Builddirect.com Technologies (TSXV:BILD) Q1 2026 Earnings Call

0:00 Hi, everyone. We're just waiting for more people to log in to the call. We'll begin shortly. All right, let's begin. Hello, everyone, and welcome to BuildDirect's Q1 twenty twenty six Financial Results Conference Call. My name is Bob, and I'll be your moderator for today. BuildDirectTrades on the TSXV under the ticker symbol BILD, that's BILD, and on the OTCQB under ticker symbol BDCTF, that's BDCTF. Joining me on the call are Sean Wilson, CEO and Carrie Bix, CFO of BuildDirect.

0:52 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 and A function at the bottom of your screen or email them to irbuilddirect dot com. We'll address these questions during the Q and A session. A replay of this call will be available approximately twenty four 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 Sean Wilson, CEO of BuildDirect.

1:39 Please go ahead, Sean. Thank you, Bob, and greetings, 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 delivered strong margin retention, generated positive operating cash,

1:54 and most importantly, to advance our footprint expansion initiatives. Last twelve months, we've completed three accretive acquisitions, the Orlando Pro Center, custom wood in February, and tile outlets of America was just closed. As a story this quarter, while the market compresses valuations, we're using a strengthened balance sheet to scale to build an operating leverage for the recovery. As you'll see in today's materials, Q1 revenue was $14,600,000 down two percent year over year reflecting a softer industry wide demand. But importantly, we held gross margin at 40.2%, generated $550,000 in positive operating cash flow and strengthened our cash position. Working capital improved by $4,700,000 year over year.

2:43 Pro centers represented 70% 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 and 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 Cary to walk through the detailed financial results. Yeah, thanks, Sean, and good afternoon, everyone. Let me walk you through the quarter here. Sean noted Q1 was $14,600,000 of sales compared to $15,100,000 in Q1 twenty twenty five, so a decrease of 3.3%,

3:27 which we view as fairly positive given the macroeconomic environment that the company is in. Gross margin came in at 40.2%, 110 basis points below the very strong 41.3% margin we delivered in Q1 of twenty twenty five. Again, as Sean noted, we did generate positive operating cash flow of $550,000 a good result for the quarter given the demand backdrop. Looking at the segment breakdown, e commerce contributed $3,900,000 of the quarterly revenue and a 52% gross margin, while the Pro Centers contributed $10,700,000 at a 35.9% gross margin. So together, our omnichannel model continues to deliver structurally higher margins than a pure retail comparable.

4:25 Turning to the consolidated summary. Year over year revenue was down 3.3% to $14,600,000 Gross profit was $5,900,000 versus $6,200,000 the prior year. And gross margin as noted was 40.2 versus 41.3. 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 $120,000 and the Pro Centers at $620,000 for combined operational segment adjusted EBITDA.

5:14 Pre corporate costs came in at $740,000 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 $3,900,000 down 8.1% from 4,200,000 in Q1 of twenty twenty five, reflecting a slightly softer category demand in early twenty twenty six. Gross margin actually expanded 10 basis points to 52% this quarter, supported by disciplined pricing and a core product mix assortment.

6:01 Operating expenses came in at 1,900,000 on lower marketing and discretionary spend. And segment adjusted EBITDA, as noted, was $120,000 compared to $150,000 in Q1 of twenty twenty five. 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 adds 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.

6:47 This remains obviously our largest segment in our M and A integration platform. Revenue for this segment was $10,700,000 down 1.4% year over year. Gross margin was 35.9%, generating $3,850,000 in gross profit. And again, the segmented adjusted EBITDA was $620,000 for the Pro Center segment. The Orlando Pro Center we opened in Q1 of twenty twenty five by the purchase of the Yorkshire and Anchor assets, was our opening M and A step into the Florida market. And the Tile Outlets of America acquisition that we just closed on May 12, has three new Florida showrooms in Tampa, Sarasota and Fort Myers, along with approximately 19,500,000 of annual sales to our Florida Foundation.

7:38 TOA expand 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 Sean to walk through the footprint expansion in more detail here. Thanks, Carrie. This is the single most important slide for understanding our strategy in today's presentation. Last twelve months, BuildDirect has added three new platforms to our footprint.

8:04 Deliberately, while the broader point market has been compressing. First, Pro Center, which is purchased in Q1 twenty five. The infrastructure investment is complete, gives a new beachhead and one the most attractive foreign markets in the in The US. Second was Grain Custom Wood, which we closed in February of this year, which really brought an online toy marketplace platform, which will be able to plug into our US retailer channels, approximately 6,000,000 in 2025 sales, 300,000 adjusted EBITDA and roughly 4,000 identified annual cost synergies, logistics, and warehousing consolidation. You know, really third, I thought of America, which we're very excited about, recently closed in two way brings three established Florida showrooms approximately, as Terry mentioned, 19,000,000 in sales and really an experienced operating team with a meaningful expansion to the tile category, which is a category that is relatively net new for us, will be very accretive for us across our business.

9:05 The net purchase consideration was approximately 3,700,000 funded entirely with cash on hand, and we expect to be accretive to adjusted EBITDA. Over time, believe we can progress to our long term targeted adjusted EBITDA and operating profile of 10 to 15%. The North American point market is fragmented. And as we mentioned many times before, many regional operators are facing real macro pressure and limited scale that creates accretive entry points for an operator like us, that has the platform, the sourcing network, digital marketing capabilities and our integration playbook. They tend to keep on using this window. Okay. Yep, just next slide moving on to the balance sheet liquidity. At 03/31/2026, we held $7,200,000 in cash and cash equivalents, up $3,700,000 from Q1 twenty twenty five.

9:59 Net working capital was $7,200,000 at the end of this quarter, up 4,700,000 year over year. And total assets stood at $36,000,000 up just over $9,000,000 from a year ago. On the working capital side, accounts receivable was 3,300,000 Accounts payable was $6,500,000 down from $7,200,000 prior year, reflecting healthier payment cycles and the RBC revolving credit facility was drawn at 3,300,000 Obviously, this working capital was set aside for M and A dry powder and obviously we use that to fund the TOA acquisition with entirely cash on hand to 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 Sean for our outlook and some of our '26 priorities.

10:56 Yeah, thanks, Terry. So looking at Q2 in the back half of twenty six, we do expect industry demand to remain softer until macro conditions improve, specifically for interest rates moderate, and how the turnover recovers. It's a huge driver the polling industry. Input cost pressure from tariffs and logistics likely 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 and A when the market really gives us, you know, simple valuations and great opportunities. We expect demand recovery as macro headwinds ease. We want the platform to be meaningfully larger and denser when that recovery arrives.

11:42 This leads me to really our three 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 chain efficiencies and integration into 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 Grain is underway, and we expect seven new contribution to accelerate. And the cost synergies identified at the announcement are tracking to plan. Third, we have a list of active active targets, and we're going to continue to work through 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 you can buy at compressed valuations, and with a put a fine point on it, 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 ladders set it out as what Q1 was the TOA close both represent.

12:50 Lastly, with that, I'll turn it back over to Bob for any questions. Thank you, Sean and Carrie. 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 and A function at the bottom of your screen or email them to irbuilddirect dot com. So a question we received here, you completed three acquisitions in the last twelve months. How do you view BuildDirect's acquisition pipeline today?

13:34 And do you believe the current environment remains rich with similar opportunities? Yeah, I'll take that one, Carrie, if I may add anything to it afterwards. Yeah, so feel free. So yeah, I mean, if anything, extremely optimistic. The there definitely are a lot of great opportunities out there. The latest acquisition in, in Florida, you know, really kind of speaks to what we are looking for and what's what's available. And I would say, you know, for us, you know, 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 on the hard synergy side is also is also great. If you kind think about it in really basic practical way.

14:30 So for example, TOA in Florida had a great legacy in the tile business, which is a considerable part of the flooring business or other operations we're not in. And you have, you know, foot traffic just flowing in. And with that, have adjacent categories, things like vinyl plank, wood, carpet, so on and so forth, area rugs that were not part of that, 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, we're able to bring that together. Along with that, there's a a very important pro focus for us. And we get asked a lot, hey, why do you buy?

15:19 Why would a customer buy from you guys versus buying from Florida core? So I'll give you a specific sound bite standing in the Fort Myers location a couple of days ago, one of our major pros who literally works out of the location, they occupy one of our one of our spaces 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 a full service. We help their customer decide the design supports real. And it's a great flow for a pro who's operating their own small business selling to their referral customers on the installation side. So we're able to take that that complexity complexity away. That type of specialty service, especially in a in an age of automation is highly important, very practical, and helps 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, pro centers.

16:30 And so for us, feel really good about the the opportunities out there. And, really haven't been, you know, I've been pretty, pretty, pretty excited before, but I'm, you know, even more so even more so now, for sure.

16:49 Sounds good. And then the next question here is regarding TOA and Green, which you mentioned in the presentation. What should investors be watching over the next few quarters as these acquisitions are integrated? Yeah, so I would say a couple things, you know, so we'll, we'll, we'll talk through category expansion. It's definitely, you know, it's an example of a hard synergy. So, you know, technically speaking, we have the locations today, you have your product assortment there, and there are net new categories that we're adding to those locations, as we mentioned, that will be done. So you know, really, the confirmation points on the category expansion within those locations.

17:34 Same thing applies to grain. So for example, that company had a really good marketplace presence with big box retail. So that's great. We addition to that, we're able to add in a lot of skews on our existing profile, as well as expand to other other partnerships. And so we don't we simply don't, you know, PR specific company names. But, know, just big box retail servicing those segments. And as those deals flow through, that's what I've been looking at, and really where the the hard synergies on the growth side come from. Doesn't seem we have any more questions.

18:22 So I'd 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.