Good afternoon, ladies and gentlemen. Welcome to Richelieu Hardware second quarter results conference call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question and answer session, which will be restricted to analysts only. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on July 6, 2023. [Foreign language]. Thank you. Merci. Good afternoon, ladies and gentlemen, welcome to Richelieu's conference call for the second quarter ended May 31st and first half of 2023. With me is Antoine Auclair, CFO. As usual, note that some of today's issue include forward-looking information, which is provided with the usual disclaimer, as reported in our financial filings. In the second quarter, we achieved good results and ended the period with a strong position, building on our major strengths, namely our multi-access value-added service concept and our ongoing acquisition strategy. The comparison with the second quarter of 2022 shows a decrease in sales and earnings, it should be remembered that the first half of 2022 was particularly favored by exceptional increases in our market context, resulting from the pandemic. To put things in perspective, if we compare second quarter of 2023 to the same quarter in 2019, sales increased by 68% and EPS by 67%. During the quarter, we completed 2 acquisitions in the U.S., 1 in Oregon, Maverick Hardware in Eugene, the other 1 in Minnesota, Westlund Distributing in Monticello, 2 compatible specialty hardware distributor who extend and strengthen our presence in this market. That makes 6 acquisitions since the start of 2023, adding some $26 million in annual sales. In addition, we opened a new distribution centers in Minneapolis and continue to make progress with our expansion and modernization projects at our Atlanta, Nashville, Seattle, and Pompano centers, which we expect to complete very soon. This will add some 500,000 sq ft to our U.S. network. From a total of 115 interconnected distribution centers in North America, we now operate 62 in the US, which accounted for 42% of our total sales in the first half of 2023. Antoine will now review the financial highlights of the quarter and first half. I will conclude, and we will take your questions. Thank you, Richard. Second quarter sales reached CAD 172.4 million, down 3.2%, of which 4.7% from internal decrease and 1.5% from acquisitions. It's important to note that in the second quarter of 2022, Richelieu had achieved exceptional internal growth of 16.1%, including a 22.7% increase in the U.S. In Canada, sales amounted to CAD 279.5 million, down 4.3%, of which 6.4% from internal decrease, partially offset by a 2.1% positive contribution from acquisitions. Our sales to manufacturers reached CAD 229.9 million, down 3%. For the hardware retailers, sales stood at CAD 49.6 million, down 9.8%. In the US, sales grew to $141.9 million in US dollar, down 7.9%. Sales to manufacturers reached $131.3 million in US dollar, down 7.2%. 7.2%, sorry. In the hardware retailers and renovation superstores market, sales reached $10.6 million. In Canadian dollar, total sales in the US reached CAD 192.6 million, a decrease of 1.6%. For the first half, sales reached CAD 875.1 million, up 0.3%, of which 1.8% from internal decrease and 2.1% from acquisitions. In Canada, sales reached CAD 510.4 million, down CAD 11.2 million or 2.1%, of which 3.9% from internal decrease and 1.8% from acquisitions. Sales to manufacturers reached CAD 415.4 million, down CAD 7.3 million or 1.7%. Sales to hardware retailers and renovation superstores reached CAD 95 million, compared to CAD 98.9 million, down 3.9%. In the U.S., sales amounted to $269.6 million, down 2.4%, of which 4.8% from internal decrease and 2.4% from acquisitions. They reached CAD 364.7 million, up 4%, accounting for 42% of total sales. Sales to manufacturers totaled CAD 249 million, a decrease of CAD 3.2 million or 1.3%, of which 3.9% from internal decrease and 2.6% from acquisitions. Sales to hardware retailers and renovation superstores were down 13.8% compared to last year. Second quarter EBITDA reached CAD 61.5 million, down CAD 16.3 million or 21% over last year, resulting from lower sales and to overall operating expenses returning closer to pre-pandemic level, as well as additional external storage expenses due to temporary increased level of inventories. Gross margin remained stable, and the EBITDA margin stood at 13%, compared to 16% last year. First half, EBITDA reached CAD 110.6 million, down 16%. As for the EBITDA margin, it stood at 12.6% compared to 15.1% last year. Second quarter net earnings attributable to shareholders totaled CAD 30.7 million, down 25.6%, mainly due to amortization of right-of-use assets increased, resulting from new business acquisition and expansion projects, mainly in the U.S., as well as higher interest expense on bank overdraft. Net earnings per share were CAD 0.55 compared to CAD 0.84 last year, a decrease of 34.5%. First half, net earnings attributable to shareholders reached CAD 53.1 million, down 25.6%. Diluted net earnings per share stood at CAD 0.95 compared to CAD 1.37 last year. Cash flow from operating activities before net change in non-cash working cap balances was CAD 48.4 million, compared to CAD 60.7 million last year. Net change in non-cash working capital items represented a cash inflow of CAD 23.6 million. Excess inventory started to decline with a positive effect of CAD 49.2 million. As a result, operating activities represented a cash inflow of CAD 72 million in the quarter, compared to a cash outflow of CAD 3 million last year. For the first half, cash flows from operating activities represented a cash inflow of CAD 88.4 million, compared to a cash outflow of CAD 40.5 million last year. For the second quarter, financing activities used cash flow of CAD 15.4 million, compared to CAD 21.5 million last year. Dividends paid to shareholders of the corporation amounted to CAD 8.4 million, compared to CAD 7.3 million in the same period of 2022. First half, financing activities used cash flow of CAD 35.1 million, compared to CAD 29.8 million in 2022. Dividends paid to shareholders amounted to CAD 16.7 million, compared to CAD 14.6 million last year. During the first half, we invested CAD 34.3 million for 6 business acquisition and CAD 14.3 million for the purchase of equipment to maintain and improve operational efficiency, as well as for network expansion projects. We continue to benefit from a healthy and solid financial position with a working capital of CAD 586.2 million for a current ratio of 2.9 to 1, and an average return on equity of 18.2%. I now turn it over to Richard. Thank you, Antoine. In this transition year, we are actively working in reducing our inventory levels, therefore reducing additional external warehousing space that is impacting our performance. In addition, 2023 is a year of significant investment in our network, and these investments will start to bear fruits in 2024. We will remain focused on market penetration, synergies with our recent acquisition and our innovation, value-added service and acquisition strategies to deliver good results in the coming quarters. We will continue to seize and create opportunities. We have the team, the strengths, and the asset to consolidate our North American leadership and deliver solid growth over the next period. Thanks, everyone. We'll now be happy to answer your questions. Hello? Thank you, ladies and gentlemen. We will now begin the question and answer session. Should you have a question, please press star followed by the one on your touch tone phone. You will hear a three-tone prompt acknowledging your request, and your questions will be polled in the order they are received. Should you wish to decline from the polling process, please press star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. Your first question comes from Hamir Patel with CIBC Capital Markets. Please go ahead. Hi, good afternoon. Richard, are you able to quantify how much the cost of carrying that excess inventory weighed on your EBITDA margins in the quarter? When do you expect inventories to normalize? We let Antoine complete the answer, but just to the first lens, the outside warehousing cost is costing, as we speak, about CAD 3 million per year. Per quarter, sorry. CAD 3 million per quarter. Per quarter, sorry. Yeah, plus the other expenses related to the, you know, the back and forth of the merchandise that we have to carry between the different warehouses. We can add to that also the interest on the bank overdraft. We're talking about over CAD 6 million per quarter just for to carry these additional inventories. To answer the second part of your question, I mean, basically, the inventory started to decline, so we're starting to reduce the excess. We told you guys that the inventory should reduce between CAD 60 million-CAD 80 million this year, and we should see another CAD 50 million next year to bring us more, to a more reasonable level of inventories. Okay. Thanks, Antoine. With respect to EBITDA margins, I know in the past you've kind of put out some commentary around where you see that longer-term figure going. Just given how much the margins pulled back in this quarter, you know, where once you through this inventory carrying costs, where would you expect your EBITDA margins to stabilize at? Yeah, this year, we should be able to close the year at around 13% EBITDA. It all depends, of course, Hamir, of the volume of business, but once we clean up the inventory and we reduce the additional external warehousing, we should be anywhere between 13% and 14%. Yeah, 13%, 14%. Okay, thanks. That's helpful. Then just with respect to the quarter itself, given you're carrying this warehousing cost, how much pricing declines did you experience in that 4.7% organic decline in the quarter? We have not experienced any price decline as such, but sometime for certain item in the inventory, we make temporary promotion. Basically, yes, it does affect our margin, but we don't have any specific prices decrease as such. Okay. Fair enough. Just the last question I had was, Antoine, are you able to update us on how the margins at your U.S. locations today compare to the margins at the Canadian assets? it's approximately 75% of the Canadian margins. It keeps improving. Okay. No, that's helpful. Richard, just given the, all the modernization initiatives, where, you know, what's the goal for lifting that 75%, in coming years? The goal is to increase our sales. In the U.S., we have a, we have a, you know, a good performance budget with our managers in the U.S. Basically, sales should increase because every one of those investment have been justified because of sales increases, because of the market need, because we needed that space basically to continue our growth in the U.S. And those new investments so far, Antoine, of course, saying what? On a yearly basis, something like $8 million-$10 million. Yeah. Next year, we should see the benefit to cover the cost of this. Okay. Then I guess the longer term, Richard, structurally, if today the U.S. locations are 75% of the EBITDA margins of the Canadian locations, long term, can they get up to the same as the Canadian locations, or is it just a different market and it's gonna be structurally just to some degree, lower? In long term, that should be very close, but for the I would say for the short and the medium term, that should continue to be at 25%, because we keep making acquisitions that make 3% and 4% and 5%, you know, EBITDA margin. Basically, we take that 3, sometimes 4 years to get those businesses back to the margin, close to the initial, margin. Basically, we're very optimistic that margin will continue to improve, and we will not stop making acquisitions because, it does, temporarily affect our growth, our EBITDA margin. Okay. Fair enough. That's, that's all I have for now. I'll get back in the queue. Thanks. Thank you, Hamir. Ladies and gentlemen, as a reminder, should you have a question, please press Star followed by the one. Your next question comes from Zachary Evershed with National Bank Financial. Please go ahead. Good afternoon, everyone. Thanks for taking my questions. Afternoon. Do the Canadian acquisitions perform better than the U.S. ones? No, not exactly. We have basically the same situation when we make an acquisition in Canada. We have exceptional circumstances like we bought, for example, Trans-World Distributing in Halifax. The performance is very similar to Richelieu, other acquisition that we're making, like maybe Cook Fasteners, for example, at a lower EBITDA margin. Now that we have made some changes, to just give you an example, with Cook Fasteners, in the last three months, we see sales increases by 50%. Basically that was a good acquisition, and the EBITDA margin should be probably at the same level that Richelieu is, you know, in 2024. In the U.S., it's basically the same situation, but could be it's a bit more slow in the U.S. because, you know, we have to make more changes. Sometimes it's a cultural change and, introducing new products and that type of thing, but, it's moving forward. That's good color. Thank you. My usual question on the M&A pipeline, how's it looking? Anything bigger than usual lurking there? Well, pretty much the same thing, Zach, as you've seen historically in the pipeline. In Canada and in the U.S., it's still very healthy. We've completed 6 so far, and we're working on other ones as we speak. Sounds good. Thanks. How's the pace of sales trending thus far in Q3? Yeah, in the month of June, we have to remember that last year, in 2022, we had sales increased. First of all, I think the month of June of 2022 was our best month ever, Antoine, if I remember well, and the sales increase compared to 2021 was 16%. As we speak today, we see a decrease in 10% on overall sales, which is not bad compared to the performance that we had last year. Gotcha. You mentioned that you're not seeing any real pricing declines beyond temporary promotions. Are your competitors remaining rational in terms of pricing as they're working through excess inventory? Yeah, I think they have the same situation that we have. Basically, the, you know, they try to do their best in order to decrease their inventory and maximize their margin as well. I think everybody is prudent. We don't feel any pressure. No, we don't see any systematic pressure in order to decrease, for example, the pricing for an entire product line, except temporary situation and temporary promotions. That makes sense. Also on your competitors, are you seeing any pinch from higher interest rates on their part, maybe PE-backed players slowing down on acquisitions? No. No. No major change there. Yeah. I do know that it's very lumpy, could you provide any color on what's happening in the retailers market? Yeah, the retailers market, as you know, if you look at The Home Depot and Lowe's performance in the U.S., their sales are down. You know, I think they have a decrease of something like 5%, which is not that bad, they're used to more growth than this. What we see in Canada is that they still have excess inventory, and they have overpriced inventory as well. We have, I think the pace is very slow in Canada. We see that the retailers we see now in the current month that they're starting to buy again because they were rationalizing their inventory. They were not making any changes. The favorable situation that we see with the retailers, for example, we have, let's say, just to give you an example, in Canada, at least one competitors that disappeared because they have been sold, the service was not good enough, and the customer are switching all the products there to Richelieu. We're gaining in the fastener business as well. Those gains are slow because it's month to month. We gain so much customer per month, but that should bring good results in 2022, though. In Canada, we've really gained market share. In the US, we also are gaining some new customers with new products as well. All of these things, it takes forever to make changes in the stores of our customers. We expect that to have a favorable impact, though, in 2024, both in Canada and the U.S. That's great information. Thank you. One last one for me. You have the new investments coming online, costing about $8 million-$10 million. You have about $6 million a quarter in costs related to the additional inventories that's gonna come off as you gradually work through your excess inventory. Is there, in terms of timing, is there further downside from where we were in Q2, that 13% level, due to a mismatch in additional costs coming in versus costs coming out? Should we see a tick up from here for the rest of the year? You will, you should not see a reduction in the EBITDA margin. We're working through the external warehousing, so it should, you should see some improvement on the margin. Slow improvement, because it's, it takes time to resolve, to clean up the house with the external warehousing, but you should see improvement unless the volume goes down. It's distribution, you know how it works. If volume reduces, the EBITDA reduces, but no surprise on the cost side. Perfect. Thank you very much. I'll turn it over. Thank you, Zach. There are no further questions at this time. Please proceed. Thank you very much. Have a nice day. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your line.