Jewett-Cameron (JCTC) Q4 2025 Earnings Transcript

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DATE

Monday, Dec. 1, 2025 at 4:30 p.m. ET

CALL PARTICIPANTS

- Chief Executive Officer — Chad Summers

- Chief Financial Officer — Mitch Van Domelen

- Investor Relations — Robert Blum

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Full Conference Call Transcript

Chad Summers: Thank you, Robert, and good afternoon. I appreciate the opportunity to speak with everyone here today. As I stated in the press release, we began fiscal 2025 with a positive outlook and a focus on continuing to increase sales, improve margins, lower costs, introduce innovative products and monetize surplus assets. Throughout the first 2 quarters of the fiscal year, many of management's key objectives were achieved. Specifically, our metal fence business was on a clear growth trajectory, resulting in first half 2025 revenue growth compared to the first half of 2024.

This momentum was driven by the continued success of our Lifetime Steel Post and Adjust-A-Gate products, the expansion of our innovative in-store display placements and the launch of new offerings. Further, our new supply source partners were increasing production to support our sales, lessening our dependence on China and the higher tariff impacts. With new Lifetime Steel Post displayers in place in the right stores in the right aisles, we were set for seasonally strong second half of the year when professionals and do-it-yourselfers are most active leveraging our products to enrich outdoor spaces.

Unfortunately, the rapidly escalating and unpredictable across-the-board tariffs first announced in February of 2025 on sourced goods created unprecedented market turmoil, which resulted in deferring retailer purchases, straining logistics and driving higher costs, all of which significantly impacted our second half results. It was not just our ability to understand and calculate the complex and rapidly changing executive orders, but also getting our customers to accept price increases in a timely manner. For the past number of months, we have taken aggressive steps to mitigate the impacts of the tariffs in the short term.

Some of these, we were able to move quickly and decisively on, including realignment of our workforce through the reassignment of some employees to new roles and an overall headcount reduction in 2025 of 27% year-over-year. Further, the actions taken over the past couple of years to institute multi-country sourcing initiatives have allowed us to somewhat mitigate a portion of these new tariff costs by shifting production away from China as the highest tariff country. We believe that retailers are becoming acclimated to the new tariff environment and the realities of new associated costs. Our customers are increasingly accepting the new prices, which will help alleviate a portion of this cost pressure going forward.

We will continue to work with our suppliers and customers to find solutions to these tariff challenges while reducing our cost as much as possible. Furthermore, we are working with our customers to better align our costs with the price we charge for our products. This structural alignment is critical to ensuring our long-term profitability and minimizing the risk to the business against future volatility. While the tariffs had a short-term impact on our business during the second half of fiscal 2025, it further forced us to accelerate our internal strategic review.

For years, Jewett-Cameron Trading Company had been a collection of businesses, products and brands that included pneumatic tools, seed cleaning, engineered plywood flooring as well as dog kennels, gates and fence sports. As the world evolved, we began to shift our long-term strategic focus to the business we felt could scale and deliver meaningful profits. We shut down the pneumatic tool business, closed down our seed cleaning facility and rebranded Jewett-Cameron to capitalize on our strengths of differentiation, innovation and channel presence with a focus on improving the lives of pros and do-it-yourselfers in the backyard.

Our metal fence products remain our best margin-producing category and not only maintained their growth trajectory post pandemic, but matched last year's sales even with the tariff volatility this year. Jewett-Cameron fence will continue to be the primary focus of our operations and resources as we expand our in-store presence and introduce innovative products. With thousands of display units already deployed and our Lifetime Steel Post program on track to be in over 500 stores, a small fraction of its potential, we see significant opportunities to grow through broader retail placement, new channels and continued product enhancement.

As global conditions stabilize, we believe a significant opportunity remains to accelerate growth and rebuild margins by deepening key partnerships, improving purchasing discipline and bringing our core fencing products to more customers than ever before. Mitch will touch more on this section -- in his section, but it's important to note that despite the challenges from tariffs for the year, metal fence products were essentially flat compared to the previous year. Let me expand on each of these actions just a bit more. First off, on the overhead and administrative expense reductions, we are executing on a plan to initially reduce operating expenses by approximately $1 million to $3 million.

It is our intent to match our operating expense level with our gross profit levels to achieve profitability in the long term. Jewett-Cameron was originally founded as a lumber brokerage business and has maintained strong lumber sales for many years. In 2023, we had the opportunity to help one of our larger customers who had recently lost their primary source of Western Red Cedar fence tickets, and they asked us to assist by participating in their lumber consignment program. This program helped stabilize the year-over-year lumber sales fluctuations we were commonly experiencing as a secondary supplier to multiple big box retailers.

However, the increased demand to keep sufficient quantities of inventory on hand, the inflexibility to accept price increases and longer cash conversion cycle greatly reduced the profitability of our lumber program. Under the consignment arrangement, we were required to purchase and warehouse increased volumes of inventory to support the quick replenishment of stock at our customers' distribution centers, which placed a significant liquidity burden on the company as it had to outlay cash, but would not receive payment until store supplies were replenished. Our lumber consignment customer recently provided notice of their intention to transition away from our consignment arrangement in calendar 2026.

Although the consignment arrangement provided us with meaningful revenue, it was low margin, demanding of internal resources and not as profitable as we would like. We are currently in discussions with this customer as well as other third parties regarding the purchase of our remaining lumber inventory, which is -- which, as mentioned, adds warehousing and other costs to maintain. On the pet product front, as we have communicated for the past few years, demand for certain of our pet products remains slow as the pet market continues its overall weakness. As a result, we continue to have excess pet inventory at our warehouse. This excess inventory has placed a strain with working capital tied up in inventory.

In recent months, we have successfully implemented programs that are beginning to accelerate sales of our pet products. Additionally, we are working with third-party liquidators to sell the remaining high-quality but slow-moving inventory, which will provide us with cash and clear our warehousing costs for these products. We are working to sell most, if not all, over the next few months. Because we expect to sell this inventory at lower prices, we have increased our allowance for obsolete inventory by $650,000 in fiscal 2025 over our allowance in fiscal 2024. Going forward, we are reviewing potential changes to our pet business as we expect the overall pet industry to remain challenging in the foreseeable future.

At Greenwood, sales in fiscal 2025 rose by 2% over our sales in fiscal 2024. Although demand for transit-focused products continues to rebound from the pandemic lows as more workers return to the office, a transit seat shortage during fiscal 2025 restricted new bus construction and orders for our transit products. Demand for these transit products improved as the stat shortage was largely resolved by the fourth quarter of fiscal 2025. We have recently realigned some personnel to provide support to Greenwood by working to open new sales channels and add new customers. We believe this segment has significant growth potential in both our primary transit sector and in new industrial markets.

While our Greenwood subsidiary is generally a lower risk profitable business, it is somewhat outside of our core differentiated operations and may present more value to us as part of a strategic collaboration. Thus, we are in the process of reviewing transactions that would enhance overall value for our industrial wood products subsidiary and our company. If our preliminary discussions materialize into something more definitive, we will provide appropriate additional disclosures at that time. Transitioning to MyEcoWorld. While we have seen good growth since we rebranded, we have not matched our $2.5 million in sales when we first launched our compostable dog waste bags a few short years ago.

One part of our growth strategy for this line was to enter the grocery store segment. During fiscal 2025, we secured our first placement with the launch of pet waste bags into 59 tops friendly markets across the Northeast beginning in late February. However, the imposition of the new tariffs first announced in February 2025 made our products less price competitive and growth in the grocery segment much more challenging. Instead, we will be focusing on expanding upon our successful introductions into big box stores where we have existing strong supplier relationships and into foreign markets that are unburdened by the U.S. tariffs, making these products more competitive. A big value opportunity is clearly our seed cleaning property.

It sits on our books for just $566,000 unencumbered, and it is our belief that the value of this facility is much higher. That said, the current sluggish economic conditions within both the nearby cities and in Greater Portland has reduced the previously perceived need among the nearby cities to quickly expand the urban growth boundary, which prioritize our property throughout the consideration process. Therefore, any inclusion of this property in expanded urban growth boundary or reclassification of the property from its limited rural industrial classification now appears less likely in the short term, given the prevailing economic and political environment in the surrounding area.

Accordingly, we have relisted the property based on comps, its corner location along a major highway and its unique zoning classification at a price of $7.223 million. In addition to our seed cleaning property, we also own a property in North Plains, Oregon, we refer to as our innovation studio that contains a photo studio and meeting space, which we are listing at a price of $795,000. This property is also unencumbered. After a promising start to our fiscal year 2025, the second half experienced unprecedented challenges that required us to shift our focus. As I hope you can hear, management and the Board are highly focused on evaluating strategic alternatives that prioritize the company's and shareholders' overall value.

Obviously, there can be no assurance that any strategic discussion with third parties will result in definitive agreements or the completion of any transaction, but we recognize that the status quo is not an option. We will provide further updates on these preliminary discussions if and when a definitive agreement is reached, of which there can be no assurance. As we look forward, we believe there is value to be created in our business. Our goal, first and foremost, is to create an operating structure that gets us to operating profitability as quickly as possible.

While the market is still tough, we believe the best pathway forward is by focusing on our core strengths by improving the lives of professionals and do-it-yourselfers with innovative products that enrich outdoor spaces and leveraging our extensive distribution footprint with the industry's leading home improvement retail locations. Through a focused approach that allow for a better correlation between our cost and the prices we sell our products for, reduction in our exposure to carrying excess levels of inventory by adding direct import sales, which reduces our working capital needs and a lean operating structure, we can exit fiscal 2026 in a dramatically improved financial position.

And then as we monetize certain noncore assets, we can deliver added value to shareholders. With that, let me now turn the call over to Mitch to review the financials in a bit more detail. We will then look to address your questions. Mitch?

Mitch Van Domelen: Thank you, Chad. Good afternoon to everyone on the call today. My comments will focus on adding some color to key areas and events that had material influence on the fiscal year and the fourth quarter. Now let's start on the revenue line. For the year, total revenue was $41.3 million, down $5.8 million compared to the $47.1 million from last year. For the fourth quarter, revenue was $10.4 million versus $13.2 million for the fourth quarter of last year. Despite the impact from the tariffs, our metal fence business was essentially flat from last year.

This highlights our rationale to lean into our differentiated metal fence operations as the normalization in the market occurs, and we come to the other side of this with better contractual structures with our retail customers. Looking at the remainder of our operations, our lumber sales were down due to supply challenges and profitability to support this program remain undesirably low due to the customer resistance to accept new prices in a timely fashion. As Chad mentioned, our primary lumber customer gave notice of their intention to transition away from our consignment arrangement in calendar 2026. We currently have about $5 million in excess lumber inventory, which we acquired to meet the needs of the customer under our consignment arrangement.

We are currently in discussions with this customer as well as other third parties regarding the purchase of this excess lumber inventory. Our pet business was $4.3 million compared to $7.6 million last year, reflecting the overall weakness in the pet industry in general. Our Greenwood industrial wood business saw 2% growth for the year, coming in a