Doman Building Materials Gro Aktie

Good day, and welcome to the Doman Building Materials Group Limited Second Quarter 2026 Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Ali Mahdavi. Please go ahead.

Good morning, everyone, and thank you for joining us for Doman Building Materials Second Quarter 2026 Financial Results Conference Call. Joining us on today's call are the company's Chairman and Chief Executive Officer, Amar Doman; and Chief Financial Officer, Darren Gwozd. If you have not seen the news release, which was issued after the close of market yesterday, it is available on the company's website as well as on SEDAR along with our MD&A and financial statements.

I would also like to remind you that a replay of this call will be accessible until midnight on August 20. Following the presentation of the second quarter results, we will conduct a Q&A session for analysts only. Instructions will be provided at that time for you to join the queue for questions. Before we begin, we are required to provide the following statements regarding forward-looking information, which is made on behalf of Doman Building Materials Group Limited and all of its representatives on this call. Remarks and answers to your questions today may contain forward-looking information about future events or the company's future performance.

This information is subject to risks and uncertainties that may cause actual events or results to differ materially. Any information regarding forward-looking statements is made as of the date of this call, and the company does not undertake to update any forward-looking statements. Please read the forward-looking statements and risk factors in the MD&A as these outline the material factors which could cause or would cause actual results to differ.

The company will not provide guidance regarding future earnings during today's call, and management does not anticipate providing guidance in future quarterly or interim communications with investors. I'll now turn the call over to Amar.

Thanks, Ali. Good morning, everyone. We appreciate you taking the time to be with us as we review Doman's second quarter 2026 financial results and discuss the current market environment. Overall, our second quarter performance demonstrates the resilience of our business model and the strength of our diversified product offering. Despite a market that continues to be influenced by economic uncertainty and uneven demand across construction markets, we delivered another solid quarter, highlighted by record second quarter numbers on revenue, stable margins and improved net earnings.

Revenue for the quarter reached a record $904 million, an increase from $887 million in the second quarter of last year. This performance was primarily driven by higher year-over-year pricing in several construction materials categories. Construction materials continued to represent the largest component of our business, accounting for approximately 84% of sales with specialty and allied products contributing 13% and other sources making up the balance.

Our ability to deliver record revenues while maintaining disciplined pricing and customer service reflects the effectiveness of our distribution network, the breadth of our product portfolio and the long-standing relationships we have built with customers across North America. Gross margin dollars increased modestly to $146 million, while our gross margin percentage remained stable at 16.1%. Maintaining margin in today's environment speaks to the disciplined approach our teams continue to take in managing inventory procurement and pricing across a dynamic market.

Adjusted EBITDA for the quarter was just under $79 million, broadly consistent with the prior year quarter despite continued market volatility. While EBITDA was slightly below last year's level, we were pleased to generate net earnings of $31.2 million, an improvement over the $27.7 million reported in the second quarter of '25. Looking at the first 6 months of the year, revenues totaled $1.67 billion with adjusted EBITDA of $147 million.

Gross margin percentage improved slightly to 16.5% and net earnings increased to $55.1 million compared to $51.2 million in the same period last year. These results demonstrate our ability to generate consistent profitability while navigating a market that remains far from uniform. As always, our priorities remain unchanged. We continue to focus on disciplined execution, operational efficiency, prudent working capital management and providing exceptional service to our customers.

These fundamentals have enabled us to perform consistently across different market cycles and position the company to capitalize on opportunities as demand improves. Our balance sheet and cash generation continue to support our capital allocation strategy, including returning capital to shareholders. Consistent with that commitment, we declared our quarterly dividend of $0.14 per share, reflecting our confidence in the long-term strength of the business.

Looking ahead, while macroeconomic uncertainty remains, we believe Doman is well positioned. Our diversified product mix, broad geographic footprint, experienced management team and disciplined operating model provide a strong foundation as market conditions continue to evolve. In closing, I'd like to thank our employees for their continued dedication and commitment, our customers and supplier partners for their ongoing trust and our shareholders for their continued support.

With that, I'm going to turn the call over to Darren, our CFO, to review the financial results in more detail before we open the line up for analyst questions. Thanks. Darren?

Thank you, Amar. Good morning, everyone. Sales for the 3 months ended June 30, 2026, were $904.5 million versus $886.7 million in 2025, representing an increase of $17.8 million or 2%, largely due to increases in year-over-year pricing in certain construction material categories. The company's sales in the quarter made up of 84% of construction materials with the remaining balance resulting from specialty and allied products of 13% and other sources of 3%.

Gross margin dollars were $145.8 million in the 3 months ended June 30, 2026, versus $142.7 million in 2025, an increase of $3.1 million or 2.2%, mainly driven by the increase in sales. Gross margin percentage was 16.1% during the period, unchanged from the same period in 2025 despite the volatility experienced in the past year with respect to lumber pricing, further reinforcing the resilience of our business model.

Expenses for the 3 months ended June 30, 2026, were $90.9 million as compared to $87.9 million, an increase of 3% to 3.4% and $3 million. As a percentage of sales, 2026 expenses were 10.1% compared to 9.9% in 2025. Distribution, selling and administration expenses increased by $4.3 million or 6.9% to $67 million in the second quarter of 2026 from $62.7 million in the same period in 2025, primarily due to broad inflationary pressures.

As a percentage of sales, these expenses were 7.4% compared to 7.1% in the same quarter in 2025. Depreciation and amortization expenses decreased quarter-over-quarter by $1.4 million or 5.5% to $23.9 million for the 3 months ended June 30, 2026, compared to $25.3 million for the same period in 2025, mainly due to dispositions of property, plant and equipment.

Finance costs for the second quarter of 2026 were $17.6 million compared to $19.3 million in 2025, a decrease of $1.7 million, largely as a result of overall net debt, including lower utilization of the revolving loan facility during the quarter. This quarter's EBITDA was $76.8 million (sic) [ $78.8 million ] compared to $80 million in the comparative quarter of 2025, a decrease of $1.3 million (sic) [ $1.46 million ] or 1.8%. EBITDA during the quarter was generally stable versus prior quarter despite some slightly elevated inflationary pressures from freight and fuel costs.

Doman's net earnings for the quarter were $31.2 million compared to $27.7 million for the same period in 2025, an increase of $3.5 million. Turning now to the statement of cash flows. Operating activities for the 6 months ended June 30, 2026, consumed $2.3 million in cash and cash equivalents versus generating $1.2 million in the comparative prior year.

The following activities during the period accounted for the change in the cash. Operating activities before noncash working capital changes generated $96.5 million in cash compared to $100.7 million in the same period in 2025. Operating cash flows during the period were impacted by the timing of income tax payments. During the 6 months ended June 30, 2026, the company generated $35.9 million of cash from overall financing activities related to the funding of seasonal working capital compared to $6.9 million in 2025.

Payment of lease liabilities, including interest, consumed $17.7 million of cash compared to $15.8 million in 2025. The company's lease obligations generally require monthly installments, and these payments are all current. Total net advances of the revolving loan facility were $84.9 million compared to $46.8 million in 2025. Shares issued, net of transaction costs generated $1 million of cash compared to $0.8 million in 2025. The company also returned $24.6 million to shareholders through dividends paid during the 6-month period, largely in line with 2025.

The company was not in breach of any of its lending covenants during the 6 months ended June 30, 2026. Investing activities consumed $15.3 million of cash compared to generating $8.6 million in 2025. Investing activities for the first 6 months of the comparative 2025 period included the sale of a portion of the company's Timberlands for total cash proceeds of $14.4 million. Additionally, the company invested $21 million in new property, plant and equipment during the period, $16 million of which was spent in Q1 compared to $6.1 million spent in the 6 months in 2025.

This concludes our formal commentary. We would now be happy to respond to any questions that you may have. Thank you, Operator.

[Operator Instructions]

The first question comes from Matthew Keller with -- sorry, that's Matthew McKellar with RBC Capital Markets.

First, I know you don't provide quarterly guidance, but just at a high level, what is your sense of how Q3 is shaping up relative to Q2? Last year we kind of slowed quite a bit sequentially with what was going on in the market. I'd be curious to know how you're seeing demand trends so far through Q3 in each of Canada and the U.S. And with that, how you're thinking about the sequential progression in your results?

Yes. Good question, Matthew. We've got July in the books now. And I can tell you, it's fairly similar to what we're seeing. So the economy hasn't changed much. I think the consumer hasn't changed much. The Middle East is still going on and these kind of things that are just not that bullish for the market. So kind of steady as she goes. Again, nothing crazy on the way up, nothing crazy on the way down, just hitting a lot of singles and getting it done.

Okay. And could you talk about any impacts even if indirect that you might be expecting from recently announced tariffs on Brazil and Canada, maybe particularly as it might relate to fencing?

Yes, sure. That's a net benefit to Doman. So when we look at -- of course, we don't really cross the border with a lot of materials. So the import sort of severe tariffs have been put on in South America are benefiting. We're getting a lot of inquiry for fencing. And I think that's going to continue to go well is a long-term story as we continue to ramp up our fencing production in the U.S. and pretty much stop all imports coming in. So that's certainly going to help demand as the quarters go on.

Our next question is from Hamir Patel with CIBC Capital Markets.

Amar, I just wanted to follow up on the fencing side. I know you've got various growth initiatives underway there. Maybe if you could just give us an update on how that's progressing.

Yes. We've got our Gilmer sawmill operating. It's not quite at 100% capacity yet with the upgrades we did down in Texas, but it's coming along now, which is excellent and reduced our labor cost significantly there in our automation. And then we've got our Estill sawmill that is going to start production kind of any day now. It's kind of as promised. So we'll start to get into that later in the third quarter and fourth quarter to see sales of 1-inch fence products, picket products and some 1-inch that we're going to take back to Texas as well out of Estill. So pretty excited about that. Everything is on track as far as our CapEx goes.

Great. And just on the wood decking side, it feels like you're gaining share within your product categories. But do you have a sense as to how wood is faring versus composites this year?

Yes. I think the price gap is still a barrier. So composites obviously are doing well. We distribute a lot of composites as well. Treated lumber is still around your substructure. So it really depends on your price point. Lumber is still the #1 by massive amounts. And we're happy to distribute either and produce, obviously, on the lumber side. But we just like more decking happening. So we're just good people are focusing on the backyard that bodes well for Doman.

Okay. Great. And just last question I had, any opportunities to enhance that relationship you have with your largest home improvement retailer customer in the U.S.?

Yes. We're always working to hold on to that business, number one, and make sure we service it properly. So we tend to try and bring in different product lines. And when there's opportunities in the aisles to make new products available. But there aren't a lot of new products in our portfolio, but certainly, we try to get more market share in the aisle with accessories and other things that were produced that we'd like to scale coming west out of the East on things like stair risers, stringers, ball tops, and balusters. Those are items that we're producing on the East Coast that we want to replicate, as mentioned, kind of in Texas, Arkansas markets and then push north on freight.

The next question comes from Zachary Evershed with National Bank.

It's Prashant Kamath in for Zach this morning. Congrats on the quarter. Just a few quick questions here. I saw that revenue growth was driven primarily by pricing this quarter. Can you quantify the contribution from price versus volume? And maybe explain which product categories or regions saw the greatest volume pressure?

Yes, I wouldn't say there was any volume pressure. In fact, our volumes are now ticking almost in line with 2025 and also in some areas, they are up. So we really don't have a volume issue, if you will. I can't really quantify exactly how much of those dollars were inflation on the lumber side, but it certainly has helped drive that top line to a record over $900 million for the quarter. Anything to add, Darren, there?

Yes. No, just like Amar said, I mean, volumes were not a concern. They were relatively consistent.

Okay. That's good to know. And just on the next one here. I saw that OpEx picked up this quarter and that the $67 million was higher than the $62 million average we've seen over the past 6 quarters. What specifically drove that increase? And how much of this is temporary?

Yes. So I'd say I mean there were some inflationary pressures, and that is just more general in nature. But I would say about half of the increase was kind of more non-operational in nature. And in particular, there's some earn-out costs in there related to one of our prior acquisitions, which actually in our mind is good news. It means that, that acquisition is -- it was a good acquisition, and we're kind of ahead of where we were expecting to be when we initially did our purchase allocation. So there's a little bit of that. So I'd say about half of that increase is related to that to kind of non-operational items.

This concludes our question-and-answer session. I would like to turn the conference back over to Ali Mahdavi for closing remarks.

Once again, thank you for joining us today for the conference call. We look forward to speaking with you again during the Q3 conference call. And in the interim, should you have any questions, please feel free to reach out to us. That concludes today's call. Have a great day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Greetings, and welcome to Doman Building Materials Group First Quarter 2026 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Ali Mahdavi. Thank you. You may begin.

Thank you. Good morning, everyone, and thank you for joining us for Doman Building Materials First Quarter 2026 Financial Results Conference Call. Joining me this morning are Amar Doman, Chairman and Chief Executive Officer; and Darren Gwozd, our new Chief Financial Officer. Please join me in welcoming Darren to his first conference call at Doman.

If you have not seen the news release, which was issued on Friday, it is available on the company's website at domanbm.com as well as on SEDAR+, along with our MD&A and financial statements. I would also like to remind you that a replay of this call will be accessible until midnight on May 25, 2026. Following the presentation of the first quarter results, we will conduct a Q&A session for analysts only. Instructions will be provided at that time for you to join the queue for questions.

Before we begin, we are required to provide the following statements regarding forward-looking information, which is made on behalf of Doman Building Materials Group Limited and all of its representatives on this call. Remarks and answers to your questions today may contain forward-looking information about future events or the company's future performance. This information is subject to risks and uncertainties that may cause actual events or results to differ materially. Any information regarding forward-looking statements is made as of the date of this call, and the company does not undertake to update any forward-looking statements. Please read the forward-looking statements and risk factors in the MD&A as these outline the material factors which could cause or would cause actual results to differ. The company will not provide guidance regarding future earnings during today's call, and management does not anticipate providing guidance in future quarterly or interim communications with investors.

I'll now turn the call over to Amar.

Thanks, Ali. Good morning, everyone, and thank you for joining us today. Before we get into the results, I would like to take a moment to introduce you all to Darren, and welcome him to the team. Darren has been in the CFO seat for just over a month, and we are very pleased to have him on board. I also want to acknowledge Jay Code, who retired last month and will be missed by all of us. We'll always appreciate Jay's dedication to Doman during his many years working closely with the company. On behalf of myself, the Board of Directors and the entire Doman organization, thank you, Jay. Enjoy your retirement.

I'll begin with a summary of our first quarter results followed by some perspective on market conditions and our outlook for the remainder of the year. For the first quarter of 2026, Doman delivered revenues of $762 million compared to $793 million in the same period last year. The year-over-year decline was primarily driven by lower pricing across key construction material categories, including SPF lumber, OSB and plywood, partially offset by increases later in the quarter in Southern Yellow Pine in the United States. Despite that pricing pressure, our performance reflects the resilience of our operating model. We maintained strong shipment volumes and continue to execute effectively across our network.

Gross margin for the quarter was $130 million, with margin percentage improving to 17%, up from 16.7% last year. This improvement highlights our continued focus on disciplined pricing, procurement and cost management.

EBITDA came in at $68 million compared to $70 million last year. While slightly lower year-over-year, this represents a solid result given the pricing environment and the macro picture including fuel. Net earnings for the quarter were $24 million, essentially in line with the prior year.

We also remain committed to returning capital to shareholders. During the quarter, we declared a dividend of $0.14 per share, which was paid in April.

As we move through the first quarter, we continued to see volatility in commodity pricing, particularly in SPF, OSB and plywood. While pricing trends were weaker year-over-year, we saw some signs of stabilization in the U.S. market in Q1. That said, the broader macroeconomic environment remains uncertain. Interest rates, housing affordability and overall construction activity continues to influence demand patterns across our markets. In this context, our priorities remain clear: maintaining strong cost disciplines, optimizing our product mix, leveraging our scale and distribution capabilities and preserving balance sheet strength.

Our diversified product offering with 83% of revenues from core construction materials and the remainder from specialty and allied products continues to provide stability across cycles. Looking ahead, we expect market conditions to remain dynamic as we move further into 2026. While early indicators suggest some pricing stability in certain regions, visibility remains limited, and we are planning the business with a cautious and disciplined approach. We believe Doman is well positioned to navigate this environment. Our experienced team, strong supplier relationships and focus on operational efficiency give us confidence in our ability to continue delivering solid financial performance.

In closing, I'm pleased with our start to the year. Despite pricing headwinds, we delivered stable earnings, expanded margins and continue to generate value for our shareholders. We will remain focused on execution and disciplined capital allocation as we move throughout the year.

I will now turn the call over to Darren.

Thank you, Amar, and good morning to everyone. Sales for the 3 months ended March 31, 2026, were $762 million versus $793 million in 2025, representing a decrease of $31 million or approximately 3.9%, largely due to the decreases in year-over-year pricing in certain construction material categories. The company's sales in the year were made up of 83% of construction materials compared to 81% last year, with the remaining balance of sales resulting from specialty and allied products of 14% and other sources of 3%. Doman's gross margins were $129.5 million versus $132.5 million in 2025, a decrease of $3 million as a result of lower sales. Gross margin was 17% during the quarter compared to 16.7% achieved in 2025.

Expenses for the first quarter of 2026 were $85.6 million as compared to $87 million, a decrease of $1.4 million or 1.6%. As a percentage of sales, 2026 expenses were 11.2% compared to 11% in 2025. Distribution, selling and administration expenses decreased by $1.1 million or 1.8% to $61.4 million in the first quarter of 2026 from $62.5 million in the same period of 2025, mainly due to the company's continued efforts to manage costs. As a percentage of sales, these expenses were 8.1% compared to 7.9% in the same quarter in 2025.

Depreciation and amortization expenses decreased by $0.3 million or 1.3% from $24.5 million to $24.2 million and are consistent across periods. Finance costs for the first quarter of 2026 were $16.6 million compared to $19.4 million in 2025, a decrease of $2.7 million, largely as a result of lower net debt, including lower utilization of the revolving loan facility and lower unsecured notes balances during the quarter. For the 3 months ended March 31, 2026, EBITDA was $68.1 million compared to $70 million in the comparative period of 2025, a decrease of $1.9 million or 2.8%. EBITDA during the quarter was impacted by the previously discussed decreases in year-over-year pricing in certain construction material categories.

As a result of the foregoing factors, net earnings for the first quarter of 2026 were $23.9 million compared to $23.6 million for the same period in 2025, an increase of $0.3 million.

Turning now to the statement of cash flows. Operating activities before noncash working capital changes generated $37.4 million in cash compared to $44.5 million in 2025. Operating cash flows during the period were primarily impacted by the previously discussed decline in construction pricing and materials pricing. The company generated $146.1 million of cash from overall financing activities related to the funding of seasonal working capital compared to $121 million in 2025.

Shares issued net of transaction costs generated $1 million of cash compared to $0.8 million in 2025. The company also returned $12.3 million to shareholders through dividends paid during the 3-month period, largely in line with 2025.

Repayment of lease liabilities, including interest consumed $8.8 million of cash compared to $7.9 million in 2025. The company's lease obligations generally require monthly installments and these payments are all current. The company was not in breach of any of its lending covenants during the 3 months ended March 31, 2026.

Investing activities consumed $10.6 million of cash compared to generating $11 million in 2025. Investing activities in the first 3 months of the comparative period included the nonrecurring sale of a portion of the company's timberlands for total cash proceeds of $14.4 million. Additionally, the company invested $16.2 million in new property plant and equipment during the period compared to $3.5 million in 2025.

This concludes our formal commentary, and we'd now be happy to respond to any questions that you may have. Thank you.

[Operator Instructions] Our first question comes from Hamir Patel with CIBC.

Amar, your gross profit margins were stronger than we expected in Q1. What sort of normalization would you expect into Q2? And when you think on kind of an annual basis, just given the improvements in your mix, should we think of Doman as generating margins north of 16% now going forward?

Yes. If I had that crystal ball, Hamir, I probably wouldn't be on the call. But I'll tell you that right now, the lumber market is doing sort of two different things. The Canadian market is doing one thing. The U.S. is doing another. It's all over the map. So what's really assisted us in that gross margin of 17% in the first quarter was some good astute buying by our company, taking advantage of low lumber pricing in the fall. And that executed well as the market grows, especially on the U.S. side for part of the first quarter, a very slow quarter as far as volumes go for us as usual. But the margin picked up due to us having some nice priced material on the ground at the right time. Going forward, Hamir, it's anyone's guess, SYP is obviously coming off now. Having said that, we're holding our margins not too bad. So -- let's hope that the margin train continues, but it's going to depend on all what the lumber market is up to for the rest of the year.

Fair enough. And Amar, I think last quarter, you were highlighting some investments you're making on the fencing side to grow that business. Maybe you can update us how that's progressing.

Yes, things are on track in [indiscernible] We're starting to produce trials of fencing there. And by June, we'll have some more new equipment in place to produce a heavy load of fencing on the East Coast. A lot of 1x6 pickets for retail customers out there that we currently import a lot of, which we're going to eliminate and produce all in the United States. And then we've got a little bit more happening in Texas, and we purchased some property in Hawaii, which was coming up and available to us. So that was all part of that larger CapEx number you saw. We took advantage of those opportunities. And that's kind of the lay of the land there on CapEx, Hamir.

Our next question is from Matthew McKellar with RBC Capital Markets.

Maybe just to start following up on the purchase of property in Hawaii. Can you give us any more kind of sense of what your intentions are there? And how significant that was in the quarter?

Yes, just opportunistic. So when land becomes available in Hawaii, you'll see us be nontraditional there. We will buy property there because there's just such a scarcity of industrial land opportunities there. So landlord that own this stuff for a long time came available and we put together a deal directly with the owners and it will eliminate rent for us going forward. So we quickly moved on that. So -- it's opportunistic. It's not a massive strategy. But as it happens, we took advantage of it.

Okay. And moving on, can you speak a bit about the conditions in the U.S. and Canada you're seeing so far in the quarter? Are you seeing an impact of sort of late spring? And then just also around Q2, could you give us a sense of maybe how we should think about any kind of implications downstream of conflict in Iran, most notably fuel costs and how those may impact your results?

Sure. We're having an okay spring depending on the region when weather is good, we seem to be moving materials. So it's nice to see the consumer is not dead for sure. So we're seeing that. Lumber pricing being a bit lower, that definitely makes us more advantageous to other decking opportunities for your top board. So lumber is back in vogue, which is always good. And then we look at the fuel thing, yes, we believe fuel is going to be up here for a while. We're doing the best we can with our customers for fuel surcharges, trying to pass on what we can. We can't grab all of it sadly, but we're doing the best we can to take advantage of recovery if we can -- where we can because we're paying for it as soon as it leaves the mill, as soon as we have to haul anything anywhere, there's fuel surcharges on everything. So we're doing the best we can to navigate through that. There's nothing super positive or negative about it, but we're just trying to break even if we can on it and push it through.

Perfect. And last for me. Consumer confidence, I guess, is looking a little soft at the moment. Are you seeing that in your mix at all? Any trade down going on, consumers looking for maybe lower end ranges of specialty and allied products? Any observations, I guess, you've seen over the past couple of quarters?

Yes. Just coming into the second quarter here, the trends don't seem to be too different. The SKUs we're moving are fairly traditional in what we normally sell, but really weather-driven. It does seem like we have some good weather in certain regions. It's great. Other days, where it's raining and cool in the spring like the East Coast of Canada, where you are, Matthew, it hasn't been great, and sales are sluggish in those particular markets. But really, the patterns on volumes of SKUs seem to be fairly traditional.

Our next question is from Zachary Evershed with National Bank Financial.

Congrats on the quarter. Wondering if you're seeing any difference in communication from customers on either side of the border around their expectations for the rest of the year?

Everybody is fairly cautious, just [ too ]. I think everyone is watching the Iran thing and nobody is that bullish. No one is terribly bearish, but I couldn't find you a bull if my life depended on it. Everyone is just kind of in the fog here, hoping the smoke clears over in the Middle East. But having said that, not just us, but you see earnings are pretty healthy out there despite all this noise. I think some of that's baked in. But tough to find anyone getting too excited about the economy. Rates are kind of creeping up and not much there. Anything you want to add, Darren?

No, I think that covers it. That's what I'm hearing as well.

Got you. And so where does that leave your thinking on the M&A playbook this year?

No difference there. Economy is up or down, whatever fuel is doing. We're going to continue on our M&A path and strategy. When those right transactions come over the plate, we're going to hit them. The balance sheet is primed and ready for anything. So we're going to be very selective, opportunistic and buy things of value when it makes sense for us and grow the company and do things that are important for our customers. So nothing's changed there, Zach. It's -- we haven't hit the pedal or hit the brakes, just looking for those opportunities to hit the sweet spot.

Beauty. And then if we think about the new fencing capacity coming online, when do you expect that to start contributing? And what will it do to your overall mix in terms of margin?

Yes. Probably Q3, Q4 will be in good production there with the new mill. We've upgraded our Gilmer, Texas sawmill, which is every day, approaching our targets, which is excellent. We're going to look at upgrading another 3 or 4 fence mills that we have in Arkansas and Texas. So stay tuned for those. But I can't really give you a margin increase number, but certainly bringing that manufacturing in-house and avoiding the risks and tariffs coming out of Brazil where a lot of that material comes from now is certainly going to -- we hope, not only enhance margins perhaps a little bit, but also give us security of supply. And that's what our customers are looking for in the U.S. is U.S. made, nothing coming over the water that's got tariff risk and other challenges. So we like the strategy. I think you're going to see us continue to build into that. So Q3, Q4, you'll start to see some numbers appear.

Great color. And then just last one for me. With the new capacity ramping up, how are you looking at CapEx for Q2 and Q3? And what's your run rate OpEx with the new capacity online as well?

Yes. I can't give you the exact number because these invoices and stuff come in chunks when we're doing things, but that kind of first quarter spend was a little bit heavy because we bought some of that property. That's not traditional, as you know, you followed us for a while, Zach. So that was to buy some properties as well, not just CapEx of mills or maintenance CapEx. We'll fall back into the traditional line here as we're in Q2, Q3, it will lighten up.

And for the run rate OpEx on the go forward?

There is not expected to be much change from what we've done historically there. It's pretty flat.

Our next question comes from Kasia Kopytek with TD Cowen.

Back to the fencing question. Amar, what percentage of your mix do you expect fencing to ultimately be once you get to your target build-out?

I don't have a percentage, Kasia, but let us grow into it and see what happens, and I can probably give you a better number in Q3 once we get into production there. But I think long, long term, if we can get to 15% to 18%, which would be a big number. I'd like to set big goals here at the company. That would be great in a couple of years. A lot of that's going to come through efficiencies in our current mills that are a little bit tired. And this modern efficiency that we're seeing in Gilmer, Texas, is very impressive. We're fine-tuning there and things work out the way we think. I think we can achieve those numbers in a couple of years. It's going to be exciting.

Okay. And Amar, for the fencing products, correct me if I'm wrong, those are not linked to Random Lengths, right? Those are on a negotiated list price?

Correct. The trends -- the pricing of SYP does tend to move around directionally. But no, there's no printed price that we're fixed on, on those they're negotiated.

Right. It'd be similar to some of the siding list prices that you guys would carry similar in that sense in terms of pricing dynamics?

Exactly.

Okay. Got it. Amar, can you give some context on the Q1 volume trends and maybe frame it against the adverse weather in the U.S. during the quarter as well as the difficult comp relative to some of the hurricane activity order volume you guys saw supporting last year's results?

Yes. And hurricanes, we haven't had now coming into the second year. So last year, we really didn't have any to comp on. So I can't look back and blame anything on that, certainly. But the volumes in the first quarter, again, when weather was good, we were tracking kind of identical to 2025. But we had some days and when we sit here in May, we forget how bad things were. The Carolinas were shut down for certain days, we couldn't ship. California had a ton of rain and unseasonable rain where there were days that sales were anemic. Having said all that, volumes were just off a couple of points in certain regions. And in Canada, our whitewood volumes on OSB panels and lumber were up. You're not going to see that in our top line because pricing was down, but we actually moved a lot of lumber and material at lower margin, but it's basically a fare war going on in Canada for lumber materials right now that are duty exempt, if you will, to stay home.

Got it. So for Q1, down low single digits on unit volumes. Is that a fair characterization and that carrying into April and May?

Yes, April, May getting a little bit of a pickup, again, as the weather clears, like the weather in Toronto, Montreal, Chicago, like those kind of areas are starting to come to life. And we're seeing decent volumes come back as soon as the weather turns on. The issue we have, Kasia, is that those days that back in April that were dark and bleak, they don't come back. But having said that, we're pleased with what we're seeing now. So hopefully, Q2 will be a little bit of a catch-up on some of those, I guess, numbers that were just a little bit off on volume, which kind of forecasted for, for this year with all that's going on.

Okay. Fair enough. And last one for me. Back to the M&A deal pipeline, where are you finding to be the biggest obstacles or challenges to getting things over the line at the moment?

It's just the usual stuff. If the pricing is not where we want it to be, we're patient. We're not going to overpay for industrial assets. It's got to fit into a cost-saving mode that comes in when we acquire. It also has to fit with our customer needs. I don't think there's any flashing light that's preventing us from doing M&A. It's just right ones at the right time. As you know, we're patient, disciplined. Sometimes we don't do anything for a year or 2, then we do 3 in 1 year. That's what you're going to see with us, but you're going to see us do the right deals.

Our next question is from Ian Gillies with Stifel.

Over the last number of years, the focus on investment in some of these value-added products has been on the U.S. It seems like Canada may actually start to get a bit better here in the next couple of years. Has there been much thought process? Or have you started considering putting any additional CapEx into any of your Canadian located facilities to try and take up some of the try and, I guess, gain from some of these benefits that may or may not show up?

Yes. Ian, it's a good question. Up here in Canada, we're doing different things. We're not as manufacturing heavy here. We're heavier to distribution, which doesn't require a lot of investment in technologies. We have upgraded our treating plants as far as our computer systems go there. So we're doing that. There's a couple left to go in the East. So we are investing in that. But really, there isn't sort of a new shiny toy in the treated business that's going to change the dials for us. We need more volume. We need Canadian housing to be healthier than it is. We need the economy to be better than it is here. And I'm hoping that the new caring regime is going to deliver on some of the things they're talking about. So let's all hope. Interest rates are in a good spot, so we can't blame that. So we're hoping more for the economy to drive better results in Canada. In the U.S., we have a lot of room for efficiencies that, as you mentioned, and we're describing, we're investing in and we're going to continue to do that over the next several years, and that should hit our bottom line nicely.

Our next question comes from Frederic Tremblay with Desjardins Capital Markets.

I wanted to just come back quickly on the fencing. Just on the growth ambitions you mentioned, I was curious to see if that growth you're envisioning is mainly with your existing customers or serving them across more locations? Or does that imply gaining new customers as well?

Yes, combination. So certainly, the current customers, we would stop or replace imports, as mentioned out of South America coming in. That's our #1 goal is to be producing on the East Coast. So that will hopefully drive a lot of margin that will make sense in volume, I should say. So we're looking at that. And then number two, organic growth through our current customers on the Mainland U.S. as well. So Texas, Arkansas and North shipping to some other points that take Southern Yellow Pine and then driving those efficiencies. If we can get them out of the mill, which we've seen in Gilmer, Texas, and we start to cross-pollinate those same efficiencies at other mills that we have. We should be able to extend our reach and more importantly, produce more for the markets that we're in and go a little bit further on freight. So all to say, we're going to continue to focus on that. And hopefully, execute very well over the next 2 years.

Yes, very helpful. Has it been your experience with maybe other products that a Made in USA product is a meaningful contributor to market share gains? Is that something that you envision for fencing gains as well, having the product produced domestically would be helpful.

I mean I think it will add to our bottom line. It will add additional margin. I think we want to wait and see how things fall out before we kind of give you more definitive answers and you'll see those in our results, and you'll see those kind of starting later this year and into next year.

We have a follow-up question from Kasia Kopytek with TD Cowen.

It's Kasia. I just wanted to circle back to operating leverage. You remain cost down in a subdued environment. I'm just wondering thinking about maintaining enough slack for an eventual upturn, just maintaining that balance between those two push and pull elements? And if possible, if you could quantify how much basis points of slack that would represent in your EBITDA -- current EBITDA margin or potential slack?

For fencing or for just...

No. Sorry, this is for your overhead costs. So selling, distribution and administrative expenses, you have some fixed costs in there, right? I'm just curious how you're balancing having to keep those relatively contained given the current market backdrop, but also giving yourself enough runway for once the market turns so that you're ready and you're able to respond accordingly. Just curious how much operational slack you have right now built in there.

Yes. Those costs are largely fixed. And I would say kind of fresh set of eyes here on the business. So if we do see things moving up, like I'm going to be kind of looking at things a little closer going forward. And if there's kind of some margin points we've got to give back on inflation. I'm hoping to get those kind of back on efficiencies. So generally expecting those to be largely flat. You might see a little bit of creep with CPI, but I'm hoping not to do that.

We have reached the end of the question-and-answer session. I'd now like to turn the call back over to Ali Mahdavi for closing comments.

Thank you. Once again, on behalf of the Doman team, we appreciate you joining us today. We look forward to reporting and speaking with you again on our Q2 2026 conference call. That concludes today's call. I'll turn it over back to the operator to close it.

Thank you. This does conclude today's conference. You may disconnect your lines at this time, and we thank you for your participation.

Greetings, and welcome to the Doman Building Materials Group Annual and Special Meeting of Shareholders. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce Mr. Amar Doman, Chairman.

Thank you very much. Good afternoon, everybody, and welcome to the Annual and Special Meeting of Shareholders of Doman Building Materials Group Limited. My name is Amar Doman, I'm Chairman of the Board of Directors and Chief Executive Officer. Thank you for taking the time to attend our meeting.

Please allow me to introduce the people with me here at our meeting at our offices. Today, I'm pleased to advise that I am joined by my fellow proxy holders, co-directors, nominees and officers. Board members and nominee Ian Baskerville. Please put your hand up, Ian. Thank you. Marie Graul; Michelle Harrison; Harry Rosenfeld; Ann Simms; Sieg Thoma. Our Chief Financial Officer, Darren; our General Counsel and Corporate Secretary, Rob Doman; and our Assistant General Counsel, Yong-Jae, as well. I'd like to acknowledge and thank the other members of our Board of Directors here or on our call today: Sam Fleiser; Jay Code. After the formal portion of the meeting, we will address questions.

The meeting will now come to order. With the consent of the meeting, as Chairman of the Board of Directors, it is my privilege to act as Chairman of this meeting. Also with the consent of the meeting, I will ask our Corporate Secretary, Rob Doman, to act as Secretary of the meeting and will appoint Zabrina Evangelista of TSX Trust Company to act as scrutineer.

Certain shareholders have volunteered to move and second resolutions where required. While this procedure will facilitate the handling of formal matters, any registered shareholder or proxy holder may speak on a matter when that matter is before the meeting. When I recognize you, please give your name and state whether you are a shareholder or a proxy holder.

Based on information provided to date, if a ballot were to be conducted on the matters to be considered at this meeting, more than 73.45% and up to 99.63% of the votes cast at this meeting would be voted in 39.44% favor of such matters being approximately -- pardon me, approximately 39.44% of all votes eligible to be cast at the meeting. Accordingly, voting will be conducted by a show of hands unless a ballot is demanded.

In order that we may have a complete record of those present, may I ask anyone who has not yet given his or her name to the scrutineer to do so now?

The notice calling this meeting was mailed to all directors, non-objecting shareholders and to the auditors of the company. The Secretary has filed with me, proof of mailing of the notice, and I would direct that a copy of the notice and proof of mailing be annexed to the minutes of this meeting. Will someone now move and someone second a resolution dispensing with the reading of the notice? I believe Ian and Darren have a resolution in this regard.

So moved.

Seconded.

All those in favor of the resolution, please so signify. Contrary, if any? Any questions? I declare the resolution carried.

Okay. The scrutineer having informed me that a quorum is present and that more than 25% of shareholders are represented at this meeting by 2 persons, by proxy or in person, and as the notice of this meeting has been given, I declare that this meeting has been duly convened and constituted to transact the business for which it has been called. When the formal report of the scrutineer is available, it will be kept with the minutes of the meeting.

Copies of the balance sheet of Doman Building Materials Group Limited as at December 31, '25, and the statements of earnings and cash flows for the year ended December 31, '25, together with the reports thereon of the directors and auditors of the company were provided to all the shareholders, and it is not proposed to read them to the meeting. I would also ask that all questions be reserved until the end of the meeting, at which time, we will be pleased to discuss matters related to the company of interest to particular shareholders.

The first item of business for which this meeting has been called is fixing the number of directors at 8. Will someone move and someone second the resolution fixing the number of directors at 8? In order to be approved, the resolution must be passed by a majority of the votes cast thereon. I believe that Ian and Darren have a resolution in that regard.

So moved.

Seconded.

The meeting will now vote on the motion. In order to be carried, the motion must be passed by a majority of the votes cast. If a ballot vote were conducted on this matter, 99.78% of all votes cast by proxy at this meeting would be voted in favor of fixing the number of directors at 8. Therefore, the vote for this resolution will take place by way of a show of hands. All those in favor, please so signify. Contrary, if any? I declare the resolution carried.

The second item of business for which this meeting has been called is the election of 8 directors to hold office until the next Annual Meeting of Shareholders of the company or until their successors are duly elected or appointed. The management information circular states that there are 8 candidates proposed by management. The Secretary will now read their names.

Mr. Chairman, the names of the nominees are: Amar Doman; Ian Baskerville; Sam Fleiser; Marie Graul; Michelle Harrison; Harry Rosenfeld; Ann Simms; and Sieg Thoma.

I have been advised that no other nominations have been made in accordance with the company's amended advance notice bylaw. Certain details of this bylaw are described in the management information circular. Accordingly, I declare the nominations closed.

The company complies with the CBCA majority voting requirements. Certain details of these requirements are set out in the management information circular, which require a director to tender his or her resignation if he or she receives more withhold votes than votes cast for his or her election. Based on the proxies received for the election of directors, if elected, none of the nominees would have to tender their resignation under this requirement.

I will now call for a motion for the election of each person who has been nominated. Will someone move and someone second the resolution in this regard? I believe Ian Baskerville and Darren have a resolution.

So moved.

Seconded.

All those in favor, please signify. There being no contrary, the resolution is carried. I will now declare that the 8 nominees whose names have been read by the Secretary have been elected directors of the company to hold office until the next Annual Meeting of Shareholders or until their successors are duly elected or they otherwise cease to hold office.

For the information of the meeting, will the Secretary please announce the number of shares represented by proxies received that were in favor of the 8 nominees.

I'm getting an update, Mr. Chair.

Thank you.

Prior to the meeting, proxies were received in favor of the election of 8 nominees as directors from the holders of at least 31.3 million shares representing not less than 95.98% and up to 32.5 million shares representing 99.63% of all votes cast by proxy at the meeting.

Thank you, Mr. Secretary. The next item of business for which this meeting has been called is the reappointment of the auditor and the authority of the directors to fix its compensation. In order to be approved, the resolution must be passed by a majority of the votes cast thereon.

Will someone move and someone second the resolution reappointing KPMG LLP for the current year and authorizing the directors to fix its compensation? I believe that Ian and Darren have a resolution in this regard.

So moved.

Seconded.

The meeting will now vote on the motion. In order to be carried, the motion must be passed by a majority of the votes cast. If a valid vote were conducted on this matter, 99.68% of all votes cast by proxy at this meeting would be voted in favor of the reappointment of KPMG LLP as the auditors of the company. Therefore, the vote for this resolution will take place by way of a show of hands.

All those in favor, please so signify. Contrary, if any?

None.

I declare the resolution carried.

The next item of business is to consider and if thought advisable, to pass an ordinary resolution approving the company's Omnibus Equity Incentive Plan, including approval of the awards issuable thereunder and the reservation of common shares pursuant to such awards, which is described in detail in the management information circular for this meeting. The form of resolution is set out in Appendix A to the circular. I will assume that those present have already reviewed the resolution, as I don't intend to have it read out to the meeting.

Will someone move and someone second the approval of the resolution in the form set out in Appendix A of the circular?

Mr. Chairman, I move the following resolution be it resolved that the resolution set out at Appendix A of the company's management information circular dated March 31, 2026, be and is hereby approved.

Mr. Chairman, I second the motion.

Thank you. I would be at please -- I'm sorry, I would be pleased to take any questions in respect of the Omnibus Equity Incentive Plan at this time. If anyone has any questions for me, please raise your hand, and when addressed, kindly provide your name and indicate whether you are a shareholder or a proxy holder.

Mr. Chairman, no questions.

Thank you. The meeting will now vote on the motion. To the best of my knowledge, if a ballot were to be conducted in respect of the resolution approving the Omnibus Equity Incentive Plan resolution, more than 23.9 million or 73.49% of the votes cast by proxy at this meeting would be voted in favor of such matter. Accordingly, voting will be conducted by a show of hands unless a ballot is demanded.

All those in favor of the resolution, please so signify by raising your hand. Contrary, if any?

None.

Thank you. I declare the resolution carried.

If there is no further formal business, I would invite a resolution terminating the meeting.

So moved.

Seconded.

All those in favor of the motion, please so signify. Contrary, if any? I declare the meeting of shareholders of Doman Building Materials Group Limited is now terminated.

For those on the call, if there are any questions you may have on the formal part of the meeting, please direct them to Ali Mahdavi at Investor Relations, [email protected]. We'll do our best to reply promptly. Thanks for attending.

As there are no further questions, on behalf of the directors, we thank you for your attendance and participation. The formal part of this meeting is hereby concluded. Thank you very much.

Thank you.

Thank you, operator. We are concluded.

Thank you. You may disconnect your lines at this time. We thank you again for your participation.

Greetings, and welcome to the Doman Building Materials Group Fourth Quarter and Full Year 2025 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

It's now my pleasure to introduce your host, Ali Mahdavi. Please go ahead.

Thank you, operator. Good morning, everyone, and thank you for joining us this morning for Doman Building Materials Fourth Quarter and Full Year 2025 Financial Results Conference Call. Joining me this morning are Amar Doman, Chairman and Chief Executive Officer; and James Code, Chief Financial Officer. .

If you have not seen the news release which was issued yesterday, it is available on the company's website at domanbm.com as well as on SEDAR+, along with our MD&A and financial statements. I would also like to remind you that a replay of this call will be accessible until March 20, 2026. Following management's presentation of the 2025 fourth quarter and full year results, we will conduct a Q&A session for analysts only. Instructions will be provided at that time for you to join the queue for questions.

Before we begin, we are required to provide the following statements regarding forward-looking information, which is made on behalf of Doman Building Materials Group Ltd., and all of its representatives on this call. Remarks and answers to your questions today may contain forward-looking information about future events or the company's future performance.

This information is subject to risks and uncertainties that may cause actual events or results to differ materially. Any information regarding forward-looking statements is made as of the date of this call, and the company does not undertake to update any forward-looking statements. Please read the forward-looking statements and risk factors in the MD&A as these outline the material factors which could cause or would cause actual results to differ.

The company will not provide guidance regarding future earnings during today's call, and management does not anticipate providing guidance in future quarterly or interim communications with investors.

I'll now turn the call over to Amar.

Thanks, Ali, and good morning, everybody. Thank you for joining us on today's call. Let me start by highlighting some of our key financial metrics, followed by some color on our operations during the fourth quarter. And then I will hand the call over to Jay Code, who can review the numbers in further detail. 2025 presented itself to certain challenges, which were not dissimilar to the prior year with constant falling lumber pricing and other relevant economic headwinds.

While we are not directly impacted by tariffs, the building materials sector in general, continue to navigate the effects of tariffs, fluctuating construction material pricing elevated interest in mortgage rates and even and uneven building activity across various regions. While these conditions created near-term pressure, our teams responded very well managing this. We remain focused on what we can control, operational efficiency, customer service, cost disciplines and safety while positioning the business for long-term success.

Despite the pricing movements across all construction materials categories in our portfolio on both sides of the border, we exited 2025 with strong performance across all our key financial metrics, including revenues, gross margin, EBITDA and net income, while paying our shareholders a quarterly dividend of $0.14 per common share or $0.56 per common share on an annual basis. We are both pleased and proud of the company's performance throughout 2025, given the market conditions we had to work through.

Despite trends and volatility that at times presented us with challenges, we remain encouraged and pleased with the resilience of our diversified business model withstanding these cycles resulting in Canadian revenues, gross margin, adjusted EBITDA and net earnings totaling $3.1 billion, $505 million, $256 million and $80 million, respectively. Our ability to deliver consistent performance across a variety of market cycles, results from our tireless focus on operations and to the many successful acquisitions we've completed throughout the years. Now focusing on the most recent fourth quarter results, adjusting for normal seasonality, we remain active across all business divisions, our ongoing cost management and focus on operational efficiencies enabled the company to demonstrate revenue performance, while gross margin continued to be within our target range as well as EBITDA and bottom line.

We are very proud of our financial performance and believe there is a lot to be gained from the strength and momentum, which has resulted from our successes in recent years. As a result of these efforts during the fourth quarter, we saw revenues coming in at $644 million, gross margin at 16.6% or $107.2 million, EBITDA amounting to $44.3 million, net earnings of $11 million; and lastly, our quarterly dividend of $0.14 per share was again declared.

We remain cautiously optimistic about the prospects ahead and look forward to further demonstrating the strength and leverage available in our business model as we continue to be well positioned to take advantage of sensible growth opportunities. On the heels of successfully integrating recent acquisitions, our relentless focus on paying down debt and strengthening our balance sheet remains a priority, which will enable us to be in a strong position to take advantage of strategic opportunities.

Overall, 2026 is off to a decent start, despite severe weather issues in some of our regions, which we're prepared to deal with. I continue to be pleased with how our growth strategy continues to unfold, resulting in strong sales and earnings in the face of a tough year-over-year pricing environment while remaining focused on margin protection during these times. In 2025, we were also able to demonstrate the positive impact of prior year acquisitions for the full fiscal year. We are very proud of our acquisition of Doman Tucker Lumber and prior to that Southeast forest products.

As you probably are aware, Jay Code, our CFO, of 15 years, will be retiring on April 7. So before handing the call off to Jay, one last time to provide a review of the company's full financial results on behalf of the entire Doman family, I would like to extend our sincere thanks for your years of dedicated service at Doman. Your commitment, professionalism and contributions have made a lasting impact on our team and organization. I'm truly grateful for all you have done and wish you continued success in your well-deserved retirement.

Over to you, Jay.

Thank you very much for those kind words, Amar, and good morning, everyone. Sales for the year ended December 31, 2025, were $3.12 billion versus $2.66 billion in '24, representing an increase of $456 million or 17.1%, largely due to the positive impact of the company's acquisitions completed in 2024.

The company's sales in the year were made up of 81% construction materials compared to 76% last year, with the remaining balance of sales resulting from specialty and allied products of 16% and other sources of 3%. Doman's gross margin was $505.5 million versus $424.8 million in '24, an increase of $80.7 million, benefiting from the contributions of our '24 acquisitions as well as ongoing execution of our margin enhancement strategies.

Gross margin percentage was 16.2% this year compared to 16% achieved in the previous year. Expenses for '25 were $349.1 million compared to $306.5 million last year, an increase of $42.6 million or 13.9%. As a percentage of sales, 2025 expenses were 11.2% compared to 11.5% in '24.

Distribution, selling and administration expenses increased by $19.9 million or 8.7% to $249.1 million in 2025 versus $229.2 million in 2024, mainly related to activities of the acquired companies as well as broad inflationary pressures. As a percentage of sales, DS&A was 8% this year compared to 8.6% in the prior year. Depreciation and amortization expenses increased by $22.8 million or 29.5% from $77.2 million to $100 million, mainly due to additional property, plant and equipment and intangible assets related to the '24 acquisitions.

Finance costs for 2025 were $72.9 million compared to $53.7 million in 2024, an increase of $19.1 million largely as a result of additional costs related to the financing of the Doman Tucker Lumber acquisition on October 1, 2024. We note directly attributable acquisition costs during the comparative prior year were $3.3 million and these costs included due diligence, legal, environmental, financial, management resources and other advisory services directly attributable to the acquisition activities. EBITDA in 2025 was $256.4 million compared to $192.2 million in 2024, an increase of $64.2 million or 33.4%. Adjusted EBITDA in the comparative prior year before the nonrecurring acquisition costs was $195.5 million. Our EBITDA in 2025 benefited from the full year inclusion of the results from the 2024 acquisitions, but these benefits were partially offset by the previously discussed overall weaker pricing in certain construction materials categories as well as an increase in expenses due to inflationary pressures.

Net earnings for 2025 were $80.3 million compared to $54.2 million in 2024, an increase of $26.1 million. And turning Now to the statement of cash flows, operating activities before noncash working capital generated $163.6 million in cash compared to $148.7 million in 2024. Stronger operating cash flows in 2025 were largely driven by this year's significant increase in net earnings. Financing activities in 2025 consumed $235.7 million of cash related to repayments of debt and payments to equity stakeholders.

And during the comparative prior year, the company utilized debt facilities to finance the Doman Tucker Lumber acquisition, resulting in $345.5 million of cash provided by overall net financing activities. The company returned $49 million to shareholders through dividends paid in 2025, largely in line with 2024, and the shares issued net of transaction costs generated an additional $1.8 million of cash compared to $1.5 million in the prior year. Payment of lease liabilities, including interest, consumed $32.3 million of cash compared to $29.1 million in 2024.

And we note the company's lease obligations generally require monthly installments, and these payments are entirely current. We also note the company was not in breach of its lending covenants during the year ended December 31, 2025. overall, investing activities this year generated $45.6 million of cash compared to consuming $474.3 million in 2024. Investing activities this year included the sale of the company's timber loans for total cash proceeds of $75.2 million, whereas investing activities in 2024 included the Southeast Forest Products and Doman Tucker acquisitions for total cash consideration of $460.8 million.

Additionally, the company invested $29 million in new property plant and equipment during the year compared to $14.2 million of property plant and equipment expenditures in 2024.

This concludes our formal commentary, and we'd now be happy to respond to any questions that you may have. Thank you.

[Operator Instructions] And our first question comes from the line of Kasia Kopytek with TD Cowen.

Its Kasia on the line. First question is on your margin enhancement strategies. You posted really strong margins in Q4. Can you give us an update on the sorts of things you're working on to keep margins high and just articulate your general confidence in your ability to keep margins towards the high end of your historical range going forward?

Sure, Kasia. Without us telling all our trade secrets, certainly, our lumber buyers have done a hell of a job on both sides of the border, positioning well when there was dips buying under the market and positioning ourselves ahead of time for market gyrations and really buying in those gross margin dollars. So that was evidenced in Q4, and Q1 year has started off in the same fashion. So I've got to give the credit to the lumber buyers really working through rough waters here, but really digging deep and making things make sense for us. So that's really where it's coming from.

I'd add there, Kasia, that freight optimization strategies had also a significant role in the margin enhancements. In 2025, we began to use new technology for the business. And that's starting to show in the freight cost. The freight cost being a significant part of our cost of goods. .

Right. You've talked about this great strategy in the past. Are we in the early innings of that? Is there still a lot of runway left for optimizing those kind of costs?

Yes. I'd say early. We're in the early innings. We have rolled it out in only 2 of our divisions. And so we've got a ways to go to take full benefit from that.

Okay. And this is probably a question for you as well. The selling, distribution and administrative expense, can you comment on the kind of inflation that you're seeing in these expense categories? And maybe reference what a normalized range could look like for you guys going forward?

Yes. It's -- I'd say, broadly in line with the consumer price index. We're talking about a significant portion of that being compensation costs and then facility costs, we're releasing facilities, leasing material handling equipment, that kind of thing. So we'd be in that 3% range in '25, I would estimate, overall. .

Okay. And then $61 million to $63 million quarterly that sort of a range that we're looking at and the inflation on top of that. Is that fair?

Yes. Yes. Q4 being, as Amar pointed out, normally a seasonal slower period for us. So we would expect to ramp up costs a little bit in the busier quarters.

Right. And on CapEx, there was a bit of a ramp to end the year. Any special projects worth calling out. If I recall correctly, you guys are pretty excited about things in the pipeline for your specialty lumber.

Exactly, yes. That -- there's a bunch of noise inside that number. So we can attribute it pretty much all to either upgrading or investing in new fencing equipment for our sawmills, including into the Carolinas a new market for us. So some of that production will start to evidence later this year. We've upgraded our sawmill in Gilmer. We were there this week, and it's running. We're getting close to getting it to the point of -- we're happy with the volumes. The bugs are getting out of that.

So those investments are -- and I commented earlier in my comments, the fencing market continues to be strong for us. And certainly, with some tariffs being on South American countries or a lot of U.S. spend comes in. There's a shortage right now. So we're trying to amp up pretty quickly and modernize upgrade and get more efficient.

Okay. So the level we saw in Q4, is that a new run rate going forward? Or should we see levels go back to what you did in the first 3 quarters of the year?

Yes, that would be kind of a high water.

Yes, we still expect cash to be under 1% of revenue for PP&E expenditures. So Q4 was a little bit high, just based on lumpiness of where we spend -- timing of spending. .

The next question comes from the line of Nikolai Goroupitch with the IBC Capital Markets.

With both Lowe's and Home Depot forecasting a relatively flat R&R market this year. Do you share a similar order outlook? And do you -- how do you see the treated lumber market performing in comparison?

Yes. I think everyone is just trying to forecast in a very, very murky world. It's hard to make predictions here. So I think everyone is cautious the repair and renovation market, yes, I think it's going to be flat. We had a decent takeaway year last year despite that. I think we'll have the same this year. .

I think it's just kind of what you see is what you get out there and I think Lowe's and Depot certainly have the same forecast, just kind of flat to off a bit, maybe up a bit really hard to read, frankly. And as far as our pressure treated category, we're very pleased with our initial bookings and volumes heading into '26. The first 2 months are booked and we're pleased with what we see. So not superly excited, for sure, it's just the way the world is. But certainly, we're going to be hitting good base hits this year, and we should be just fine.

Okay. And with lumber prices climbing over the past few months in the U.S. South and producers earning a decent margin in the region, do you think mills will add hours and in turns bring more SYP production online in this market?

Yes. Some have and some haven't. The increase wasn't dramatic. And of course, it was through very, very slow months, a little bit in December and then into January and then the cold, the deep freeze really came in and stalled everything and it's kind of flatlined. So don't really see the mills ramping up, and I'm hoping they kind of don't so we can kind of keep the sustainability of a bit of a higher pricing for everybody involved would be, I think, decent for the industry.

The next question comes from the line of Zachary Evershed with National Bank Financial.

Could you give us a little bit more commentary on how volumes trended throughout the quarter? I know that the cold months can be slow, but maybe a bit of an idea of how things were paced in November, December into January and February?

Yes. I wouldn't say it was abnormal. It was just a normal fourth quarter. I think some of the research analysts had different views on pricing or volumes and there was quite a range. And for us, it was just a routine fourth quarter. Pricing started to pick up in kind of the first week of December, but it's December.

So it's a bit of a so what. We did some good buying to help protect the margins. And I think -- 2 key things for the fourth quarter. I think one, our debt reduction; and number two, our margin stability was great. So the pulse of the business is just fine as it's the balance sheet.

And speaking of that balance sheet, maybe you could tell us about what's in your crosshairs for M&A at the moment?

Yes. We're still looking to fill in some of those white spaces, if you will, on the map, where we're not directly located yet, and we'll continue to work through those opportunities. But we will be in those markets, just a matter of the right opportunity coming up and the balance sheet is ready. So stay tuned, and we'll continue on with our strategy. .

And then just one last one, pretty speculative here. Obviously, we've got a very volatile tariff framework, some global geopolitical instability. The R&R side of things seems to be pretty cautious. What's your view on new residential housing in North America this year?

Yes. I think the worst is behind us, I think. I think the interest rates will continue to go down. Obviously, nobody likes what's happening with oil today. But I think that if these rates continue to tick down in the United States like they are, we're under 6% now. We're starting to see some action. So that's good. .

I don't expect some boom, but I think there will be more action as people can move around and get out of some of those cheaper mortgages they did during COVID now as the gap is getting closed. So for what it's worth, our view is the worst is behind us. But not crazily excited about things running up hard, but I don't think they get worse from here.

The next question comes from the line of Ian Gillies with Stifel.

Amar, are you able to talk a little bit about where you're at with adding value-added services into your various facilities? I mean whether it be as a percentage of revenue? Or what inning you think you may be in and where you'd like to get to?

Yes. The value added is our primary business. We'll continue to grow in areas such as fencing, manufacturing, 1 inch. We've got some good strategies inside the company to organically grow with our customer base that are national in the United States, and of course, across Canada. So we're working on all kinds of things inside with our specialty sawmills. Obviously, they're smaller, but they're very effective into our marketplace with niche products. So I won't dive into all that into the weeds today.

But some of those investments in dollars that we talked about earlier on the call are directly going into our specialty value-added side of the business, and we're going to continue to amp that up we mentioned when we bought Tucker back in '24. Some of those strategies want to cross-pollinate over to Doman Lumber side and then vice versa, getting and defensing on the East Coast of the United States in a big way starting mid this year. We're going to be producing a lot of fence boards out there and the market is ready for it. So stay tuned, we're right on track.

Okay. There's been a number of government programs either announced or bandied about on both sides of the border. Are there any in particular that you would point to that you're particularly excited about that you think could benefit Doman moving forward or perhaps demand drivers that are well understood.

Yes. I think you've heard me say it before, the government getting involved in housing has never worked. I don't think it works this time either. I think it's more of a press release than anything. I think the market has to figure things out, developers, cost of land, cost of materials, mortgage. I just don't see the government coming in.

If they do great, we can do some supplying to them. Probably the modular guys that do well, who we supply across Canada. And then, of course, in the United States, the government won't get involved in building housing, building that market to figure it out.

The next question comes from the line of Frederic Tremblay with Desjardins Capital Markets.

Starting with maybe the sensing side. Obviously, a big component there this year. I was wondering if you can help us better understand the capacity increase in fencing, given all the investments that you're putting together now? And maybe just a clarification on when you expect the revenue contribution from those initiatives to come through in the financials.

Sure. Yes. I don't have percentages ready for you today, but probably in the second or third quarter, we'll have a clearer picture of exactly how the modifications are going at the sawmills and our new venture in the Carolinas to start up there as well sometime in Q2, the start of Q3. We also did not have storms last year. This year, they're forecasting a heavier hurricane season or at least a hurricane season. And when that happens, that drives a lot of quick demand for our fencing products.

So we expect to have a busier volume year. And apologies, Frederic, I don't have percentages. But I just know that we're going to get more efficient, doing it with less labor, more automation and the volumes are going to pick up. And our goal is to be probably the #1 fence producer in the United States over the next 2 years, and I think we're going to get there.

That's very helpful. And would you say sensing products in general are margin accretive compared to the individual margin of the company?

They are. As we manufacture everything inside right from the log, right to the finished pressure-treated pick it on the truck right to the retailer. We capture those margins all along the way with the manufacturing in there. And it's not something that moves around like random lengths pricing. So we try to do our best to maintain the margin to -- there's obviously a higher cost to it being a manufactured item than distribution. So to protect those margins, and by investing in the plant and the equipment in the sawmills, we're certainly getting more efficient in driving those costs down. .

Great. And then last question for me. Just coming back on the M&A topic. Maybe from the valuation angle, are you seeing any sort of changes in seller's expectations given the state of the market now? Are you noticing any valuation changes on there?

Yes. Valuation perspectives on M&A, Frederic, I think, is what your question is. And we're not seeing any dramatic changes in expectations from sellers at this point. And we're remaining disciplined in what we will be willing to pay certainly. It has to be within our multiple range, and we're not going outside that range ever. .

The next question will come again from the line of Kasia Kopytek with TD Cowen.

The sensing products, Amar. I know you said you don't have a percentage for go-forward contribution handy, but can you give us a sense of fencing, what percentage fencing encompasses of your current product mix? Is it less than 5%? So what's the number?

It's between 5% and 10% and rapidly growing. We're pretty much sold out everything that we made currently which is a great place to be. We've never been in that position. A lot of it is to do with the tariffs again out of South America. Material is just stalled coming out of there, and it was so big going into Houston and Florida than being redistributed around.

And it's basically crickets. And the demand has turned on strong. So number one, we're looking after all of our current customers and then taking on some new business from customers that really need that we're close to and then we're trying to turn on our production as fast as possible. These things don't happen overnight. But it's a key part of our business, Kasia, that we're going to grow in. And frankly, we're very excited about the domestic production made in the U.S.A., et cetera, and carrying on with that mantra, and not importing these materials. And frankly, we did import some ourselves as well. That game is pretty much over and we'll be making our own.

Okay. And then ending on M&A, the Temecula acquisition, is that a precursor to a possible pivot in your M&A strategy going forward towards more of these types of products? What I mean here is away from commodity wood products?

Yes. Our Electrical division is small. Obviously, Hawaii is the big piece. California, with Temecula just acquired a small outfit, but certainly a key for us. We'll see where that leads. Our leader there will bring us M&A opportunities as he sees fit. And also organically grow with certain customers in that field in Hawaii works because of our [indiscernible] lumber division, there's some nice synergies we have with warehousing, et cetera, with products.

And it's not our #1 growth category, it's a very, very key business unit for us or we would not have invested in California. So kind of a stay tuned, cash. I don't think it's an exciting story at this point. But it's very key piece of what we're doing. And nice to have a little diversification there on some product lines. It's a well-run division, good leadership.

Thank you. There are no further questions at this time. And I'd like to turn the call back over to Ali Mahdavi for closing remarks.

Thank you, operator, and thank you, everyone, for joining us again this morning. This concludes today's call. We look forward to speaking to you again during our first quarter 2026 financial results call. I'll hand it over back to the operator, and I wish you all have a great weekend. .

Thank you. Ladies and gentlemen, this concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.

Greetings. Welcome to Doman Building Materials Group Limited Third Quarter 2025 Financial Results Conference Call. [Operator Instructions] Please note that this conference is being recorded. At this time, I'll turn the conference over to Ali Mahdavi. Please go ahead, Ali.

[Operator Instructions] joining us this morning for Doman Building Materials Third Quarter 2025 Financial Results Conference Call. Joining us today on today's call are the company's Chairman and Chief Executive Officer, Amar Doman; and Chief Financial Officer, James Code.

If you have not seen the news release, which was issued after the close of markets yesterday, it is available on the company's website as well as on SEDAR along with our MD&A and financial statements. I would also like to remind you that a replay of this call will be accessible until midnight, November 21.

Following the presentation of the third quarter results, we will conduct a Q&A session for analysts only. Instructions will be provided at that time for you to join the queue for questions.

Before we begin, we are required to provide the following statements regarding forward-looking information, which is made on behalf of Doman Building Materials Group Limited and all of its representatives on this call.

Remarks and answers to your questions today may contain forward-looking information about future events or the company's future performance. This information is subject to risks and uncertainties that may cause actual events or results to differ materially.

Any information regarding forward-looking statements is made as of the date of this call, and the company does not undertake to update any forward-looking statements. Please read the forward-looking statements and risk factors in the MD&A as these outline the material factors, which could cause or would cause actual results to differ.

The company will not provide guidance regarding future earnings during today's call, and management does not anticipate providing guidance in future quarterly or interim communications.

I'll now turn the call over to Amar.

Thanks, Ali, and good morning, everybody. Thank you for joining us.

On the back of a very strong first half of the year, the third quarter was similar in terms of our focus on optimizing operational and financial performance on both sides of the border while navigating through continued macroeconomic headwinds stemming primarily from rising interest rates, inflationary pressures, affordability and concerns around the risks of things slowing down.

Throughout the third quarter, we worked through the impact of what I would qualify as a very challenging pricing environment. While volumes and general demand have been steadier than the pricing side, we are seeing choppy demand in certain areas of the business due to some of the macro pressures I just mentioned. These trends continue to exist in our day-to-day activities.

Overall, the North American market has been shaped by a mix of cooling demand on housing, high mortgage rates and tariff uncertainty, all of which have tempered buying activity. While price volatility remains, we expect modest gains during the remainder of the year if housing activity rebounds and policy conditions, including tariffs and trade measures, stabilize.

Despite these external pressures impacting our numbers, our focus remains on what we can control to ensure we maximize margins and free cash flow generation. While we see a cautious tone and sentiment from our customers and how they are managing through some of the same macro headwinds, demand remained steady across all key end markets during the quarter, with volumes in various categories remaining range bound.

However, given the lower pricing for construction materials, revenues and margins experienced some pressure in the third quarter when compared to the first and second quarters of the current year.

Despite the pricing pressures caused by the various factors I mentioned, I remain pleased and encouraged by the strength of our business model and our ability to perform while ensuring that our first-class level of service remains on point.

As a result of our collective efforts, the revenues amounted to $795 million, gross margin remained strong at 15.5% or $123.1 million, EBITDA of $62 million. Net earnings came in at $18.1 million. And lastly, we paid another quarterly dividend totaling $0.14 per share, representing our 62nd consecutive quarter of paying a dividend.

I'm also very pleased with our ongoing focus on balance sheet management and optimization. To this point, after 9 years of ownership and planting approximately 10 million new seedlings, we sold the remaining portion of our timberlands during the third quarter, with net proceeds of the sale further strengthening our balance sheet, which Jay will comment on a little bit later.

Looking ahead, we remain excited as we work through the macro and pricing-related dynamics while we continue to manage our costs and always look for growth opportunities. As always, we remain confident in our ability to work through volatile markets diligently while serving our customer needs with the highest level of service. We remain excited about our growth profile and the overall prospects of the business.

And with that, I'd like Jay Code, our CFO, to take over and provide a review of the company's third quarter 2025 financial results in greater detail, and then we'll open the call up for questions. Jay?

Thank you, Amar. Good morning, everyone. Sales for the 3 months ended September 30, 2025, were $795 million versus $663.1 million in Q3 '24, representing an increase of $132 million or 19.9%. The increase in sales was primarily driven by contributions from Doman Tucker Lumber, which was acquired October 1, 2024, and therefore, did not factor into our results for the comparative third quarter of '24.

Our sales this quarter were made up of 79% construction materials, with the remaining balance resulting from specialty and allied products of 17% and other sources of 4%.

Gross margin for the quarter was $123.1 million versus $103 million last year, an increase of $20.1 million, again, benefiting from the results achieved by the Doman Tucker Lumber acquisition as well as ongoing focus on the company's margin enhancement and stabilization strategies. This quarter's overall gross margin percentage was 15.5%, which was consistent with the percentage achieved last year.

Expenses for the third quarter were $86.1 million compared to $73.5 million, an increase of $12.6 million or 17.1%. And as a percentage of sales, this quarter's expenses were 10.8% compared to 11.1% last year.

Distribution, selling and administration expenses increased by $5.5 million or 9.9% to $61 million this quarter from $55.5 million in '24, mainly driven by the addition of expenses related to Doman Tucker Lumber. As a percentage of sales, DS&A was 7.7% this quarter compared to 8.4% last year. And this quarter's EBITDA was $62 million compared to $46.3 million in 2024, an increase of $15.7 million or 34%.

Finance costs in Q3 were $18.1 million compared to $11.8 million in Q3 '24, an increase of $6.3 million, largely driven by additional interest costs related to last year's debt financing of the Doman Tucker Lumber acquisition. Doman's net earnings for the quarter were $18.1 million compared to $14.6 million in '24, an increase of $3.5 million.

And turning now to the statement of cash flows. Operating activities before noncash working capital changes generated $131.6 million in cash in the first 9 months of 2025 compared to $108.9 million for the same year-to-date period in '24.

Operating cash flows during the period were positively impacted by this year's inclusion of the results of Doman Tucker Lumber. Seasonal changes in noncash working capital generated $15.4 million this period compared to $12.2 million in the first 9 months of last year.

Overall, financing activities reflected significant reductions in debt during the first 9 months of this year. 2025 year-to-date net repayments of our revolving loan facility totaled $150 million, driven by strong operating cash flow as well as the proceeds from the sale of the company's timberlands, to be discussed further later. This reduction in debt provides the company with available liquidity of $397 million at September 30, 2025, compared to $163 million at December 31, 2024.

We also note that in the comparative period in '24, the company completed the issuance of our 2029 unsecured notes. resulting in gross receipts of $265 million, with partial proceeds used to repurchase a portion of the company's 2026 unsecured notes in the amount of $52.3 million, with the balance allocated to reduce the company's revolving loan balance last year.

Dividends this year returned $36.7 million to shareholders, largely in line with 2024 dividend amounts and payment of lease liabilities, including interest, consumed $24.1 million of cash compared to $21.3 million in '24. The company's lease obligations are -- generally require monthly installments, and these payments are entirely current. We also note the company was not in breach of any of its lending covenants during the 9 months ended September 30, 2025.

Overall, investing activities generated $59.9 million of cash in the first 9 months of '25 compared to consuming $71.4 million in '24. Investing activities this year include the sale of the company's Southeast BC timberlands for cash proceeds of $75.2 million as well as an investment in a small electrical distributor in Southern California in September 2025.

The first 9 months of 2024 included the Southeast lumber acquisition for total cash consideration of $62.3 million. Additionally, the company invested $14.7 million in new property, plant and equipment this year compared to $9.5 million in 2024.

This concludes our formal commentary, and we're now happy to respond to any questions that you may have. Thank you. Operator?

[Operator Instructions] And the first question is from the line of Kasia Kopytek with TD Cowen.

Amar, I think, buyers like Home Depot and Lowe's comfortable holding less inventory now than they would be in prior cycles, in your opinion?

Yes, definitely. I wouldn't say it's just lumber. I would say across all categories. This started probably a year ago where a lot of the big-box stores and other retailers are very much a little bit compressing their working capital down and trying to push their inventory turns up. We obviously play a part in that.

It's keeping us closer to the markets, though, and turning our inventories faster as well. So all the way down the pipe, I don't think it's a big impact on our final sales numbers.

Okay. And we've seen lumber prices move a bit here in the recent months or so. How much of that do you think is a reflection of the industry realizing that sawmill cash burn has gotten extreme here and that there will have to be cuts? West Fraser just announced last night. And how much of that is just the supply chain trying to get ahead of any more supply cuts that may be coming down the line?

Yes. I don't think there's any panic, to be honest with you. There's two things going on in the market. One, what you read in random lengths is one thing, what's happening is another. So the cash markets are very soft, very weak. The mills have a lot of inventory, both sides of the border, it's not good. So this little uptick is kind of just coming off the bottom.

I wouldn't say there's any deliberate attempt for anyone to start piling down lumber, but the activity and the takeaway just isn't strong. So it's just not a good period. So it is nice to see it stabilize with some of the curtailments and see a little bit of uptick, but I wouldn't [ write ] home about it just yet.

Yes, that's probably fair. And just back to the 2-tiered market that you referenced, we know what the price for U.S.-bound lumber is. How much of a discount are you seeing right now versus the random length print for Canadian-bound lumber?

Yes, it's all over the map, Kasia. I couldn't tell you exact numbers. But if you're a buyer, you still got the leverage today on lumber. And if you're showing up ready to buy carloads or truckloads in any sort of volume, you're just going to make your price today.

It's -- we need more curtailments to adjust to the slow takeaway that's happening. And we hope that things get better next year with more interest rate cuts, and we start to see more takeaway. But right now, it's sort of make your bid and set your price.

Right. And Amar, I think the general consensus is that something north of 1 billion board feet of lumber capacity has to come out. When would the distribution channel kind of start to get a little bit more incentivized to start positioning themselves if we get kind of 500 cumulative? Like what's the number you think?

I would say, over the next few months, if we see some more curtailments happen and again, get closer to the takeaway numbers that are out there that are still stubbornly weak, it's just sort of a flat market. So I couldn't tell you exactly when, but I can tell you that we're moving in the right direction for pricing upswing. I just don't see it tomorrow morning.

But directionally, we are starting to see lumber come off, like you mentioned the West Fraser curtailments. And there'll be some others, I think, happening and some smaller sawmills just can't make it probably through this. And if they've got a bad balance sheet, it's going to be difficult, so they're going to have to shut down. So I think directionally, we've bottomed, but I just don't see a big torque tomorrow morning.

Yes, that's fair. And then stepping back a bit, I imagine now is the time when you're starting to have discussions about new programs for 2026. Any early indications about the tone of those discussions?

We have started some of that. I think the business will be steady through 2026, which we're happy with. We're very happy with how this fall shaped up. September and October were good for volumes. Obviously, pricing has been in the tank. But for our volumes, things have been decent. So wood is moving on our end, which is good. Repair and remodel has not died. It's doing fine.

So it's nice to see that for our end takeaways. And I think rolling into '26, if we can have volumes that were the same as '25, Doman will make a lot of money, and we will, I think, continue to just work on our balance sheet and get our debt down even further than we just did. So I think we'll be in good shape in '26.

The next questions are from the line of Frederic Tremblay with Desjardins Capital Markets.

You spoke about the leverage a little bit there. I wanted to maybe tie that into potential M&A activity. Just wondering if you had any comments on the pipeline of opportunities that you're seeing and if you'd be comfortable transacting in the near term if the right opportunity was available, considering the positive evolution of your leverage position lately.

Thanks, Frederic. I'll answer the latter part of the question, and I'll let Jay discuss where our liquidity is today and the debt reduction that's moving in the right direction.

The M&A activity, we've got certainly our eyes open and in discussions all the time with certain companies that we'd like to acquire that fit our strategy. The balance sheet is now back to more than ready to move on some things if we feel like the valuation is right. So certainly, we're not hamstrung by any means, and the liquidity opening up here has been excellent.

So we can think very clearly and be disciplined as we always have on our acquisitions. And hopefully, in '26, we'll see 1 or 2 come down the pipe.

So maybe, Jay, you can answer on the leverage.

Yes. Sure. Thanks, Amar. Frederic, yes, as you pointed out, the leverage has come down, sitting at about 3.8x at the end of September. down significantly from recent peaks for financing the Tucker acquisition in Q4 of '24. So we'll expect that to continue to drop through to the end of '26 at least, given market conditions, we expect to generate -- continue to generate significant debt reductions going forward.

Great. That's helpful. And maybe switching just to margins, some nice margin protection in Q3, despite the lumber price headwinds in the U.S. Should we think about Q4 margins in a similar fashion, i.e., not at the very top of the 14% to 16% gross margin range, but somewhere in there?

Yes, Frederic, I would say so. I think that the bottoming of lumber has happened. So we're starting to see, as we just talked about in the last couple of questions there, we're seeing stable to a little bit of an uptick. It's still soft in the cash markets. But certainly, I think the margin stabilization should start to trend a little bit better as we go into the fourth and first quarter and the lumber slide has finished going down.

So hopefully, that will perk us up a little bit on margin and hopefully, the volumes will continue. And just to finalize on the liquidity, I believe now with our revolver and combined full liquidity, we've got over $400 million of liquidity right now. So we're in very good shape to take care of some M&A.

The next question is from the line of Zachary Evershed with National Bank Capital Markets.

Congrats on the quarter. With the larger acquisitions now playing on your team for some time now, do you think you've reached a level where your distribution S&A in dollar terms should remain roughly flat or in line with inflation?

Yes, I would say so. I think inflation or wage inflation, obviously, we take care of our team members, and there's always that push up on wages, et cetera. But yes, I think we'd be in line there.

And also, we're consolidating and -- we don't have huge numbers to report or anything, but we're consolidating a lot of our SG&A in the U.S. into Plano, Texas into our office there. So that's going to bring some operating leverage to the system as we continue to lever up and organize all of our computer systems in the states, and that's going to drive some good synergies and cost savings as well.

Got you. And then the latest acquisition does look pretty small, but maybe you could tell us a bit more about it. Any expected synergies and what you like about it?

Yes. It's a strategic acquisition that came through one of our business leaders, and it's very small, but putting our toe in the water in Southern California to assist our Alpha electrical division that's out in Hawaii. This will help some buying synergies. It will also put us on the map on the mainland and electrical, and we'll continue to grow. It's a smaller business for us, but certainly very strategic. And we're excited about Temecula Electric being in our fold now.

Excellent. With your customer concentration up since the acquisition of Tucker, how are you feeling about it? Do you view it as a risk?

Sorry, Zach, could you say that again?

How are you feeling about your customer concentration these days? Do you view it as risk?

No, certainly not. We're very close to our large customers. And of course, we work hard every day to maintain those relationships. It's our business to lose. So we got to work on that every day. And our team members do that.

So I think our customer relationships are in very, very good shape. We work hard at it. I think we're one of the best as far as having relationships with the folks that issue us purchase orders, which we thank them for every day.

But I think our customer concentration is not any issue, as far as the Tucker acquisition went. It's helped broaden our base with one of our largest strategic customers, and we continue to grow with all of our customers. So things are in good shape there.

The next question is from the line of Nikolai Goroupitch with CIBC Capital.

Considering the shopping demand you're seeing, could you maybe highlight some pockets of strength and weakness in the business?

Yes. The R&R business, repair and remodel, has been surprisingly steady to up in the fall after a soft summer of takeaway. So we're pleasantly surprised to see that consumers are still spending despite, I think if we read the headlines, we all want to kill ourselves and it feels like the world is coming to an end, it's not. Things are going on. And frankly, consumers have money. We're not seeing mass, mass layoffs in the U.S. Consumer is good there.

And in Canada, we're having a nice fall on all building materials. So we've had a nice pickup in our distribution system in Canada, starting kind of late August, early September, and it continues into October here and into November. So a nice pickup later in the year. So we're surprised at these trends. A lot of it is R&R. Obviously, new homes, construction is flat to soft. So the R&R business has been good.

I see. And then maybe looking into next year, respective of commodity prices, what sort of main projects or initiatives are you looking at that could potentially provide some gross margin uplift?

Yes. We're going to -- well, we are, I should say, we're upgrading our Gilmer, Texas production line and fencing. We produce a lot of fencing in the states, and we're going to continue to invest in our mills and upgrade them, reduce labor and modernize and optimize. So we're working on that. If that works, we'll roll it across all of our sawmills, and we're looking at planting a flag in the East Coast as well as far as producing fencing on the East Coast.

There's a lot of tariffs and things that are happening with South America, which is squeezing production coming north. And we want to take advantage of that opportunity, not for the short term, but for the long term and establish ourselves as a large fencing player on the East Coast of the United States as well. So you're going to see some pretty good exciting things come from us on the sawmill side in specialty.

We have a question from the line of Amit Prasad with RBC.

It's Amit on for Matt. Just a quick follow-up on the last one. You called out some benefits to the Canadian distribution side. Just wondering if you've seen any changes to the competitive environment on the U.S. side.

Yes. Yes, the strength in Canada has been nice. It's not robust or crazy, but it's certainly picked up from where it was, where it was looking very dire most of the year. And we've caught up to our budgets, and it's nice to see that. The team has worked hard at that for sure.

As far as the U.S. goes on the competitive landscape, I haven't seen or saw, I should say, in our kind of runway or our space too much activity as far as M&A goes. We've seen it kind of in the pro dealer with Lowe's and Home Depot doing a lot of acquisitions like FBM, [ Accestra ], and SRS.

Those acquisitions are large, but they're not really in our space. Those are different product lines that Doman doesn't participate in. So really kind of a nothing burger as far as what's going on with kind of LBM and what we're up to.

At this time, I'd like to turn the floor back to management for closing comments.

Once again, thank you, everyone, for joining us this morning for the quarterly call. If you have any follow-up questions, by all means, please feel free to reach out to myself. We look forward to speaking with you again on our next earnings call, which will be in the new year. That concludes today's call. Wishing you all a great weekend.

Ladies and gentlemen, thank you for your participation. Please disconnect your lines, and have a wonderful day.