Builddirect.com Technologies (TSXV:BILD) Q4 2025 Earnings Call

0:00 Good afternoon, everyone, and welcome to BuildDirect's Q4 and Full Year twenty twenty five Earnings Conference Call. My name is Prit Singh, and I will be your moderator for today. For those unfamiliar, BuildDirect trades on the TSXV under the ticker BILD, that's B I L D and on the OTCQB under the ticker BDCTF. 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.

0:45 Please refer to the detailed forward looking statements and advisories in today's earnings deck and press release. In addition, please note that all dollar amounts mentioned in this presentation today are in U. S. Dollars unless otherwise stated. Following comments from BuildDirect's management team, the call will be open for questions. Questions can be sent in using the Zoom Q and A function at the bottom of your screen. If you're calling in to listen to the webinar today, please email your questions directly to irbuilddirect dot com. That's irbuilddirect dot com. A replay of this call will be available approximately twenty four hours after conclusion of this presentation today. It will be posted on the Investor Relations section of our website at irbuilddirect.com. With that out of the way, I would like to turn the call over to Sean Wilson, CEO of BuildDirect.

1:35 Thank you, Greg for everyone. Good morning. Thanks for joining us today. So 2025 was a year of disciplined execution and tangible progress for BuildDirect. Despite a challenging macro environment and industry headwinds, we delivered on our key priorities, gross margin expansion, EBITDA growth, and balance sheet strengthening. As you'll see in today's materials, we grew full year revenue 1.1% to 66,200,000, expanded gross margin 170 basis points and increased adjusted EBITDA 39% to 3,100,000. Our Pro Center segment continued to scale while e commerce achieved a full year EBITDA turnaround of close to 2,000,000. We also strengthened our liquidity position with 8,200,000 in cash and working capital up to 6,100,000 to 8,800,000 following successful 5,200,000 equity raise.

2:29 These results reflect durability of our omni channel model, and the focus we place on operational efficiency, and higher margin product mix. I'll now hand the call over to Carey to walk through the detailed financial results. Thanks very much, Sean, and good morning to everyone. So let me start with Q4 here, fourth quarter twenty twenty five. Q4 revenue was 16,200,000 down slightly from last year Q4, but with strong margin performance overall. Gross margin expanded two forty basis points to 41.7% and driving gross profit of $6,700,000 Adjusted EBITDA for the quarter reached 900,000 up 140% year over year.

3:23 On a full year basis, the story is even clearer with revenue of $66,200,000 as Sean noted, gross profit of $26,700,000 which is up 5.5% and adjusted EBITDA of $3,100,000 which was up 39%. Operating cash flow was positive $2,400,000 And as noted, we ended the year with significantly improved working capital on the balance sheet. So let's break down the business by segment. I think that's probably the next slide. On the e commerce segment revenue was $14,300,000 down 5.8% as we deliberately shifted toward higher margin SKUs and direct imports.

4:19 Gross margin reached a record 57.8% and the segment adjusted EBITDA turned positive at $1,500,000 for the e comm segment, over $2,000,000 improvement year over year. The drivers were direct import optimization, meaningful OpEx reductions and headcount restructuring that right sized our current revenue base as we press released in early twenty twenty five. Moving on to the next slide in the Pro Center segment. This remains our largest and most stable growth engine. Revenue grew 3% to 51,900,000 Gross margin improved to 35.6%.

5:12 And segment adjusted EBITDA was $5,800,000 for the ProCenters. We opened the new Orlando ProCenters early in 2025 and continued to integrate recent acquisitions, delivering operating leverage across our network. Advancing to the next slide, Slide eight, balance sheet and liquidity. You see that we ended the year with $8,200,000 of cash, as Sean noted, up $5,400,000 Net working capital of $8,800,000 was up $6,100,000 and the strengthened equity position following the $5,200,000 raise. Total debt remains prudent and we have ample liquidity to support 2026 and our growth initiatives that we expect to undertake.

6:06 So with that, I will hand it over to Sean for our 2026 priorities and outlook. Sean? Sounds great. So as we enter '26, we're seeing some near term softness in Q1 driven by macro headwinds and fully tariff related cost pressure. I believe this as a physical entry point for M and A, especially flooring. Our cooperations remain focused and have an active pipeline for acquisition, really targeting deep value cash flow, positive businesses that fit our ProCenter platform, especially the main focus for our expansion. So looking ahead, we have three clear priorities for 2026. I'll keep building on our foundation we put in place. First, we closed the acquisition of Grain, which was an e commerce platform in February.

6:57 And then based on unaudited pre deal information, Grain generated approximately 6,000,000 revenue, about 300,000 in adjusted EBITDA in '25. We expect that deal to deliver strong cost synergies to logistics over housing optimization. And full integration is already well underway. Looking forward to revenue contribution, as well as the synergies in the second half of this year. At the same time, we're continuing to prioritize our pro centers and e commerce operations. I mean, our online reach, driving further margin, expanding the traditional product categories, which will unlock more operating leverage across our brick and mortar brick and mortar network. And then third, we're actively working on our pipeline, we have a strong list of opportunities, especially flooring.

7:43 Our focus remains squarely on deep value margin accretive targets that fit in with our platform. And really, you know, viewing the softness in the market as a good opportunity on the buy side. As mentioned, demand recovery is expected to improve as macro improves. Short term, we're focused on being opportunistic where possible across our strategies. With that, I'll turn it back to Prit for any Q and A. Thanks, Gary. Sorry, thanks, Gary and thanks, Sean. As mentioned at the top of the call, if anyone does have any questions, can submit them to the Q and A function at the bottom of your screen. Alternatively, if you're calling in today, you can email us directly at irbuilddirect dot com. Again, that's irbuilddirect dot com.

8:38 Your first question, can you please walk us through your balance sheet and any significant changes that took place throughout the year? Okay. Got it. Yes, Yeah, I think, yeah, obviously, I think from a balance sheet perspective, the first and foremost is the cash position. Obviously, we did the equity deal. So we have at this point the dry powder to support as I've noted 2026 growth profile. Overall again working capital if we focus on AR, AP AR is in line with prior year, right sized AP as well. We've flushed through some of our payables that were at the end of the prior year. So overall, we're in an extremely strong position from a working capital perspective with right sized APAR and obviously our cash position. I'd also kind of note the RBC credit facility remains as dry powder as well. We are in a good spot with that facility close to CAD8.5 million.

9:59 We drew to support some of our acquisitions this year. But again, we have significant capacity on that credit facility. And finally, I'll point out those that kind of know the balance sheet. We have had a vendor take back from note associated with Floresource acquisition over the last number of years, which was an outflow of approximately US1.3 million of principal payments to pay those vendors back. That now is gone. We made our last payment in early January. So that incremental $1,300,000 will go directly to the bottom line to support our growth. So overall, we're in a great spot on the balance sheet and cash flow perspective.

10:50 Okay, thank you. Just touching on the macro market, I guess, Sean, can you please touch base on the overall condition in the flooring market, and how it's affecting the your overall business? Yeah, I'll talk to them. Feel free to add anything on the let's sell in. So last year, actually, last couple of years have been quite challenging. One of the primary drivers for residential flooring is, you know, housing turnover in The US, with the exception of the, you know, COVID, like the nesting phenomenon that happened where people had nothing but time money to renovate their houses, typically housing turnover drives both flooring. And then also, you now, like a part of that new construction, which is related.

11:39 So the last few years have been very soft on on that front, with interest rates being where they are people stuck in their homes, they have time so on and so forth. And so we've, you know, really have turned this business around, and built a foundation during difficult times, which is just great, right? Because you're effectively getting things in great spot and getting ready to pounce as conditions improve. But I'd say in Q1, really Q4 towards the very tail end, like December and coming into into Q1, you know, macros and intuitively, they're more challenging with the tariffs, changes, uncertainty, things like that in the market. Flooring is a discretionary purchase and it was not tied to housing turnover, but rather residential remodeling.

12:29 People that change their floors out in the place they already live, you can find uncertain times or disruption like that can delay projects. So you normally see as you see backlog, backlog increase, projects get delayed, things like that. The other part I mentioned, we have a considerable business in Michigan that is tied to new construction as well. And it's been unseasonably cold Q Q1 there. So that means, practically speaking, as you have backlog that increases and projects that will come through this time, it will be be a bit often initial. So think overall, that's what we're what we're seeing. As I mentioned, we've kind of built this business for the conditions that we were that we were in and using the opportunity to aggressively pursue acquisitions and deals along the way, both on the product side and a few others that take advantage of the spot that we're the spot that we're in. So in tougher times, that's how we approach it opportunistically, and build things for when they pick back up and be able to ride that as hell when anything to add, Kerry?

13:46 No, no, that's great. That's great, Sean. Thank you. Next question. Can you talk about the ecommerce division and your thoughts for 2026? Yeah, so our ecommerce business, as I mentioned previously, is one of those businesses that we have that can scale very well from an operating leverage perspective, that the business doesn't really need a lot on the support side for higher revenue volumes. You know, really, and you look at the tail end of last year and going into this year, that category business rather, of all of our businesses heavily tied into discretionary homeowner traffic. So like, you know, specifically, we don't do a lot of, know, a lot of, like, large commercial projects or new construction or things like that. Out of that, out of that business is typically a homeowner who's working with a pro, or vice versa, you know, doing a project.

14:41 And so, that segment can be a bit sensitive to, to macro, like you have same thing I mentioned before, you have backlog that piles up and, and projects that get pushed, get pushed out. Thankfully, the floor doesn't improve in someone's home. If it's ugly today, it just gets uglier. So it's a bit of pent up demand. We try to stay close to customers and, and nurture along along the way. But I would say still an area, it's one of our segments that I'm probably the most excited about pulling up pulling up, but also along with that, being mindful that it can be it can be adversely impacted by by the macro. And what that means practically speaking is that business is primarily driven by by digital advertising.

15:27 And you want to be a bit cautious in a tougher market. They don't go too hard, too heavy and have marketing expense explode, but rather, you know, kind of ride ride that wave. So still a bright spot for us to believe in the in the future. You know, for sure, along with that, that's that's how we've kind of shown up so far with it towards the end of last year and also in our earlier beats for this year. Okay, thank you. Next question. Can you please walk us through same store performance in 2025 for some of the Pro Center locations? Sure. Want to grab that one? Yeah, I won't get into the specific details here. But I guess what I'd say, like, if you take a look in our MD and A, in the segmented area, we do split out some of the revenue with and without Orlando.

16:29 So like in our MD and A on Page eight, we note Pro Center sales for Q4 twenty twenty five versus Q4 twenty twenty four with and without the Orlando location. So really that's just the only store that came on stream 04/01/2025, which kind of will impact the results. So without Orlando Q4 twenty twenty five versus Q4 twenty twenty four, same store sales would have decreased approximately 9% as disclosed in the MD and A. On the next page on a consolidated basis for the twelve months, again Pro Center revenue was 51,800,000 for the full year 2025 Without the Orlando Pro Center revenue for 2025, that number would have been 48,400,000.

17:31 So you compare that with prior year would have been a decrease of 4% for the full year. So yes, same store sales as kind of Sean noted, overall soft, but that kind of gives you an idea of the Pro Center contribution from Orlando. And again, if you kind of continue through the MD and A on the operating expense side of things, if we kind of split that out as well, where without Orlando, OpEx is down year over year. So I'll just kind of guide you to the MD and A for further details. Okay, great. Next question. Can you give some color on the acquisition pipeline?

18:17 If you can, how many are you currently looking at? What products, categories and geographies are you focused on? And how do you view the valuation multiples that are attractive to you? So it's a few questions. Yes, it sounds good. So I would say kind of first and foremost, we're the most interested in the Sunbelt scenario of the country, intuitively a lot of people are moving to and also have a lot of growth. But along with that also helps balance out our geographical mix. Intuitively, you know, freight, you know, ships in the East and inflows West. So it's a good, good place for us. For us, Orlando was kind of step one and, and that area. Second part I mentioned, so, you know, our company today does not have a strong presence in tile. We talked a lot about that category specifically.

19:13 And so businesses who operate in the Sunbelt, intuitively also are heavier on the tile side and tiles a very large segment of the overall flooring industry, and pretty decent margins. It's a good category for people like us, our company, on the import side, since most of the competitors in The US are are procuring from like two step distribution due to complexities around the categories. We like that as well. When it comes to, like, it comes to what's attractive to us, you mentioned kind of before we look for businesses that have a good mix of pro customers, a lot of times, that's a mix of homeowner slash, you know, pro or vice versa. Those two things, you know, very often go go together, versus like full service, fully installed retail, as we tend to prefer the more pro focused DIY locations.

20:10 And then from a deal size, like the last two acquisitions we've done, each location was around 5 to $5,000,000 range, right? We'll talk about that lots kind of a sweet spot for our ideal footprint, warehouse inventory need to, to support it, things like that. And this year, we do want to continue deploying capital in that regard to, you know, to boost our our personal account in the Sunbelt area, definitely, definitely a priority. When it comes to deals, like, look, the very straightforward play hasn't changed in many years. On the back of COVID, the flooring industry got very soft, saw a big opportunity coming to likely buy the dip.

20:56 The extra macro pressure that's out there, that was definitely unforecasted, kind of across the board has made deals more available and more attractive, but also at the same time, being mindful that when you're doing deals, you typically have to deal with a restructuring to make a right size them, make sure it's a good fit. When we do deals, we tend to look for intrinsic value. So it's not so much about the multiple of EBITDA as the business has performed in the past, but rather, what what is the business? How the customers acquired at what cost? And then what are you buying specifically? We prefer you know, if I could be purchasing working capital inventory, although they are, but typically quality inventory, and then we back into what that multiple might look like. But first and foremost, know, value from an intrinsic perspective, not a business done four or five times EBITDA.

21:59 And so you pay some kind of multiple, you know, against against that, it's not how this business is designed to buy, or how we think about deals. And so, intuitively, as I mentioned before, because of that, it's a good time to go out and do deals, but also to be be very mindful at the same time and operate and make those adjustments, those changes when you do the other transactions. Anything you want to add, Terry, to that? I'd just say that the valuation metrics, as you point out, haven't changed really, they've only gotten better, right over the last six months. And that's what we're seeing, buying X dollars worth of assets at an 80% or 90% discount is a good thing. So yeah, that's our focus.

22:48 Not a discount, but a realized value, right? Yeah. Very good. Okay, excellent. I think that's it for questions. Sean and Carrie, thank you today for being on the call. Thank you for everyone who joined today. A replay and the full earnings deck will be available within twenty four hours on the IR website. We look forward to speaking with everyone again next quarter. That concludes today's call. Have a great day. Thanks everyone. Thanks all.