ADENTRA Announces First Quarter 2025 Results

First quarter 2025 sales of US$542.5 million

LANGLEY, BC, May 6, 2025 /CNW/ - ADENTRA Inc. ("ADENTRA" or the "Company") today announced financial results for the three months ended March 31, 2025. ADENTRA is one of North America's largest distributors of architectural building products to the residential, repair and remodel, and commercial construction markets. We currently operate a network of 84 facilities in the United States and Canada. All amounts are shown in United States dollars ("US $" or "$"), unless otherwise noted.

Financial Highlights (as compared to Q1 2024 unless otherwise noted)

• Generated sales of $542.5 million (C$778.6 million), up $7.4 million, or 1.4% from $535.1 million (C$721.7 million)
• Gross margin percentage of 21.6%, compared to 22.1% in Q1 2024
• Operating expenses increased by $6.1 million, or 6.5%
• Basic earnings per share of $0.16 (C$0.23), compared to $0.48 (C$0.65) per share
• Adjusted basic earnings per share of $0.42 (C$0.60), compared to $0.76 (C$1.02) per share.
• Adjusted EBITDA of $40.0 million (C$57.4 million), compared to $45.6 million (C$61.4 million), a decrease of 12.3%
• Declared a dividend of C$0.15 per share, payable on July 25, 2025 to shareholders of record as of July 14, 2025
• Shareholder returns included $2.6 million in dividends and $1.9 million in share repurchases

"We demonstrated strong operating stability in difficult conditions through the first quarter of 2025," said Rob Brown, President and CEO of ADENTRA. "Drawing on our strategies, operating discipline and proven business model, we successfully met challenges including the negative impact of adverse winter weather conditions, a softer residential construction market driven by elevated US mortgage rates, consumer affordability challenges and increasing economic uncertainty related to the volatile US trade landscape."

"Total first quarter sales grew by 1.4% with acquisition-based growth from our new Woolf Distributing operations offsetting a volume-related decline in organic sales. We also maintained stable product pricing, signaling a positive shift following the deflationary pressures of 2023 and 2024. Importantly, our operations were not significantly impacted by recent US tariff actions, with approximately 92% of our product mix unaffected."

"I am particularly proud of our success in achieving a 21.6% gross profit margin percentage, which was consistent with our fiscal 2024 performance of 21.7%. Our ability to maintain strong gross margins in the current environment underscores the resilience of our business model and the effective execution of our pricing and procurement strategies. Additionally, we maintained tight control of our organic expenses, increasing by just 1% year-over-year, well below the rate of inflation."

"While successfully managing the immediate challenges of the first quarter, we also prepared the business for ongoing tariff and trade uncertainties. In addition to executing our normal spring inventory build, we took modest additional stocking positions in certain areas as a precautionary measure in anticipation of potential trade disruptions. As a result, we are well positioned with inventory heading into the 2025 building season, and have created added flexibility to help us manage during a period of heightened global trade uncertainty."

"Overall, while we are conservative in our outlook given our belief that a sustained improvement in demand will require better housing affordability and a rebound in consumer confidence, ADENTRA is uniquely positioned to navigate the current environment. We have the size, the diversification, and above all, the experience to manage effectively through challenging market conditions. Our price pass-through revenue model historically enables us to achieve higher product prices and therefore generate increased gross profit dollars during periods of inflationary pressure. At the same time, our disciplined working capital management enables us to release cash, protect the balance sheet and safeguard free cash flow, ensuring we remain well positioned to invest in growth and deliver shareholder returns. As we move forward, we are fully committed to creating continued long-term value for our investors," said Mr. Brown.

Trade

We estimate that 8% of our product mix is subject to current tariff actions, at an average tariff rate of 10%.

Additionally, there is an ongoing Section 232 ("S232") investigation initiated by the US Department of Commerce ("Commerce") on March 10, 2025 to determine the effects on national security of imports of timber, lumber, and derivative products. Commerce has until December 5, 2025, to make a recommendation to the President related to it's S232 investigation. Commerce can render their recommendation sooner, and the timing and amount of potential S232 tariffs, if any, is uncertain. We estimate that if S232 tariffs are imposed the proportion of our product mix impacted by tariffs could rise to 35%.

We are well-equipped to manage potential tariffs. Our business operates a price pass-through model. We expect to offset tariff-related product cost increases by raising selling prices, thereby maintaining normal gross margins and generating additional gross profit. Moreover, our global sourcing network spans over 30 countries, offering a diverse range of product options for our customers if tariff rates differ by country. Additionally, we are a key partner for our US vendors, often ranking among their largest customers, which ensures a robust domestic supply to the extent our customers choose a US supply solution versus an off-shore one.

Increased product pricing due to tariffs may lead to a reduction in consumer demand for goods, including our products. In this instance, we expect to adjust inventories and preserve cash flow. During periods of slower economic activity, we release working capital and pay down debt. Furthermore, we believe that near-term reductions in home building will only exacerbate the long-term housing undersupply, which could be a positive for future demand.

Outlook

Persistent macroeconomic headwinds continue to weigh on our markets. Elevated US mortgage rates and constrained housing supply remain central to ongoing affordability challenges, while the escalating trade war between the US and key partners has introduced greater economic uncertainty and the prospect of renewed inflationary pressures.

Considering these factors, we maintain a conservative near-term outlook, even as we remain confident in the long-term fundamentals of the residential construction market, supported by structural undersupply, favorable demographics, and an aging housing stock. Our focus remains firmly on operational efficiency and executing our proven strategy, drawing on our deep experience navigating through varied economic conditions. Our diversified portfolio, national scale, and strong supplier relationships further reinforce our resilience.

To ensure our guidance framework remains aligned with the current macroeconomic landscape, which is marked by unprecedented trade tensions and heightened market volatility, we are transitioning from our Destination 2028 fixed 5-year targets to a full-cycle performance framework. This is not a shift in strategy, but a measured response to a shift in economic conditions. Our priorities remain firmly intact and include disciplined execution, double-digit capital returns, and long-term sustainable earnings per share growth.

Full-Cycle Target Financial KPIs

• Average annual organic growth: Low-to-Mid Single Digit
• M&A spend per year: $50-150 million
• Gross profit margin: +20%
• Adjusted EBITDA margin: +8-10%
• Return on invested capital: +10-12%

This adjustment in guidance provides the flexibility to advance our strategic priorities without being constrained by short-term market volatility, while reaffirming our unwavering commitment to long-term shareholder value creation.

For further details, please refer to our investor presentation available on our website.

Q1 2025 Investor Call

ADENTRA will hold an investor call on Wednesday, May 7, 2025 at 8:00 am Pacific (11:00 am Eastern). Participants should dial 1-888-510-2154 or [phone] (GTA) at least five minutes before the call begins. A replay will be available through May 21, 2025 by calling toll free 1-888-660-6345 or [phone] (GTA), followed by passcode 99683 #.

Summary of Results

	Three months		Three months
	ended March 31		ended March 31
	2025		2024
Total sales	$              542,506		$              535,138
Sales in the US	501,199		492,470
Sales in Canada (CAD$)	59,282		57,542
Gross margin	116,978		118,234
Gross margin %	21.6 %		22.1 %
Operating expenses	(99,946)		(93,835)
Income from operations	$               17,032		$               24,399
Add: Depreciation and amortization	20,465		18,329
Earnings before interest, taxes, depreciation and
amortization ("EBITDA")	$               37,497		$               42,728
EBITDA as a % of revenue	6.9 %		8.0 %
Add (deduct):
Depreciation and amortization	(20,465)		(18,329)
Net finance expense	(11,268)		(11,078)
Income tax expense	(1,644)		(2,650)
Net income for the period	$                 4,120		$               10,671
Basic earnings per share	$                   0.16		$                   0.48
Diluted earnings per share	$                   0.16		$                   0.47
Average US dollar exchange rate for one Canadian dollar	$                 0.697		$                 0.742

Analysis of Specific Items Affecting Comparability (in thousands of Canadian dollars)
	Three months		Three months
	ended March 31		ended March 31
	2025		2024
Earnings before interest, taxes, depreciation and
amortization ("EBITDA"), per table above	$               37,497		$               42,728
LTIP expense	2,470		2,824
Adjusted EBITDA	$               39,967		$               45,552
Adjusted EBITDA as a % of revenue	7.4 %		8.5 %
Net income for the period, as reported	$                 4,120		$               10,671
Adjustments:
LTIP expense	2,470		2,824
Foreign exchange (gain)/loss	(43)		285
Amortization of acquired intangible assets	6,731		5,527
Tax impact of above adjustments	(2,518)		(2,289)
Adjusted net income for the period	$               10,760		$               17,018
Basic earnings per share, as reported	$                   0.16		$                   0.48
Net impact of above items per share	0.26		0.28
Adjusted basic earnings per share	$                   0.42		$                   0.76
Diluted earnings per share, as reported	$                   0.16		$                   0.47
Net impact of above items per share	0.26		0.28
Adjusted diluted earnings per share	$                   0.42		$                   0.75

(1) Prior year comparative figures have been adjusted to add back amortization of acquired intangible assets, foreign exchange (gain) loss, and LTIP tax deductibility to conform with current year presentation.

Results from Operations - Three Months Ended March 31, 2025

For the three months ended March 31, 2025, total sales increased by $7.4 million to $542.5 million, from $535.1 million in Q1 2024. The year-over-year increase was driven by our acquired Woolf operations, which contributed sales of $31.9 million, partially offset by a $21.9 million, or 4.1%, decrease in organic sales. Lower sales volumes as compared to Q1 2024 were the key factor in the lower organic sales. In addition, foreign exchange fluctuations in the Canadian dollar resulted in a $2.7 million unfavorable impact on sales results.

In our US operations, first quarter sales grew by $8.7 million to $501.2 million, from $492.5 million in Q1 2024. This year-over-year increase was driven by the $31.9 million contribution from the acquired Woolf business, partially offset by a $23.2 million, or 4.7%, decrease in organic sales primarily driven by lower sales volumes.

In Canada, first quarter sales rose by C$1.7 million, or 3.0%, to C$59.3 million as compared to Q1 2024. The year-over-year improvement in Canadian sales was driven by an approximate 2% increase in product prices and a 1% increase in sales volumes.

First quarter gross margin of $117.0 million was $1.3 million, or 1.1%, lower than in the same period in 2024. The modest decrease reflects a slightly lower gross margin percentage of 21.6%, compared to 22.1% in Q1 2024, partially offset by the 1.4% increase in net sales.  

For the three months ended March 31, 2025, operating expenses increased to $99.9 million, from $93.8 million in Q1 2024. This $6.1 million, or 6.5%, increase primarily reflects the addition of $4.9 million of expense related to the acquired Woolf business, together with higher warehouse operating costs.

For the three months ended March 31, 2025, depreciation and amortization increased to $20.5 million, from $18.3 million in Q1 2024. The year-over-year increase was mainly due to higher premise lease costs and an additional $1.2 million in amortization of acquired intangible assets related to the Woolf acquisition. Depreciation and amortization in the current period, included $6.7 million of amortization on acquired intangible assets.

For the three months ended March 31, 2025, net finance expense increased by $0.2 million to $11.3 million, from $11.1 million in the same period in 2024. The year-over-year increase primarily reflects a higher indebtedness balance, partially offset by lower interest rates. 

For the three months ended March 31, 2025, income tax expense was $1.6 million, representing an effective tax rate of approximately 28.5%, as compared to 19.9% in Q1 2024. The increase in our effective tax rate is primarily related to the Excessive Interest and Financing Expense Limitation ("EIFEL") legislation enacted in Canada, which limits our ability to deduct interest expense.

We generated first quarter Adjusted EBITDA of $40.0 million, compared to $45.6 million in Q1 2024. The $5.6 million, or 12.3%, decrease reflects the $4.3 million increase in operating expenses (before changes in depreciation and amortization and LTIP expense) and the $1.3 million decrease in gross margin.

In the first quarter of 2025, we generated net income of $4.1 million (basic earnings per share of $0.16), compared to $10.7 million (basic earnings per share of $0.48) in Q1 2024. The $6.6 million, or 61.4%, year-over-year change reflects the $5.2 million decrease in EBITDA, $2.1 million increase in depreciation and amortization and $0.2 million increase in net finance expense, partially offset by the $1.0 million decrease in income tax expense.

First quarter adjusted net income was $10.8 million, a decrease of 36.8% from $17.0 million in the same period in 2024. Adjusted basic earnings per share for Q1 2025 were $0.42, compared to $0.76 in Q1 2024.

About ADENTRA

ADENTRA is one of North America's largest distributors of architectural building products to the residential, repair and remodel, and commercial construction markets. The Company operates a network of 84 facilities in the United States and Canada. ADENTRA's common shares are listed on the Toronto Stock Exchange under the symbol ADEN.

Non-GAAP and other Financial Measures

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, 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, transaction costs, foreign exchange gain (loss), 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 to assist in evaluating our ability to meet debt service requirements and fund organic and inorganic growth, and as an indicator of relative operating performance.
  
  
• "Organic sales" consists of quantifying the change in total sales as either related to organic or acquisition-based, or the impact of foreign exchange. Total sales earned by acquired companies in the first 12 months following an acquisition is reported as acquisition-based growth and thereafter as organic sales. Organic sales excludes the impact of acquisitions and foreign exchange impact related to the translation of Canadian sales to US dollars. From time to time, we also quantify the impacts of certain unusual events to organic sales to provide useful information to investors to help better understand our financial results.
  
  
• "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 to evaluate the operating liquidity available to us.
  
  
• "Return on invested capital" is calculated by dividing Adjusted EBITDA, after subtracting depreciation, amortization and taxes, by the sum of total bank indebtedness and shareholder's equity at period end.

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 March 31, 2025 (which is incorporated by reference herein).

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 Canada ("forward-looking information"). The words "anticipates", "believes", "budgets", "could", "estimates", "expects", "forecasts", "intends", "may", "might", "plans", "projects", "schedule", "should", "will", "would" and similar expressions are often intended to identify forward-looking information, although not all forward-looking information contains these identifying words.

Forward-looking information is included, but not limited to: We have the size, the diversification, and above all, the experience to manage effectively through challenging market conditions; our price pass-through revenue model historically enables us to achieve higher product prices and therefore generate increased gross profit dollars during periods of inflationary pressure; at the same time, our disciplined working capital management enables us to release cash, protect the balance sheet and safeguard free cash flow, ensuring we remain well positioned to invest in growth and deliver shareholder returns; as we move forward, we are fully committed to creating continued long-term value for our investors; we estimate that 8% of our product mix is subject to current tariff actions, at an average tariff rate of 10%; persistent macroeconomic headwinds continue to weigh on our markets; elevated US mortgage rates and constrained housing supply remain central to ongoing affordability challenges, while the escalating trade war between the US and key partners has introduced greater economic uncertainty and the prospect of renewed inflationary pressures; considering these factors, we maintain a conservative near-term outlook, even as we remain confident in the long-term fundamentals of the residential construction market, supported by structural undersupply, favorable demographics, and an aging housing stock; our focus remains firmly on operational efficiency and executing our proven strategy, drawing on our deep experience navigating through varied economic conditions; our diversified portfolio, national scale, and strong supplier relationships further reinforce our resilience; our priorities remain firmly intact and include disciplined execution, double-digit capital returns, and long-term sustainable earnings per share growth.

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 North America; our management information systems upon which we are dependent are not impaired; we are not adversely impacted by disruptive technologies; an outbreak or escalation of a contagious disease does not adversely affect our business; and, our insurance is sufficient to cover losses that may occur as a result of our operations.

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; tariff policies extending to regions not currently under discussion; our results are dependent upon the general state of the economy; the impacts of pandemics, 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 North America; disruptive technologies could lead to reduced revenues or a change in our business model; we are dependent upon our management information systems; disruptive technologies could lead to reduced revenues or a change in our business model; our information systems are subject to cyber securities risks; our insurance may be insufficient to cover losses that may occur as a result of our operations; an outbreak or escalation of a contagious disease may adversely affect our business; our credit facility affects our liquidity, contains restrictions on our ability to borrow funds, and impose restrictions on distributions that can be made by us and certain of our subsidiaries; the market price of our Shares will fluctuate; there is a possibility of dilution of existing Shareholders; and, other risks described in our Annual Information Form, our Information Circular and in this press release.

This press 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 press 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 press 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 ADENTRA Inc.

For further information: Maggie MacDougall - Capital Markets Advisor, Phone: [phone], Email: [email protected], Website: www.adentragroup.com