Thank you, operator. Good morning, everyone, and thank you for joining our Q1 2026 earnings call.

On the call today, I will briefly review our financial results for the first quarter, which our CFO, Leon Wu, will cover in more detail, and then discuss our operational highlights. We entered fiscal 2026 with strong momentum.

Total Q1 sales reached $42.6 million, up 6.5% year-over-year, driven by growth in both segments. Direct-to-consumer sales increased 3.3%, with comparable sales growth of 3.2%, or 16.6% on a two-year stacked basis.

Partner and other revenue grew 26.6%, supported by strength across our wholesale, business-to-business, and licensing channels. Gross profit was $25.5 million, representing a gross margin of 59.9%, compared to 61.5% in Q1 2025.

Direct-to-consumer gross margin was strong at 61.3%. The change in gross margin reflects two factors, both of which we expect to be temporary.

First, prior to transitioning to our new third-party logistics partner, we have been proactively reducing aged inventory by shifting additional products to final sale, which will limit the volume carried into the new facility. Second, as we sold inventory purchased at a higher U.S.

dollar exchange rate last year, this impacted gross margin. This headwind will reverse over the balance of fiscal 2026.

The adjusted EBITDA loss in the first quarter was $7.4 million, compared to a loss of $7.1 million last year. The most material difference versus prior year relates to a non-cash expense from the mark-to-market revaluation of our DSUs, which increased as our share price appreciated during the quarter.

Net debt of $23.4 million represented a 20.7% reduction year-over-year. During the quarter, our trailing 12-month active customer base also grew in the high single digits year-over-year.

Overall, Q1 reflects a solid start to fiscal 2026 and demonstrates the continued resilience of the Roots brand. I will now turn to the operational initiatives that drove our first quarter performance.

Our merchandising performance in the first quarter reflects the continued strength of our core franchises and the success of our investment in newer, higher-growth categories. Our Cloud Collection delivered another standout quarter, with demand outpacing our planned supply in parts of the collection.

Our activewear category continued to grow as a meaningful component of our product mix and now exceeds 10% of direct-to-consumer sales. Midway outerwear and our packable seasonal spring lifestyle collection both performed ahead of our expectations.

These results validate our strategy to extend the Roots brand into year-round, complementary categories. Our newer collaborations and partnerships also continue to gain traction, with the successful launch of the Roots Toronto Blue Jays 50th anniversary collection and the second drop of our official WNBA collection in March.

In April, we also launched a limited-edition spring/summer collaboration with Loopy, a popular Korean character, paired with Buddy the Beaver, the iconic Roots mascot. The launch coincided with International Beaver Day and reflects our strategy to extend the Roots brand to new audiences internationally.

Our marketing approach in the first quarter continued to evolve towards a more disciplined, data-driven model, with a clear focus on return on advertising spend and incremental contribution. Our paid search and paid social channels both delivered strong growth, and our investment in conversion-focused campaigns generated meaningful incremental revenue.

In the quarter, we also completed an external assessment of our customer base that confirmed the underlying strength of our customer economics. Our base is sticky, our retention is consistent across cohorts, and our omnichannel customers continue to generate a higher lifetime value than those who shop any one channel exclusively.

These findings will help guide our marketing investment in the remainder of the year. Creator marketing remains an efficient tool in our marketing mix.

Now and looking ahead, we continue to evolve our roster, ensuring we show up authentically across the channels and communities that matter most to our customers. In March, we announced the continuation of our partnership with Toby Fournier, a Canadian standout for Duke University's women's basketball team, for a second year as a Roots brand ambassador.

The partnership reflects our deepening commitment to women in sports and our growing activewear category. In April, we extended our partnership with the Nature Conservancy of Canada into a third year and launched a limited-edition Made in Canada T-shirt series crafted from circular materials.

This program reflects the continued investment we are making in sustainable design and in supporting the natural landscapes that have always been central to Roots' brand. As we look to the summer, we are focused on maximizing engagement with our customers and new consumers, particularly given the major sporting events happening in key cities.

From cross-country activations to product customizations, we are focused on connecting with our communities at a point when Canadian pride and togetherness are trending higher. Now turning to our direct-to-consumer performance.

Comparable store sales improved year-over-year, reflecting the continued benefit of our investments in selling training, visual merchandising, and store operations. We also completed renovations at several of our key locations during the quarter, including Sherway Gardens in Toronto.

Furthermore, as we continue to expand our retail footprint, we've opened our first mono-brand Roots store in the Vancouver International Airport in partnership with Dufry. As a brand associated with Canada, travel, and comfort, we see meaningful growth opportunities in travel retail locations across the country.

In e-commerce, online traffic and revenue both grew year-over-year. Our paid media generated meaningful incremental revenue, and we expect to continue building on that progress throughout the balance of the year.

During the quarter, we also made meaningful progress on the operational initiatives outlined in our previous calls. Our distribution center transition to Metro Supply Chain remains one of our top priorities and is on track for completion this summer.

We also continue to integrate artificial intelligence into our workflows where relevant as we advance our technology roadmap. Thus far, we've experienced benefits across several areas of the business, including inventory management, analytics, omnichannel experience, and customer service.

We continue to look for ways to drive efficiency and growth by leveraging these powerful tools that have been enabling us to operate the business with greater agility. As we move into the second quarter, our priorities remain consistent.

Our management team remains focused on operations and long-term growth. We continue to invest in our highest-growth product franchises and category extensions.

We're completing the transition of our distribution operations. We are reallocating more of our customer acquisition investment towards our highest-return digital channels, and we are taking a disciplined, evidence-based approach to brand and marketing investment to support both near-term performance and long-term brand equity.

We are mindful of the broader macroeconomic and trade environment, and we will continue to monitor these dynamics closely while operating the business with discipline and focus. Before I turn the call over to Leon, I would like to thank our employees for their continued dedication and our customers for their continued loyalty to the brand.

Roots is a brand with deep heritage, a commitment to quality, and a genuine connection to community and nature that continues to set us apart. With that, I will turn the call over to our CFO, Leon Wu, for a deeper review of our financial results.

Thank you, Meghan, and good morning, everyone. Our first quarter results reflect the continued sales momentum and balance sheet deleveraging we have built over the past several quarters, while we also balance day-to-day operations with the progression of two of the important initiatives: our distribution center transition with Metro Supply Chain and the ongoing strategic review process.

These initiatives resulted in $2.4 million of incremental costs incurred in the quarter, which had a more pronounced impact on our P&L given the seasonally smaller nature of our first quarter. I will now share some more details on the key elements of our results.

Sales in Q1 2026 were $42.6 million, increasing 6.5% as compared to $40 million in Q1 2025. Our DTC segment sales were $35.8 million in the quarter, growing 3.3% relative to $34.6 million last year.

Our comparable same-store sales grew 3.2% in the quarter, delivering a two-year stacked comparable sales growth of 16.6%. The DTC sales growth was driven by positive traffic across both channels, supported by a thoughtfully curated product assortment, which resulted in double-digit growth in certain franchises like Cloud and activewear.

Our partner and other sales were $6.8 million in Q1 2026, up 26.6% compared to $5.4 million last year. The growth in this segment was driven by significant growth across our domestic wholesale, custom products, and licensing channels, reflecting both the continued expansion of our customer base in these channels and stronger volumes with existing customers.

Total gross profit was $25.5 million in Q1 2026, up 3.8% as compared to $24.6 million last year. Total gross margin was 59.9% as compared to 61.5% in Q1 2025.

Q1 2026 DTC gross margin was 61.3% as compared to 62.9% last year. The change in the DTC gross margin was driven by a temporary initiative to offer select products at final sale price points.

The intentional strategy minimizes the prior-season inventory that would need to be transferred and ingested into our third-party distribution center during the move in the second quarter and to reduce the potential processing of sales returns during this transition. Additionally, the DTC gross margin was also impacted by year-over-year foreign exchange impacts on U.S.

dollar purchases, partially offset by continued momentum and improvements to our product costing. SG&A expenses were $37.3 million in Q1 2026 as compared to $33.3 million last year, an increase of 12%.

As previously noted, the progression of our DC transition and strategic review initiatives had a more notable impact on SG&A expenses during an otherwise smaller quarter. Within SG&A expenses, there was $1.8 million of incremental costs related to the distribution center transition, $1.7 million of which was comprised of accelerated non-cash depreciation on existing assets, and $0.6 million of incremental consulting and legal costs related to the strategic review.

Excluding these non-recurring costs, SG&A expenses would have increased by 4.9%, primarily reflecting higher variable selling costs from our sales growth, along with higher store-related occupancy costs and personnel-related salaries, non-cash stock option expenses, and severance costs, along with an incremental $0.2 million of expenses recorded through the revaluation of cash-settled DSUs that are linked to the increase in our share price. Our Q1 2026 net loss was $10.1 million, as compared to a net loss of $7.9 million last year, and our net loss per share was 26 cents, as compared to 20 cents last year.

Since the first quarter historically represents approximately 14% of our full-year sales, the impacts of the non-recurring project costs had a more pronounced impact on our net earnings in this quarter. Excluding the impacts of the distribution center transition and strategic review initiatives, along with other non-recurring or unusual costs outside the normal course of operations, our Q1 2026 adjusted net loss was $7.6 million, as compared to $7.4 million last year.

This represents an adjusted loss of 19 cents per share, as compared to an adjusted loss of 18 cents per share last year. Our Q1 2026 adjusted EBITDA was a loss of $7.4 million, as compared to a loss of $7.1 million in Q1 2025.

As a reminder, due to the seasonality of our business, we typically generate small operating losses during the first half of the year, offset by larger earnings in the second half of the year. Now turning to our balance sheet and cash flow metrics.

Our Q1 ending inventory was $45 million, increasing 11.1% as compared to $40.5 million last year. Of the increase, half a million was attributed to the unfavourable foreign exchange impacts on our purchases.

The remaining $4 million increase was primarily driven by higher in-transit inventory to support upcoming selling seasons, and higher inventory in our partners and other segment to support the incredible momentum we are seeing in the custom product wholesale business. Our Q1 free cash outflow was $19.1 million, improving from an outflow of $21.8 million last year.

The year-over-year improvement in free cash flow was driven by sales growth and ongoing management of working capital. Due to the seasonality of the business, we typically see cash outflows as we build up our working capital ahead of our peak seasons, before generating larger cash inflows through the higher-volume fall and holiday seasons.

Our prior NCIB program terminated on April 10th, 2026. Under that program, we did not repurchase any shares during Q1 2026, and over the full life of the program, we repurchased just under 1.3 million common shares for total consideration of approximately $4 million.

Net debt was $23.4 million at the end of Q1 2026, down 20.7% as compared to $29.6 million at the same time last year. Our net leverage ratio, measured as net debt over trailing 12-month adjusted EBITDA, was healthy at 1.0 times.

At the end of Q1 2026, we had $32.6 million outstanding under our credit facilities, and total liquidity of $53.7 million, including net cash and available borrowings under our revolving credit facility. Operator, you may now open the lines for questions.

Good morning.

Good morning.

Morning, Brian.

Maybe Leon or Meghan really, just on the gross margin impact from merchandise clearance, does this reflect a different costing structure associated with the 3PL than an owned facility? If so, will this impact your merchandising holdover strategy or working capital approach post the transition?

Brian, I can help address that. The gross margin structure change has not occurred yet.

That will occur when we fully transition to the DC starting really at the end of Q2 and early Q3. This is more of the discipline as it relates to as we transition the goods from the existing DC to new DC, we will incur extra cost.

We're being diligent on looking at where we can really reduce those costs and where we have seasonal inventory that we could sell through. Really, it's more of a temporary initiative as we work to minimize the transition costs.

Going forward, we continue to take a very disciplined approach on managing our inventory and making sure that that balance remains healthy. I wouldn't say it changes drastically from the new DC to the existing DC from an overall long-term inventory management perspective.

I got it. Then I guess the growing impact of inflation here, whether it be freight, sourcing, product inputs, how are you impacted by this?

What's your ability to or your approach to mitigate?

Good question. Far in Q1, we haven't really seen any material impact from a fuel surcharge or freight perspective, nor really from a supply chain, raw materials perspective.

Longer term, I would say the impact really depends on the duration of the war, right? We do have longer partnerships with several of our partners, whether it's logistics or supply chain, where we have capped fuel costs and ongoing discussions.

Really at this point, we have not seen a notable impact yet.

Okay. Then I guess Meghan, you're obviously seeing very good reception to your product offering, especially your lifestyle and activewear.

It looks good in the store certainly. I'm curious just in general the consumer behavior that you're seeing.

Is it still ongoing bifurcation, continued resiliency? Maybe just update what you're seeing as disinflation starts to creep in.

I think it continues to be a dynamic environment. Right now we're operating in some of our smallest quarters, and so I think the impact on the consumer is really going to depend again on the duration of the war.

In the interim, we're focused on some of the positive events in Canada such as World Cup, and really focusing on some of the strong newness we've had within our product collection, and really focusing consumers in on that. As I mentioned in the overarching call, when you look at what we've focused on in the first quarter, really extending that lifestyle collection, focusing on investing behind some of the strong things on activewear, outerwear, and also our Cloud Collection sweats, those all perform well for us and we're continuing to see our newness resonate with consumers.

From the overall inflation environment, we really are looking at the longer term, and really closely monitoring what happens with this war in the next couple months as we lead up to our peak quarters of Q3 and Q4.

Okay. I guess my last question, I apologize I joined late, I assume you're going to say no comment, process remains ongoing, but what is the public comment on the strategic process?

As we said in previous releases, we do not intend to disclose any developments with respect to the strategic process. Really this is unless and until the board has approved a specific transaction or we otherwise have a determination from the board that disclosure is required or appropriate by law.

At this point, there's no further update.

Perfect. Thank you very much.

Thank you.

Thank you, everyone, for joining the call today. We look forward to updating you in upcoming quarters.

I would like to say good luck to our Canadian team. Operator, you may now conclude the call.