ADENTRA Announces Second Quarter 2024 Results
Second quarter 2024 sales of
Earnings per share increase to
Highlights for Q2 2024 (as compared to Q2 2023, unless otherwise stated)
-
Generated sales of
$549.5 million (C$751.9 million ), as compared to$585.9 million (C$786.8 million ) -
Gross margin of
$119.2 million , similar to$119.4 million in Q2 of 2023 -
Gross margin percentage increased to 21.7%, a 130 basis points improvement
-
Operating expenses decreased by
$2.2 million , or 2.4% -
Net income increased by 81.6% to
$17.0 million ; Basic earnings per share grew 76.2% to$0.74 (C$1.01 ) -
Adjusted net income increased by 47.3% to
$24.4 million ; Adjusted basic earnings per share increased 43.2% to$1.06 (C$1.45 ) -
Adjusted EBITDA grew 5.1% to
$48.5 million (C$66.3 million ) -
Operating cash flow before changes in working capital increased
$12.8 million to$37.5 million , from$24.7 million -
Declared a dividend of
C$0.14 per share, payable onOctober 25, 2024 to shareholders of record as ofOctober 15, 2024 -
On
June 12, 2024 , issued in aggregate 2,582,900 common shares at a price of$28.27 (C$38.75 ) per common share through a bought deal treasury public offering ("Equity Raise") resulting in gross proceeds of$73 million (C$100 million ). -
On
July 29, 2024 , announced theUS$130 million acquisition ofWoolf Distributing Company, Inc . ("Woolf"), a US Midwest-based value-added distributor of architectural building and millwork products for residential and commercial markets. -
On
August 7, 2024 theU.S Department of Commerce ("Commerce") announced preliminary results of a further administrative review with respect to certain hardwood plywood products produced inVietnam that they believe are circumventing a previously established duty order against hardwood plywood fromChina . Based on these results, we believe that we may be eligible for a refund on a significant portion of duties paid. Commerce's results are provisional and subject to change, with a final decision expected in early 2025.
"This past quarter has been an eventful period for ADENTRA, marked by several significant developments. In May, after 11 years of service Mr.
"In June we successfully completed an equity offering of
"On
"From an operations perspective, our bottom-line results continued to strengthen in the second quarter as tight operating management, successful strategy execution, and our significant diversification across products, geographies, customers and end-markets delivered predictably robust performance, despite softer markets."
"Adjusted basic earnings per share of
"On the topline, our sales volumes were generally stable year-over-year. Product price deflation accounted for most of the 6.2% decrease in total sales as compared to the same period last year. As the North American industry returns to a more balanced supply and demand environment, product pricing has been gradually adjusting and normalizing in step."
"Overall, our second quarter results underscore the resiliency of our business model and the deep experience of ADENTRA's team in managing diverse market conditions. Our results also continued to demonstrate our strong cash generating capabilities, with
"While focused on future growth, we also remain committed to providing near-term value for investors. During the first six months of 2024 we returned
Outlook
On an organic basis, we anticipate third quarter Adjusted EBITDA will be similar to what we achieved in Q2 2024. Acquisition-based growth is expected to build on that performance as we benefit from the inclusion of Woolf's operations for August and
Overall, the inflation and interest rate hikes of recent years are expected to continue to moderately impact residential, repair and remodel, and commercial construction markets in the second half of 2024. Despite this, we expect our strategies will continue to support strong and stable sales volumes as we demonstrated in Q1 and Q2 under similar conditions. The size, scale and sophistication of our business model allows us to implement comprehensive initiatives that drive our success and are difficult to replicate by smaller regional competitors. Key strategies include our global sourcing program and vendor management programs that provide us access to branded, exclusive, and semi-exclusive products with attractive terms. Additionally, our digital engagement initiatives with customers have been effective, with approximately 20% of our transactions occurring online. Our proprietary
These strategies are core components of our Destination 2028 plan, which targets an additional
Over the longer term our business is supported by strong end-market fundamentals, including historic under-building of homes, positive demographic factors, strong home equity, and an aging housing stock. Decreases in interest rates could further support end-market demand for our products. We continue to see a multi-year runway for growth in our core repair and remodel, residential, and commercial markets.
Q2 2024 Investor Call
ADENTRA will hold an investor call on
Summary of Results
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Three months |
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Three months |
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Six months |
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Six months |
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ended |
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ended |
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ended |
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ended |
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2024 |
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2023 |
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2024 |
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2023 |
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Total sales |
$ 549,492 |
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$ 585,935 |
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$ 1,084,630 |
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$ 1,165,792 |
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Sales in the US |
504,633 |
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540,988 |
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997,103 |
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1,077,172 |
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Sales in |
61,388 |
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60,365 |
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118,930 |
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119,433 |
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Gross margin |
119,218 |
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119,449 |
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237,452 |
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236,442 |
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Gross margin % |
21.7 % |
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20.4 % |
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21.9 % |
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20.3 % |
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Operating expenses |
(92,219) |
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(94,419) |
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(186,054) |
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(186,847) |
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Income from operations |
$ 26,999 |
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$ 25,030 |
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$ 51,398 |
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$ 49,595 |
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Add: Depreciation and amortization |
17,965 |
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17,713 |
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36,294 |
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34,731 |
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Earnings before interest, taxes, depreciation and |
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amortization ("EBITDA") |
$ 44,964 |
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$ 42,743 |
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$ 87,692 |
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$ 84,326 |
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EBITDA as a % of revenue |
8.2 % |
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7.3 % |
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6.9 % |
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11.0 % |
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Add (deduct): |
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Depreciation and amortization |
(17,965) |
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(17,713) |
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(36,294) |
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(34,731) |
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Net finance expense |
(10,418) |
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(12,105) |
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(21,496) |
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(24,324) |
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Income tax recovery (expense) |
435 |
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(3,557) |
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(2,215) |
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(6,306) |
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Net income for the period |
$ 17,016 |
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$ 9,368 |
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$ 27,687 |
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$ 18,965 |
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Basic earnings per share |
$ 0.74 |
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$ 0.42 |
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$ 1.22 |
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$ 0.85 |
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Diluted earnings per share |
$ 0.73 |
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$ 0.42 |
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$ 1.20 |
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$ 0.84 |
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Average US dollar exchange rate for |
$ 0.731 |
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$ 0.745 |
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$ 0.736 |
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$ 0.742 |
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Analysis of Specific Items Affecting Comparability (in thousands of Canadian dollars) |
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Three months |
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Three months |
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Six months |
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Six months |
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ended |
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ended |
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ended |
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ended |
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2024 |
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2023 |
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2024 |
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2023 |
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Earnings before interest, taxes, depreciation and |
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amortization ("EBITDA"), per table above |
$ 44,964 |
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$ 42,743 |
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$ 87,692 |
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$ 84,326 |
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LTIP expense |
3,517 |
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3,407 |
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6,341 |
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4,693 |
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Adjusted EBITDA |
$ 48,481 |
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$ 46,150 |
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$ 94,033 |
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$ 89,019 |
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Adjusted EBITDA as a % of revenue |
8.8 % |
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7.9 % |
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8.7 % |
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7.6 % |
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Net income for the period, as reported |
$ 17,016 |
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$ 9,368 |
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$ 27,687 |
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$ 18,965 |
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LTIP expense, net of tax |
3,333 |
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3,141 |
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5,919 |
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4,313 |
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Amortization of acquired intangible assets, net of tax |
4,062 |
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4,062 |
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8,124 |
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8,124 |
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Adjusted net income for the period |
$ 24,411 |
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$ 16,571 |
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$ 41,730 |
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$ 31,402 |
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Basic earnings per share, as reported |
$ 0.74 |
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$ 0.42 |
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$ 1.22 |
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$ 0.85 |
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Net impact of above items per share |
0.32 |
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0.32 |
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0.62 |
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0.55 |
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Adjusted basic earnings per share |
$ 1.06 |
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$ 0.74 |
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$ 1.84 |
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$ 1.40 |
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Diluted earnings per share, as reported |
$ 0.73 |
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$ 0.42 |
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$ 1.20 |
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$ 0.84 |
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Net impact of above items per share |
0.32 |
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0.32 |
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0.61 |
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0.55 |
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Adjusted diluted earnings per share |
$ 1.05 |
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$ 0.74 |
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$ 1.81 |
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$ 1.39 |
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Results from Operations - Three Months Ended
For the three months ended
Our US operations generated second quarter sales of
In
Second quarter gross margin decreased to
For the three months ended
For the three months ended
For the three months ended
For the three months ended
Excluding this loss carryforward tax recovery, income tax expense was
Second quarter Adjusted EBITDA grew 5.1% to
Net income for the second quarter of 2024 increased 81.6% to
Second quarter adjusted net income grew 47.3% to
Results from Operations - Six Months Ended
For the six months ended
Our US operations generated first half sales of
In
First half gross margin increased to
For the six months ended
For the six months ended
For the six months ended
For the six months ended
First half Adjusted EBITDA grew 5.6% to
Net income for the first half of 2024 grew 46.0% to
First half adjusted net income grew 32.9% to
About ADENTRA
ADENTRA is one of
Non-GAAP and other Financial Measures
In 2024, we revised our calculations of Adjusted net income, Adjusted basic earnings per share, and Adjusted diluted earnings per share to exclude the amortization of acquired intangible assets. The historical presentation of these measures within this news release has also been updated to reflect the revised calculations. We believe that excluding the amortization of acquired intangible assets from these non-GAAP financial measures helps management and investors in understanding our underlying operating performance.
In this news release, reference is made to the following non-GAAP financial measures:
- "Adjusted EBITDA" is EBITDA before long term incentive plan ("LTIP") expense, accrued trade duties, professional fees, and transaction costs. We believe Adjusted EBITDA is a useful supplemental measure for investors, and is used by management, for evaluating our ability to meet debt service requirements and fund organic and inorganic growth, and as an indicator of relative operating performance.
- "Adjusted net income" is net income before LTIP expense, accrued trade duties, professional fees, transaction costs, and amortization of intangible assets acquired in connection with an acquisition. We believe adjusted net income is a useful supplemental measure for investors, and is used by management to assist in evaluating our profitability, our ability to meet debt service and capital expenditure requirements, our ability to generate cash flow from operations, and as an indicator of relative operating performance.
- "EBITDA" is earnings before interest, income taxes, depreciation and amortization, where interest is defined as net finance income (expense) as per the consolidated statement of comprehensive income. We believe EBITDA is a useful supplemental measure for investors, and is used by management, for evaluating our ability to meet debt service requirements and fund organic and inorganic growth, and as an indicator of relative operating performance.
- "Working capital" is accounts receivable, inventory, and prepaid expenses, partially offset by short-term credit provided by suppliers in the form of accounts payable and accrued liabilities. We believe working capital is a useful indicator for investors, and is used by management, for evaluating the operating liquidity available to us.
In this news release, reference is also made to the following non-GAAP ratios: "adjusted basic earnings per share", "adjusted diluted earnings per share", "Adjusted EBITDA margin" and "Leverage Ratio". For a description of the composition of each non-GAAP ratio and how each non-GAAP ratio provides useful information to investors and is used by management, see "Non-GAAP and Other Financial Measures" in the Company's management's discussion and analysis for the quarter ended
Such non-GAAP financial measures and non-GAAP ratios are not standardized financial measures under IFRS and might not be comparable to similar financial measures disclosed by other issuers. For a reconciliation between non-GAAP measures and non-GAAP ratios and the most directly comparable financial measure in our financial statements, please refer to the "Summary of Results".
Forward-Looking Statements
Certain statements in this press release contain forward-looking information within the meaning of applicable securities laws in
The forward-looking information in this press release is included, but not limited to: On an organic basis, we anticipate third quarter Adjusted EBITDA will be similar to what we achieved in Q2 2024; acquisition-based growth is expected to build on that performance as we benefit from the inclusion of Woolf's operations for August and
The forecasts and projections that make up the forward-looking information are based on assumptions which include, but are not limited to: there are no material exchange rate fluctuations between the Canadian and US dollar that affect our performance; the general state of the economy does not worsen; we do not lose any key personnel; there is no labor shortage across multiple geographic locations; there are no circumstances, of which we are aware that could lead to the Company incurring costs for environmental remediation; there are no decreases in the supply of, demand for, or market values of our products that harm our business; we do not incur material losses related to credit provided to our customers; our products are not subjected to negative trade outcomes; we are able to sustain our level of sales and earnings margins; we are able to grow our business long term and to manage our growth; we are able to integrate acquired businesses; there is no new competition in our markets that leads to reduced revenues and profitability; we can comply with existing regulations and will not become subject to more stringent regulations; no material product liability claims; importation of components or other innovative products does not increase and replace products manufactured in
The forward-looking information is subject to risks, uncertainties and other factors that could cause actual results to differ materially from historical results or results anticipated by the forward-looking information. The factors which could cause results to differ from current expectations include, but are not limited to: exchange rate fluctuations between the Canadian and US dollar could affect our performance; our results are dependent upon the general state of the economy; the impacts of COVID-19, further mutations thereof or other outbreaks of disease, could have significant impacts on our business; we depend on key personnel, the loss of which could harm our business; a labour shortage across multiple geographic locations could harm our business; decreases in the supply of, demand for, or market values of hardwood lumber or sheet goods could harm our business; we may incur losses related to credit provided to our customers; our products may be subject to negative trade outcomes; we may not be able to sustain our level of sales or earnings margins; we may be unable to grow our business long term or to manage any growth; we are unable to integrate acquired businesses; competition in our markets may lead to reduced revenues and profitability; we may fail to comply with existing regulations or become subject to more stringent regulations; product liability claims could affect our revenues, profitability and reputation; importation of components or other innovative products may increase, and replace products manufactured in
This news release contains information that may constitute a "financial outlook" within the meaning of applicable securities laws. The financial outlook has been approved by our management as of the date of this news release. The financial outlook is provided for the purpose of providing readers with an understanding of our anticipated financial performance. Readers are cautioned that the information contained in the financial outlook may not be appropriate for other purposes.
All forward-looking information in this news release is qualified in its entirety by this cautionary statement and, except as may be required by law, we undertake no obligation to revise or update any forward-looking information as a result of new information, future events or otherwise after the date hereof.
Third-Party Information
Certain information contained in this news release includes market and industry data that has been obtained from or is based upon estimates derived from third-party sources, including industry publications, reports and websites. Although the data is believed to be reliable, we have not independently verified the accuracy, currency or completeness of any of the information from third-party sources referred to in this news release or ascertained from the underlying economic assumptions relied upon by such sources. We hereby disclaim any responsibility or liability whatsoever in respect of any third-party sources of market and industry data or information.
SOURCE