Richelieu Hardware Ltd.

Merci. Thank you.

Good afternoon, ladies and gentlemen and welcome to Richelieu's conference call for the fourth quarter and the year ended November 30, 2024. With me is Antoine Auclair, CFO and COO, as of now.

As usual, note that some of today's issue includes forward-looking information which is provided with the usual disclaimer as reported in our financial filings. The year 2024 ended well for Richelieu with good results in the fourth quarter including sales up 5%, driven almost equally from internal growth and acquisition.

For the year, our total sales were $1.8 billion, which we are pleased with given the renovation slowdown and the price deflation on some commodity products. Our team got its expertise and drive to meet the challenge with continuous product innovation, second-to-none service and customer support.

The diversification of our market segment -- sorry, I've lost my page -- the diversification of our loss segments and the expansion of our operation in Canada and in the US with a strategically well-established network gives us the strength to face the market and economic condition. We pursued our acquisition strategy in the fourth quarter, closing our fourth acquisition since the beginning of the year, Panexel on November 13th.

We are looking forward to integrate this new Quebec-based business located in Boucherville, which specializes in surfaces and decorative panels, adding new products for our Eastern Canadian market. In addition, we signed three agreements in principle in the fourth quarter, which were successfully concluded in December and early January 2025.

We acquired three new fully compatible businesses, Mill Supply on December 1st located in Dartmouth, and Charlottetown, Darant Distributing in Denver, Colorado adding a location in this long time targeted strategic market where we did not have a physical presence and Midwest Specialty Products in Minneapolis, Minnesota. As a result of this acquisition, we now operate two distribution centers in Minneapolis while adding product lines related to the countertop manufacturing market.

Together, the seven acquisitions closed in 2024 and early 2025 will bring an additional $100 million in annual sales, boost our market presence, and diversify and expand our product lines. Antoine will now go over the financial highlights for the quarter and the year.

Then I will conclude and we will take our questions. Antoine?

Thanks, Richard. Our fourth quarter sales reached $476 million, up 5%.

Sales to manufacturers stood at $421.6 million, up 7.2% with 4.1% from internal growth, and 3.1% from acquisitions. In the hardware retailers and renovation superstores market, sales were down 9.7%.

In Canada, sales amounted to $275 million, an increase of $7.8 million or 2.9%. Our sales to manufacturers reached $230 million, up 4.4%.

As for the retailers market, sales stood at $45 million, down 4% with last year. In the US, sales totaled $146 million in US dollar, up 7.1%.

Sales to manufacturers reached $139 million, up 10%, evenly split between internal growth and acquisitions. In the retailers market, sales were down 29.6%.

Total sales in the US reached CAD201 million, an increase of 7.9%, representing 42% of total sales. Total sales for 2024 reached $1.8 billion, an increase of 2.5%, of which 2.2% from acquisition, and 0.3% from internal growth.

Sales to manufacturers reached $1.6 billion, up 4.6%, of which 2% from internal growth, and 2.6% from acquisitions. Sales to hardware retailers were down by 10.9%.

In Canada, sales totaled $1 billion comparable to last year. Our sales to manufacturers amounted to $872 million, up by 1.8%, mostly from acquisitions.

Sales to hardware retailers and renovation superstores were $191 million, down 7.9%. In the US, sales amounted to $575 million in US dollar, up 5%, of which 2.1% from internal growth and 2.9% from acquisitions.

They reached CAD784 million, up 6%, accounting for [43%] (ph) of total sales. Sales to manufacturers reached $544 million, an increase of 7.1%, and sales to hardware retailers were down by 22.1%.

Fourth quarter EBITDA amounted to $54.3 million compared to $58.8 million in the fourth quarter of 2023, down 7.7%. Our gross margin was slightly lower than last year and the EBITDA margin stood at 11.4% compared to 13% in the same period last year.

This decline was primarily driven by a lower sales price on certain products, higher cost of goods sold in specific categories, as well as the impact of our expansion project that are still in ramp-up mode. Fourth quarter net earnings attributable to shareholders totaled $24.4 million compared with $28.5 million last year.

Diluted net earnings per share reached $0.44 compared with $0.51 in 2023. For the year, net earnings reached $86 million, a decrease of 23.1% and $1.53 per share compared to $1.98 per share last year.

Fourth quarter cash flow from operating activities before net change in non-cash working capital balances were $43 million or $0.77 per share. Net change in non-cash working capital balance used cash flow of $15.8 million.

Consequently, we generated $27.2 million in cash flow from operating activities compared with $72.7 million for the fourth quarter of 2023. For the year, we generated $165.7 million in adjusted cash flow from operating activities.

Throughout the year, we paid dividends of $33.5 million with $8.3 million paid in the fourth quarter. We also repurchased common share for $38.7 million, including $20 million in the fourth quarter.

In total, we distributed a total of $72.2 million to our shareholders this year. Investing activities used cash flow of $51 million, which included $20 million primarily for our four business acquisitions completed in fiscal 2024.

Additionally, $30 million was spent on operational equipment to maintain and improve efficiency as well as on distribution center expansion projects including major investment in our new 250,000 square foot building in Calgary. I now turn it over to Richard.

Thank you, Antoine. Our results reflect the efficiency of our business model which we want always to be well adapted to our customer needs, our value-added distinctive service, the strength of our network, the performance of our website richelieu.com, and our capacity for ongoing innovation.

We have a unique product offering, featuring diversity, quality, and depth in our product lines. The depth of our product lines is very variable.

It enables us to respond to the increasing specialized needs of our customers to increase -- in order to increase sales and to distinguish ourselves in the market. Over the coming period, we will continue to build on our lead developing synergies with our recent acquisition.

Our strength must benefit each acquired business and vice versa. We will do our utmost to preserve and improve our margins and continue to invest in innovations and value creating acquisitions to prepare the future.

Our strengths are multiple and we continue to optimize them. In conclusion, I am pleased to announce to you that following the Board of Director approval, Antoine Auclair, Chief Financial Officer of the corporation since 2011, will now also assume the function of Chief Operating Officer in addition to his current responsibility.

With this new role, Antoine will allow me to dedicate more of my time to strategy and business development while continuing to leverage his leadership, and expertise to ensure that the company continues to achieve solid result. Antoine, would you like to add something to that?

Yeah. Thanks for your trust, Richard.

I think that with the growth and multiple acquisitions, we were at a point where we could really benefit from streamlining the organization and give the chance to Richard to spend his time and focus on strategy and market development. So, I'm up for the challenge.

Very good, Antoine. Thanks everyone for listening.

We'll now be happy to answer your question.

Hi, good afternoon, and congratulations, Antoine on the new role.

Thanks, Hamir.

Richard, maybe we could just start first talking about the sort of price volume dynamics in the quarter. I know there's noise on the retailer side because of the US Lowe's business, but at least when I look at the manufacturer side in Q4, you kind of had organic sort of 4% growth.

What would be the breakdown there between price and volume? Because from elsewhere, it looks like the price comps were still negative in Q4.

We don't expect any price increases in Q4. So basically the business for the price -- the pricing is going to be stable.

As far as the -- at the market though it seems that, the market is doing okay. And initially, I think we're more aggressive than ever in order to seize as much share as we can because in a more competitive market, our competitors are getting -- they're starving and the issue is really the target.

But we do very well with the sales force that we have in our website and everything else. And the same thing happened in the US, where because we have to understand also that the US is 10 times the people, it also 10 times more competitions.

So in the circumstances, we does very, very well and we expect -- except for the -- not to mention the Trump, whatever is going to happen next week, we expect for us to achieve very good result in the course of the next 12 months.

And Hamir. Sorry, Hamir, the -- for the retailers, most of the price reduction…

Behind us.

Took place at the beginning of the year. So soon we're going to -- those will be behind us.

Okay. And based on maybe what's been, obviously we'll see what happens next week on tariffs.

But, Richard, based on sort of existing sort of communications of pricing, are you seeing signs of prices increasing yet?

So I think that’s what happened though. We hear, it's not official yet, but the suppliers are just starting to discuss about the new pricing, mainly the North American pricing.

But everything is in the hold because they are like us, they wait till next week what's going to happen. So they might have to increase their price by 20% next week or 25% instead of 2% or 3%.

So basically everything is on hold. But the market is ready and is desperate for price increases because the cost -- operating costs of all the companies, all of suppliers, whatever they're in Europe, in China or in North America, they have cost increase since two or three years and they are not -- they did not have the possibility to increase their pricing.

So people really need this to happen soon. So basically we're going to see what's going to happen next week.

But after that, something should start to move.

It's only a question of time, yeah.

Yeah.

And I mean, Richard, I know we've had -- there's been tariff talk since the election in November. So, given your strong balance sheet, have you positioned yourselves after the end of the quarter with perhaps staging or having more inventory in advance of tariffs, which maybe could drive some higher margins?

We don't have an inventory in advance, because I think we have plenty of inventory. Whatever will happen, you know that we're going to pass through the -- the tariff will be passed through to the customers.

So basically and regarding our competition, we're all in the same bag. They buy basically from the same country and some same sources.

And many of our real US supplier that have used manufacturing in the US, they manufacture in Mexico now. So that would have quite an effect on the market because for example, in the Rev-A-Shelf business, which is a kitchen accessory business, they're all made in -- that's a big business for us.

It's all made in Mexico. And our competitors also sell the same products.

So we're all in the same bag. But on top of that, I think the big advantage we show you is our ability to react fast to whatever will happen and our balance sheet, as you said earlier.

And also our product offering because [indiscernible] alternate products, if product comes from Canada or another country with tariffs, we can look at alternative products. So we have over 130,000 products.

So we definitely have a good competitive advantage.

It's going to be a challenge. We're going to have fun.

That's helpful. And, Antoine, are you able to just maybe update us what the geographic mix of your products are right now?

Almost 45% in the US as we speak.

Yeah, 43%.

43%?

Yeah.

No, I meant for the products. When you're sourcing products from outside of North America.

Okay, sorry. 25% from Asia, 15% from Europe, and 60% from North America.

Okay, perfect. That's helpful.

And just the last question I had, Richard, when you look at margins, 11.4% in Q4 looks like they kind of almost ticked up 10 basis points each of the last three quarters. Should we expect that slow, steady kind of 10 basis points each quarter gradual [indiscernible] over '25?

And where's that long-term margin going?

If you ask the entrepreneur answer, our EBITDA margin should go at 12 to 12.5. But it's going to take time though.

Maybe Antoine can give you more details. But I think we have to get higher than 12%.

Unfortunately, we make a lot of acquisitions. It's fortunate on one side because we really reinforce this company for the future because we do the right moves.

But all those like the $100 million of new business that we just bought, we expect EBITDA margin between 3% and 5% from that. But that's the right move to do if you want to have a CAD3 billion company in five years from now.

And so, Richard, is that the sort of sales aspiration now for…

That's an entrepreneur feeling. Sometimes maybe I talk too much.

All right, that's all I had. I'll turn it over.

Thanks.

Thanks.

Thank you. Congrats on the quarter everyone.

And congrats, Antoine, on the additional title. Just starting there quickly.

Any change to the scope of your role now, Antoine, or is this a case of your title catching up with your responsibilities?

No, basically it's been a while that I'm involved in operation and I think that like I said, we were at the point where streamlining the organization and make sure that Richard also focus on strategy and market development was a priority. So I'm going to do whatever I can to free up Richard and work with the team in operation as well as the CFO role.

My version of the answer is that Antoine has been more than tested on those new responsibilities. He's been involved with me in all the -- what we've done, all the management, whatever the meetings that we had and everything else.

So he was already in charge of many of the manager that are working for us. So now we're adding some manager that's going to report to him.

But he knows exactly what to do and I'm certain 100% that he's going to do it perfectly.

Excellent, thank you. And then flipping over to Q1 thus far, what are you guys seeing in terms of organic growth so far on both sides of the border?

What you've seen in the last quarter is going to be really the same thing, cut pace in this new quarter. But I think some of the bad news being behind us like deflation that type of thing, overpriced inventory.

So everything should at the minimum should improve. So basically we were optimistic and we, I think our sales force, whatever the way we have to sell more products, we have added sales rep on the road, we have added people that sell over the phone.

And we can call that telemarketing, not people taking orders, people that phone the customers because we received many new customers every month that sometimes the rep did not have time to contact. Now we have people that do that on phone.

The results are tremendous as we speak. So basically we're very positive.

I have meeting personally with the Canadian retailers. The Canadian retailers is going to come back.

I had a very good meeting with Home Depot last month. We are introducing new products with them like the stairway components.

We already have the kitchen accessory that has been added. But now we're going to have starting in the east of Canada what we call the safety fencing for the pools.

It's a product that Onward, one of our division sells. It's a very sophisticated fencing system that you cannot leave the fence open and it has to be locked all the time.

So it's very safe for the children and other people as well. So that's going to be added to Home Depot.

And with RONA, as I said earlier in previous meetings that we introducing something like $5 million now in their stores in order to revamp all the product that we have there. Because in the last three years it was not possible to update our products at RONA.

But now we almost finished with the new setup. The new setup means new displays, new sample, new products and adding also new product line with RONA.

So basically as we already said in previous meeting with RONA, we had lost $10 million of sales in Canada. Not our fault because we cannot -- we are not allowed to do our job because of administrative reason, because the company was for sales, was sold, management was changing everything like that.

So basically I'm very optimistic that RONA business, it's going to take me a while to recapture the $10 million, but we're going to be on the right track in 2025. So basically that's all -- all are very good news.

[indiscernible]. Thanks.

And so I'm hearing that EBITDA margin should be north of 12% over the longer term and there's some good tailwinds for organic growth. So if that trend holds, what are your hopes for EBITDA margins this year in 2025?

Yeah, between 11.5% and 12%, that's what we're heading for this year. But we would see, we need to see some kind of a pickup in the economy because what we're seeing today, it's pretty neutral in terms of growth.

We will look maybe a bit better than what we were because the comps will not be as strong in the few months to come but to achieve those margins -- we're in distribution. So market gain or additional sales goes right to the bottom line.

So that's where we're going to -- that's how we're going to be improving the EBITDA. So, to achieve that, we're hoping to see some kind of an improvement in the market maybe more in the second half of the year.

And any divergence in those trends between Canada and US given interest rates or jobs data?

That’s pretty much the same, to be honest and all across the region as well. So now we're seeing the same thing.

The same trend in Canada and in the US.

Good color, thanks. On the acquisition pipeline, how is 2025 shaping up for you?

It's good. It started strong.

We've completed three acquisitions so far in 2025 and we're only January 16th. So it's looking good.

The pipeline is healthy. Team is working 100% on that.

So it's looking good.

Beauty. Thanks.

And then I'll just end off with the tariff risk. With the threat of tariffs from China, are you seeing any of your customers move closer to you or maybe farther away from you in preparation?

No, we don't have any such feeling. I think a lot of customers will be -- will stick with Richelieu because of the prodigious product range that we have.

We've got everything. We're flexible, we have plenty of inventory, many distribution centers, good salespeople to service them and to answer the questions and help them for the technical aspect of their products.

So basically I think distribution could be the first choice for many things. But anyway, as I said earlier, it's a challenge but we have a solid balance sheet and we have all the talented people that will help us to support our customers and to get most of whatever is going to be available from the -- any business.

That's it for me. Thank you very much for taking my questions.

Thank you, Zach.

Hi. Richard, just thinking through some of the maybe organic growth CapEx, when you think about the platform, are there any states where maybe you haven't had as much success with acquisitions where you're looking to build a platform out organically and how do we think about timing or maybe product categories that where the opportunity lies?

Well we -- while making the two latest acquisition the Panexel and Midwest now in Minneapolis we were adding product lines like Quartz for example. So we started the year in 2024 selling zero Quartz and now we're going to sell in 2025, it's CAD25 million worth of Quartz.

So basically that's terrific comeback. And we also -- one of our division that sell what we call the Division 10 of the construction which has a tremendous growth and has many of our division as well.

So new products we always open. We will reinforce our presence in China this year for visiting a couple of exhibitions that are important for us.

There is going to be a big exhibition which I will be present too in, I think in May, it's for Interzum, [just to see the name] (ph) in Germany, I would be there also personally where we meet all the suppliers from around the world and these are the best places and there's going to be Milano as well which is going to be next, I don't know something in the next few months and basically this is where we find all the new products and we have -- we're going to have many of our team players being present with a clear mandate to find new products, find new suppliers and to continue the relationship with our best supplier as well. So, basically, we're going to put a lot of emphasis to refresh many new products and because as we've discussed in another meeting this morning, from Europe, the new product innovation was not really there in the last 18 months because the market is very tough.

In our market in Europe, our suppliers, we are not investing much in new products. But now since Interzum is coming they really have to go there with new products.

So, basically, they have a lot of pressure on them to present new products and we just enjoy selecting new products at Richelieu and selling them to our customers.

Fair enough. And just the last question I have just looking at the US retailers business, sort of three quarters here of this negative 30% comps just with the loss of the Lowe's business in the US.

I know in the past it sounded like you thought over time you could fully replace that with, I think, Tractor Supply and maybe Ace Hardware. So how do we think about -- there's probably, I guess Q1 would still also be that kind of negative 30% comps.

But how long to rebuild the sales that you've lost in the US retailer category.

We have many projects, but the problem is to conclude those projects and to get the orders, so we have something in the air with many, many customers. But the retailers, they take forever to make a decision.

For those that know about this market, they are not quick decider. They listen.

They change the barrier all the time. So we have to restart again and again and again.

In Canada, it's a different ball game. We up to date now as I explained earlier, in the US, it's not a big business, but it has to become a big business.

We're going to have to continue to make some effort in order to grow that business and maybe make an acquisition would be interesting as well. We're on the lookout.

Maybe we're going to find something. But I'm a believer that, that US retail sales should become important for us.

All right. Okay, that's helpful.

All right. Well, I think covered everything I had, so I'll turn over.

Thanks.

Thank you.

If there is no more question. Thanks again.

Thank you for your patience. And thank you for listening to us.

We'll always be happy to talk to you. If you need more information, call out Antoine or myself.

Thanks.

Thank you.