Good morning, ladies and gentlemen. Welcome to Hammond Power Solutions Inc.'s Second Quarter 2025 Financial Results Conference Call. Certain statements that will be discussed in this conference call will constitute forward-looking statements. The forward-looking information and statements included in this discussion are not guarantees of future performance and should not be unduly relied upon. Forward-looking statements will be based on current expectations, estimates, and projections that involve a number of risks and uncertainties, which could cause actual results to differ materially from those anticipated and described in the forward-looking statements. Such information and statements involve known and unknown risks, uncertainties, and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking information and statements. These factors include, but are not limited to, such things as the impact of general industry conditions, fluctuations of commodity prices, industry competition, availability of qualified personnel and management, stock market volatility, and timely and cost-effective access to sufficient capital from internal and external sources. The risks just outlined should not be construed as exhaustive. Although management of the company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Accordingly, listeners should not place undue reliance upon any of the forward-looking information discussed in this call. I'd now like to hand the call over to Mr. Adrian Thomas, Chief Executive Officer of Hammond Power Solutions Inc. Mr. Thomas? Thank you, Operator, and good morning, everyone. Thank you for joining us for our second quarter update. I'm pleased to share that Hammond Power Solutions Inc. delivered another strong quarter in Q2 2025, achieving record quarterly sales of $224 million, 14% growth compared to Q2 2024. Driven primarily by U.S. shipments, all three of our channels to market saw strong gains. At the same time as our rapid sales growth, we saw faster-than-expected material cost increases. We implemented our annual price increase in April, which will partly offset these costs. We will see the net effects of our pricing more fully in Q3 as pricing flows through our backlog. Despite these cost headwinds, our gross margins ended the quarter at 31%. Our customer and market activity remains resilient with continued quotation and orders momentum, and we delivered growth in all three of our market channels. Healthy demand was seen across core markets, and increased production capacity allowed for higher shipments. While our increased shipments reduced our backlog on a quarter-over-quarter basis, our backlog remains strong on a year-to-date basis. The U.S. market experienced its strongest growth of all regions, up more than 18% compared to the same quarter last year, driven by strong standard product sales in the quarter. The Canadian market continued to grow at a rate of approximately 5%, with our distribution channel contributing to both standard product and custom product sales. Large projects in a diverse set of industries contributed to the sales of custom products. Looking at our recently acquired Micron brand, we continue to see strong sales from their products, and they are performing as expected and margin slightly ahead of our expectations. Together, we offer a broader array of solutions to our customers and enhance our reputation for quality products and services, particularly within our OEM markets. As mentioned during our last call, while demand for some of our MESTA products has slowed due to a temporary pause in EV and chip manufacturing projects, we are making exciting progress in new areas. Our market development and sales efforts around power quality solutions, especially active harmonic filters, are gaining traction with new customers and projects. This positive trend in active harmonic filter sales is expected to balance out any softness in induction heating sales for the year. For most of the last two years, we have been operating our manufacturing facilities at near capacity. Today, we continue to install new equipment within several facilities and have constructed two new facilities in Mexico. We are now in the process of loading our newest facility, expecting shipments in the second half of the year. As we ramp up production in this facility and as we load up the other equipment and plants to meet the market demand, we expect to see benefits to our operating costs. Finally, I would like to share two great external recognitions earned this quarter. We are pleased to announce that Hammond Power Solutions Inc has again earned the Great Place to Work certification, now including our Mexico facilities for the first time. This recognition demonstrates our dedication to employee engagement and workplace culture. We believe this recognition and the underlying employee culture will support us in our staffing growth and retention rates in Mexico and across our organization. I would like to close by mentioning that we were recently honored by TED Magazine as recipients of the Best of the Best marketing awards, an accolade that acknowledges distributors and manufacturers for excellence in marketing strategy and execution across multiple categories. We are proud to be one of this year's winners. With that, I will turn it over to Richard Vollering for some financial detail on the quarter. Richard? Thank you, Adrian, and good morning, everyone. As Adrian mentioned, we are pleased with the strong top-line performance in the second quarter of 2025. This was a continuation of the growing momentum we spoke of at the tail end of the first quarter. Gross margin, while still historically strong at 30.7%, was lower than expectations. There were two main reasons for this. One is the higher material cost referenced by Adrian earlier, and the other is the cost of ramping up our new facilities in Mexico as we set up equipment and trained an expanded workforce. These costs had an impact of approximately 123 basis points on the gross margin in the quarter. As we load the factories in the coming quarters, the impact of these costs will diminish. While it is difficult to ascertain what cost increases we might experience in the coming months, we will continue to monitor them and be prepared to adapt. Moving on to overhead costs, selling and distribution costs increased in the quarter by $4,074,000 due to higher shipping volumes and were slightly higher as a percentage of sales. With respect to general and administrative expenses, I will first highlight that the rapid share price increase since the end of the first quarter resulted in a share-based expense of $9,104,000 in the second quarter. On a year-to-date basis, there was a recovery of $1,752,000. The remaining general and administrative expenses were generally flat in the quarter. Adjusted EBITDA, which excludes the impact of share-based compensation and foreign exchange gains and losses, was $33,396,000 in the second quarter of 2025 versus $32,587,000 in the same quarter of 2024, an increase of 2%. On a year-to-date basis, adjusted EBITDA was $64,312,000 in 2025 versus $63,559,000 in 2024, an increase of 1%. Adjusted EPS was $1.72 in the second quarter of 2025 and $3.32 on a year-to-date basis. By comparison, adjusted EPS in the first two quarters of 2024 was $3.37. Net income was $13,376,000 in the second quarter and $39,598,000 on a year-to-date basis. Working capital increased in the quarter, mainly due to higher accounts receivable due to higher sales, inventory levels that remain historically high, and significant cash outlays in the quarter due to share-based compensation payments and income taxes. We expect that net cash will increase in the third quarter. Capital expenditures were $8 million in the quarter and $20 million year-to-date. This is in line with our expectations of capital expenditures of $35 million- $40 million for 2025. Our financial focus in the coming quarters will be to monitor margins closely and be prepared to react quickly to maintain them. Ensure that we are managing our overhead costs prudently and manage working capital closely to bring it below 20% of sales. Thank you for your time and attention. I will now hand things back to the Operator to open the line for questions. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Matthew James Lee with Canaccord Genuity. Hey, morning, guys. Thanks for taking my questions. Maybe just starting on margins, it sounds like gross margin pressure was mainly due to supply chain costs, but can you just maybe walk through how much of that cost increase year- over- year was related to the Mexican ramp-up? You know, maybe a secondary question on that. How much of the additional supply cost do you think you can pass on to customers via price increases over time? Good morning, Matt. It's Richard here. The factories, we pointed out that the impact of gross margins from the two new factories in Mexico was about 123 basis points, and that isn't unexpected. As I mentioned, we have to get people in, we have to train them, and in some processes on the factory floor, that takes a little more time. The good news is that the progress has been good, and we are going to start making and shipping product out of there very soon. Go ahead, sorry. The second part of your question was related to costs and how effectively we can pass those cost increases on. It's always going to be our objective to maintain margins as best we can, Matt, but as we've talked about many times before, that doesn't happen overnight. With respect to custom product, the lead times tend to be longer, but changes to pricing can be implemented quickly. On the catalog product, that typically takes a few months. What I can tell you is that we are watching where costs are going very closely, and we will make decisions accordingly. That's really helpful. If I think about margins, you know, if the Mexican facility was up and running at kind of capacity levels, then your margin would have looked kind of closer to 32%, if I just add the 123 basis points. I think so, Matt. The thing that'll make that happen, of course, is loading up those new factories, which will take some time. That'll happen over the course of the remaining quarters this year and probably a larger impact going into 2026. Okay, that's super helpful. Maybe, Adrian, on the demand side, it sounds like quotation activity was really robust. Can you maybe break that down into demand from data centers versus sort of your more traditional clients? Any sort of changes that you're seeing with a bit more stabilization in the U.S. economy right now? I think a couple of things to note. A lot of the growth came from the U.S., and we still see a lot of activity on the custom side, and that's project-related. Without giving you an exact percentage, I would say a large portion of that growth was coming from data center activity. We do see it as the fastest growing segment, but I would remind you we're quite diversified, so we continue to quote and participate across all the markets. One of the comments we had made was that we saw broad-based support, particularly diverse in Canada, but also in the U.S. Yes, data centers was the fastest growing piece. The indications from our customers in that space is that they see a lot of opportunity moving forward as well. Right, okay. Is that a... Sorry, go ahead. No, with respect to standard products, we saw good volumes on our standard products. As we've mentioned before, that's sort of related to we sell those products everywhere. Every sort of construction project that has electricity will have a standard transformer. That's just in general, I think, a result of kind of how the economy is continuing its momentum in the U.S. Okay, that's really helpful. Maybe just one last housekeeping question. Can you remind me how much of the new Mexico facilities are online right now, and where your total capacity is right now? In terms of ramp-up, the two facilities, Mon3 came up last year, and we've been producing products for a while. On Mon4, we have produced certification products. We'll be building some products for stock out of there to help get the workforce accustomed to building and the skills that they need to produce. We would expect that we would start producing probably September timeframe, starting to ramp up some small volume by the end of the year, and really loading that factory for next year. We're sort of in the training phase. We'll ramp up, if you make a comparison to a restaurant, it's sort of like a soft opening, just to make sure that we have the skill sets that we're producing quality products. We'll limit the volumes out of that facility while we make sure that we have the right trained workforce and skill sets. It should be more fully ramped up starting first quarter next year. That full ramp-up is $9 million, $9.5 million in terms of revenue still, or is it maybe a little higher now? When we get Mon4 ramped up, Matt? Yeah. Oh, no, it'll be closer to $1.1 billion. Right, okay, with Micron included? Yeah. Okay, got it. Thanks. I'll pass the line. Our next question comes from Nicholas Boychuk with Cormark Securities. Thanks, good morning, guys. I just wanted to come back to the dynamics between the three selling channels you had and the costs. Obviously, the commentary suggested that your private label and OEM segments, they're strong, yet selling and distribution costs as a percentage of sales was flat quarter over quarter. Can you maybe expand or talk a little bit about any changing dynamics that you're seeing within that? Is it maybe becoming a little bit more expensive to onboard new distributors? Any color there on that dynamic is helpful. Good morning, Nick. I wouldn't say there's a whole lot changing in that dynamic in the quarter anyway. I don't think there's anything really to call out or to speak of that's notable. With respect to the distributors, we are still adding branches as time goes by, but our real focus is on increasing the sales within the existing distributor branches that we have. The best way to do that for us is to not only perform well in our delivery, quality, and price on standard product, but also to grow the custom product aspect of it. We'll continue to do that as we go forward. In terms of this quarter, there wasn't anything unique in terms of that mix with those distributors that would make the gross margin profile or the SG&A profile a little bit heavier? No, I wouldn't call anything out that's notable. Okay. On the raw material and commodity input cost pressure, obviously, as you input this new Mexican facility, your scale is starting to really get to a point here where I'm assuming you have a little bit more leverage with some of your suppliers. Are there opportunities you guys are exploring to maybe procure things on a little bit of an advanced lead time, maybe fix pricing in terms of purchases, things that could maybe prevent some of the volatility and swings quarter- over- quarter? I would say, Nick, that our view of the pricing, I wouldn't look at material cost inflation as a quarter- over- quarter. I think there have been faster inflationary cost pressures in the first half of this year than maybe was anticipated when we were exiting last year. I do believe where we'll land in terms of cost is slightly higher, but you know we'll see how that flows through. Yes, we definitely have scale. We've been using that scale to diversify our supply base to create more robustness in terms of reliability of supply and having options if we have issues with our supply base. It also does give us more flexibility in terms of where we're sourcing materials, which I think is an important flexibility right now. A lot of our focus has been on the robustness, but we continue to look at ways that we can minimize or take advantage of our scale to get some leverage. Okay, thanks. We talked a little bit about MESTA and Micron. Can you give us a little bit of an update on the overall power quality M&A market? Any updates on pipeline, opportunity set, valuations? I think a couple of things to note on power quality. I called out, you know, we were focusing significantly in terms of promoting and training and educating customers and our sales reps and our sales teams around that product line since the second half of last year. We've seen compression in quote-to-ship cycles, so it seems that, you know, some of the cycle times from when we're participating or quoting projects are shrinking, so that's positive, and that's led to some acceleration of our volumes on the filter side. Micron is going well, as we mentioned, and you know, we'll continue to look for more acquisitions in that space. I think Micron is a good example that we can execute an acquisition and integrate it successfully, so we'll continue to work there. We have an active pipeline, and can't talk too much more about that, but yes, we continue to be active, and I think I had mentioned at one point we have a dedicated business development person on our team, Norm Bates, who was leading Micron, who's helping us in that business development as well, so we're fully active in developing a pipeline. Okay, thanks. Thank you. Our next question comes from Jim Byrne with Acumen. Good morning, guys. Richard, you kind of highlighted the shipping costs, and we just wanted to maybe get a better sense of what you're seeing there. Obviously, volumes are up. We hear from a number of the truckers that rates are actually down. I wonder if you're actually seeing that, or is it just strictly volume that is pushing that number up? As you mentioned, in percentage of sale, it's actually been climbing, so I just wanted to get a sense of where you are on that shipping cost. Yeah, it really is just the volume, and you know, we're still kind of at the tail end of our warehouse strategy as well, not completely done, so we're not realizing the full benefits of that quite yet, but you know, it's my expectation that that will improve in the coming quarters. Okay, on the rates, are you seeing any cost inflation on the shipping rates? I don't really see too much moving either way. Okay, and then Adrian, obviously, we're still seeing strong demand on data centers, power generation projects, seem to be announcements coming up. I noticed, I think Enbridge signed up for a large solar project. Maybe just on the solar and renewable side, are there any major project wins or anything that you can note on the solar side? What I would say is that, globally, because we do serve that not only North America, but also from our India operation, I would say, generally speaking, we see renewable activity. I would say we see the drop-off in the U.S., and I think there were some changes in tax codes and things like that, so I would expect the U.S. might be subdued for a while while those projects get reevaluated. Elsewhere in the world, we see that renewables continue to be a stable business. Okay, and then maybe just lastly, can you talk about the FX impacts here in the second quarter, and obviously Canadian dollars are strengthening here, how you anticipate that here for Q3, maybe the back half of the year? That's a tough one to predict, Jim, as you can probably imagine. Maybe I'll just highlight, you know, our major currency pairs are Canadian dollar, U.S. dollar, and U.S. dollar, peso, and there's some euro, U.S. dollar as well, but to a much lesser extent. Those are our major currency pairs, and we've seen a general strengthening of the peso and strengthening of the U.S. dollar. There are a lot of things that go into that line, so it's tough to predict where it will land in the coming quarters, not just in terms of what the rates might be, but also in terms of what the respective gains and losses in all those currency pairs might be. One thing just to sort of highlight again is that when it comes down to U.S. dollars, we still have a pretty good natural hedge in place, so we don't have a tremendous amount of exposure on U.S. dollars by the time you look through the whole P&L. Okay, that's it for me, guys. Thanks. As a reminder, if you'd like to ask a question at this time, please press star one on your touchtone phone. Our next question comes from a line of Baltej Sidhu with National Bank of Canada. Hey, good morning, guys. Just as a follow-up on some of the prior questions here, on commodity volatility, are we seeing this transcend in other areas outside of just aluminum wiring? Any other notable inflationary items outside of aluminum wiring and the Mexican facility ramp? Yeah, I mean, insulation would be the other one. Voltage, and then, yeah, I think those are sort of the major ones. You know, the thing to remember, too, is that the supply chains are quite long, and we source from a lot of different places, and it seems like there's inflation creeping in in a lot of different places. Yeah, you've called out the major ones. Yeah, that's fair. Just on the sequential backline declogging in Q2 due to record shipments, which makes sense, how do we think about the trajectory going forward from here? Are you seeing order intake keeping pace with elevated shipment levels? Are there any signs or moderations or delays in customer decisions just given the current environment that we're in? Excluding renewables, you know, we're not seeing any shift in sort of activity. We ended Q1 with some significant order bookings, and at that point, I sort of mentioned, think about that as sort of on a half. There was some timing there where stuff got booked. What I would expect going forward, we continue to see good orders momentum and quotation activity around our custom products. We are ramping up, but that's not going to give us a tremendous amount of extra capacity until next year. I think on balance, we should expect to see pretty consistent shipment rates for the rest of this year. Perfect. Just on pricing power, just getting the cost pressures that we're seeing, have you pushed in any additional price increases since Q2? Is the price that we saw in the increase in April, we should see that continue flowing through Q3 and Q4 here? Generally speaking, we would do an annual price increase early in the year, and this year, that was in April. As Richard mentioned, it takes a little bit for that price increase to flow through our shipments. We will see more of that in Q3 than what we realized; some price increase in Q2, but we'll see more of that realizing in Q3 and Q4. We'll just continue to look at where we see the material cost inflation, and we'll have to take decisions going forward based on how we see material cost rising. That would be outside our normal course of operations. Perfect. Thank you. That's all for me. That concludes today's question and answer session. I'd like to turn the call back to Adrian Thomas for closing remarks. Thank you, Operator. We're proud of our record shipments this quarter and the work of the teams to increase our capacity of our factories over the last two years. While we'll continue to look for opportunities for acquisitions, I believe that our expanded capacity gives us the opportunity for continued growth in a market that's seeing the boost of the world's desire for data and electricity. Thank you, everyone, for joining us today. This concludes today's conference call. 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