Richelieu Hardware Q2 2026 Earnings Call: Complete Transcript

On Thursday, Richelieu Hardware (TSX:RCH) discussed second-quarter financial results during its earnings call. The full transcript is provided below.

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Access the full call at https://www.richelieu.com/html/An/statique/calendrier.html

Summary

RCH reported a 3.9% increase in total sales to $532.1 million for the second quarter, with a 5% increase on a comparable currency basis.

The company's acquisition strategy has been a focus, completing four acquisitions in the year, adding approximately $45 million in annual sales.

Second quarter EBITDA reached $56.1 million, up 1.7%, with a slight decrease in EBITDA margin to 10.6% due to tariff impacts.

Net income attributable to shareholders increased by 3.2% to $23.2 million, with diluted net earnings per share rising to $0.42.

For the first half of the year, total sales were nearly $1 billion, up 4.4%, with internal growth contributing 1.9% and acquisitions 2.5%.

The company plans to invest more in sales personnel in the U.S. to drive customer acquisition and market growth.

Management expressed confidence in achieving an 11% EBITDA margin despite current challenges, emphasizing the strong performance expected in the second half.

Working capital remains strong, with plans to reduce inventory levels by $5 to $10 million in the second half of the year.

Full Transcript

OPERATOR

Good afternoon, ladies and gentlemen, and welcome to RCH's second quarter results conference call. At this time, all participant 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 zero for the operator. Also note that this call is being recorded on Tuesday, May 31, 2026.

Richard

Thank you. Good afternoon, ladies and gentlemen, and welcome to RCH's conference call for the second quarter and first half ended May 31, 2026. With me is Antoine Duclair, CFO and COO. As usual, note that some of today's issues include forward-looking information, which is provided with the usual disclaimer as reported in our financial filings. We recorded good growth and positive results. During the second quarter, we have remained focused on our acquisition strategy, completing one new acquisition followed by two quarter ones.

After the end of the quarter, three promising acquisitions met our criteria, further strengthening our leading position in this high-growth market segment. Thanks to steady growth in our main market segment in Canada and the U.S., our sales increased respectively by 5.5% and 4.4% in U.S. dollars for the U.S. sales, for total sales of 532.1 million, up 3.9%, an increase that would have been 5% on a comparable currency to 2025. Our sales to manufacturers accounted for 89% of our total sales, reaching 473.7 million, up 3.8%.

Driven equally by internal growth and acquisitions, our sales to retailers and renovation superstores increased by 4.2% to 58.4 million. EBITDA reached 56.1 million, and net income attributable to shareholders was up 3.2% to 23.2 million. Regarding the execution of our acquisition strategy, since the beginning of the year, we have completed four acquisitions: one in the U.S. during the first quarter, another in Canada during the second quarter, and two additional acquisitions after the end of the quarter in Canada.

On May 1, we acquired Phenomenon, a distributor and manufacturer based in Hampton, Quebec, specializing in premium wall covering panels with high decorative and acoustic value. These products stand out for their unique design, quality, and installation ease for both residential and commercial applications, and they fit perfectly with our decorative panel offering. On June 26, we completed the acquisition of Solution Acoustic, which operates in the Greater Montreal area as a specialized distributor in acoustic solutions, known for product performance and architectural design.

Then on July 8, we completed the acquisition of WineC, a distributor of specialized hardware operating in the GTA area with three distribution centers. This reinforces our position in the key market of Ontario. These acquisitions, completed since the beginning of the year, add approximately $45 million in annual sales, bring new value expertise, new products, new customers, and further enhance the value we provide to our customers. In fact, the addition of Phenomenon and Solution Acoustic strengthens our leadership in decorative and acoustic solutions to a growing market segment while further expanding our presence among architects and designers.

This strategy builds on the recognition we received earlier this year with our Best of KBIS awards in two different product categories, and it reflects our commitment to differentiate ourselves and remain a leader in innovation. I will now ask Antoine to review the financial highlights for the quarter and the first six months.

Antoine Duclair, CFO and COO

Thanks, Richard. In the second quarter, sales reached 532.1 million, up 3.9% or 19.9 million, driven by 1.8% internal growth and 2.1% from acquisitions. At comparable exchange rates, sales growth would have been 5%. In Canada, sales totaled 291 million, up 5.5%, despite flat sales in Ontario, where market conditions remain more challenging. Sales to manufacturers amounted to 246 million, up 4.5%, while sales to hardware retailers totaled 45 million, up 11.6%.

In the U.S., sales grew to 175 million in U.S. dollars, up 4.4%. Sales to manufacturers reached 166 million in U.S. dollars, up 5.6%, with 3.1% coming from internal growth. In the hardware retailers and renovation superstores market, sales reached 9.6 million, down 12.7% in Canadian dollars. Total sales in the U.S. reached 241 million, up 1.9% over last year, accounting for 45% of total sales. Sales to our U.S. manufacturers market now represent 48% of total sales to manufacturers, further reflecting the growing importance of our U.S. operations. For the first half, total sales reached nearly 1 billion, up 4.4%, of which 1.9% resulted from internal growth and 2.5% from acquisition. At comparable exchange rates, sales growth would have been 5.9%. In Canada, sales reached 541 million, up 4.5%, including 2.9% from internal growth and 1.6% from acquisition. Sales to manufacturers totaled 452 million, up 21.6 million, or 5%. Sales to hardware retailers and renovation superstores were 88.7 million, compared to 86.8 million, up 2.2%.

In the U.S., sales amounted to 231 million in U.S. dollars, up 7.5%, with 3.7% from internal growth and 3.8% from acquisitions. They reached 455 million in Canadian dollars, up 4.2%, accounting for 46% of total sales in U.S. dollars. Sales to manufacturers totaled 313 million, an increase of 23.2 million, or 8%, driven by 4.5% internal growth and 3.5% from acquisitions. Sales to hardware retailers and renovation superstores stayed the same compared to last year.

Second quarter EBITDA reached 56.1 million, up 1 million or 1.7% from last year. EBITDA margin was 10.6% compared to 10.8% last year. The slight decrease in percentage reflects the impact of tariffs, which proportionately increased both sales and cost of sales. First half EBITDA totaled 99.4 million, up 1.8%, with the EBITDA margin at 10%. Second quarter net earnings attributable to shareholders amounted to 23.2 million, up 3.2%, while diluted net earnings per share increased 2.4% to $0.42 from $0.41 last year.

First half net earnings attributable to shareholders reached 37.6 million, up 3.5%. Diluted net earnings per share stood at $0.68 compared to $0.66 last year. Second quarter cash flow from operating activities before net change in non-cash working capital reached 47.9 million, up 2.4% from 46.8 million last year. Change in non-cash working capital used cash flow of 28.5 million, primarily driven by a 14.8 million increase in accounts receivable and a 9.4 million increase in inventories.

As a result, operating activities generated a cash inflow of 19.4 million for the quarter. For the first half, cash flows from operating activities represented a cash inflow of 36.6 million compared to a cash inflow of 51 million last year. For the second quarter, financing activities used 33.5 million in cash compared to 23.3 million last year, primarily reflecting higher cash returns to shareholders through 7.6 million of common share repurchase in addition to quarterly dividend payment of 8.6 million.

First half financing activities used cash flow of 58.6 million compared to 44.7 million in 2025. In the first half, we invested 26 million, including 15.3 million for two business acquisitions and 10.7 million primarily for equipment required to maintain and improve operational efficiency, including IT equipment. We continue to maintain an outstanding balance sheet with working capital of 629.5 million. I now turn it over to Richard.

Richard

Thank you, Antoine. In conclusion, we are integrating our acquisitions while the current economic environment is creating attractive acquisition opportunities in our target markets. We are evaluating several opportunities and remain well-positioned to pursue those that meet our strategic criteria and support our long-term growth. We continue to differentiate ourselves by constantly expanding our product offering and bringing innovative solutions and emerging global design trends to the American market.

By introducing products that are first to the market and maintaining them exclusively with our own brand names, we have become a trusted partner for architects, designers, woodworking professionals, and retailers. This relentless focus on innovation, product leadership, and value-added service, combined with the strongest team and their strategically located distribution network, is what defines RCH, reinforcing our competitive advantage and helping our customers be more successful in their own business.

Thanks, everyone, and I'll be happy to answer your questions.

OPERATOR

Thank you, Mr. Lau. Ladies and gentlemen, if you have any questions, please press star followed by one on your touch-tone phone. You will then hear a prompt that your hand has been raised, and should you wish to decline from the polling process, please press star followed by two. And if you're using a speakerphone, you will need to lift the handset first before pressing any keys. And a reminder that questions are restricted to analysts only. Thank you.

Please go ahead and press star one now if you have any questions. First, we will hear from Amir Patel at CIBC. Please go ahead.

Amir Patel, Analyst at CIBC

Hi, good afternoon, Richard. Can you share how sales fared in the month of June and, you know, any differences there across categories or geographies? And I know, I think last time you kind of highlighted Ontario as being particularly weak. So any signs of turnaround there?

Richard

I think the sales performance is the same performance that we had until the end of last quarter. So what we see, Canada is doing well as a whole, except for Ontario. I think Quebec is doing very well with a sales increase by more than 10%. Western Canada is also very healthy. I think it's over 5% increase. Basically, except for Ontario, Canada is pretty good. In the U.S., it's about the same everywhere, but we have different market segments like the specialized market, like the Closet market, for example, where we experienced and continue to experience between 15% and 20% increase.

For the rest, we have basically a performance of 2% to 3% per market segment. So basically, we're satisfied with that. But I think we have to, what we have decided here in this company is that maybe to invest a little bit more in salespeople, mainly in the U.S., in order to gain more customers and to move the market. We think the market is a kind of lethargy as we speak. So I think we have to be more aggressive in visiting more customers and acquiring new customers and, as a result, new sales as well.

So basically, we don't think that the months to come in the near future will help us. We have to help ourselves by taking the initiative.

Amir Patel, Analyst at CIBC

Fair enough. And Richard, how much is Ontario as a percent of your Canadian business?

Richard

It's about 44%.

Amir Patel, Analyst at CIBC

And I know I make it 17% of total sales.

Richard

Of total sales. Thank you.

Amir Patel, Analyst at CIBC

Right, okay. And then I know, I think, Richard, in the past you highlighted some U.S. box business that was going to resume. You know, I think it was supposed to start in Q2. Did that start? Is that only playing out here in Q3?

Richard

Yes, it has started. So we're in the process of delivering our first order. So basically, that's going to create more sales, really for a couple of quarters. It's going to be flat for the next quarter because once we fill up the stores, it takes a while before they reorder, but after that, you can imagine, 10 to $12 million in yearly sales.

Amir Patel, Analyst at CIBC

And I made it started in June.

Richard

June. Perfect.

Amir Patel, Analyst at CIBC

Okay. And just last question I had, Antoine. Your EBITDA margins averaged 10% in the first half. On the last conference call in April, you were pointing to an 11% average for the year. Is that 11% still looking achievable? And what type of demand backdrop would you need to get margins to that sort of longer-term, 12, 13% objective?

Antoine Duclair, CFO and COO

Yeah, we would need a bit more rigor in the market to pump up those margins. But keep in mind, Amir, that the second half is always stronger than the first half. And you understand as well that the very slight decrease, 0.2%, is basically due to tariffs because when we're passing through the tariff, we're passing the dollar. So it has, for sure, a slight dilution on the percentage. We should be able to be close to the 11%, but we would need a bit more rigor in the market.

Amir Patel, Analyst at CIBC

Fair enough. That's all I had. I'll turn it over. Thanks.

OPERATOR

Thank you. Next question will be from Zachary Evershed at National Bank Capital Markets. Please go ahead.

Nate, Analyst at National Bank Capital Markets

Good afternoon, everyone. This is Nate calling in for Zach. Thank you for taking my questions today. I want to ask first on the margins. So was there anything else to call out on the margin compression year over year other than tariffs? Because we noticed your gross margins fell around 200 basis points year over year, but your EBITDA margins only fell 20 basis points.

Antoine Duclair, CFO and COO

No, there's nothing else than that. So structurally, it's the same. So really, the tariff is definitely what has impacted the margin.

Nate, Analyst at National Bank Capital Markets

I see. Okay. And with the aforementioned 11% EBITDA margin goal, how are you feeling about that on top with recent acquisitions now in the mix and the few, I believe, several you have currently evaluating in your pipeline?

Antoine Duclair, CFO and COO

Yeah, some of the ones we closed last year were businesses that we acquired that needed some restructuring. The ones that we announced this year in the second quarter are businesses that are generating EBITDA already. So we're confident about these acquisitions. So the ones we just did will not dilute the EBITDA margin.

Nate, Analyst at National Bank Capital Markets

Thank you very much. And we did notice also that capital expenditures ticked up to 7.5 million this quarter. Are there any plans you can tell us about?

Antoine Duclair, CFO and COO

Yeah, no. Basically, there's a $2 million of IT equipment that we have to make every three to four years. So except that, it's pretty much back to maintenance capex. So we should be at the end of the year. We should be between 18 and 20 million like we told you guys earlier. So we should be around that. We're looking at a few projects. So we're looking at increasing our footprint in our Drummondville location. So as you know, we have a building there, we have land available.

So we're going to be, we're going to have some leases expiring, and we're going to be building in Drummondville, Quebec. So that should occur at the end of the year and the beginning of next year. But other than that, there's nothing else to mention.

Nate, Analyst at National Bank Capital Markets

Great color. Thank you. And one last one for me. How are you guys feeling about your working capital position, and do you have any targets you'd like to call out for this year or next year?

Antoine Duclair, CFO and COO

I think working capital here is pretty simple. It's accounts receivable and inventory. So I think on the AR side, we're in good shape. We have a day of sales outstanding around 45, 46 days, which is pretty aligned with the historical levels. On the inventory side, you've seen increases in the first two quarters. We've also captured some opportunistic acquisition in terms of inventory. So before price increases, we've closed some deals to bring in the inventory at a lower price.

So we've done that. So we should see a reduction in the second half. I'm hoping to see a reduction between 5 to 10 million in the second half.

Nate, Analyst at National Bank Capital Markets

Thank you very much. I will turn it over.

OPERATOR

Thank you. And at this time, Mr. Lau, it appears we have no other questions. Please proceed.

Richard

Thank you very much. It's very nice talking to you again. If you have any other questions, do not hesitate to call us. Thank you.

OPERATOR

Thank you, sir. Ladies and gentlemen, this does indeed conclude the conference call for today. Once again, thank you for attending. And at this time, we ask that you please disconnect your line.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.