which oversaw the mailing. Notice of the meeting has been posted on SEDAR plus and is included in our management information circular. Copies of the circular and other meeting materials are available under the company's profile on SEDAR plus on the company's website and on the Lumi platform. Absent any objection, I will dispense with the reading of the notice of the meeting. In light of the foregoing proper notice of the meeting has been given. I will now address whether quorum is present today for the transaction of business. The company's articles specify that a quorum at the meeting of shareholders is 1 shareholder who is or who represent by proxy shareholders who, in the aggregate, hold at least 25% of the issued shares entitled to be voted at the meeting. With respect to the presence of a quorum at today's meeting, the preliminary scrutineer's report indicates that there are 47 shareholders present at this meeting, either attending online or being represented by proxy, holding an aggregate of 62,369,217 common shares. This represents approximately 90.54% of the company's issued and outstanding common shares as of the record date of March 16, 2026, on which 68,886,721 common shares were issued and outstanding. I adopt the scrutineers' report and declare that a quorum is present. With the appropriate notice of the meeting have been given and a quorum being present, I declare the meeting is duly constituted and ready for the transaction of business. In accordance with the company's articles, no motion that the meeting needs to be seconded. After preliminary voting results are announced in following the conclusion of voting, the Chairman will announce the results of each motion. At this time, I'd like to advise that Jeff Glasberg, the representative of our auditor, has joined us remotely. The first item of business is to receive the company's audited consolidated financial statements for the year ended January 3, 2026 and a copy of the financial statements and auditor's report for the company's financial year ended January 3, 2026 was mailed to those registered and beneficial shareholders of the company who requested them. Copies of these documents are available for review on the Lumi platform. They are also available for review on the company's website and on SEDAR Plus. These documents are now placed before the meeting. No vote is required for the reception of these documents. Accordingly, I declare that these documents have been received. As previously noted, there will be a Q&A session after the formal business of the meeting is completed and management will be available to answer any questions. We will now move on to the second item, which is setting the number of directors for the ensuing year. The circular for this meeting dated March 17, 2026, which is included in the meeting materials accessible on the Lumi platform sets out the details of this motion on Page 12. This vote is to approve an ordinary resolution to set the number of directors elected for the ensuing year at 8. This will be subject to any increases as may be permitted by the articles of the company and the provisions of the British Columbia Business Corporations Act. I move that the number of directors be elected for the ensuing year be set at 8 and that this be passed as an ordinary resolution of the shareholders. Are there any comments or questions on the motion?

No, there are no comments or questions on the number of directors to be elected for the ensuing year.

As there are no further comments or questions, we will now proceed. We will tabulate your vote, and we progress through each matter to be voted on, and we will announce the preliminary results of all votes immediately after we close the polls at the end of our agenda. The next item to be voted on is the election of directors. The circular for this meeting sets out the details of the 8 individuals nominated for election of the Board, pursuant to the circular the following 8 individuals are the nominees for election to the Board for the ensuing year. Anthony Truesdale, Danielle Barran, Sarah Davis, Carmen Fortino, Laurence Lloyd, Greg Rameir, Ed Randel and Aaron Young. Under the company's advanced notice provisions, shareholders' nominations for directors must be made not less than 30 days prior to the date of the Annual General Meeting of Shareholders. As no further nominations were made in accordance with the advanced notice policy and management has proposed 8 nominees, I declare that the nominations be closed. I move that 8 nominees just announced be elected to the Board for the ensuing year. Are there any comments or questions on the motion?

No, there are no comments or questions on the nominations.

As there are no further comments or questions, we will now proceed. The next item to be voted on is the appointment of the company's auditor. The company's current auditor is Ernst & Young LLP. Management proposes to appoint Ernst & Young LLP as the auditor of the company's and to authorize the directors to fix the compensation payable to the auditors. I now move that Ernst & Young LLP be appointed as auditor of the company until the next Annual General Meeting. And that the directors of the company be authorized to fix the auditor's compensation. Are there any comments or questions on this motion?

No, there are no comments or questions.

The final item of business to consider is the nonbinding advisory resolution on the company's approach to executive compensation. This approach is set out starting on Page 28 of the circular along with the full text of the advisory resolution, which is set out on Page 24 of the circular. This vote is advisory only and nonbinding on the company and the Board. However, the Board will consider the outcome of the vote as part of its ongoing review of executive compensation. I move on an advisory basis and not to diminish the role and responsibilities of the Board of Directors that the shareholders accept the approach to executive compensation disclosed in the circular delivered in advance of this meeting. Are there any comments or questions on the advisory vote on executive compensation?

No, there are no comments or questions.

As there are no further comments, we will now proceed. This completes the matters to be voted on at this meeting. The polls will close shortly. So if you have not yet voted on a matter, please do so immediately. While we are waiting for the polls to close, let me advise you that immediately after they close, our scrutineer will provide me with a preliminary tabulation of the results on each matter voted on based on proxies received in advance of the meeting and the votes cast at this meeting. I will now announce those results presently. Full ballot results for each item submitted to the shareholder vote at this meeting will be posted on the company's SEDAR plus profile following this meeting. The polls are now closed. And I have received the scrutineer's preliminary report. The preliminary results are as follows: With respect to the number of directors, a majority of the common shares voting on this motion voted for setting the number of directors for the ensuing year at 8, with respect to the election of directors, each of the nominees has received a sufficient number of for votes to be elected to the Board until the next Annual General Meeting and that for each nominee, the number of withheld votes is less than the number of for votes. With respect to the appointment of the company's auditor, a majority of the common shares voting on this motion voted for appointing Ernst & Young LLP as the auditor of the company until the next Annual General Meeting, and for authorizing the directors to fix the compensation payable to the auditors. With respect to the advisory resolution on the company's approach to executive compensation, a majority of the common shares voting on this motion voted for adopting the advisory resolution. I declare that each of the motions submitted to vote of the shareholders at this meeting has been approved. We have completed the formal business for which this meeting has been called. I now ask that anyone that has any other business they would like to bring before the meeting. If you wish to bring any other motion or objection before this meeting, please click the messaging tab and type your question. I'll pause now to allow any attendees to submit comments.

There are no motions or comments or objections.

There being no other business or objection, I now declare the meeting terminated. I'll now hand the proceedings over to Greg Ramier, Chief Executive Officer of the company.

Thank you, Tony. On behalf of the Board of Directors, our franchise partners, our leadership team and our ACEs across Canada. Thank you for joining us today and for your continued support of that value. It is a privilege to speak to you as we reflect on our performance in 2025 and look ahead to an important milestone year, our 50th anniversary. Before I begin, I want to note our customary cautionary language regarding forward-looking statements and non-IFRS measures. As we reflect back on 2025, the Canadian pet industry was shaped by continued demand for quality products together with a heightened desire for value fueled by macroeconomic uncertainties. In this environment, we acted decisively to strengthen our market position by leveraging our scale. We expanded our physical and digital reach. We sharpened our everyday value. We deepened our in-store expertise, and we fostered innovation across our assortment. As a result of these actions, we saw another year of market share gains and delivered solid financial outcomes. Fiscal 2025 revenue grew 7%, supported by a return to positive same-store sales growth. Adjusted EBITDA margins remained healthy at 22% and we returned adjusted EPS return to adjusted EPS growth despite absorbing $0.12 of incremental fixed costs associated with our supply chain transformation. We generated $104 million in free cash flow, representing a strong 40% free cash flow conversion ratio, supported by our capital-light model and easing reinvestment needs. We returned a record $121 million to shareholders through dividends and share repurchases. And just as importantly, we reinforced the long-term resilience of our model by continuing to support the success and profitability of our growing franchisee community. Our performance reflects disciplined execution against our 3 strategic priorities, let me share some of those highlights. First, to be Canada's local and everywhere pet specialty retailer. Together with our franchise partners, we opened 40 new stores in 2025, reaching meaningful milestones across our banners. -- including surpassing 100 locations in each of Basleys and British Columbia, Pet Valu in Alberta and Chico in Quebec. Our franchisee community grew to 370 local owner operators who collectively operate 600 local pet specialty stores across Canada, including our core corporate network, we ended the year at 863 stores nationwide nearly 4x more locations than our nearest pet specialty peer. Our digital channel remained a powerful complement to our store network, rounding out our industry-leading omnichannel offering. Building on our recent e-commerce platform modernization, we introduced everyday shipment, everyday auto ship offers, expanding -- expanded third-party delivery partnerships and enhanced our pet profile capabilities to strengthen engagement and personalization. Sales generated online once again outpaced our company average with particular standouts in our click and collect and online delivery platform offerings, which leverage the core strength of our corporate and franchise stores across Canada. Moving to our second focus: To deliver the best pet customer experience in Canada. As macroeconomic uncertainty weighed on consumer confidence, we leaned in to provide much needed value to devoted pet lovers through our merchandising and loyalty strategies. Over the course of the year, we made measured enhancements to our value proposition, including lowering everyday prices on key national brands and our most popular proprietary brands. We expanded the assortment of brands eligible for our frequent buyers loyalty program, helping drive record loyalty sales penetration of 88%, and we executed a sharpened promotional calendar focused on building basket size, supported by effective in-store activation and our new promotional tool. This value proposition was complemented by our enduring commitment to innovation and quality. With the introduction of new specialty formulations and brands, we also leaned into our Maiden Canada leadership, broadening our assortment of innovative Canadian brands, improving in-store and online merchandising of domestic products and leveraging our ACEs to support informed trust-based conversations with devoted pet lovers. On the back of our successful Performatrin Culinary launch in 2024 and we rolled out an enhanced culinary experience across 130 stores, elevating pet value as a destination for culinary customers who represent some of the highest lifetime value devoted pet lovers. And finally, our third focus: To fortify strong retail and wholesale fundamentals. In 2025, we completed our nearly 4-year $100 million supply chain transformation with commissioning of our final distribution center in Calgary, with over 1.3 million square feet of modern, partially automated capacity across 3 facilities, we have built what we believe is Canada's strongest pet specialty supply chain. Benefits from this investment are already materializing including a 60% and climbing productivity improvement, increased wholesale penetration with franchisees, particularly within Chico and the beginning of a long runway of distribution cost leverage. Looking ahead, 2026 marks an incredible moment for Pet Valu, our 50th anniversary. For over half a century, we and our franchisees have been there for devoted pet lovers and their pets, celebrating their important milestones, providing advice to help navigate uncertainty and creating memorable moments along the way. our shared desire to help Canadians with the health and happiness of their pets has sat at the core of our success and will continue to as we chart our next 50 years of growth. And this all starts with our plans for this year. 2026 is taking shape very much the way 2025 left off with heightened levels of value-seeking behavior, perhaps amplified by the pressure rising fuel cost supply across household budgets. With our strong foundation, financial flexibility and unmatched scale in the pet specialty channel, we and our franchisees are well positioned to navigate the current environment, while strengthening our competitive moat, to drive growth over the long term. Let me provide a few highlights of what is underway and what is to come this year. We will continue to invest in convenience with plans for approximately 40 new store openings across Canada complemented by ongoing reinvestment in our existing network. Digital engagement will also remain a priority as we introduce more ways to integrate our retail experiences across channels. We will deliver everyday value, led by our high-quality proprietary brands and programs such as item of the month, while exciting customers through compelling events and promotions. We will continue to bring innovation and quality across consumables and hard lines, delivering the breadth and differentiation to what pet lovers expect from Pet Valu. We will further evolve our in-store model through the phased expansion of our enhanced culinary experience into the franchise network and continue investing in our animal care experts to enrich in-aisle expertise. And finally, as our supply chain shifts fully into optimization mode, we will pursue additional productivity gains across labor, transportation and systems, supporting a long runway of operational leverage. In closing, thank you for your continued confidence and investment in pet value, as we pursue our mission to be Canada's preferred pet retailer, delivering the products, care, expertise and memorable moments pet lovers want locally in stores and everywhere online. This concludes my prepared remarks, and I'd be happy to respond to any questions. Team, are there any questions on the Lumi platform? Seeing as there is no further questions, this concludes our presentation. Thank you for joining us today via webcast and over the telephone and for your continued support of Pet Valu.