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Operator: Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Dorel Industries Second Quarter 2025 Results Conference Call. [Operator Instructions] Before turning the meeting over to the management, please be advised that this conference call will contain statements that are forward-looking and subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated. I would like to remind everyone that this conference call is being recorded today, August 11, 2025. I would now like to turn the call over to Martin Schwartz, President and CEO. Please go ahead.
Martin Schwartz: Okay. Thank you. Good morning, and thank you for joining us for Dorel's second quarter earnings call for the period ended June 30, 2025. With me today are Jeffrey Schwartz, CFO; and Jayson Kwasnik, Vice President of Finance. We'll take your questions following our comments. And please note that all figures mentioned during this call are in U.S. dollars. Dorel Juvenile delivered a strong second quarter in 2025, building on the momentum from the start of the year and overcoming the challenges posed by U.S. tariffs. Our performance was driven by strong growth in Europe and key international markets, disciplined cost control and favorable foreign exchange movements. Dorel Home experienced a difficult second quarter with tariff uncertainties and liquidity constraints impeding sales. On June 30, we announced our expanded restructuring plan and are actively implementing changes to reduce costs and further streamline operations. We remain confident that the benefits of our Home segment's transformation will begin to emerge in the fourth quarter of this year with full impact expected in 2026. As always, Jeffrey will elaborate further on our results. But first, I want to update you on some very positive momentum in Juvenile. Our Juvenile revenue growth for the quarter was less than 1%, which is less than the pace we have been setting over the past several quarters. The only reason for that was reduced sales in the U.S. In fact, revenue growth, excluding our U.S. market, was just over 12% in the quarter. Europe was the driver of that given their relative size, but our smaller markets like Canada, Australia, Chile and Peru and our export markets were also up at least high single digits. This is a tribute to our business model of combining our powerful global brands like Maxi-Cosi with local brands like Mother's Choice in Australia and Infanti in Chile and Peru. Of course, our local management teams are key to our success and led by our Juvenile President and CEO, Rafael Camarano, the teams we have in place right now are as strong as they have ever been. Let me now turn to some of the exciting developments across our brands and markets in the quarter. We officially launched our MaxiCosi nursery and youth furniture collection of grips and dressers, marking a strategic expansion into this category. The Juvenile team has taken the legacy of our Home segment and expanded it into premium collections, which previewed at both the High Point furniture market and the ABC Kids Expo in Las Vegas. Retailer and consumer interest was very strong, and we expect meaningful shipments to begin the latter part of the second half. This will coincide with a near similar launch at the Juvenile Products trade show in Cologne this September. One of the most exciting developments this quarter was the global rollout of the Maxi-Cosi Fame stroller. Following its successful debut in Europe earlier this year, we launched Fame in Canada, Brazil and Chile, reinforcing our commitment to premium innovation and regional brand alignment. These strategic launches were coupled with tailored activations designed to maximize impact. These efforts in Chile led to a 35% increase in brand purchases and 82% sales growth versus last year and a 3-point increase in Maxi-Cosi share of Dorel Chili's sales. Last quarter, I mentioned about the management team in Chile turning that business around, and that continued into the second quarter. Safety 1st made headlines in Brazil by launching the first safety-certified hotel by Safety 1st, integrating child safety into the hospitality experience. This initiative opens new avenues for brand engagement and long-term loyalty. And finally, in Europe, beyond the ongoing success of Maxi-Cosi, we have a new BebeConfort Disney car seat line, which was launched in France with vibrant in-store displays and strong consumer interest. We see an opportunity to grow in lower to mid-price point categories under BebeConfort and this Disney line is part of that ongoing strategy. And now on to Dorel Home. We made a significant announcement on June 30 that we were ceasing manufacturing in North America. This was not a decision made easily giving our legacy as an RTA manufacturer since our beginning. It is also contrary to what we discussed in our first quarter conference call at the beginning of May when we discussed changes being made to improve what has been a money-losing operations for several years. However, after extensive analysis aided by third-party consultants from EY- Parthenon, we recognize that the time required for a turnaround was not something we could afford. This led to the decision, and we are winding down operations in the third quarter with stoppage planned for the end of September. Our first thoughts are with our employees who will need to seek new opportunities. Many of them have been with us for decades, and this made the decision that much harder. I want to thank everyone who has helped build Dorel over the years, and we wish them the best in the future. We are doing our best for our employees to transition out of manufacturing, but also for our suppliers and customers. We are committed to fulfilling our obligations as we transition to a pure import business in the future. The decision to exit manufacturing not only removes a part of our business that was not profitable, but allows us to fully leverage synergies with our Juvenile segment. We will be integrating all of Dorel Home's North American back-office functions into the Juvenile ecosystem, including combined warehousing in some locations. This will be done in the current year. And if we hit the milestones we have set for the integration, the benefits will accrue as soon as the start of 2026. These decisions are part of a broader transition to a leaner organization with a reduced product line focused on profitable categories. The Home segment is actively working on exiting product categories that are now considered noncore, including a plan to significantly reduce inventories by the end of the year. thereby allowing for a much smaller distribution footprint. Our Home segment teams have been informed of our plans. And of course, with synergies come job losses, and we are working with our employees to help them manage this transition. What we have seen through all of this is that we have some of the best employees, and this is why we have been successful in the past. I want to personally thank them for their support and their commitment to Dorel even with all these changes. I'll now ask Jeffrey to review the financials.
Jeffrey Schwartz: Thank you, Martin. Before we do that, I just want to add a little more color to a couple of recent events, the restructuring. So Dorel Home's new round of restructuring, as Martin has been discussing in the second quarter, is founded upon the reduction of the size of the organization and its ability to merge the sales, marketing and product development organizations into our successful Costco division. We call it the Costco Plus model. A limited number of high-performing Dorel Home import SKUs will be transferred to the Costco portfolio, focused on categories and customers driving the highest contribution with the least added complexity. An additional contributor to improved earnings is the consolidation of certain Dorel Home back-office functions with the Juvenile North America operation based in Columbus, Indiana, which will provide further synergies for Dorel overall. The decision will result in substantial savings based on a much smaller footprint and workforce and eliminate the losses from the domestic operation. This will allow the reduction of the current distribution footprint, which now is much too large for the new streamlined home operation. The company will be exiting from existing warehouses based on their scheduled lease termination dates this year. And for the facilities with longer termination dates, the company is exploring subleasing opportunities for which we believe we can realize sometime next year. For Q2, we took a restructuring charge of $22.4 million, of which $13.2 million was noncash with the balance, mostly severance spread over time in the future. The other event signed last week was we -- the company amended its ABL facility and term loan facility, whereby the lenders agreed to continue to forbear their enforcing their rights and exercising their remedies until -- under both the ABL facility and the term loan facility. In addition, the company received access to $20 million more of additional liquidity in 3 tranches under the ABL facility in order to finance new inventory. In addition, the company is continuing to work with 2 leading capital market advisers to assist in recapitalizing the company's balance sheet to allow for growth in the Juvenile segment and support the reorganization of the Home segment. The new structure will replace the current debt structure, which no longer matches the company's needs. Dorel will update stakeholders on developments when we can. Now if we move over to the numbers, from a consolidated standpoint, the second quarter, Dorel's revenue decreased by $55.7 million or 16%. Organic revenue declined by about 16.8%. The revenue decline was all in Dorel Home as the Juvenile business was essentially flat. In Juvenile, the revenue improvement was in all markets across -- and most brands, except for the United States and the Brazilian market. Gross margin for the second quarter decreased by 210 basis points as a percentage of revenue to 16.9% from 19%. The decrease in gross profit and gross margin in the quarter was in Dorel Home, offset in part by increases in gross profit and gross margin in Dorel Juvenile. For the second quarter, Dorel reported an operating loss of $37.2 million compared to $49.3 million last year. Excluding impairment loss on goodwill and restructuring, adjusted operating loss increased by $10 million to $13.5 million. Finance expenses decreased by $1.2 million in the quarter to $8.3 million, and the decrease is mainly explained by the lower average long-term debt balances compared to last year. We move over to Juvenile, which we're pretty proud of except for the U.S. The revenue was increased by less than 1% compared to last year, with organic revenue being essentially flat. The improvement in revenue, as I stated before, was just about everywhere except the U.S. and Brazil. Despite the uncertainty in the macroeconomic environment and changes in consumer spending, Europe experienced double-digit organic revenue growth in several of its key markets and categories, building upon the momentum from the first quarter. In addition, Latin America, Australia, Canada, our export markets all continue to grow, driven by growth in the Maxi-Cosi brand, channel optimization and the launch of new products. The revenue improvements were offset by a revenue decline in the U.S., which was due to the tariffs. So the tariffs hit in April and the effect was practically an embargo on all Chinese goods as the tariffs shot up to 145%. So everybody, ourselves, our competitors, retailers, everybody pretty much stopped importing goods from China during that period. Since then, with the tariffs dropping to 30%, business has restarted again in May and in June. However, the uncertainty is certainly causing what I would call paralysis on decision-making by our customers, even in a sense by ourselves. as changes around the world continue almost on a weekly basis as far as where tariffs are from other parts other than China. So that impact in itself had a significant negative impact on our sales numbers in the quarter. On the other side, our factory in Columbus, Indiana has been picking up as that is an area that allows us a little more certainty and allows our customers more certainty in both pricing and availability. So that -- we are seeing momentum gathered in that factory as volume is increasing on American production. We expect that to continue throughout the year. The only other area of decline was in Brazil, where we declined less than 1% as a key customer delayed their orders to the third quarter. That seems to be back on track again. So that's a nonissue. From gross profit for the quarter increased by 2.6% compared to last year, foreign exchange rates as well as a better product mix. And that was partially offset by lower volumes in the U.S. The operating profit, $6.5 million during the second quarter compared to $6.3 million. Excluding restructuring costs, the profit was up by about $1 million. to $7.8 million. The increase in operating profit, again, was explained by increase in gross profit dollars and higher gross margins and then partially offset by some higher expenses. If we move over to Home, this is obviously a very difficult quarter for the Home. The second quarter revenue declined by $57 million or 43%. And as we announced, we will be taking a substantial reduction in the size and sales of our business, primarily on the e- commerce channel, which will not represent a large portion of our sales moving forward. The rest of the numbers in the quarter for Home has a lot of noise in those numbers because of things like restructuring, the factory wind down, tariffs, SKU reductions. So we're determining that those numbers are somewhat kind of meaningless as we look forward because of all those factors. The one thing I do want to point out, which I think is very valid is the Costco division of Home, which is the surviving entity. They were profitable despite significant tariff headwinds in the quarter. So we're feeling good that as we look forward in our Home business, we're looking forward to taking a profitable division and adding SKUs and a limited number of people to it. And as we look forward to that, we have a fairly large level of confidence that we will have a profitable business going forward even in this environment at home furnishings. And with that, I'll pass it back to Martin.
Martin Schwartz: Okay. Thank you, Jeffrey. Okay. In our outlook, despite the challenges of the U.S. tariffs, the Juvenile segment is well positioned relative to competitors based on its worldwide footprint and its domestic manufacturing capabilities in the U.S. This was evidenced in the second quarter as reduced earnings in the U.S. were more than offset by improved earnings in other markets. With our facilities in the U.S., which could present further opportunity going forward and our strong international business, we expect to continue to improve earnings and remain on track for a better 2025 than '24. Dorel Home is entering a pivotal phase in its transformation journey and with second half of '25 focused on executing the structural changes initiated this year. We are confident that the actions taken, streamlining operations, integrating with Dorel Juvenile and transitioning to a more agile distribution model will position us for a return to profitability in 2026. The company continues to work with key customers and suppliers to maintain strong relationships during this period of transition, and we are appreciative of that support. We are on track to secure additional financing. And when we do, this added liquidity will mean a much healthier Dorel on day 1. This will coincide with our reduced cost structure in Dorel Home and with our ongoing growth in Dorel Juvenile. We will have the ability to better serve our customers and work even more closely with our key suppliers. With that, I'll ask the operator to open the lines for questions and please limit your questions to 2 in the first round. Operator?
Operator: [Operator Instructions] The first question comes from Derek Lessard with TD Cowen.
Yaozhi Zhang: This is Cheryl calling in for Derek. So firstly, on Juvenile, I'm curious, have your customers started reordering again? And what have they said about their reordering plans at this point?
Jeffrey Schwartz: Yes. I mean they never stopped ordering. The problem is we've had to raise some prices because of tariffs. That's caused some uncertainty. I mean, we obviously had sales in the U.S., so they are ordering. It's just they're not sure where they're going with all of this. What are their alternatives? It's just a lot of paralysis. I think this is not a juvenile issue. I think this is a much more of a consumer product issue. So there's just a lot of uncertainty there, and that's not leading them to make long-term decisions yet. I think that's the issue.
Yaozhi Zhang: Okay. Got it. And then one more before I requeue. Is there any color you can offer on the delay in the refinancing and any timing of when we could expect an update on that?
Jeffrey Schwartz: So it's not as -- what we've done now is we're looking to do a complete refinancing of the whole credit agreement. Before we were looking at adding a new piece to our current lending agreements, and now we're looking at a completely new lending agreement. So we're focused on trying to get something done before the end of the quarter. We're halfway through the quarter. So we're working on it. I can't give you any more details on that.
Operator: [Operator Instructions] Our next question comes from Stephen MacLeod with BMO Capital Markets.
Stephen MacLeod: Just a couple of questions. Just with respect to the home restructuring, that's obviously quite significant, and you've indicated a return to profitability in 2026. Just a couple of questions there. Just wondering if you can give any sort of expected magnitude of the benefits you expect to receive? And then when you talk about return to profitability in 2026, is that a -- do you expect to be profitable in every quarter in 2026? Or is it a run rate where you achieve profitability somewhere in the later parts of the year?
Jeffrey Schwartz: I mean the benefit -- let's start with that. I mean, we are reducing -- the way to look at it is we're trying to cut all of the parts of the business that didn't make money leaving only the parts that were profitable, which is really the Costco Plus business and our European business. Everything else is going to be cut. So we're looking at fairly significant footprint of warehousing and factories and people associated with that. So it's in the tens of millions of dollars that we're going to be cutting and have been -- a lot of it's already been in the works. We are fortunate in that a number of the larger warehouses or buildings that we've been leasing, they are up for renewal this year, so we won't be renewing those. So there's not a cost there. So I can't give you the exact number. We're working it through. And as far as profitability, we're hoping we start the year really close to profitable. Again, it's all about getting rid of stuff as opposed to -- the difference between this turnaround and the last one, the last one, there was some hope in there. The last one involved increasing sales. It involved increasing efficiencies in the factory. It involved turning around this, turning around that. This one doesn't. This one is a lot simpler in effect. It's literally about cutting away the parts that don't work and just leaving the parts that do work and adding some pieces to that. So we have a lot more confidence that this time, we're going to get to the profitability area. And as we're working now, there's been a lot of severance and there's been a lot of layoffs. There'll be a lot more. I think it's Q4 is when it kicks in. And therefore, we do expect to -- I wouldn't say it's January, but certainly, Q1 is an area where we'd like to get to breakeven to small profitability and then go from there.
Stephen MacLeod: Okay. That's helpful. And then maybe just wondering lots of noise in Q2 in both segments. And I'm just curious if you can give a little bit of color as to what Q3 to date has looked like in both Juvenile and the Home business on the top line.
Jeffrey Schwartz: Yes. I mean, again, we're continuing the -- all the area except the U.S. is continuing to grow. We're very excited about -- some areas that we were struggling with like Chile has turned and other areas are doing really well. So everywhere -- the U.S. is picking up. going to be challenging to beat last year in the U.S., I would say. That's very questionable given the tariff circumstance. But the rest of the world is doing very well. And our Juvenile business, I think more than 50% of our business is outside the U.S. today. So it's a very significant portion. So therefore, I think we're on track to do what our internal budgeting is supposed to do for Juvenile. So optimistic there. I mean even though the top line is down, we're trying to make up earnings in other areas. So we're very optimistic on the Juvenile. And on the home, I mean, it's really where focus is on the Costco Plus business. We are getting into a busier time of the year. Keep in mind this -- the Costco business is a lot of folding chairs, tables, ladders, climbing, we call them climbing products, stuff like that. This is more of the season normally for that. So we are seeing orders picking up. We've had liquidity issues, which haven't allowed us to fulfill all those orders. We're hoping now with the increased liquidity that, that allows us to fulfill the orders we need for the second half of the year.
Stephen MacLeod: Okay. And then maybe just like -- just to sort of dig in on Home a little bit. With the sales weakness that you saw in Q2, do you expect to be kind of improved from that on a quarter-over-quarter if you think about sales...
Jeffrey Schwartz: It's mostly -- yes. You know what I mean, the 2 big factors more than 2, as I mentioned, you've got the exiting of most of the e- commerce -- you've got a factory wind down. So we're no longer bringing it. The tariffs really hit Costco hard in April. A lot of product is made in China. That is coming back now, and we are getting -- so that part of the business is improving over the second quarter, but you're seeing the rest of the business kind of dropping off. So -- which again is the plan part. So we're just focused on keeping the Costco part. I mean the longer-term plan, Steve, is really to stabilize the business, make some money, make it no longer a losing business. I say, take a breath, have a coffee and then start building again. But build in an asset-light mode, no warehouses all over the country. I mean we have other options for that, a limited amount of people, just keeping it asset-light and grow the sales. And that's kind of the way Costco has always been or it has been for 10 years, a significant amount of sales with not a lot of people and not a lot of like overhead. And that's the model we're going with, and we're going to try and grow the business through that model instead of the heavy model that we had coming out of COVID, which we had locations and warehousing and factories, and that's what really killed us here.
Operator: We have a follow-up question from the line of Derek Lessard with TD Cowen.
Yaozhi Zhang: So just a couple more clarifying questions. So first on Home sales. Just curious if you have any idea on the rough run rate of sales and margin profile after you fully rightsize the business.
Jeffrey Schwartz: What's the run rate? The run rate will be -- just trying to think there because again, we're cutting that down to -- it will be between...
Yaozhi Zhang: On consolidated basis.
Jeffrey Schwartz: Well, if we get the Home segment done, we're going to be consolidated, we'll be done for sure. I mean the Juvenile business is going very well. It's going to plan. It's hit our plans for a couple of years. Despite -- I mean, it's even doing well this year despite the tariffs and despite the liquidity issues, it's not allowing us to do everything we want to do. So we're pretty confident once we can get a new lending structure in place that, that business will continue. And then we will also be -- have a profitability from the home business and you put -- they will be profitable, the Juvenile will be profitable, and we do have some corporate expenses in there. But overall, we're looking to certainly be profitable across the board next year.
Yaozhi Zhang: Got it. And I think in the press release, you noted that the gross margin of Juvenile benefited from favorable FX. Just curious if you might be able to quantify how much of that improvement came from FX?
Jeffrey Schwartz: It depends on how you do it. I mean with the new rate, it allows margins to go up and it allows different decisions to be made. So I don't have a hard number for you. But certainly, if you want to also zoom in on where that's occurring, it's occurring significantly in Europe, where we have a growing business that is also having its -- a positive exchange rate. So it's a meaningful number. But again, it's hard to actually calculate. It's not a hard number. It becomes a soft number because it allows different things to happen within the business. It's -- but it's a material number, and it's going to continue because we're buying goods at a better rate now than we were earlier in the year.
Yaozhi Zhang: Okay. Okay. That's fair. And then in Juvenile, you noted that the 12% organic growth in Europe and other markets was driven by channel optimization. Just curious if you could elaborate on that.
Jeffrey Schwartz: Well, we continue to grow the higher-end business. We've had a lot of success in the last couple of years with introducing new products to the higher-end business, the Fame stroller as an example, other strollers. The SlideTech car seat is now probably the single most important car seat in Europe today. So those are allowing us to grow higher-end product and make more use of that high-end channel.
Yaozhi Zhang: Got it. And then maybe just last one for me. I think you noted higher legal expense in Juvenile in the quarter. Just curious what are this related to?
Jeffrey Schwartz: Is that the -- I believe that's the case that -- we have a case in which we're actually the plaintiff on this point. I don't believe that's the case, but it is. It's not anything, I think, that would affect us going forward, put that way.
Operator: Our next question is a follow-up from Stephen MacLeod with BMO Capital Markets.
Stephen MacLeod: I just wanted to follow up on the Home business sort of rightsizing to that kind of $250 million to $300 million on the top line. Is that -- would you expect to be at that run rate sort of by this time next year, you'll have achieved 4 quarters of the plan?
Jeffrey Schwartz: Yes. Yes, for sure. What's interesting there is that includes the sales reduction that we're estimating we're having on the Costco business because of tariffs. So we would have had a higher number if tariffs didn't happen. Tariffs have pulled down some of that imports business. So we're estimating a reduced Costco business and then adding what we call the plus to that. So yes, I would think that some point next year that we should be there, yes.
Stephen MacLeod: Okay. Okay. And you mentioned the single-digit returns. Were you specifically referring to margins with that comment?
Jeffrey Schwartz: Net overall margin. No, not gross margins, but like operating margin.
Stephen MacLeod: Operating margin, yes. Yes.
Jeffrey Schwartz: Again, what we're not doing here is we're not expecting growth. We're not -- how do I put it? Internally, we're obviously working on growth. But from an external standpoint, we don't want to forecast a turnaround, a growth in our sales, any type what we did in the first time we did a restructuring in home, which clearly didn't work. Though a lot of that -- what didn't work, we did cut the expenses we said we were going to cut, but we didn't get the growth in sales. We didn't get the turnaround in the factory. This time, we're saying, no, let's take what we have today and forecast that forward. And then once that is profitable, and that's the -- that's what we -- the exercise we went through with the restructuring when we had even E&Y helping us to get to where we're going, that gives us the confidence. And then from there, we'll try and grow it. But what we're talking about isn't a turnaround in sales. It's just what we have. I just want to make sure that's clear. It's very different concept...
Operator: This concludes the question-and-answer session. I would like to turn the conference back over to Martin Schwartz for any closing remarks.
Martin Schwartz: Okay. I just want to thank everyone for joining us today, and I wish you all a great week ahead. Thank you.
Operator: This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.