Good morning everyone, welcome to LFL Group's second quarter 2026 conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be an opportunity to ask questions. If any research analysts would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you'd like to withdraw your question, please press star then two. I would now like to turn the conference over to Jonathan Ross of Investor Relations for LFL Group. Please go ahead. Thank you. Good day, everyone, welcome to LFL Group's second quarter 2026 conference call and webcast. LFL's second quarter 2026 financial results were released yesterday. 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 yesterday. 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 will turn the call over to Mike Walsh. Mike? Good morning, everyone, thank you for joining us. The second quarter played out largely as we described earlier in the year. The consumer remained cautious and value-focused with continued pressure market-wide on large discretionary purchases, and we were off comparing against strong performance last year. In this environment, our team executed with discipline and continued to strengthen our position in our core categories. System-wide sales were down 2% with same-store sales down 2.2%. Victor will take you through the drivers in more detail. The story under those numbers is clear. Customers are still shopping, they're doing it with a sharper focus on value and opening price points. That showed up most clearly in average ticket. In an environment like this, our priority is to stay positioned against what Canadians are looking for, keep gaining share in core categories, and translate disciplined execution into profitability. Category performance was mixed during the quarter. That is consistent with our portfolio approach to the overall business. Furniture sales were lower against a very strong second quarter last year when we grew the business 6%. That is the comparison we knew we were facing. We drove two years of strong growth in furniture through a market that was under pressure. We managed the category this quarter the same way we built that track record: disciplined assortment, deeper inventory behind our best performers, and targeted promotional activity. Mattresses grew again this quarter, our second consecutive quarter of growth in the category. The same focused assortment playbook that drove our furniture performance over the past two years is now delivering in mattresses, and the category performed well across the assortment. The dynamic underneath is one we've been talking about for several quarters. Our digital platform is increasingly a research and qualification engine, drawing customers into our stores with clear purchase intent. Online sessions grew again this quarter, and sales in the channel grew as well. We have always managed digital as a channel that works with our stores rather than apart from them, and that has not changed. Whichever way the customer comes to us, our salespeople are well-positioned to convert that intent into the right product, the right add-on, and the right solutions for their needs. We also kept investing in our banners this quarter, in the products they carry, and in how they connect with the customers. In May, we launched the Shaq-O-Pedic collection with Shaquille O'Neal at The Brick, bringing oversized comfort to a segment of the market we believe was underserved. In June, Alphonso Davies, captain of Canada's men's national soccer team, joined The Brick as a brand ambassador in a summer when Canada was co-hosting the World Cup. Partnerships like these keep our banners in front of Canadians in ways that matter well beyond a single quarter. On the store network, we continue to expand in a measured way. During the quarter, we opened four franchise locations, including three Brick locations that opened all on the same day, and a Leon's store in Happy Valley-Goose Bay. Shortly after quarter end, we held the grand opening of our Leon's Furniture location in Welland, where the initial customer response has been very strong. More broadly, we continue to see opportunities to expand our network where we can earn attractive long-term returns, primarily for The Brick on the East Coast and for Leon's on the West Coast. In the commercial channel, sales were down slightly, which is solid performance in the context of a very challenged segment of the market. That resilience reflects progress we've been making on a few fronts. We've continued to grow the property management side of the business, and our expansion in Western Canada is paying off, helping offset continued softness in Ontario. We are also winning new business, even as builder activity has slowed across the market. We are taking share, and that comes back to our reputation for delivering for our customers when we say we will. Competitors exiting the channel, we believe there will be further opportunities over time. Looking ahead, the operating environment remains challenging. We have seen encouraging signs on the demand side early in the third quarter. We are planning the balance of the year prudently. Comparisons ease through the back half, with the fourth quarter setting up most favorably. Our focus remains on gaining share through this cycle and coming out of it in an even stronger position as conditions normalize. The fundamentals that drive this business have not changed. Trusted banners coast to coast, the scale to source directly and secure advantage in 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. Before I turn it over to Victor, I want to recognize our associates across the country. Periods like this ask a lot of our people in our stores, on our trucks, in our warehouses, and on the phone with our customers, and once again, they delivered. Victor, over to you. Thanks, Mike, and good morning, everyone. I’ll start with the second quarter walkthrough, then move to capital allocation and a few considerations for the back half of the year. Revenue for the quarter was CAD 631.2 million, down 2% year-over-year. The quarter reflected the dynamics Mike described. Customers remained active but more value-focused, and we were comparing against a strong second quarter last year. Average unit price was lower in most categories other than mattress, as consumers continued to prioritize value, while retail delivered units were up against last year. The combination is the clearest way to see the trade down. Customers are still buying, and they are choosing lower price points when they do. Furniture sales were 4.2% lower against 6% growth in the second quarter of last year, with unit sales down slightly year-over-year. Appliance sales were down low single- digits, reflecting softer retail demand and slowing builder pipelines in the commercial channel. Appliance units were up. Mattress sales were up mid single- digits, and units were higher as well, reflecting the assortment work Mike described and the team’s ability to translate merchandising initiatives into share gains. Gross margin was 44.63%, down 19 basis points year-over-year, primarily reflecting us lapping the benefit recorded in last year’s second quarter compared with a small headwind this quarter. Normalizing for that swing, the underlying margin story was solid, and gross margin rate improved. Improved margin rate in mattresses and increased revenue from higher-margin insurance and delivery service offerings helped offset category mix and targeted promotional activity. SG&A as a percentage of revenue was 36.85%, an increase of 47 basis points over the second quarter of 2025. The increase reflects lower revenue and the related fixed cost deleverage, increased marketing costs due to the timing of promotions and the launch of new product partnerships, increased fuel costs, and higher occupancy costs. This was partially offset by lower point-of-sale retail financing fees due to the lower Bank of Canada interest rates. On a dollar basis, expenses were down year-over-year, which reflects the strict cost discipline we maintained through the quarter, despite investments in our business and ongoing inflationary pressures. Adjusted net income was CAD 34.8 million, and adjusted diluted EPS was CAD 0.51, compared with CAD 39.4 million and CAD 0.57, respectively, last year. The year-over-year comparison reflects the 40 basis point swing in the revaluation of U.S. dollar payables mentioned earlier, as well as a CAD 1.4 million settlement benefit recognized in other income in the second quarter of 2025. Both factors contributed to the decline in adjusted earnings. Turning to the balance sheet. We ended the quarter with CAD 560.1 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 gives us the flexibility to invest in the business, navigate volatility, and act opportunistically. Our approach to capital allocations remain disciplined and consistent. We prioritize reinvestment in the business where we see attractive returns, maintain a strong balance sheet, and return capital to shareholders over time, primarily through our regular dividend. We are also attuned to returning more to shareholders when it makes sense. Consistent with our opportunistic approach to buybacks, we were active under our NCIB during the quarter, repurchasing approximately 120,000 shares for approximately CAD 3 million. Looking ahead, the freight environment has tightened. Rates and container charges are higher, and we are seeing pressure on certain shipping lanes we use. That shows up for us in two places. The first is margin. We have begun to receive inventory carrying higher costs, primarily related to fuel, and we are working that into the margin equation through the back half. The second is availability. The lane pressure is creating some inventory delays, and our teams are focused on keeping product flowing so we protect sales. That could be a factor in the third quarter. To be clear, that’s a supply consideration, not a demand one. Our REIT initiative remains an important strategic priority. Timing continues to be guided by market conditions and regulatory approvals, and we'll share updates when appropriate. The near-term environment remains dynamic, and retailers across the sector are navigating a more selective consumer. Our scale, disciplined sourcing, and strong balance sheet provide the foundation to continue driving profitable growth and shareholder value over the long term. With that, I'll turn it back to Mike. Thanks, Victor. To wrap up, the second quarter was a demanding one for the consumer, and our top line reflected that. The execution underneath was strong. Customers kept choosing to shop with us. We protected margin where it counted, kept tight control on costs despite ongoing inflationary pressure, and continued to strengthen our position in our core categories. Most importantly, we continue to invest in our stores, in what we offer customers, and the capabilities that will matter well beyond this cycle. We are navigating this environment from a position of strength, and we are confident in our ability to keep building long-term value for our shareholders. Thank you to our associates across the country for their execution through a demanding quarter and to our shareholders for their continued support. With that, we'll be happy to take your questions. We will now begin the analyst question- and- answer session. 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're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then two. We'll pause for a moment as callers join the queue. Our first question comes from Ahmed Abdullah from National Bank of Canada. Please go ahead. Good morning, thank you for taking my question. The delivered retail units increased year-over-year per your commentary even though revenue declined, given the lower pricing. Can you help us perhaps understand how these unit trends progressed through the quarter and maybe some commentary around July and how that's been progressing? Are you seeing any evidence that perhaps demand is beginning to recover, or is the unit growth that you are seeing primarily a function of consumers trading down but buying more? I'll try and unpack that. Good morning. I think from an assortment perspective, if you think about it in terms of good, better, best, and best being premium, we're seeing the premium customer still spending money in that place. What we're seeing, though, is really our target is in the midpoint. We're seeing that customer lowering down to more of the opening price point. Yes, we're selling more units and at a lower average sale. How is that progressing into July? Are you seeing anything different, or is it more of the same? Yeah, I would say we're cautiously optimistic. As we went through July, we saw some green shoots on a written perspective. We saw some of the traffic coming back. We saw some of the average sale coming back. July is the smallest month of the quarter. I just want to balance that that's based on written, not delivered. We still have to translate those written sales into delivered. Early days, cautiously optimistic. Okay. Acknowledging what Victor said about supply issues, demand picture where you noted that comps ease through the back half, can you perhaps help us square that off with how modeling should look like from top line and profitability? Do you expect profitability to be down in the back half because of the supply constraints, where you're not able to deliver versus the expected sales? Yeah. As you know, Ahmed, we're not going to give specific guidance on that. I think just to build off of Mike's points there, we're seeing some improvement in traffic in July, some improvement in average unit price. I think we take that as a positive. Very early days in the quarter, we haven't necessarily seen a significant shift in the consumer environment, but we've seen some improvements. We'll have to see where August and September come in. I think the other thing we got to consider is we are comping a monster furniture quarter last year where we were up 11%. That's a consideration. Some of the inventory delays we're seeing is a consideration as it relates to delivered sales. That said, the teams are working really hard to make sure we're getting the right flow and that we can mitigate some of those risks to the quarter. On the positive side, we have the four franchise stores that opened. We'll get a full quarter of that. We've got two corporate stores opening midway through the quarter in Q3. As I think you suggested, and we suggested in our call, Q4, the comps start to ease, and we feel that we're still really well-positioned for Q4, especially with the flyer issues we had last year and the weather issues we had last year. We think Q4 is still set up favorably for us. Okay, that's helpful. I'll give it a shot, but not sure I'll get much out of it. You now disclosed an appraisal value of CAD 1.17 billion of the owned real estate. Can you give us any color as to how that came about? Also, what are the milestones that you're still kind of progressing towards before you can formally launch the REIT IPO that you have mentioned before? Yeah. Hey, Ahmed. Thanks for the question. I think on just the real estate appraisal value, as we've talked about for the last number of years, we've been very forward around real estate being a valuable asset for us. Obviously, real estate on our books is at historical cost, and we thought it was important for us to get a good market reference. I think analysts have taken a shot at what the value of our real estate is or was, and we thought it was time and important for us to establish a market-based reference point for our portfolio. That's all there is to that. I think we're feeling good about that, and it validates what we've been saying all along. I think as it relates to the REIT process, remains a strategic priority subject to market conditions and regulatory approvals. There's no change there. It does remain a strategic priority for us. All right. Noted. Thanks. I'll pass the line. The next question comes from Martin Landry from Stifel. Please go ahead. Hi. Good morning, Mike and Victor. I would like just to go back to the inventory availability. I'm sorry, I didn't understand fully what was the cause for maybe a bit of a shortage on inventory. If you could just expand on that, it'd be great. Yeah. The shortage, midway through, I would say Q2, we started to experience some delays or hear back from our carriers around some delays as it relates to specific lanes in Asia. Those delays may result in some of the inventory, obviously, that we need to deliver for customers not coming in exactly when we need it to come in. That's all that was about, Martin. We're working hard, obviously, with our carriers and our brokers to find alternative ways to get that inventory in. We're just trying to signal that there may be some delays in certain lanes related to some of the geopolitical supply-demand issues that we're seeing. Spot market rates have jumped up quite a bit, over the last couple of months as well. I think it's just that dynamic, where spot rates jump up and supply tightens, which is typically what happens in these environments. We start to see delays in certain lanes, and we're starting to see that now, which may impact our ability to deliver furniture in Q3. That being said, we're obviously working very hard to try to find alternative ways and mitigate any of that risk. Okay. Just to be clear, this was not just in Q2, but it's still ongoing, right? Yes. The delays in certain lanes that we're seeing is ongoing. It didn't impact Q2, because it's inventory on the water, and it takes a few months to start to impact our inventory position. Yeah, on a go-forward basis, beginning Q3, and we're planning by Q4 that we would have mitigated some of those impacts. You never know, but we're working hard to find alternative routes to ensure Q4 is not impacted. Okay. You've also talked about starting to receive inventory with higher costs, I was just trying to understand what's going to be your pricing strategy in relation to that. Do you intend to pass these higher costs to consumers or absorb them? Yeah, Martin, what I would say is, as we've said the last number, probably six quarters, is that we're still in a very value-oriented mood with the consumer. The consumer is really constrained from disposable income. Discretionary purchases are always going to be challenged. We're very strategic. We've incurred lots of increased costs as it relates to fuel, whether it's from containers, from rail, from our delivery trucks, and we definitely do not want to raise prices across the board. We will be strategic in nature where we can. Again, as I said, it's a challenging environment. It's going to continue to be that way. The consumer is affordability is a big challenge, and we play in a large discretionary purchase area. We're very cognizant of the value proposition that we need to play in. Okay. Last one from me. I know mix is important for you in terms of a margin driver. Mattress sales were higher from a mix perspective this quarter. Remind us, what should we expect in terms of Q3 in terms of your mix, given your comps? Do you expect mattress to still be a favorable driver of gross margin in Q3 when we look at it on a year-over-year basis? Yeah, Martin. Hey, thanks for the question. Yeah. I think we've been pretty consistent around our margin framework. I think going into the year, our objective was consistency throughout the year on rate. I think through the first half of the year, we've certainly seen that, and that has been a good mix story, especially in Q2, where lower furniture sales being our highest margin category was offset by really strong mattress and good mattress rate improvement. We are expecting to continue to see strong mattress performance throughout the year, and that should continue to help drive a favorable benefit for us. It'll depend, again, in Q3. As Mike has said, we've been very surgical and strategic around our pricing decisions. Where rate comes in will largely be dependent on mix and the mix of furniture and mattress specifically as the two highest margin categories. We don't look at it as quarter- to- quarter necessarily. We look at it as, here's where we'd like to land for the year. If we need to make adjustments, if we're seeing rate come in not exactly where we want it to be, we'll need to make adjustments there and look through that. That's the color I think I would provide for now. Okay, that's helpful. Thank you, and best of luck. Thanks. Once again, if you have a question, please press star then one. Our next question comes from Nevan Yochim from BMO Capital Markets. Please go ahead. Thank you. Good morning, guys. Hoping you can provide an update on the commercial business and your visibility into the builder pipeline. How should we think about the sales headwind in the second half of the year? Is the comp getting more difficult as we move through Q3 and then into Q4? Yeah, I would say that the headwind, we signaled this 18 months ago when we really dialed up the property management business, which we've seen some good movement on. As you know, it's still a challenging environment as it relates to development, especially in Ontario. Then there's been an exit of some competitors, which won't be immediate, but over time, we believe that we'll get a benefit from that to our commercial business. It won't be a step up immediately. Over the next 12 - 18 months, we see that unfolding positively. Just to build on that, Nevan, we commented that commercial sales were slightly down. I think that's actually beating expectations, just given how slow the environment has been. We're quite proud of that performance. We think we're continuing to gain significant share off of multi-year significant growth in that category. I think it's trending in the right direction for us, despite where the environment is. Okay, great. Good to hear that. On the SG&A outlook, you called out several items driving costs higher in Q2, including some promotional timing. Can you help frame whether some of those items begin to ease in the second half and where you expect SG&A to trend as we move into Q3 and Q4? Yeah, for sure. I think, on SG&A, when you think about dollars being down for us in the quarter and for the year to date, we've been very disciplined around cost management. I think what you're seeing in Q2 was obviously what we didn't anticipate going into the year was where fuel was going to land. We saw some fuel inflation due to the geopolitical issues. We saw some marketing timing partly related to the launch of our partnership with Shaq, which has been a huge success for us. We're really proud of that one. Those marketing dollars will start to ease on a year-over-year basis as we did plan for higher costs in Q2, and those will start to ease into Q3 and Q4. The SG&A rate story, if you're commenting about that will largely, as it always will largely depend on sales mix and where that comes in because we have invested in our business, we're investing in our stores, we've invested in our people. We're not backing away just given the environment. We're continuing to do that. It will largely depend on where our sales growth lands. Yeah, understood. Thanks, Victor. Just lastly, on your M&A strategy, within the context that we've seen some mattress firms under duress in the U.S., are you looking at these types of opportunities, and can you remind us about your appetite for expansion into the U.S. market? Yeah, great question. I would say, as we have previously said, that we look at every M&A opportunity, whether it's in Canada or the U.S. The U.S. is a little bit more challenging as it relates to today. We continue to look at all of that. We have three key things that we're looking for from an M&A perspective, which is strong leadership team, runway for growth, and the ability to dovetail our insurance warranty business in. We're very opportunistic. We're not going to do something for the sake of doing it. We'll continue to look and challenge ourselves to look whether it's in Canada or the U.S. Okay, great. Thanks, guys. Our next question comes from Ryland Conrad from RBC Capital Markets. Please go ahead. Hey, guys. Good morning. Just to start, could you provide an update on the promotional environment across your key categories and maybe how that's evolved through Q2 and into Q3, just as obviously the industry is trying to cater to a more cautious consumer, but you're all also managing through the inflationary pressures. I would say the promotional has hit an intensity with whether it's us or competition. As I said before, the customer is still in a very value-oriented mode. You need marketing to be super value-oriented. We're seeing on our big VIP events. We've seen that the customers are still shopping, they're still buying, but they truly want value. Your marketing has to scream value to the consumer to attract them into your stores. Okay, got it. On Appliance Canada and the expansion there in B.C., how has that store within a store concept been performing versus your expectations? Longer term, how are you thinking about the opportunity to expand that banner further outside of Ontario? Yeah, we're really actually happy with the results so far. Again, it's still early days. As you recall, the reason why we did it was because Ontario was depressed from a building standpoint. Appliance Canada was primarily in Ontario. By getting them into Western Canada allowed them to be able to service their customers that were in Ontario as well as Western Canada. We've seen that as a success, and we'll continue to look at other markets where it could be viable, but early days, we're very happy with the results. Okay, great. Just as a follow-up there, I guess, are those locations primarily focused on the commercial channel, or do you also see some retail consumer upside there as well? Yeah, I would say both commercial and retail are important. Appliance Canada is a much higher end. They have folks that come in that are doing their kitchens with designers and other folks. It's a very integral part. It sets us apart from The Brick and Leon's. It caters to a more premium customer, so still very important to us from a retail channel. Okay, great. Thanks very much. Thank you. There are no further questions at this time. This concludes today's conference call. Thank you for participating, and have a pleasant day.