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Operator: Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Dorel Industries Second Quarter 26 Results Conference Call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a Q&A session. The 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, 08/06/2026. 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. Thanks for joining us for Dorel's second quarter earnings call for the period ended June 30, 26. Today, we will review our second quarter performance, provide an update on strategic actions underway across the Dorel Juvenile and Dorel Home and discuss how these initiatives are intended to improve profitability, simplify the business, and strengthen cash generation over time. With me today are Jeffrey Schwartz, CFO and Jayson Kwasnik, VP of finance. We will take your questions following our comments. And please note that all figures mentioned during this call are in US dollars. Dorel Juvenile delivered a resilient second quarter supported by strong international performance, and continued momentum in its premium brands. While softer market conditions in The United States affected sales, the segment continued to improve underlying operating performance. With growth across several key international markets. Ongoing investment in innovation consumer engagement, and commercial execution continues to reinforce Dorel Juvenile's ability navigate market challenges while strengthening its foundation for long term profitable growth. As announced with our first quarter results, Dorel Home required a further reduction in its overhead structure. During the quarter, we advanced a new business model centered on Costco product categories. In addition, our European furniture distribution company, Notio, will continue to supply key large retailers with select furniture SKUs. Although this transition resulted in a reduction in revenue in the quarter, we are very pleased that the Costco business performed in line with expectations and was profitable under the new operating model. As always, Jeffrey will walk you through our results But first, I want to add color to our press release of today. Starting with the juvenile segment. Juvenile results included some significant year over year foreign currency variations. When those are excluded from the figures, the underlying earnings actually improved both in the quarter and the year to date. This was in spite of some challenges in our major U. S. Market and again demonstrates the resilience of our business model. The smaller international markets continue to excel. Averaging our product engine mostly the European line. And we are winning in our smaller markets like Australia and our export markets. Maxi-Cosi continues to be the growth that has been established in many non European markets as a preferred choice for consumers. The quarter reflected progress in several areas that are important to our long term strategy. Innovation, strengthening our brands, and expanding product credibility. While these highlights are not financial results in themselves, they are meaningful indicators of the underlying health of the business. We saw encouraging momentum across several of our key brands during the quarter. At the ABC Kids Expo, in Las Vegas, Dorel Juvenile USA showcased innovation and upcoming product launches across Maxi Cosi, Safety First, Little Seeds, and Tiny Love. This event provided an important opportunity to engage customers and present new category initiatives, and reinforce the relevance of our portfolio in the juvenile products market. External recognition also reinforced the strengths of our product Safety first received recognition for home safety, and connected nursery products. Including the 80 piece baby-proof baby proofing kit, and the smart humidifier. Maxi-Cosi also received recognition for its Embrace foam-driven dresser, supporting the brand's expansion into the nursery category. Our focus remains clear. Build trusted brands, deliver relevant products, strengthen execution with retail partners, and support the teams that make us successful. We believe these priorities position Dorel Juvenile to continue advancing its strategy and creating long term value for stakeholders. At Dorel Home, and as previously announced, we undertook a further comprehensive review of the Dorel Home business after the slow start of 2026? As a result, we have fundamentally reshaped the Home segment around the businesses we believe offer the strongest long term returns potential. The new structure is built around 3 focused platforms. Costco products, youth furniture under Dorel Juvenile, and select furniture opportunities supported by Notio. Throughout the restructuring process, Costco has demonstrated resilience and remains the foundation of our home strategy. It benefits from strong retailer relationships. Leading positions in leading positions in functional living categories, and an operating model that can generate attractive profitability and supported by the appropriate cost structure. Importantly, the second quarter reinforced our confidence in this business. While Dorel Home overall remained burdened by legacy costs and restructuring activities, management's analysis show that Costco itself performed in line with expectations and was profitable within the new operating model. The second component of our strategy is the transfer of youth furniture into Dorel Juvenile. This move leverages the natural connection between youth furniture, nursery furniture, and Dorel Juvenile's existing product category. Importantly, this business will remain subject to strict profitability requirements. Growth will only be pursued if it can generate a appropriate returns without recreating the overhead structure of the legacy home organizations. Third element involves transitioning the remaining viable furniture activities to Notio. Our Europe based furniture division. Notio is a lean furniture distribution business that possesses extensive furniture expertise, strong sourcing capabilities, established retailer relationships, and a lower cost operating structure. The items being transferred to Notio will be sold in North America and will be limited to active profitable SKUs to start. I will be direct shipment sales or utilize third party warehousing and do not require company owned warehousing in North America. The dedicated home furniture organization has been further downsized with certain retained activities integrated into existing platforms and juvenile or Notio. These actions are expected to improve profitability increase flexibility, and reduce risk going forward. I will now ask Jeffrey to review the financials.
Jeffrey Schwartz: Thank you, Martin. For the second quarter of 26, Dorel's revenue decreased by $42.9 million 14.7%. The organic revenue decline was 16.9%. The decline in revenue in home was mainly due to the intentional reduction of active SKUs that are now considered non core So this is a continuation of our policy to drive down the business to get it to the new format that Martin described. In Dorel Juvenile, the decline was, mainly in The US. The revenue declines were partially offset by some robust double digit revenue and organic growth in most of our export markets. Places like Australia, Brazil, Canada are doing the best they have done in years and years. So we are pretty excited about that level of growth. The margin line, the margins decreased by margin $9.3 million or 18.7%, and that decreased by 80 basis points from a percentage from 16.1 or to 16.1% from 16.9 However, excluding restructuring costs, the gross profit decreased by $5.1 million but improved as a percentage from 21.5% last year to 23.1%. In home, the decrease in the gross profit and margin is mainly due to lower sales, which we talked about and a continuing sales of noncore SKUs at very low margins. To help clean up and get us out of some facilities. We do, of course, have a significant lower overheads now, but that was not able to offset all of the margin pressure from the stuff I have mentioned before. On the Juvenile side, the decrease in gross profit and margin in the second quarter was primarily driven by year over year significant negative foreign exchange impacts due to the U. S. Dollar weakening against the euro in the second quarter. Operating loss for Dorel was $24.3 million compared to $37.2 million But when you take out restructuring, the operating loss dropped to $5.3 million. And furthermore, if you remove the impact of FX we actually get a positive result of $1.5 million From an FX standpoint, we had a loss, not a significant loss this year. However, there were some significant FX gains in Q2 of last year. As the euro strengthened significantly against the U. S. Dollar. When you take the loss of this year and you add back or you take away the gain of last year, we would have been slightly positive. If we move over to Juvenile now, the second quarter revenue was $209 million decreased by 3.9% versus last year. The organic revenue line was down a little bit more at 6.8%. The revenue and organic revenue declined were mainly in The U. S. Market. In The U. S. Market, we were driven by some softer category demand We did some reduced promotional activity compared to last year. The timing of certain programs with key customers. And in addition, some of our competitors engaged in what we thought was extremely aggressive promotional activity. Across a number of categories during the quarter. And that pretty much caused a lot of the decline in sales. The revenue decline described above was partially offset by double digit revenue and organic growths like I said, in our international area. Australia, Brazil, like I said, do doing extremely well. Australia growth has now allowed our Maxi Cosi brand to finally take the number 1 position in car seats in that country with the leading retailers. So that is been a long time coming, and we are we are pretty excited about that. In Brazil, organic revenue growth was from every major product category and across all the brands. Both the export markets and Canada are all really working from the fact that, you know, our original plan of having all this distribution works really well when we have some great product being produced and a lot of the product that is leading to the growth is the product that is coming out of Europe allowing our various divisions around the world to really succeed. So while this used to be a very minor point of Dorel you know, it was not really influencing our export business or you know, businesses outside of Europe and The U. S. Are actually starting to contribute meaningful dollars to the bottom line. From a gross profit, gross margin standpoint, the numbers decreased in the Juvenile by $4.7 million declined by 110 basis points as a percentage down to 27.9% The decrease was really mostly part of the negative foreign exchange and some, obviously, lower sales in The U. S. And does not help us on that end, partially offset by higher sales volumes and better mix in most of the other markets around the world. From an operating profit, it was $3.6 million during the quarter, compared to $6.5 million. If we remove restructuring costs, adjusted operating profits, declined by $2.7 million to an operating profit of $5.1 million And again, we look with the FX adjustments, in both periods, We actually improved just the FX would have our earnings by $4.0 million And again, that is mostly because of the large FX gain that we had in 2025 Q2. Switching over to home. Again, very difficult to read a lot into the numbers. Sales are down significantly. But again, all of that is pretty much in the areas that we are just exiting the business. So you see a decline of 46.4% as I explained before, where that is coming from. The losses the home loss was $11.3 million in the quarter. versus $23.9 million And adjusting excluding restructuring costs, adjusted operating losses decreased by $6.9 million $6.3 million to an adjusted operating loss of $6.5 million The other thing just I wanted to address was finance expenses during the quarter. Increased by $8.6 million to $17.0 million However, the cash portion of the interest was $11.1 million this year. So a significant chunk of that, just $5.9 million is noncash. So that is an important thing. With that, I will pass it back to Martin for the outlook.
Martin Schwartz: Okay. Thank you, Jeffrey. The real juvenile enters the second half of 26 confident in its strategic priorities and the strength of its global platform. Building on solid performance in key international markets. Company expects improved earnings in both The US and Europe, supported by significant new product launches. As an early indicator, US sales improved in July and we expect that trend to continue. Dorel Juvenile remains focused on sustainability profitable growth, while further strengthening its position as a global leader in juvenile products. Dorel Home remains focused on executing its transformation strategy and building a simpler, more agile, and financially sustainable business. Supported by the continued profitability of Costco, and a stable European operation expected to contribute plus positively to earnings. The company is focused on eliminating legacy costs and scaling its most profitable platform. With that, I will ask the operator to open the lines for questions. Operator?
Operator: We will now begin the Q&A session. Please pick up your handset before pressing any keys. The first question comes from Cheryl Zhang with TD Cowen.
Cheryl Zhang: Hi, good morning, Jeffrey, and thanks for taking our questions. I wanted to first start on the Juvenile segment. So I think MD and A, you noted that part of The U. S. Sales decline was due to the timing of certain programs. Dorel the key customers delaying sales to the second half of the year. I wonder if you could please elaborate on that. You also said U. S. Sales improved in July Can you maybe speak to what you are seeing that support your that is support a continued sales improvement in the second half, please? Thanks.
Operator: Well, the first part of your question, I mean, that is standard.
Martin Schwartz: there is rollouts. there is programs that retailers run, and they are not always the exact same time of the year. You know, they and I think that is that is that is more of a general issue. We looked at what programs we had all across in 2026 versus 2025. And see, you know, some of them have shifted to later in the year. So there is not a do not have a hard number for you on that. On the second question, yeah, we are we are getting a little more active in promoting Yeah. So that yeah. And we are seeing the results. I mean, you know, we started in July, and we saw some instant results particular, in some car seat areas that we are excited about. And you know, I think it is just it is just that. it is some of the timing of the year. it is it is, it is coming back. I mean, it was a particularly tough quarter on the top line. And I feel good that, you know, things are getting back to where they should be in The US. July is a good indication that we are on the right track for that.
Cheryl Zhang: Okay. that is helpful. So is this fair to say that the improvement is from the promotional activity that you are doing, but will we also be seeing the you know, the retail programs coming back as a tailwind in the second half? Curious if you have any Yeah.
Martin Schwartz: I think so. And the key yeah. I mean, I think that is the key. The real key, and it is goes for all markets, is the is the actual introduction of the new items that we have been showing. And that is different for all different markets. You know, we have a couple of really great products that we are waiting on. And I know in Europe, 1 of the Great strollers that I am very excited about is hitting in Q4. Beginning of Q4, but that 1's only hitting in The US in the beginning of Q1. So that particular item, we will have to wait, you know, 3 months more. But that is a key thing in juvenile. Right? it is it is about you know, promotions are great, and they and they drive some big numbers, but you really move the needle when you have got new products introduced. So that is what we have been focusing on, and that is what is driven our business so well in Europe over the last 2 to 3 years. And driven our international businesses. We are just really succeeding. We have got to get more of those introduced The U. S. We do have some. That are coming in Q3, and we have more in Q4. And we have quite a bit in Q1 and Q2 next year. So that is what is really going to drive meaningful numbers. that is helpful context. Thank you.
Cheryl Zhang: Maybe switching gears to home segment, You introduced like a new business model. And I wonder if you could give us a sense of how much of that home sales currently is under Costco. And when should we be expecting the transfer of used furniture from home to juvenile? And how much would the that sales shift be between the segments? Oh, yeah.
Martin Schwartz: Let me ask let me answer the second part. First. So, really, what it is it is I do not think you are gonna see it per se. It is authorizing we have already moved the cribs over. As you know, that was about a year plus ago, maybe 2 years ago. And, and then the next logical step for us is what we call youth furniture. So youth furniture would be bunk beds, end beds, for children's bedrooms as opposed to just babies' bedrooms. that is not a big huge business. there is a couple of SKUs that we had but it is just more of a focus. And so I do not think that is gonna be a material number that you are gonna see. On the flip side, your first question was about cost. Cost represents about 70% of our of our business right now with 30% being Notio. I am I am actually I mean, I am excited not necessarily about the business, but about I think we finally found our right footing. I mean, it is been a while. It was this is a business that is been tumbling. As you know, many businesses in this area have just closed up We have closed a lot of that business that is just could not make a go at. And we finally found a place where it makes sense. And, you know, I think for you to think about it, and this is how we look at it now is we have got a Costco business that was profitable in Q1 in Q2, sorry, not in Q1. Will be profitable for the rest of the year. So we, you know, we need to grow that business. We need to do a lot of things. We are no longer burning money there. Or we finally turn that 1 around. And then the Notio business, which is already distributing furniture in Europe, will now add the US to its model. And that business will be profitable in the second half. And then the third piece, what I call it is the legacy. Costs. So these are things that we are still paying for as we get out of the old business. So that is we still have some warehouses we wanna exit. We are looking to sublease most of those. Some of them are running out. Sooner than others. We still have inventory in them that we need to sell. And some of that inventory is generating cash to you know, pay for these legacy costs. But eventually, when those legacy costs are gone, and I do not have an exact date for you when they are all gone because they will be reducing every quarter, Then you will see a profitable business again on the home side. Okay. Awesome. that is great color. Thanks so much. I will requeue. Yep. Okay.
Operator: Our next question comes from Stephen MacLeod with BMO Capital Markets.
Stephen MacLeod: Thank you. Thank you. Good morning, guys.
Martin Schwartz: I just wanted to circle back around on home business. And I guess post most recent business transition or restructuring, If you look at the revenue base from where we are now, can you sort of size up what the go forward business will be in terms of the top line?
Jeffrey Schwartz: Let's see. Am I yeah. I am just getting some feedback from my people. Yeah. that is the number I thought. We are looking at an area under $200 million Just under 200. For, I guess, like, a forward looking business you know, over the next 12 months would be in that ballpark. Yep.
Stephen MacLeod: Okay. Okay. that is helpful. And then I guess just thinking about the more near term, how much how long are you expecting to see kind of sales declines from these proactive exits? I would have thought we would be close to lapping it in Q2, but maybe it is something that you expect to lap in the back half of the year?
Jeffrey Schwartz: Not sure I understand. You are talking about home, I am assuming? Yeah. The home business. Yeah. Yeah. Well, again, I mean, we have I mean, every core it is gonna last for like, you know, we have had a number of restructurings here. Yeah. So what we have done is we have said, okay, we are gonna eliminate you know, all of this business and run with you know, the remaining. Remainder. And then, you know, we go into it and find out what part of that remainder business is not really gonna be profitable. Or what happens in most cases is, oh, it needs a lot of overhead to run it. We need to have warehousing to run that business. But the volumes are not there. So we have cut that back. And we have done a number of times. We have finally got to a point where we are saying, you know what? This business works because now we are seeing it work as opposed to hoping it works. And therefore, we are not I do not think we are gonna cut anymore, but again, we still have inventories left. To do that with. So the core 180 to 200, I think, you know, if we can isolate that, you know, you are gonna see both growth in top line and bottom line there. And then the other part, it is difficult to figure out how fast you can get rid of the old stuff. I mean, we are trying every day. Right.
Stephen MacLeod: Okay. Okay, understood. And then maybe just moving to the juvenile segment. You talked about a lot of the promotional discounting and particularly FX headwinds that weighed on the quarter. If we backed out FX and saw where you were on the adjusted operating profit line. Is that sort of a good run rate for the go forward business when you think about the back half of the year?
Jeffrey Schwartz: Well, yeah. Yeah. I mean, actually, I expect it to be better. In the back half of the year. I mean, this was a tough quarter. We have orders and business going forward. I mean, the US is picking up, and that was the only spot. The only spot in the whole world, actually. The only country. And, again, we are very global. That is that had a tough, tough quarter. it is the U.S. Everywhere else, things are working pretty much to plan. And I will tell you, when we look at our own business plan, every area except for 2 areas right now are expected to hit or exceed its plan. 1 is The U. S. And the other 1 is Chile, you know, and we are we are dealing with that. But every other country, every other market is doing exactly what we thought. So with an improvement in The U. S. In the second half and improvements even in Europe, in the second half with a lot of the new stuff that is coming through. Yes, I am pretty optimistic about the second half of the year. Yeah.
Stephen MacLeod: Okay. that is that is great. And then maybe just on the balance sheet. You had some commentary on the MD&A about some covenant relief that was given on including some of the including the restructuring charges as add backs or sorry, noncash write downs, I suppose. Is that something that does continue into Q3, or is it very 1 time in nature isolated to this period?
Jeffrey Schwartz: I hope that we are not gonna see that again in Q3. You know, it is we are we are working hard. I mean, some of it is again, write downs of like you said, noncash items that were not forecasted for the quarter. So that ended up being really what the covenant issue was. You know, we have taken care of it, and it is good. And, again, we do not plan on having that issue again. It does not mean there is not more restructuring. I think we have some restructuring in our plan. But I do not see these particular items You know, we-- they are-- they have been written down to zero type of thing. So Yeah. We are close to zero. So you know, they are gone. Okay. Okay. that is that is great. Thanks, guys. Okay.
Operator: Our next question comes from Cheryl Zhang with TD Cowen.
Cheryl Zhang: Hi, just a couple of follow ups. So going back to the Home business profile, I guess on a go forward basis, I think you mentioned that Costco is profitable, and Notio will be profitable, and then there is just some legacy cost from the business that is still that you guys are still paying I wonder when should we like, should we be seeing, like, home overall as probable in the second half, or is the legacy cost still continuing that is weighing on probability?
Jeffrey Schwartz: I think the legacy costs are going to continue to negatively impact it for at least the second half. Some of it is big chunks, right? I mean, most of it, I am going to say, is leasing of warehouses. So we are in the market to get out of those. As soon as we can. Getting the right deal could have a major impact on that sort of legacy number. So I cannot predict I cannot tell you which quarter we are going to start really seeing those legacy costs drop away. But they are getting less and less. I mean, there is you know, there is the and hopefully, we can fund those with you know, some of the inventory sales that we are doing as well. But, yeah, I do not but sorry. You know, getting back to it, I yeah. I do not I do not we know what a legacy is cost we have. We do not exactly have the exit date on those legacy costs go. Okay.
Cheryl Zhang: Understood. And then just on your manufacturing footprint, I know there is been quite some changes over recent quarters. But could you remind us of your current manufacturing footprint globally in both segments? And how much of your sales is currently exposed to U.S. tariffs?
Jeffrey Schwartz: Okay. So let's start with okay. there is no manufacturing in home. Right? In fact, a bulk a bunch of most of Costco's business is what we call direct import. So it goes directly from we design the product sell the product, and it goes from a factory in various parts of Asia. On the juvenile side, you know, we have a very large production facility in Columbus, Indiana. Which is a very key asset because that facility is not subject to the variabilities of tariffs. And allows both us and our customers to know, you know, that we are sort of got a good solid cost base. A percent of sales, I am not I would have to be of our U. S. Sales, I would guess. I do not have that right now, Cheryl, but you know, we in addition, we do have a assembly manufacturing facility in Portugal which sells a lot of the lower priced European products. And we actually have an assembly facility in Brazil. Which sells, again, the lower cost products, the lower cost car seat products in the Brazilian market. But I do not I do not you know, it is more than 50% of our business is still imported. China's still in the juvenile industry. China's still is the largest player. Difficult to get out of China in the juvenile. And he at home, we exited a lot from China, although, again, they still play a key role. But look today, here's the crazy part. Right? Like, today, Brazil has a much higher tariff going into the US than China does. So Brazil produces furniture. So I do not think anyone predicted that or saw that coming. So again, it is huge. there is huge variability here in what is happening with tariffs. But I can get back to you with I guess, the percentage of our manufactured goods you know, on the juvenile side.
Cheryl Zhang: That will be great. Thank you. And then just lastly, I guess on the cost pressures, wonder if you can maybe elaborate on any impact that you are seeing from the higher fuel costs and we are seeing in terms of other raw material cost inflation.
Jeffrey Schwartz: Yeah. I mean, there is definitely I think we have been managing it well. Certainly, you know, freight rates are being pushed up. And we have a lot of contracts for steps. So we are not as sort of reliant on spot markets that go up and down. So there is been less where you know, less pressure from that point of view. But, you know, I definitely things are moving up. We have done some price increases. As we get more and more into the higher end goods the Maxi-Cosi brand, price is not as difficult As When You Have The Lower End Goods That Are Sold, You Know, In A Discount Market At A Certain Price Point. that is Particularly More In The US. So the US would be more I guess, exposed to the price increases. While I find that, you know, another area is Maxi-Cosi if we have to raise the price because costs have gone up but that is a lot easier to do. So and because Maxi-Cosi is becoming more and more important in Dorel's business and certainly dominates most of the European and international business. it is a little bit less of a challenge than it might have been 5, 10 years ago. that is very helpful. Thanks so much. Okay.
Operator: This concludes the Q&A session. I would like to turn the conference back over to Martin Schwartz for any closing remarks.
Martin Schwartz: I just want to thank everybody on with us today. To hear our story. And I wanna wish everybody a great day. Thank you.
Operator: This brings to a close today's conference call. You may disconnect your lines. You for participating and have a pleasant day.