Hey everyone, welcome to BuildDirect Q2 2025 Financial Results Conference Call. For those who are unfamiliar, BuildDirect trades on the TSXV under the ticker BILD, that's BILD, and on the OTCQB under the ticker BDCTF. My name is Prit Singh, and I will be the moderator for today's call. Before we begin, I would like to note that some of the comments today will contain forward-looking information and statements under applicable securities law that reflect management's current views with respect to future events. Any such information and statements are subject to risks, uncertainties, and assumptions that could cause actual results to differ materially from those projected in the forward-looking information and statements. Please refer to the various materials the company has filed with Canadian securities regulators for a broader description of operational and risk factors that could affect the company's performance.
In addition, please note that all dollar amounts mentioned in this presentation are in U.S. dollars unless otherwise stated. On today's call, we will be covering BuildDirect's Q2 2025 financial and operational highlights, as well as its growth outlook for the remainder of 2025. Following comments from BuildDirect's management, the call will be open for questions. Questions can be sent using the Zoom Q&A function at the bottom of your screen. If you are calling in to listen to the webinar today, please email us your questions directly to ir@builddirect.com. Again, that's ir@builddirect.com. Our presenters today will be the CEO of BuildDirect , Shawn Wilson, CFO Kerry Biggs, and CO I O Jay Allen. I will now turn the conference call over to Shawn .
Thanks, Prit. For those joining for the first time, welcome. Let me start with the industry picture. The North America retail flooring market is about $90 billion in size and growing at a steady rate. One of the big shifts is how pro customers are buying. They're looking for reliable supply, stronger service, and integrated solutions, not just product. BuildDirect is positioned differently, with direct procurement, Pro Centers, and e-commerce all working together. The broader industry has faced some pressure. Some estimates have industry-wide sales down roughly 2%- 5%, with higher interest rates and tighter consumer spending weighing on demand. Tariffs add another layer of pressure in markets like Michigan, where the economy is heavily tied to auto manufacturing. We saw those tariffs impact the local macro environment.
However, our business held up very well despite the headwinds, and I've never been more excited about what we're building. Companies with the strongest model are positioned to win, and we BuildDirect. In Q2, we expand our pro network with a new build in Santa Fe Springs, California, and a bolt-on acquisition in Orlando, Florida. These strengthen our coverage in two important regions and build on a model we've proven elsewhere. The strategy is straightforward: bring inventory close to the customer, provide hands-on pro support, and tie it directly to our e-commerce engine. That's what makes each Pro Center more than a store. They become the growth hub. Now let's shift to e-commerce. Our e-commerce business has been fully overhauled. We've streamlined the assortment, shifted fulfillment into our Pro Centers, and moved sample distribution to Michigan from Richmond, D.C., to cut tariffs and improve delivery speed.
The platform is now leaner, faster, and built to scale. With that, I'll hand over to Jay.
Thanks, Shawn. Our view is that the U.S. digital channel represents a massive opportunity for our organic growth. What we see in customer behavior and competitor activity suggests a meaningful headroom for growth. With a $15 million current run rate, we believe our e-commerce business has the cost position and the structure to scale well beyond that, using our direct import model and Pro Center integration to deliver more value than distributor-dependent competitors. We are intently focused on this channel. I'll now turn it over to Kerry for the detailed financial review.
Yeah, great. Thanks, thanks Jay. I'm very pleased with the progress we've achieved in Q2 of 2025. Looking at our performance for the quarter ended June 30, 2025, the key highlights are summarized here on slide eight. Adjusted EBITDA was approximately $600,000, removing the non-operating tax credit, compared to $578,000 last year, reflecting continued gross margin strength and disciplined cost management. Revenue was approximately $16.9 million, up 4.2% compared to $16.2 million the prior quarter, Q2 of 2024, last year. Gross profit was $6.7 million, with a 39.9% margin compared to $6.2 million and a 38.2% margin last year, an increase of $500,000 in gross profit. Operating expenses were $6.9 million, up $500,000 year- over- year, primarily due to the opening of our new Orlando Pro Center. Excluding this new Pro Center, expenses were essentially flat with the same period last year.
EBITDA was approximately $1.47 million, including the cash tax rebate, compared to $573,000 last year. This increase is attributed to that $1.2 million employee retention tax credit, as well as the gross margin strength that we noted earlier. Net income overall was $138,000 compared to a loss of $517,000 in Q2 of 2024. Working capital was very strong at June 30, 2025, up $700,000 from the prior year. Moving to the next slide. As I noted, consolidated revenue in Q2 of 2025 was $16.9 million, up $700,000 or 4.2% versus Q2 of 2024. If we just look at this by segment, e-commerce revenue for Q2 2025 was $3.66 million compared to $3.26 million the same period last year, an increase of 12.2% for our e-commerce segment.
Gross profit was $1.82 million with a margin of 50%, slightly lower than the 52.4% margin last year due to sales mix driven by slightly less non-core inventory sales. On the Pro Center side, the bricks and mortar revenue was $13.2 million for Q2 of 2025, up from $12.9 million in Q2 of 2024, an increase of 2.2% year- over- year. Gross profit in this segment grew to $4.9 million with a margin expanding to 37.1% compared to 34.6% last year, supported by incremental sales from our new Orlando Pro Center and favorable inventory mix that we sold. Together, as I noted, it resulted in a consolidated gross profit of $6.7 million, up 8.7% year- over- year, and a margin improvement of 170 basis points to 39.9%. On the OpEx side, operating expenses were $6.9 million for Q2 of 2025, up from $6.4 million in Q2 of 2024.
Again, largely driven by the new expenses from our Orlando Pro Center. Excluding these expenses, operating expenses were generally flat year over year, so a good sign. On the fulfillment side, fulfillment costs decreased 10.2% to $905,000 in Q2 of 2025, thanks to lower in-house fulfillment costs. Selling and marketing expenses rose modestly by 5.9% to $1.5 million. Admin costs increased to $3.8 million in Q2 of 2025 from $3.3 million the same period prior year. That's where we saw the incremental expenses of our new Orlando operation. Excluding those new expenses from Orlando, overall costs were fairly flat year- over- year. Depreciation and amortization was $741,000, up slightly from last year's $700,000. Overall, our operating expense ratio in Q2 2025 saw a slight increase year over year, again showing our strong commitment to cost management.
Moving down on the other income side, I'll go through a couple of the key items here. Interest expense rose to $407,000 versus $322,000 the prior year. The majority of that is non-cash related to the insider notes in the larger accrued balances. We recorded a non-cash warrant fair value loss of $116,000 compared to a gain of $24,000 the same period prior year. Included in here, we received $1.2 million cash from the U.S. IRS under a prior employee retention tax credit program. Restructuring costs were $37,000 in e-commerce related to severance and headcount reduction. Finally, we had a non-cash foreign exchange loss of $126,000 compared to a small gain the prior year of $42,000. Overall, adjusted EBITDA was around $600,000, again slightly above last year's $578,000.
Moving on to slide 10 on the balance sheet, I'm very, very pleased with the state of our balance sheet and our working capital position. At June 30th 2025, current assets totaled $19.5 million. Overall, current liabilities were $15.9 million, resulting in a current ratio of 1.2x and working capital of approximately $3.6 million at June 2025 quarter end compared to $2.7 million at December 31st 2024, and $2.9 million at Q2 2024, the same period prior year. Overall, our cash balance was $4.1 million at June 30, up $1.7 million from both the prior quarter and the year-end 2024. We're in a great place as we speak. Moving on to slide 11, I'll quickly walk you through the cash flow summary.
On the operating activity side, after changes in non-cash working capital, we had cash provided of $529,000 for Q2 of 2025 compared to $89,000 the prior year, same quarter Q2 2024, an improvement of over $440,000, reflecting stronger operating income, partially offset by larger working capital changes with our inventory build that occurred in Q2. Investing activities used $33,000 compared to cash provided of $53,000 last year, reflecting modest equipment purchases offset by a small asset sale in Q2 of 2025. Financing activities provided $84,000 of cash compared to a small outflow the prior year of $36,000 last year. Overall, this included net advances on our revolving credit facility to fund working capital, insider borrowing offset by a loan receivable, scheduled lease payments, prom note payments, as well as interest payments on our line of credit. We ended Q2 with a stronger cash position, improved operating cash flow. With that, I will turn the call back over to Shawn.
Okay, great. Thanks, Kerry. On August 1st, we closed a non-brokered private placement of approximately CAD 7 million. This financing involved the issuance of just over 6 million common shares at a price of CAD 1.15 per share. The financing was led by Sun Mountain Partners and IFCM MicroC ap. In addition, our three largest shareholders and several insiders, including myself, also participated in the financing. This capital further strengthens our balance sheet and positions us to execute on our growth strategy. On that note, Jay will update us on our most recent acquisition.
Thanks. Earlier this year, we acquired a $6 million revenue business in Orlando with a strong niche in institutional flooring. Since then, we've moved the operation into a better facility at minimal cost, migrated all of their systems onto our ERP, and consolidated our Georgia 3PL e-commerce fulfillment into that location. We've also launched a retailer program in the Orlando market, and the next step is rolling out our [Pro Elite Contractor] program, which will further leverage our shared inventory.
This is a great example of what we mean by a bolt-on acquisition, one that not only expands our footprint in a high-growth region, but also in the institutional segment and also enhances efficiency across multiple channels.
Looking ahead, our growth plan runs on three tracks. Organic growth will come from scaling e-commerce. We're targeting two to three times its current run rate, expanding the commercial spec and quote pipeline, and launching a pro marketing funnel focused on value-added services. While the exact size of online flooring isn't formally reported, we view it as a significant growing channel where we have a strong advantage.
Yeah, thanks, Jay. [Track two] is our bolt-on acquisition program. We buy smaller pro-focus locations and convert them into BuildDirect Pro Centers. [Track three] is larger division expansions. These are selective opportunities that add capabilities like new categories, contractor networks, and create clear synergies. These three tracks give us flexibility, different paths to grow while keeping capital efficiency at the forefront. With that, I'll turn the call back over to Prit to begin the Q&A session.
Thanks, Shawn. Thanks, Kerry. Thanks, Jay. Thank you, everyone. We will now begin the Q&A session. As a reminder to our audience here, you can submit your questions using the Zoom Q&A function at the bottom of your screen. If you're listening in to the call today, please email us your questions directly to ir@builddirect.com. Again, that is ir@builddirect.com. First question, your gross margins expanded to nearly 40% this quarter. Can you discuss the sustainability of this margin profile and whether you see additional levers to further expand margins going forward?
Yeah, it's a great question. We're in a pretty unique position. We have our direct import, and that really complements what we also buy from distribution to balance out the working capital requirement for our inventory. When things like the tariffs happen, the noise and all the different changes, having both lines of sight was really important. You can leverage existing inventory that's already here as well as have clarity on the actual practical implication of what those tariffs are. Whereas others who don't have those two lines are really held captive, right? For example, we source from multiple countries, and the ability to have that flexibility, I mean, who'd have known, right? It was kind of a surprise for a lot of companies, but that really helped us protect it.
With that, for us, we track our penetration of what we sell through our network from direct import versus other distribution. It's a key metric that we watch and keep working towards increasing. I would say on the margin front, there definitely is room for further expansion. For us, ensuring that we have multiple supply chains and really make sure we're focused on the pro segment, which is a very profitable segment, relatively speaking, is how we continue to win there on the gross margin side and how we continue to intend on increasing it.
Okay, fantastic. With Pro Centers now accounting for approximately 80% of your overall revenue, how do you continue to balance e-commerce investment with accelerating Pro Center expansion?
Hey, Jay, you can take that one.
I'll jump in here. I think on the e-commerce side, we've already made the big investments in systems and processes and kind of the hard decisions to give us a good platform to grow from. I think we feel great about the growth there. Further expansion just requires us to invest in some marketing spend and inventory, which also benefits the Pro Center side. I think overall, I would say we're in a good place to grow both e-commerce and the Pro Centers without having to make, without having to start up one channel or another to do it.
I'm very good.
Perfect. Thank you. Can you provide some color on the current M&A pipeline?
Yeah, so on the pipeline, I would say going back to our three tracks, Jay touched on the biggest one for our organic side. Especially on track two, the industry is very dense on targets. A lot of that is also just like with the tariff and noise, the up and down, so on and so forth. You have a lot of smaller distributors or pro-focus locations who are having trouble kind of working through what that means. Often it's because their supply chain is tied to the distributor who might have been adversely impacted or maybe taking advantage, who knows, of the noise on pricing. We're finding a pretty significant amount of inbound on that track. I won't get into too much detail on the call, but for us, we have a pretty good marketing program that's running to help bring those to light.
On track three, the larger acquisitions, there are a lot of companies who are in the flooring business but have adjacent categories. For example, countertops, cabinets, so on and so forth, are kind of relatively common. I'd say on those, we're being a bit more selective, making sure they make more sense because, intuitively, those have a bit more on the goodwill side versus track two is really just your assets with some reasonable expectations on earnouts potentially. I would say for us, the pipeline of targets is not a limiting factor for us. It's pretty healthy on both those fronts.
Okay, thank you. Next question here. How much of your revenue growth this quarter was a result of new acquisitions and Pro Centers coming online? Did you also see same-store sales growth across existing Pro Center locations?
Yeah, I'll actually take that one, and then Jay, you can add to it, or Kerry, you can add to it. In Q2, the structure for only the Orlando acquisition was effectively neutral, ARAAP neutral, and there's a build-up period for institutional flooring. What I'm trying to say there is the short answer is no. On the revenue side, Q2 is not really where that started showing up. Anything you'd like to add to that?
Yeah. I think I just echo that, Shawn. Generally speaking, we're going to see the run rate of Orlando moving forward, kind of starting now as we speak, right? The majority of the revenue in Q2 was kind of current operations. A little bit of it was Orlando as it ramped up. Happy to kind of get into the specific numbers offline through Prit. The majority of our current Q2 revenue was kind of current operations with a small portion of Orlando.
Which is why we really believe the model held up well. For two reasons. First and foremost, the majority of our current revenue outside of e-commerce is concentrated in Michigan. Michigan, the macro environment got hit pretty hard, right, with all the noise of all the states you can have a lot of volume in. For us to stand up well and our existing locations to do very well in that environment was really encouraging. Also, I think a testament to the team and as well the model that we're running in addition to that.
It's interesting to see, like, if you look at the overall industry with estimates, kind of what we said earlier, potentially down 2%- 5%, that's going to be a lot sharper in some of those areas that are heavily impacted. For us to stand up where we did was pretty exciting.
All right. Two-part question. It sounds like you would like to double the e-commerce business over the next few years. When do you think we'll start to see higher growth rates? This year or next year? What type of EBITDA margins do you target for e-commerce?
Yeah, hey Jay, I do want to take that one to start off, and I can fill in.
Sure. On the e-commerce side, we're targeting higher growth rates really starting now in the fourth quarter of this year, and we are investing in order to grow that business now and into 2026. On the e-commerce side, we target EBITDA margins, I mean, we target product margin above 50%.
Yeah, and then from there, that product margin bleeds down a little bit with the fulfillment costs. I would say, I think like maybe the root question there is, hey, if you double e-commerce, what does that do to your financials? I would say if you look at like the contribution margin, you know, take 20-25% somewhere in there as like a pretty good, like, you know, number. That business model is highly leverageable. For example, if you were to pick up another, you know, $10 million in sales, a whole lot of that flows down the bottom line.
Yeah. Perfect. Thank you. Should we expect you to pursue additional equity raises moving forward, or will future growth be funded through your debt facility and operating cash flow?
Yeah, so that one, I'll key thoughts, and Kerry, feel free to fill in. Look, you know, we've said this before, and I think we've probably more so than others. We treat equity as one of the most valuable assets, of course, we have. For us, we're primarily interested in growth and doing it in a way that's, for the most part, on track one. Track two, you have deals that are mostly inventory, AR, things like that. We tend to prefer those types of growth strategies that you can intuitively use debt for. When it comes to things like way outside of that, like, potentially, you could look at the need to use equity. I think frugality there on the equity side is a good characteristic of how we think about it in our team and our bias on how we structure deals. Kerry, any thoughts you want to have on that in addition to it?
Yeah, no, I think echo what you just said, right? We have a lot of dry powder right now on the equity side. Our debt facility as well provides us significant liquidity and capacity. In the near term, even the medium term, we have absolutely no thoughts on new equity, right? We have lots of runway here to use what we have, and we're very excited. Yeah, no immediate needs for new equity.
Okay, great. For our viewers, again, if you have any other questions, please do submit them to the Q&A function at the bottom of your screen. Alternatively, you can email us at ir@builddirect.com. That's ir@builddirect.com. I guess there's no further questions. Thank you to our attendees. Thank you, Shawn, Kerry, and Jay today. That is it for the Q&A function today. Before we end the conference call, Shawn, do you have any closing comments you would like to share with our audience?
Yeah, I just want to say thank you. We really appreciate folks coming along with us on the journey. It's been a lot of fun. Really for the rest of 2025, our focus is growth. We've done the work to set up the platform, and now it's just time to lean into expansion and momentum. I just want to say thanks for your time, and as always, we're happy to share more feedback or answer questions offline as well. Thanks for tuning in, and we appreciate you all very much.
Thank you. For our viewers again, Build trades on the TSXV under the ticker BILD, and on the OTCQV under the ticker BDCTF. For those that couldn't attend, the recording of today's earnings call will be uploaded onto BuildDirect's investor relations website. If you have any additional questions that were not addressed during the call, please do send them in to ir@builddirect.com. I would like to thank everyone for joining us today. Have a good day.
Thanks, all.