Good morning, everyone, and welcome to the LFL Group's first quarter 2026 conference call. All lines today have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If any research analysts would like to ask a question during this time, simply press the star key followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star one again. Thank you. I would now like to turn the conference over to Jonathan Ross, investor relations for LFL Group. Please go ahead. Thank you. Good day, everyone, and welcome to LFL Group's first quarter 2026 conference call and webcast. LFL's first quarter 2026 financial results were released earlier. The press release, financial statements, and management's discussion and analysis are available on SEDAR+ and on our website at lflgroup.ca. Joining me on the call today are Mike Walsh, President and Chief Executive Officer, and Victor Diab, Chief Financial Officer. Today's discussion includes forward-looking statements. These statements are based on management's current assumptions and beliefs and are subject to risks, uncertainties, and other factors that could cause actual results to differ materially from these assumptions and beliefs. We encourage listeners to refer to the risk factors outlined in our management's discussion and analysis and annual information form, which provide additional detail on the risks and uncertainties that could affect future results. This call also includes non-IFRS financial measures, definitions, reconciliations, and related disclosures for these measures can be found in the management's discussion and analysis and press release issued earlier. Forward-looking statements made during this call are current as of today, LFL Group disclaims any intention or obligation to update or revise them except as required by applicable law. All financial figures discussed today are in Canadian dollars unless otherwise noted. With that, I'll turn the call over to Mike Walsh. Mike? Good morning, everyone, and thank you for joining us. The first quarter played out largely as we described on our February call. The consumer remained cautious and value-focused with continued pressure market-wide on larger discretionary purchases, and we faced a particularly demanding prior year comparables we had flagged coming into the year. In this environment, our team executed with discipline, and we continued to outperform the market and gain share across our categories, which remains our priority through the cycle. System-wide sales were down 3.5%, with same-store sales down 4.2%. Victor will walk you through the drivers in more detail. Furniture sales were lower against an exceptionally strong Q1 of last year, but the underlying story is a strong one. On a three-year compound annual growth basis, our furniture business is up nearly 7% in Q1, meaningful outperformance against an industry that's been under real pressure for some time. We continued to gain share in the category in the first quarter. Our priority in environments like this is not defending absolute sales. It's strengthening our position through the cycle. We stayed disciplined on assortment, deeper on our best-performing SKUs, and continued to be surgical on how and where we promote. Mattresses were a real standout this quarter, delivering mid-single-digit growth in a highly promotional category, reflecting the same focused assortment playbook that drove our furniture performance last year. The dynamic underneath is one we've been talking about for several quarters. Our digital platform is increasingly a research and qualification destination, drawing customers into the store with clear purchase intent. Our salespeople are well-positioned to convert that intent into the right product, the right add-ons, and a healthier total ticket. This dynamic, along with our targeted approach to promotional activity, is also showing up in our gross margin, which expanded year-over-year on a consolidated basis. Category performance was mixed, but that's consistent with our portfolio approach to the overall business. Our warranty, insurance, and service businesses continued to perform well. These are profitable platforms that support the core business, deepen our relationship with the customer, and contribute to earnings. In the commercial channel, trends in Q1 were broadly in line with what we outlined last quarter with some near-term variability. While we expected moderation heading into 2026, winter weather delayed builder activity and shifted project completions, which we expect will support volumes in the second quarter. We also saw a competitor in the channel file for creditor protection following quarter end, which we believe creates an incremental share opportunity for us. Taken together, while the commercial business is still expected to moderate through 2026 as builder inventories clear, we now see that moderation occurring at a slower pace than originally anticipated. We continue to make progress on the replacement side, which has been a deliberate focus over the past 12- 18 months and remains an important priority going forward. We are also taking a selective approach to growing our store network. In the second quarter, we expect to add four franchise locations. Looking ahead, we expect the consumer to remain cautious in the near term, with some of the Q1 headwinds carrying into Q2. That said, comparisons ease as we move through the year, and we continue to look for gradual improvement in the back half. The fundamentals that drive this business haven't changed. Trusted banners coast to coast, the scale to source directly and secure advantage pricing, one of the largest final mile delivery networks in the country, and a balance sheet that gives us flexibility through the cycle. These are durable advantages and they matter most in environments like this. Our focus is unchanged, delivering value to our customers, executing with discipline, and continuing to make the right investments in the business. Before I turn it over to Victor, I want to thank our associates across the country, our teams in the store, our drivers and warehouse teams, and our customer service teams. Environments like this are where their experience and commitment really show. Victor, over to you. Thanks, Mike. Good morning, everyone. I'll start with the first quarter walkthrough, then move to capital allocation and a few considerations as we look to the second quarter and the balance of the year. Revenue for the quarter was CAD 557.2 million, down 3.8% year-over-year. To put some shape around the drivers Mike just walked through, the majority of the decline reflects the expected furniture normalization following last year's timing benefit, compounded by a more challenging macro backdrop and unfavorable weather, which impacted traffic to the stores. The appliance and electronic categories were impacted by the same factors, while mattresses were a bright spot during the quarter, reflecting the team's ability to translate strategic merchandising initiatives into market share gains. Gross margin expanded 21 basis points year-over-year to 44.8%. The improvement was driven primarily by favorable category mix, reflecting strength in the higher-margin mattress category, along with improved appliance rate performance. These gains reflect disciplined pricing and promotional execution during the quarter, supported by the sourcing and vendor initiatives we've been working on. SG&A as a percentage of revenue increased to 39.48%, reflecting fixed cost leverage and a lower revenue environment, along with higher commission expense tied to sales mix and property-related costs, partially offset by lower retail financing fees. On a dollar basis, we maintained strict cost discipline through the quarter, which is particularly meaningful given the broader inflationary backdrop. Adjusted net income was CAD 20.1 million, down from CAD 24.1 million in the prior year, reflecting the sales and cost dynamics I just described. Earnings remain meaningfully above pre-normalization levels. For context, adjusted net income in the first quarter of 2023 was CAD 13 million, which speaks to the structurally higher earnings base the business operates from today. We have gained share and kept that share. Adjusted diluted EPS was CAD 0.29 compared to CAD 0.35 last year. On the commercial side, as Mike noted, builder activity slowed more than initially expected in Q1 due to weather-related delays, shifting a portion of volume into Q2. While we continue to expect moderation in the segment through 2026, the competitive dynamics we're seeing, including the exit of a competitor, support our view that this will unfold more gradually than originally anticipated. As always, we'll continue to manage the business with the same discipline and selectivity that have served us well. Turning to the balance sheet. We ended the quarter with CAD 560.8 million in unrestricted liquidity, including cash, marketable securities, and our undrawn revolving credit facility. That liquidity continues to be a strategic asset in this environment. It provides the flexibility to invest in the business, navigate volatility, and act opportunistically. Our approach to capital allocation remains disciplined and consistent. We prioritize reinvestment in the business where we see attractive return, maintain a strong balance sheet, and return capital to shareholders over time, primarily through our regular dividend. We're also attuned to returning more to shareholders when it makes sense. The CAD 0.50 special dividend declared in February and paid in April reflects that approach. As we outlined coming into the year, we expect to expand our footprint in a measured and strategic way. We currently anticipate four franchise openings in the second quarter. On operational efficiency, centralized distribution remains a multi-year priority, with Ontario the most significant opportunity. As with Mississauga, we're approaching this deliberately, using a phased test-and-learn approach with a clear focus on maintaining service levels while driving longer-term efficiency and working capital benefits. We will provide updates as we make progress through the year. On our REIT initiative, this remains an important strategic priority. Timing continues to be guided by market conditions and regulatory approvals, and we'll share updates when appropriate. A couple of cost items worth flagging. On fuel and freight, fuel impacts not only our delivery fleet but our entire value chain. It's a challenging cost driver because it's largely indexed and shows up broadly across the ecosystem. On tariffs, the impact of the recently implemented steel-related tariffs remains narrow and manageable, and any cost pass-through will be targeted and measured. Both are industry-wide pressures, and few in the sectors are better equipped to manage them. We'll balance the customer and profitability the way we always have. Looking ahead, the near-term environment remains dynamic, with retailers across the sector navigating a more selective consumer. We've never been better positioned to compete and take share. Our track record of delivering profitability, driven by sustained progress on our merchandising and sourcing initiative, is what gives us the room to invest tactically when conditions warrant. Any near-term margin investment is always tested against the return inside a 12-month period. We expect comparisons to ease as the year progresses, with some commercial activity shifting into Q2 as I previously outlined. Our scale, disciplined sourcing, and strong balance sheet provide the foundation to continue driving profitable growth and shareholder value. With that, I'll turn it back to Mike. Thanks, Victor. To wrap up, the first quarter was a difficult one for the industry. Our top-line performance partly reflected that. The quality of execution underneath it was strong. We leaned into the categories where we were positioned to win, expanded gross margin, kept tight cost controls, and continued to gain share through the quarter. We're navigating this environment from a position of strength. We're confident in our ability to keep building long-term value for our shareholders. Thank you again to our associates for their continued execution and to our shareholders for their continued support. With that, we'll be happy to take your questions. Thank you. We will now begin the analyst question and answer session. As a reminder, to join the question queue, you may press star then one on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing the keys. If your question has been addressed and you would like to withdraw it, please press star then two. We will now pause momentarily to assemble our roster. Today's first question will come from Ahmed Abdullah with National Bank of Canada. Please proceed. Yeah, good morning. Thank you for taking my question. Can you give us some more color on how sales and perhaps same-store sales and traffic has trended through the quarter and kind of what your exit rate is looking like, you know, exiting March post all the noise of weather and into April? Yeah. Thanks for the question. We've seen similar things that we've talked about in the past, which is we're still seeing the consumer coming to our website, doing their shopping and doing their, you know, their review of different products, but we're seeing less customers still coming to our store. They're still more qualified. Our salespeople are being able to spend more time with them to sell them the value-added services. As we transition from March into April, we see that continuing. The other dynamic that plays into this is the fuel inflation. You're still continuing to see the consumer pullback going into Q2, that affects not just us, but the consumer. Their wallet remains still challenged, and they're still spending money. We're still seeing in our big events, we're still hitting it out of the park. There is still consumer, pullback sentiment out there in the market. Okay. Touching on the kind of what you alluded to around promotional intensity and some of the fuel dynamics, how are you balancing, you know, your pricing versus your promo levers in order to maintain some traction here? Yeah. What I would say is that, you know, we've signaled it for the past number of quarters that we're still in a value environment. We have to be very selective where we wanna increase cost, and it's more of a surgical thing than across the board. We continue to put our foot down on financing because we believe that plays into the value proposition with the consumer. Okay. Just one last one for me. You know, if industry demand kind of stays weak throughout this quarter and into the rest of the year, what structurally would allow Leon's to kind of grow earnings going forward? What kind of cost levers do you have to still play around with? Yeah, Ahmed, I can jump in here. Yeah, look, I think, you know, obviously, we have a very disciplined framework around gross margin management. You know, working very closely with our vendors, continuing to work very closely with our vendors to make sure we're getting really good pricing so that we can remain value-focused with the consumer. How we manage margin rate. On the SG&A front, look, I mean, we got to balance a couple of things, right? One is, rate will largely, you know, depend, as we said at the beginning of the year, on how sales play out. We are investing in our business. We're not slowing that down. We've invested in our org. We've invested, you know, in our stores. We continue to do that. We're prioritizing that. We're not backing off some of those strategic priorities. At the same time, we gotta be mindful of sort of where we sit today and how we view the world. At the beginning of, you know, in February, we thought, you know, that the first half of the year was gonna be more challenging for a couple of reasons. We saw a more cautious consumer. We have tougher comps. A layer on the inflationary impacts of a fuel increase, which we hadn't anticipated at the time. In the back half of the year, we think, you know, we're hopeful that there's gonna be an easier macro environment, easier comps from our perspective. There's gonna be unit growth. Like we said, there's four franchise stores opening in the quarter, and more corporate stores opening as the year progresses. You know, I think the commercial side of the business, right? Like Mike said, you know, his opening comments, with the competitor exiting, that opens up a share play for us. We're very well positioned to pick up some of that share. We already are picking up some of that share. That should ease the moderation we expected in that commercial channel. You know, all those things combined will help us, I think still deliver growth in the back half of the year. Okay. Thanks for the color. I'll pass the line. Our next question comes from Stephen MacLeod with BMO Capital Markets. Please proceed. Thank you. Good morning, guys. I wanted to talk about the strength that you delivered in the mattress category. Can you help unpack what's driving this? Is it all share gains, or do you believe the overall category is also seeing some improvement as well? Thanks for the question. No, we believe we're getting share gain. You know, last year was a focus of, you know, a smaller assortment going deeper on the inventory and furniture, and we were successful doing that. The same thing's played out with mattress. We're really focused on the mattress category, top of bed, bottom of bed, and we truly think we're gaining share. It's a similar focus that we did with furniture last year. We're just applying that to mattress this year. Got it. Thanks, Mike. Then maybe just on the comps. You know, you talked about the comps being, you know, easing to some extent. If we look back at 2025, Q2 and Q3 were also notably strong as well. Is there something within those numbers that varies relative to the Q1 comp? I think the difference with the Q1 comp is you had a two-year stack of about 12% entering into Q1. We had a lot of, excuse me, we had a lot of visibility going into Q1 around the normalization with furniture. Now we're mindful. Obviously, furniture was up 6% for the year last year, it was strong comps throughout. We do feel better again with the dynamic around the consumer environment hopefully easing in the back half with unit store growth. Q4 is a big opportunity for us. There was a lot of noise in Q4 last year, we're pretty optimistic about our ability to bounce back in Q4, again, assuming no other macro channel challenges emerge. I think it's really about that, Navan, than anything in particular there. We are feeling better about the back half than the first half. To your point, like, furniture was strong throughout the year, but we feel good about our plans going forward, especially in Q4. Okay, that's helpful. Thanks, guys. The next question is from Martin Landry with Stifel. Please proceed. Hi. Good morning, guys. I just wanna go back to the rising fuel costs. Just I'm not sure if I understood exactly your strategy. Do you intend to pass fuel surcharges to customers or absorb it? Yeah, Martin, we haven't. As Mike said, we're being very thoughtful just given the environment. We haven't passed any surcharges, fuel surcharges to customer. It's gonna depend on how long, you know, this environment and fuel prices remain elevated because it doesn't just impact us from a last mile perspective directly. It does impact our value chain. If input costs, from a supplier perspective start to increase, then, you know, obviously we're gonna challenge and push back on that. It really will depend on how prolonged it is. You know, if we decide to take price action, it's gonna be very surgical, and strategic in terms of how we approach that, as we always do. We wanna remain the leaders from a pricing standpoint. We're very focused on providing value, and that's our number one priority. Our You know, again, from a if you think about margin rate perspective, we still feel good about stabilizing that over a full year basis relative to last year, holding stable. There's gonna be ebbs and flows, and we have to react to what we're seeing in the environment, and those are real-time conversations that happen on a daily basis. That's, that's the I guess that's the extent of color that we can provide at this time. Mike, anything you wanna add there? Yeah. I think you covered it well. I think, you know, if you look at our sourcing, our capabilities, and our balance sheet, we're really positioned well to, you know, endure these types of cycles. We'll be very methodical and surgical as we look at where we need to increase prices. Again, the consumer is still in that value mode, and, you know, as the leader in our space, we have to play in the value proposition and continue to do that. Okay, that's helpful. I understand it's very dynamic and not easy to deal with. Can you talk a little bit about your new franchise stores, where they will be located? Sure. We had one open up in April. That was in Goose Bay, Newfoundland. We have three more opening up on May 28th, Bridgewater, Liverpool, and Barrington Passage in Nova Scotia. Atlantic Canada. Cool. I think you Did you say you have a corporate store coming up later on? We have a couple things happening. Welland store, that's gonna be the Leon's store. It's also gonna have some commercial pad developments that we're doing there. We've got a few other stores in the mix. We'll be in a better position at the end of Q2 to give you timing because there's some shifting from potentially Q4 of 2026 to 2027. The exact numbers, I think we signaled that we'd have four to fi ve franchises open this year and two new corporate stores. Somewhere in, as Mike said, four franchise stores. We are expecting one corporate store to open in Q3. The Welland grand reopening, which is not net incremental. We have a Welland store right now, but it will just be the grand reopening of a brand-new store. Then a couple of other renovations hitting this year in Q3, Q4, then potentially one other new store. To Mike's point, there's some timing considerations around development that are happening in real time right now. That's kinda where we stand today. Okay. Last question. I understand the consumer is soft right now, but how is your industrial and builders division? Is that still going fine or you're seeing weakness there as well? Well, I think we signaled last year that we were seeing some, you know, challenges that are gonna happen in 26 and 27 in the builder segment. Eighteen months ago, we signaled that we were gonna really focus on the replacement business with the developments. We've been winning in that segment. The company that is going out of business, we're gonna hopefully reap some of the benefits of that organically. We're actually cautiously optimistic on the development in the builders side for 2026. Superb. Thank you and best of luck. Thank you. The next question is from Ty Collin with CIBC. Please proceed. Good morning, Mike and Victor. Thanks for taking the questions. Maybe just to start, want to unpack your comments around the consumer a little bit more. You mentioned that you're seeing some softness carrying into Q2. You know, I'm wondering if you've seen any kind of incremental weakening or trade-down activity compared to what you've seen over the last couple quarters or whether that's kind of stable. Victor, I think you also mentioned that you're expecting or hoping for some macro improvement, a bit of an easier environment in the second half of the year. Can you just unpack that comment a little bit? What's the basis of that hope? Well, I'll kick it off, and then Victor can jump in. We're still seeing the same thing, Ty. We're still seeing the consumer trading down, so from mid to, you know, more of the opening price point. You're seeing more unit growth, which translates into, you know, you know, higher unit growth, but it's more challenging sales. Still seeing that. We're still seeing the customers at the top end still continuing to buy there. Definitely the trend that we've seen for the past number of quarters is still continuing. Yeah. Ty, like, you know, I think it's a really important point that Mike just mentioned. When we think about written units in the quarter, it's actually up, but we are seeing pressure on average basket because customers are trading down. It's a dynamic that I don't think is just specific to us or our segment. We're hearing that across retail. I think it's just fair given the affordability challenges and inflation, recent inflation with fuel. On my speculative comments with respect to hoping that the environment eases, I think, you know, peace deal from a geopolitical standpoint that pulls back fuel prices and oil prices, takes pressure off our suppliers and their input costs. I think, you know, we're hoping that's a factor that plays out. More trade certainty in Canada, I think. More housing activity, which was really slow in Q1. I think all of those factors obviously impact our business from an ancillary driver perspective. That's what my comments allude to. Do I believe that? You know, do I have a crystal ball? No. That's what we're hoping for. Okay. I join you in hoping that all of those things come to pass in the second half of this year. maybe just for my last question, you know, I appreciate your comments around the promotional environment and the industry and the consumer remaining value conscious. I guess, can you maybe just give a little more color on how you've actually seen the promotional environment evolve over the last couple quarters, you know, from the holiday season through Q1 and now entering into Q2? Has that remained stable or any changes to call out? I think the promotional thing, I think all retailers, not just in our space, but all retailers. There's more intensity from a promotional offering because, you know, sales are challenging. We've been, you know, bullish on the fact that we're seeing unit growth, that tells us we're winning share in a very challenging marketplace. Yeah, definitely the promotional activity's intensified. Okay, great. Thanks. All the best, guys. Thanks, Ty. Once again, if you do have a question, please press star then one. The next question comes from Rylan Conrad with RBC Capital Markets. Please proceed. Hey, good morning, guys. Just to start, on the three-year furniture sales CAGR of almost 7%, at a high level, do you have any sense as to maybe how that category performed over that same period? Sorry, can you clarify that question again? Yeah. Just, I'm curious about your performance in furniture at, you know, a three-year sales CAGR of 7%, and how that might have compared to the market overall. Oh, yeah. No. Fair, fair question. I think, look, tough to get exact data on furniture. If you tend to look at StatCan, over that period, it's probably in the 2% range, is what I've seen. Again, I think that points to us gaining significant share over that period of time. I think if you talked anecdotally, we also talked to our vendor base, and I think they would agree with the statement that collectively as LFL, we've gained a good amount of share in furniture over that period of time. We're pretty confident on the share gains. Can't give you a very specific number, I think around that 2% range. Again, if you kind of just zoom out a little bit and think about the North American backdrop in home furnishings, there's a ton of, you know, public, furniture public companies in the U.S. that we can point to. It's been a really challenging environment for those folks. The folks in Canada that they might not be public, but they've put out numbers, those numbers have been down the last couple years. I think just collectively, we feel good about that statement that we have gained share. Okay. No, that's super helpful. Then just on the distribution consolidation opportunity in Ontario, I know you guys have a more medium-sized test ongoing there, but, with that, what are the key milestones you're looking to hit? And assuming those are met, is this going to be the final test prior to potentially putting shovels in the ground on a DC? It really depends on the results of the test and what we see. The next test that we're planning is just bigger in nature. It's actually, it'll probably be out west, another big opportunity for us out west that we're looking at. Again, if that's successful, our number one focus is on customer experience, making sure we're getting that we're not, you know, we're not taking away from getting product to the customers on time. I think we gotta really be cautious around that. Then it's around, okay, are we seeing the right efficiency from a transportation perspective, from an SG&A perspective? If we start to see that and we feel good about that consolidation, that's going to give us the confidence to roll that out and then potentially invest in a new facility and move a bit quicker on the rest of the consolidation. The next test, which again is still in the planning phases because it's pretty involved and complicated. If that does go well, I do believe that will give us the confidence to move a bit more quickly on Ontario. Okay. Got it. Just lastly for me, obviously balance sheet's in a really good spot. Could you just remind us of your free cash flow priorities for this year? On a related note, I guess, what's your framework for special dividends? Like, is there a cash threshold you might target before possibly declaring another one? Yeah. I think, you know, typically the way we approach it, and we talked a bit about that in our last call, is focus on, first of all, we like carrying extra liquidity at this point in time in the cycle, and we continue to feel strongly about that. It positions us to be opportunistic. We talked about investing more in our business, in our store network specifically. You know, there are strategic opportunities obviously that continue to come our way that we will evaluate. You know, we continue to think about the regular dividend is something we continue to think about. The special dividend, we just announced one. Look, we have conversations around capital allocation all the time. I'm not gonna talk about any particular cash threshold. It's really how we're feeling about the underlying business and how we're feeling about the priorities in front of us, how much cash do we feel like we need to hold given where the environment is. Depending on how we feel around those different variables, that's what triggers a conversation to whether it's doing a special or accelerating buybacks or any incremental return of capital to shareholders. That's generally our framework, continues to be our framework. Again, we've been pretty balanced as we just, you know, executed on the special. We'll continue to do that. Thanks very much. There are no further questioners at this time, and this concludes today's conference call. Thank you for attending today's presentation, and you may now disconnect.