BuildDirect.com Technologies Inc. (BILD) Earnings Call Transcript & Summary

Good afternoon, everyone, and welcome to BuildDirect's Q4 and Full Year 2025 Earnings Conference Call. My name is Prit Singh, and I will be your moderator for today. For those unfamiliar, BuildDirect [ trade ] on the TSXV under the ticker build, it's BILD and on the OTCQB under the ticker, BDCTF. Before we begin, I would like to remind everyone [ certain ] -- that certain statements made during this call may constitute forward-looking information within the meaning of applicable securities laws. These statements are based on management's current expectations and are subject to risks and uncertainties. Please refer to the detailed forward-looking statements [ on ] advisories in today's earnings deck and press release. In addition, please note that all dollar amounts mentioned in this presentation today are in U.S. dollars unless otherwise stated. Following comments from BuildDirect's management team, the call will be open for questions. [Operator Instructions] If you're calling in to listen to the webinar today, please e-mail your questions directly to [ ir@billdirect.com ], that's ir@billdret.com. A replay of this call will be available probably 24 hours after conclusion of this presentation today. It will be posted on the Investor Relations section of our website at irdbilldirect.com. With that out of the way, I would like to turn the call over to Shawn Wilson, CEO of BuildDirect.

Thank you, Prit, for everyone. Good morning. Thanks for joining us today. So 2025 was a year of disciplined execution and tangible progress for BuildDirect. Despite a challenging macro environment and industry headwinds, we delivered on our key priorities, gross margin expansion, EBITDA growth and balance sheet strengthening. As you'll see in today's materials, we grew full year revenue 1.1% to $66.2 million, [ expanded ] gross margin, 170 basis points and increased adjusted EBITDA 39% to $3.1 million. Our Pro Center segment continued to scale while e-commerce achieved a full year EBITDA turnaround of close to $2 million. We also strengthened our liquidity position [ cash ] working capital up to $6.1 million to $8.8 million following a successful $5.2 million equity raise. These results reflect durability of our omnichannel model and the focus we place on operational efficiency and higher-margin product mix. I'll now hand the call over to Kerry to walk through the detailed [ anti ] results.

Yes. Thanks very much, Shawn, and good morning to everyone. So let me start with Q4 here, fourth quarter 2025. Q4 revenue was $16.2 million, down slightly from last year Q4, but with strong margin performance overall. Gross margin expanded 240 basis points to 41.7% and driving gross profit of $6.7 million. Adjusted EBITDA for the quarter reached [ million ], up 140% year-over-year. On a full year basis, the story is even clearer with revenue of $66.2 million, as Shawn noted, gross profit of $26.7 million, which is up [ 5.5% ] and adjusted EBITDA of $3.1 million, which was up 39%. Operating cash flow was positive $2.4 million. And as noted, we ended the year with significantly improved working capital on the balance sheet. So let's break down the business by segment. I think that's probably in the next slide. On the e-commerce segment, revenue was $14.3 million, down 5.8% as we deliberately shifted toward higher-margin SKUs and direct imports. Gross margin reached a record 57.8% and the segment adjusted EBITDA turned positive at $1.5 million for the e-comm segment over $2 million improvement year-over-year. The drivers were direct import optimization, meaningful OpEx reductions and head count restructuring that rightsized our current revenue base as we press released in early 2025. Moving on to the next slide in the Pro Center segment. This remains our largest and most stable growth engine. Revenue grew 3% to $51.9 million. Gross margin improved 35 points to [ 35.6% ]. And segment adjusted EBITDA was $5.8 million for the Pro Centers. We opened the new Orlando Pro Center early in 2025. And and continue to integrate recent acquisitions, delivering operating leverage across our network. Advancing to the next slide, Slide 8, balance sheet and liquidity. You see that we ended the year with $8.2 million of cash. As Shawn noted, up $5.4 million. Net working capital of $8.8 million was up $6.1 million and the strength in equity position following the $5.2 million raise. Total debt remains prudent, and we have ample liquidity to support 2026 and our growth initiatives that we expect to undertake. So with that, I will hand it over to Shawn for our 2026 priorities and outlook. Shawn?

Sounds great. So as we enter '26 we're seeing some near-term softness in Q1 driven by macro headwinds and [ tariff-related ] cost pressure. [ Have ] we do this as a [ cycle ] entry point for M&A, especially flooring? Our core operations remain focused and have an active pipeline for acquisition, really targeting deep value, cash flow positive businesses that fit our Pro Center platform, actually the main folks for our expansion. So looking ahead, we have three clear priorities for 2026. So I'll keep building on our foundation that we put in place. First, we closed the acquisition of [ grain ], which was an e-commerce platform in February. And then based on audit [ predeal ] information, Grain generated approximately $6 million in revenue, about $300,000 in adjusted EBITDA in '25. We expect that deal to deliver strong cost energy [ so ] logistics and we're housing optimization and full integration is already well underway, looking forward to the revenue contribution as well as the synergies in the second half of this year. At the same time, we're continuing to prioritize our Pro Centers and e-commerce operations. I mean, scaling our online reach, driving further margin, expanding into additional product categories, which will unlock more operating leverage across our brick-and-mortar -- brick [ and ] motor network. And then third, we're actively working on our pipeline. We have a strong list of opportunities in [ specialty ] flooring and our focus remains squarely on deep value margin-accretive targets that fit in with our platform and really viewing the softness in the market as a good opportunity on the buy side. As mentioned, demand recovery is expected to improve as [ macro ] improves. Short [ term ], we're focused on being opportunistic or possible across our strategies. With that, I'll turn it back to Prit for any Q&A.

[Operator Instructions] Alternatively, if you're calling today, you can e-mail us directly at ir@buildddirect.com, again that's ir@buildddirect.com. First question, can you please walk us through your balance sheet? And any significant changes that took place throughout the year?

Kerry, you got it?

Yes. Yes. I think -- yes, obviously, I think from a balance sheet perspective, the first and foremost is the cash position. Obviously, we did the equity deal. So we have, at this point, the dry powder to support, as I've noted, the the 2026 growth profile. Overall, again, working capital, if we focus on AR, AP, AR is in line with prior year. Right-sized AP as well. We've flushed through some of our payables that were at the end of the prior year. So overall, we're in an extremely strong position from a working capital perspective with rightsized AP, AR and obviously, our cash position. I'd also kind of note the -- the [ RBC ] credit facility remains as dry powder as well. We are in a good spot with a facility close to CAD 8.5 million. We drew to support some of our acquisitions this year. But again, we have significant capacity on that credit facility. And finally, I'll point out those that kind of know the balance sheet. We have had a vendor takeback from note associated with floor source acquisition over the last number of years, which was an outflow of approximately $1.3 million of principal payments to pay those vendors back. That now [ has ] gone. We made our last payment in early January. So that incremental $1.3 million will go directly to the bottom line to support our growth. So overall, we're in a great spot on the balance sheet and cash flow perspective.

Just touching on the macro market. I guess, Shawn, can you please touch base on the overall conditions in the flooring market and how it's [ affecting ] your overall business?

Yes. I'll talk to that a [ load ] anything on the tail end. So last year, actually the last couple of years have been quite challenging. One of the primary drivers for residential flooring is housing turnover in the U.S. with the exception of the [ COVID ], like the nesting phenomenon that happened where people had nothing but [ time ] money to renovate their houses. Typically, housing turnover drives both flooring. And then also, part of that is new construction, which is related. So the last few years have been very soft on that front with interest rates being where they are, people stuck in their homes, and so on and so forth. And so we've really have turned [ this ] business around. We built the foundation during difficult times, which is -- which is great, right, because you're effectively getting things in a great spot and in rate [ pace ] as conditions improve. [ Notice ] in Q1, really Q4 towards the very tail end, like December and coming into Q1. Macro has been intuitively [ be ] more challenging with the tariffs, changes, uncertainty, things like that in the market, flooring is a discretionary purchase, and it was not tied to housing turnover, but rather residential remodeling people changing their floors out in the place they already live. You can find uncertain times or disruption like that can delay projects. So you normally see as you see backlog increase, probably be [ delayed ] kind of things like that. The other part I mentioned we have a considerable business in Michigan that is tied to new construction as well, and it's been unseasonably cold to Q1 there. So that means practically speaking, as you have backlog that increases and projects that will come through just the time it will be a bit often initial. So big overall, that's what we're seeing. As I mentioned, we've kind of built this business for the conditions that we were in and using the opportunity to aggressively pursue acquisitions and deals along the way, both on the product side and a few others that take advantage of the spot that we're in. So in tougher times. That's how we approach it opportunistically and build things for when they pick [ back ] up and be able to ride that tailwind. Anything to add, Kerry?

No. No, that's great. That's great, Shawn.

Next question, can you talk about the e-commerce division and your thoughts for 2026?