Next speaker, Shawn Wilson with BuildDirect.com Technologies. Why, thank you. All right, guys. Our story is relatively straightforward. We are in the flooring industry. We're starting also now to get into some adjacent categories, like cabinetry, other interior finishings. Really, our ticker is great. It's very convenient. We'll talk through a couple example deals we did as well, but we're effectively just rolling up flooring businesses predominantly in the U.S., which is an industry I spent my entire life in, along with my team as well. Great opportunity, great industry. Definitely a lot of fun. When you think about our company, we'll walk through our origin, where we came from. Really, at this point now, we have a great platform that's been built for digesting these businesses and plugging them in, extracting value very quickly. We also are very focused on the flooring space, which is predominantly based on renovation, remodeling, not tied to new construction, things like that. It's a pretty cool story as we've built the business and have started expanding into additional locations. If you go back, the origin of the company, the company was started when I graduated, I think high school, many years ago. It's funny, the business initially was going to be the Amazon of the building materials industry. This was like Jeff Booth in Vancouver. You had Jeff Bezos in Seattle, both building companies. Jeff Booth wanted to be in the building materials space, so flooring, windows, things like that. Great business model. It was an e-com focused business. It had some challenges on fulfillment. When you have heavy things, fulfillment can be very challenging. Also with long tail inventory, things like that. The pivot was when I came in a few years back, brought a new team in. Loved the business, absolutely loved the business. Had a lot of good bones. Definitely an e-com model that needed to be re-geared, but also had the initial foundings of a brick-and-mortar footprint. We pivoted the business and turned it into a vehicle for what we're doing today, which is growing through acquisitions. More specifically what we call Pro Centers, pro focus flooring, and other businesses throughout the U.S. Yeah, today we're a well-oiled platform and moving forward. When you think about why we're unique in the flooring space, I joke about this a lot. The flooring industry is a very old school dated industry, like quite a few other ones are. Our tech development, origins, then deployment now, it's great. It makes it very easy to compete, makes it really competitive on the buying and evaluating side. Really from an execution perspective, is quite rare for the flooring industry. The supplier network goes back 20 years. We have a lot of vendors on consignment, deep ties to factories across the world. That's very unusual in the flooring space, which is typically dominated by just local mom and pops who are buying from distributors. From a category perspective, we have a very solid team with deep roots in the flooring industry. As I mentioned, really we're an omnichannel play, which is quite nice now. We effectively fulfill from our Pro Centers for our e-commerce business and then vice versa. The flooring industry, I love it. It's highly fragmented, about a CAD 90 billion TAM. Cabinets, for example, is about CAD 60 billion. There's a few other adjacent categories. Highly fragmented. Your average competitor is just a former installer who's now a shop owner. They have a building maybe in a strip mall nearby. They maybe have five or 10 employees and they're selling projects. That's really what the flooring industry is all about. Big Box attempted a couple times to go after this market aggressively. I'm a former Home Depot buyer, I can tell you firsthand what it's like competing. It's a great industry, but it's a very difficult industry to satisfy your customer from that format. For us, our competition, that's who it is. It's going to be local mom and pop retailers, which we can acquire and/or sell to. When it comes to just the fragmentation, if you are north of CAD 20 million, CAD 30 million, you're actually a big player in the flooring industry. I would say when it comes to other Big Box, you can think of them more like customers for us. We sell on homedepot.com, also lowes.com and a few others. We sit at that point in the value chain. Flooring, I mentioned before, is predominantly renovation or remodel. When the industry is bad, it's not that bad, when it's good, it's not that good. It'll be up and down a few percentage points either ways. You will see just wild swings within the industry, like in new construction or property management, things like that. It's a very stable industry, very low R&D, not a lot of cap expense. You don't have to redo your infrastructure, there's no patent pending on the next thing we're doing. It's a pretty stable, large industry for doing a build-in. When it comes to the opportunity, it's interesting. When we first started, we would talk about each company we wanted to acquire, their origins, their backstory, so on and so forth. Now we don't. We hop on our M&A calls, it's the same story every time. The owner's probably between 60-70 years old. More than likely, because they're pro-focused, they own inventory. Because of that, they have a building. They recently probably cleared their building for CAD 20 million, CAD 30 million, or buildings, plural. They effectively have a business that's left over, that's inventory heavy with really no plan to move on. The kids probably work at Amazon or pharmaceutical rep or something like that. It's the same story over and over again. On our end, instead of being judgmental, we developed a pretty interesting process, which we'll walk through in a minute on how to transact these businesses, pull them in, preserve legacies, and really have a great experience for the owner, their team they want to take care of, and then the next generation. Effectively from there, we just plug them into our back end. When Kerry joined a few years back, Kerry's done quite a few deals over his tenure, so have a lot of our members, they never really saw deals like this. If you have an ERP in place, it's probably not being used right. Typically, they're QuickBooks, if that. Everything's expensed inventory can be a challenge for sure. For us, we literally do a deal on both sides. Instead of being judgmental and looking for companies with really good decks, we just look for the right fit, the right geographic locations, right hard assets, and we literally do a zero-based budgeting build on how we want to operate it, post the deal, and then no two deals are the same. We get excited. We get our cash back in one to two years, and we like to buy things with heavy working capital coverage. For us, those are the things that we're looking at when we're doing deals, and then we'll work on both sides of the deal to get it done. Our biggest competitive alternative to not selling to us is just aging out. We've had a few targets now who just closed. It's shocking, right? CAD 30 million businesses, 10% EBITDA, just closing because the process of transacting is too complicated. We focused a lot on making it really smooth and easy for them. When it comes to synergies, it's pretty straightforward. System, process, people on the back end go into our Vancouver team. We can leverage inventory working capital relatively easily. Most companies don't direct import like we do, so there's always lift on the procurement side as well as pricing, we found. Like for example, the new Florida acquisition we bought, we raised pricing double digits within four days of buying it, and still it's remarkably underpriced in the market. Really fine-tuning basic things like that is where we kind of thrive. From a platform perspective, our platform scales well. We don't talk about it too often, but this vehicle, BuildDirect, was a great vehicle for a roll-up. It had a tax loss from historical operations that's quite considerable and that resides at the platform level. Preserving that was important for myself and the team when we're doing this build. Our platform effectively is offset heavily by that. From here, it scales well. Scales very, very well. We have not a lot of incremental overhead needed as we grow. These businesses that we're buying, they tend to do between 10%-15% EBITDA. They dilute down the average cost or the cost, rather, of our platform, and most of that flows into cash flow, about 90% or so. There's not a lot that doesn't flow into cash flow. The fun part, how we deploy capital. We've done this now three times since last year. It was last year, right? Yeah. We came to MicroCap last year. It was our first conference coming to. It was fun. We raised capital on the back of that. We deployed it, deployed CAD 5 million, and we bought three businesses. First one was CAD 5 million. Bought it for one times EBITDA, all covered by inventory. Next one was CAD 6 million. Similar numbers. The last one in Florida was done recently at also similar structure. We've demonstrated a track record now of deploying capital in the way that we say we're going to deploy it. There's not like these deals aren't outliers. They're just out there to find if you have a team and a process to find them. From a strategic perspective, personally, I think a company is 15x-20x if you're looking at an exit. For us, we want to, A, buy and capture all the arbitrage or most of it if we can, and then, B, we want that also to be covered by cash paid back that's pretty fast, secured by inventory, in some cases AR, but it's usually inventory on the working capital side. Okay. I would say, for the most part, the targets are self-generated. We have a tremendous amount of inbound from 20 plus years of cocktail parties back when I had long blonde hair, it was amazing, and till now. We have a pretty good flow. With that also, effectively the cash of the acquisitions flow back into our platform, and it's a pretty good model. At some point, we look at deal size. We get asked, "Do you continue doing deals in that CAD 10 million or CAD 15 million revenue range?" Probably. They're very capital efficient, easy to plug in. We don't like to buy a lot of goodwill since we have a great brand, a lot of great functions already with our platform. TOA, Tile Outlets of America. I now am in love with West Florida. Love Florida. We bought a business in Orlando last year, and then we bought this one this year, just closed. This is one of the locations. You can see all the working capital we bought is those pallets of tile. This business is operating for well over 20 years. Great founder, great guy, great team. We effectively bought around CAD 4.5 million of assets for CAD 3.7 million. We have a lot of work to do. We got our systems mostly plugged in. It will probably be another 30 days until we're wrapped up with that. We're doing some light remerchandising, some new products, signs, pricing, kind of things like that. That's it. That's it. Great business, great flow, great customers. They sell mostly to pro customers with homeowner traffic as well. These deals are out there everywhere, and our team is definitely well-suited to buy and integrate them. For us, really where we pride ourselves, we want to be the most capital-efficient company in this space. For us, for the most part, we have, I mentioned, our sourcing happening internally from our own targets, our own network, our own team. With that also, just having a very tight guidelines around payback periods, so we keep on self-funding deals. That's the long-term view. On the EBITDA improvement, it's just really simple. It's just basic marketing, pricing, and a little bit of cog savings on the procurement side. It's pretty straightforward. There's no integration plan that's wildly confusing or abstract. They're all very tactical and practical things. Okay. I won't really spend much time on the cap and ownership, or the team. It's all in the materials, but great inside holders, very tightly held company, and a solid operating team looking to grow and expand. That's it. Any questions? Two. I know a lot of the industrial rates come down for housing, et cetera. Clearly, that's not happening right now. Do you have any commentary to share about where rates are right now and how that impacts short term? Yeah. Two things. One, I got asked a few times, what's a bear market look like for flooring? We're in one. It's been one for a while now. It's never that bad, so it's down a few%. The segment that got hit the hardest was new construction. New construction is roughly around 15% of the flooring industry. Yeah, when the rates are cut, will that get supercharged again? Definitely. From an overall industry perspective, it might raise it 1%, 1.5% for that specific segment. We have a decent exposure to new construction in the state of Michigan, so that might pick up 10%, 15%, on an adjusted basis. I would say that's really what we're seeing. Historically, housing turnover was the number one driver for flooring. Back in the day, I worked, as I mentioned, as a buyer at The Home Depot, we just used housing turnover to predict future demand, and not much has really changed there. It's just normalized with the new lower rate turnover, because most of these projects, they're usually renovation projects. Any other questions? All right. Keep going, man. It's all you. Okay. I have a few questions here. I don't think we've covered this, so sorry if we did. When you're acquiring the mom and pops, do the buildings themselves often come with the deal? That's a good question. That's a great question, and that question bothers me a little bit. A few thoughts. I'll give you example. One of the first businesses we bought, the main location's in Flint, Michigan. I'm not sure if you guys been to Flint. It's not exactly a booming town, and it's an old Kmart. It's a giant, 120,000 sq ft Kmart. If we weren't operating out of there, I don't know if it'd be rented out anytime soon. There's a lot of big empty buildings like that. I would tell you, when you're buying businesses, can you get a discount on the real estate? Probably can. Probably get a very good discount, even more so on the business more than real estate. We haven't played in that space yet, so typically all the businesses that we've bought, the owners still own the real estate, or they sold the real estate and then we're leasing it from a prop management. For the most part, though, the businesses are in light industrial, commercial. It's not tied to a specific high traffic flow area, with the exception of this location. This one's actually in a pretty good spot. Yeah, I would say, as one observation is you tend to find these businesses located in these 30,000- 40,000 sq ft buildings. You could probably get a pretty good deal if you bought the real estate as well. Yep. Shoot. To piggyback off of what you mentioned here with increasing kind of rents directly from the owner. Has there been any situation so far where the property owners have moved on and maybe have a complicated relationship with new owner management The owner of the building that we were leasing from sold it, and the new person is not so great? Yeah. Sold it or passed on to the next of kin or something like that. Yeah. From a lease perspective, we're pretty aggressive with five-and options on top, also the nature of the business. I'll give you one example. The one in Orlando, we were going to occupy the building that they were historically in, that the owner owned, there was a bit of a dispute on what the value of the lease should be. We just moved it 10 minutes down the street. Everything was great. The owner sold the building. We got a better deal down the street that was newer. I wouldn't buy businesses that their success can't be tied to location if I don't own the location. That's how we think about it. With these businesses, you can move them very inexpensively, which is good check and balance. Yep For what? Your acquisition. Oh, yeah. That's a great question. When we did our cap raise last year, we changed the type of target we were going after. Initially, the company, before I arrived, acquired businesses based off of multiple, had them as a subsidiary, so on and so forth. That's not what I'm interested in. I like doing tuck-in deals like this. We raised capital, and then did our first three deals together to make sure things flowed well. We were literally ripping and replacing out ERPs, not doing dual entry very aggressively, so wanted to make sure that that flowed. You have a great playbook, but the playbook still requires players to do it. First one went okay, second one went better, third one went great. For us, at this point now, it's just literally, we've deployed capital, we either have to raise more capital and redeploy it or wait for our capital to flow back to us to reinvest it. I would say, like last year, for example, I got a bit of feedback, "Hey, why don't you raise 10 or 20 or X, Y, Z more and do more deals?" Well, look, we had a great playbook. It was a strategic shift. I have a decent position in this company and wanted to make sure it was really tested and proved before we supercharged the model. Yep. For your growth, do you have a strategy like for regional expansion or for as long as a deal makes sense, it doesn't matter where it is? Yeah. I've changed my view there a little bit. We definitely initially were looking at deals across the U.S. opportunistically. It's much easier to leverage inventory when you're tied in close. Like, for example, our first deal in Orlando was a bit rough being by itself. When we plugged in the other three locations, like four days later, inventory is flowing back and forth between those locations, which is great. For us, we're going to focus on Florida. We have our footprint in Michigan and the states in between. For example, our next target out of our Michigan operations is in Ohio, and then Florida is north up through Georgia, Tennessee. For us, that central corridor is a great spot for us because we're able to add locations and leverage working capital from an hour to two-hour drive times. Yep. From a capitalization standpoint, like I can't imagine there's always going to be a prime opportunity consistently for acquisitions. Like you mentioned, let's say you're thinking right now for instance, every time you did each one of those periods back when you got. What do you think of the top allocation strategy during those downtime? We would build. Yeah, we'd definitely build, yeah. We look at our footprint, for example. We could build out of our Michigan locations or even in Florida. Fort Lauderdale, Miami is an area we're looking at. If I can't find a location that fits well, which I think I do have one, it'd be great. If I can't find, get the deal done, then we'll build. It's close enough to something else. We built a couple of satellite locations that were for servicing our e-commerce that were just net new locations. From that perspective, in building location, it's roughly around CAD 250,000 to CAD 500,000 in your initial expense. Half that's OpEx, half is initial inventory, and then your payback is relatively the same. Just the buildup takes a bit longer, intuitively, and it's not at discount. Right. Mm-hmm. Yep. Yeah, great question. Yep. Is there a deal sourcing problem? What's that? How do you source deals? We do have a couple of brokers out there that are not super useful. For us, it's just, I mentioned before, it's just 20 years of cocktail parties. I get inbound literally every week. There's others like me who've been in this industry forever who get inbound as well. We've developed a reputation in the industry. We also are marketers, so we have a lot of outbound marketing. If you're a flooring owner, like in Texas, you probably got as well. We're pretty aggressive there as well. Not a huge fan of sourcing deals on the broker side at this point, because typically they're not the kind of deals that we are interested in doing. Our pipeline is pretty full just from that. Yeah. To that end, For the purpose of scale, is there a certain point that I think would be it where you actually get additional operating leverage once you hit a certain Yeah, 100%. Like for us, CAD 120 million is a key point. We don't have it layered out that cleanly here. It's in our IR deck if you guys want it. We have it kind of modeled out for you. Yeah, 100%. When you're able to get to the point where the platform is 3% or so-ish%, it's a lot more attractive for us. We're racing to that point, for sure. Because all these deals that we bolt on, they contribute 10%-15% back. It flows the bottom line pretty fast. Just a follow-up question to that. It's a bit nuanced. On the organic side, there's two things that we did that brought revenue down pretty substantially. One, I took e-commerce from around CAD 30 million run rate to CAD 15 million while we were deploying, or we were setting up our Pro Centers. That now will be an organic tailwind for sure. The second thing is on new construction. I mentioned we do have a decent footprint in Michigan for new construction, so we have pipeline there. It's a matter of home selling, so on and so forth. We strip that out, organic growth, our target's around 3%-5%. For the most part right now, we are buying the dip, 100%. The latest Florida business, my main concern was buying it, getting in position, great market, getting marketing, a few things turned back on. If sales declined 5% or so percent because of the market conditions, but EBITDA jumps up 5% or 10%, that's my main focus. I think I'm done. How was timed? All set? Thank you.