Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Supremex 2026 third quarter earnings conference call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. Instructions will be provided at that time for you to queue up for questions. If anyone has any difficulties hearing the conference, please press star followed by 0 for operator assistance at any time. Before turning the meeting over to management, please be advised that this conference call will contain statements that are forward-looking and subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated. I would like to remind everyone that this conference call is being recorded on Thursday, November 5, 2026. I will now turn the conference over to Martin Goulet of MBC Capital Markets Advisors. Please go ahead.
Thank you, operator. Good morning, everyone, and welcome to Supremex's conference call for the third quarter ended September 30, 2026. With me today are Stewart Emerson, President and CEO, and Norm Macaulay, CFO and Corporate Secretary. Press release, MD&A, and financial statements were issued this morning and are available on SEDAR+ and at www.supremex.com. Today's presentation is also on our website, and we will call out page numbers as we go. Please note that today's remarks contain forward-looking information, and actual results could differ materially. Please refer to the risk factors in our MD&A and annual information form. We will also refer to non-IFRS measures, including adjusted EBITDA, adjusted net earnings, and adjusted free cash flow. They are defined and reconciled in our MD&A and summarized on pages 15 and 16 of this presentation. Finally, all amounts are in Canadian dollars unless otherwise stated.
I will now turn the call over to Stewart.
Hey, thank you, Martin, and good morning, everyone. Let me start with the headline. This quarter reflects the company we continue to build. Revenue of CAD 76.2 million, up 16.1%. Adjusted EBITDA of CAD 8.6 million, up 38.5%, with the adjusted EBITDA margin climbing to 11.3%, up from 9.4% last year. This quarter, both engines pulled at once. Packaging grew, and envelope delivered higher margins, and we did it while absorbing about CAD 1 million of U.S. tariffs. Norm will take you through the details shortly, but I will focus on what is behind the numbers, because this quarter, like last quarter, our strategy is showing up in the results. Please turn to page three of the presentation, which is our plan on one page. Simply, we run two businesses, and we ask something different of each. Packaging is the growth engine.
Folding cartons, e-commerce packaging, and labels sold to premium customers in markets that grow every year. Envelope is our cash engine. Number one in Canada, top five in North America, we run envelope with discipline for margin and cash. What makes the model powerful is how the two engines work together. Every dollar the cash engine produces has a job: fund the growth of packaging and fund the tuck-in acquisitions that extend the life of the envelope business itself. We try to do both while keeping leverage around our target of 2x net debt to adjusted EBITDA. You will also see the stamp on page three, tariffs. Let me tell you upfront how we view them, but we won't get into any details about what we think of them. They are a headwind, period. They slow the pivot, but they do not change it.
We are managing them effectively, and Norm will quantify the impact in a moment. We are planning prudently. We have implemented a reorganization plan built on tariffs exactly as they stand today, so we are prepared whether they ease or whether they stay in place. Moving to page four, you can see how the plan is changing our revenue mix. Packaging was 31.3% of our revenue a year ago. In the third quarter, it reached 38.9% of consolidated revenue, and we are not done. Our short-term destination has packaging approaching 50% of revenue, with the timing driven by our acquisition pipeline. Please turn to page five. The shift in revenue split did not happen by accident. We were a pure envelope play less than a decade ago. Since 2017, we have methodically built our packaging business, and this past year, that build accelerated.
Five acquisitions in the last two years, each with a clear purpose. In packaging, we buy to grow, strategically in product categories with durable growth. Trans-Graphique strengthened our packaging platform. iFlex gave us a firmer footing in labels and a real platform to grow from. In June, the acquisition of Goldrich Printpak gave us our first folding carton plant in the large Ontario market. We did not stand still with envelope either. We were opportunistic with Enveloppe Laurentide in Montreal and Elite Envelope in Massachusetts, two highly synergistic deals. Within weeks, we took on their customers and absorbed the volume through our own plant network on more efficient equipment, which delivers more cash from a well-developed platform that we already own. One playbook, two jobs, growing packaging and stretching the runway on envelope. Let me take each envelope in turn, starting with envelope.
Please turn to page six of the presentation. Over the last 12 months, envelope generated roughly CAD 192 million in revenue, and it keeps doing exactly what we ask of it. In the quarter, revenue was CAD 46.5 million, up 3.2% from the third quarter of 2025. Average selling prices rose 4.7%, unit volume declined 1.5%, and Elite Envelope, which we acquired in December of 2025, helped offset part of that decline. But the real story here is margin. Segment adjusted EBITDA was CAD 7.7 million, up 44%, and the margin expanded to 16.5% from 11.8%, 470 basis points of improvement despite the CAD 1 million of tariffs. That margin is earned, not gifted. It comes from how we run the envelope business, pricing discipline, capturing the synergies from Laurentide and Elite, and consolidating capacity. Indianapolis Envelope is a good example of consolidating capacity.
In January, we closed our envelope plant there and moved the production primarily to our plants in the Greater Toronto Area. The same customers are now served from fewer, significantly more efficient, and now fuller plants, and the resulting improved absorption contributed to the margin improvement this quarter. Please turn to page seven of the presentation. It shows us why the runway is longer than many assume. The U.S. envelope market is approximately $2 billion, roughly 23 times the size of Canada's, well beyond the usual 10 to one ratio between the two economies, primarily because direct mail remains an important marketing channel in the U.S. That recurring direct mail for marketing and fundraising provides a steadier demand stream. Our share of the U.S. market is still single digits, and much of that volume is within reach of plants we already own.
Every point of the U.S. share we win offsets the decline in Canada using equipment and know-how we already have. Tariffs make the opportunity more challenging in the near term, but this is exactly where our footprint pays off. We have plants on both sides of the border, and where we can, we are rebalancing production between the countries to optimize our cost structure and improve absorption. That flexibility lets us keep serving our U.S. customers competitively while tariffs are in place and maintain our market position for the long term. With the cash envelope provides, packaging is where we put it to work. Please turn to page eight. Packaging delivered a strong quarter. Revenue was CAD 29.7 million, up 44.4% from the third quarter of 2025. Our first full quarter with Goldrich and iFlex contributed about 34 points of that growth.
The number I want to underline is organic growth of 10.5%, because it tells you the base business is winning. A larger share of business with our multinational consumer packaged goods customers and continued growth in e-commerce. On the heels of that increase in revenue, profit followed. Segment adjusted EBITDA was CAD 3.5 million, up 61% with the margin improving to 11.8% from 10.5% last year. I also want to be straightforward where we need to be better. Commercial print sits in this segment and remains very soft. Revenue is down almost a half a million dollars in the quarter, and it weighs on the segment's margin. Excluding commercial print, the rest of the packaging grew 46.5%, and with commercial print recording a CAD 400,000 loss in the quarter, segment adjusted EBITDA would have been about CAD 400,000 higher without it.
We continue to optimize commercial print, including reducing the footprint of the standalone Saint-Laurent commercial print facility announced in October, while Goldrich, iFlex, and the cross-selling opportunity in Ontario keep building the rest of the segment. Our confidence comes from the reasons why we succeed. We serve premium quality-sensitive customers, health and beauty, pharma, and larger in-home food manufacturers across Quebec, Ontario, and the Midwest U.S. These customers increasingly want their packaging made closer to their own plants, and our plants are close to theirs. Importantly, we hold the certifications they demand, ISO 9001, ISO 14001, BRCGS, Forest Stewardship Council, printing certifications like G7, GFSI, and GMI, and we have pharma standard accreditations and even a nut-free facility where food manufacturers can have boxes manufactured with confidence. The credentials that take years to earn and provide us with the ability to service a broad cross-section of the packaging market.
We continue to put capital behind this business. In September, we announced approximately CAD 4 million in investments to expand our high-end, high-performance folding carton and e-commerce packaging capacity, a new six-color press with inline UV coating, and new converting and finishing equipment in Indianapolis, and added e-commerce capacity in a Chicago area envelope plant. These investments bring work in-house that we used to subcontract, added much-needed capacity, and allows us to respond faster and control quality from start to finish. Please turn to page nine. Our packaging business stands on three legs: folding carton, e-commerce packaging, and labels. All three legs of the stool are growing. U.S. folding carton demand is growing at approximately 2.6% per year toward roughly $15 billion by 2029.
U.S. e-commerce packaging demand is growing at more than 6% a year, and global label volumes, a good proxy for growth in the North American markets we serve, are growing at approximately 4.5% per year. Each leg plays a distinct role for us. Folding carton serves high-value health and beauty, pharma, and in-home food markets, where we have critical mass in Quebec, and with Goldrich, a growing presence in Ontario. Our e-commerce is in a premium niche where package is part of the product. Innovative, right-sized solutions we develop with e-tailers themselves. And labels, which we scaled with iFlex, carry attractive margins and open a meaningful cross-selling opportunity across our packaging customer base. Large growing market with attractive niches and plenty of room to grow in the geographies we already serve. That is a good place to be in.
Norm will now take you through the numbers and how we're managing through the tariffs. Norm?
Thank you, Stewart, and good morning, everyone. Please turn to page 10. Revenue was CAD 76.2 million, up 16.1% from CAD 65.7 million in the third quarter of 2025, driven by our packaging acquisitions, organic packaging growth, and higher envelope pricing. Adjusted EBITDA was CAD 8.6 million, up 38.5% from CAD 6.2 million in the third quarter of 2025, with our adjusted EBITDA margin improving to 11.3%, up from 9.4% last year. And that's after absorbing approximately CAD 1 million of tariffs in the quarter. Net earnings were CAD 0.5 million, or CAD 0.02 per share, compared with CAD 9.1 million, or CAD 0.37 per share, in the third quarter of 2025. Note that last year's results included a CAD 6.1 million gain on the sale and leaseback of two properties and a CAD 3.1 million tax recovery.
On an adjusted basis, which excludes the sale and leaseback gain, net earnings were CAD 0.8 million, or CAD 0.03 per share, compared with CAD 0.19 per share last year. Cash generation in the quarter was very strong. Adjusted free cash flow was CAD 5.2 million, up from CAD 0.1 million in the third quarter of 2025. Now turning to page 11, let's look at the quarter by segment. Compared with the third quarter of 2025, packaging revenue grew 44.4% to CAD 29.7 million. Goldrich and iFlex added 33.9 points, and organic growth added 10 and a half points. Envelope revenue grew 3.2% to CAD 46.5 million on a 4.7% increase in average selling price, partly offset by a 1.5% decline in volume.
Envelope adjusted EBITDA was up 43.5% to CAD 7.7 million, a 16.5% adjusted EBITDA margin, and packaging adjusted EBITDA was up 61.4% to CAD 3.5 million, an 11.8% adjusted EBITDA margin. Corporate costs were CAD 2.6 million, up from CAD 1.3 million a year ago, mainly because the CAD 0.7 million foreign exchange gain recorded in the third quarter of 2025 did not repeat itself, and salaries and benefits were higher, partly offset by lower share-based compensation expense. On a year-to-date basis, packaging revenue grew 24.1% to CAD 80.1 million, reflecting the acquisitions and continued organic gains. Envelope revenue grew 3.8% to CAD 142.6 million on both higher pricing and higher volumes. Adjusted EBITDA was CAD 26.3 million, up 26%, with the adjusted EBITDA margin improving to 11.8%, up from 10.3% last year. Please turn to page 12.
Net debt was CAD 38.6 million at September 30th, down CAD 1.5 million from June 30th, as we made the first installment on the acquisition term loan and net repayments on the revolver. We did that while continuing to invest approximately CAD 3.5 million of capital expenditures in the quarter, including investments in the packaging business that we believe will fuel further growth. Net debt to adjusted EBITDA was 1.09 times, down from 1.22 times at the end of the second quarter, and comfortably within our target of around two times net debt to adjusted EBITDA. Leverage is higher than the 0.26 times of a year ago on account of the acquisitions we have completed over the last 12 months. We ended the quarter with CAD 31.4 million of available liquidity. Please turn to page 13. The main headwind we are managing is tariffs.
We estimate the impact at CAD 10 million-CAD 12 million a year, pre-tax, and that is after the mitigation we already have in place, pricing actions, supply chain adjustments, and our initial rebalancing of production between our Canadian and U.S. plants. The estimate assumes tariffs stay as currently enacted. To be clear, we're not standing still. The restructuring plan we announced on October 6th eliminates approximately 60 positions, consolidates certain activities across our Canadian and U.S. envelope and folding carton sites, and accelerates technology adoption in the back office. We expect annualized savings of about CAD 5.7 million, benefits beginning in the fourth quarter, with the full run rate reached during the first quarter of 2027, and a restructuring charge of approximately CAD 1.8 million in the fourth quarter of 2026. Those savings offset roughly half of the tariff impact.
As for the remaining gap of CAD 4 million-CAD 6 million, we are committed to continuing to identify ways to reduce it through all of the levers at our disposal. With that, I will turn it back to Stewart.
Okay, thank you, Norm. Let me bring it together on page 14 of the presentation. What is working? Packaging is scaling, up 44% in the quarter and now stands at 39% of revenue. Envelope margins remain on solid footing, given pricing and optimization initiatives, and leverage is down to 1.09 times. We are watching the tariffs and paying close attention to the continued softness in commercial print, and we are proactively managing both. Our focus for the coming quarters is clear: deliver the CAD 5.7 million of restructuring savings, integrate Goldrich and iFlex, continue to grow organically, keep working on tariff mitigation, and pay down debt. Let me leave you with this. The cash engine is performing. The growth engine is compounding. Tariffs are a headwind we are managing. The restructuring plan offsets roughly half of the annualized impact.
We are committed to finding further ways to close the remainder, and the steps we have taken to protect the balance sheet while protecting the pivot continues. Thank you for your time this morning. Norm and I would now be happy to take your questions and turn it over to the operator. Thank you.
We will now begin the 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 are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star, then two. We will pause for a moment as callers join the queue. The first question comes from Donangelo Volpe with Beacon. Please go ahead.
Hey, good morning, guys. Just on the tariff mitigation efforts, I understand that full run rate savings should come through in Q1. Just wondering how I should be looking at timing for Q4. Are we expecting kind of partial realization of these efforts in December? Are we expected weighted towards the end of the period, or do we look at kind of that 1 million impact for, call it, a little over a month and just look at that as pretty much flat through Q4?
Yeah, there'll be a little bit of savings on that in the fourth quarter, Donangelo. Much of the impact being realized in December. So, if you wanted to make an estimate on that, it'd be at the lower end of like a typical quarter, right?
Okay, thank you.
Post-fourth quarter.
Yeah. Okay, that makes sense. Okay, then, I guess just pivoting over packaging side, excellent organic growth. I would say materially stronger than we've seen in recent periods. Just wondering how much of this was driven by new customer wins versus kind of increased wallet share with existing customers, and how sustainable we should look at that double-digit growth rate kind of moving forward?
I do not have the number precisely, but it is a combination of the two, and if I had to put a mark on it would be 60/40/60, new customer wins versus share of wallet gains. It is not all new customer wins, it is not all share of wallet gains. There is a combination thereof. Double-digit organic growth is impressive, but it is a tough bar. We expect organic growth every quarter. Can we keep it at 10.5%? I would like to think so, but that is a tough one.
Mm-hmm. Okay, thank you. Then, final one from me, and then I will hop back in the queue. Just wondering if you can provide more color on Goldrich's performance, I guess kind of towards revenue growth, utilization, and margins, and just kind of how it is tracking compared to your expectations when you guys originally completed the acquisition?
It is still early. There has been, I do not want to say a couple of customer defections, but faced a little bit of headwinds with the transition. Not with the transition. We had a little bit of customer overlap where maybe one and one does not equal two. But it has performed very well. It operates extremely well. There is some significant capacity available there, adding to the sales organization as we speak. And it is still early, but it is performing well and within expectations.
Okay. Congratulations on the results, guys. I will hop back in the queue.
Thanks, Donangelo.
Thank you. This concludes the question and answer session. I would like to turn the conference back over to Stewart Emerson for any closing remarks.
Hey, great. Thanks, operator. Again, thank you to everybody on the call, and thank you for your time and your interest in Supremex. I would like to take this opportunity to thank the employees of Supremex. None of this happens without their continued commitment and presence and perseverance to making Supremex the company it is today. So, thank you to everybody.
This brings to a close today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.