Jewett-Cameron (JCTC) Q1 2026 Earnings Transcript

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DATE

Wednesday, January 14, 2026 at 4:30 p.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Chad Summers
• Chief Financial Officer — Mitch Van Domelen

TAKEAWAYS

• Revenue -- $8.3 million, reflecting a 7% decrease, with gains in metal fence and Greenwood industrial wood offset by lower lumber and pet product sales.
• Gross Operating Profit Margin -- Negative 12.5%, down from a positive 18.3% driven primarily by $2.2 million in inventory write-downs on pet and lumber.
• Net Loss -- $3.9 million, or $1.12 per share, compared to $658,000, or $0.19 per share, the prior year, due mainly to inventory-related impacts.
• Wages and Employee Benefits -- Down to $1.2 million from $1.7 million as a result of ongoing headcount reduction.
• SG&A Expenses -- Increased to $1.4 million from $809,000, attributed to consultant fees and higher warehouse costs from surplus lumber inventory.
• Inventory Position -- Inventory at $13.5 million as of November 30, 2025, down from $15.9 million at August; inventory allowance raised to $3.05 million, up $1.85 million from August.
• Credit Facility Amendments -- Borrowing capacity expanded: accounts receivable advance rate increased to 90% (from 80%), eligible inventory advance rate to 50% (from 25%), overall line increased to $6.5 million (from $4 million), and overall purchase ceiling to $8 million (from $6 million).
• Operational Strategy -- Efforts underway to reduce annual operating expenses by $1 million to $3 million and exit fiscal 2026 with a sustainable business model.
• Asset Monetization -- Initiatives to divest non-core assets, including industrial lumber, certain pet and wood fencing divisions, and real estate properties.
• Pricing Actions -- “We were successful in getting new pricing accepted to minimize the margin erosion of the increased tariffs going forward, and most of that implementation began in 2026.”

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RISKS

• Gross margin deterioration resulting from $2.2 million in pet and lumber inventory write-downs and liquidation sales carrying zero margin.
• “Uncertainty surrounding tariffs remains a significant factor influencing cost and purchasing behavior across the market, and weak consumer sentiment continues to weigh on discretionary spending.”
• A major primary lumber customer has “gave notice of their intention to transition away from our consignment arrangement in calendar 2026,” leading to ongoing inventory and customer concentration risk.
• Net loss sharply expanded to $3.9 million, primarily attributed to inventory impacts and escalating SG&A expenses tied to consultants and warehousing.

SUMMARY

Jewett-Cameron Trading Company Ltd. (NASDAQ:JCTC) reported a 7% revenue decline, led by metal fence and industrial wood growth but offset by weaker lumber and pet sales. The company’s gross margin turned sharply negative due to significant inventory write-downs, particularly in pet and lumber categories, with management noting that removal of these impacts would have resulted in margin improvement, though “still not where they need to be.” A notable cost reduction was achieved through lowered wages and benefits; however, SG&A expenses rose on higher consultant fees and warehousing costs. Jewett-Cameron expanded credit access through renegotiated lending terms, enhancing liquidity and providing flexibility for its operational restructuring and inventory management initiatives. Strategic priorities include a commitment to reducing annual operating expenses by $1 million to $3 million, divesting non-core assets, and executing revised pricing agreements to address tariff cost pressures.

• Management highlighted “renewed momentum” in the core metal fencing business, targeting this segment for focused capital allocation and innovation.
• The amended credit facility provides short-term liquidity, with increased advance rates and a higher borrowing ceiling secured partly by real estate assets.
• The company is actively evaluating sale opportunities with third-party liquidators and customers to further reduce slow-moving inventory and associated costs.
• Tariff unpredictability and customer acceptance delays were identified as ongoing hurdles for timely pricing alignment and profit margin recovery.

INDUSTRY GLOSSARY

• SG&A: Selling, General, and Administrative expenses, encompassing overhead and operating costs not directly tied to manufacturing.
• Inventory Allowance: Financial reserve for expected reductions in inventory value caused by obsolescence, slow-moving items, or anticipated liquidation below cost.
• Advance Rate: The proportion of asset value a lender is willing to finance against receivables or inventory.

Full Conference Call Transcript

Chad Summers: Well, good afternoon, and thank you for joining us today. Given that we conducted our year-end conference just 45 days ago, I will keep my remarks a bit more brief. I certainly encourage everyone to listen to a replay of our December 1 call as we went into a deep dive on many aspects of the business and our strategic plans. I will dive into a few of the updates we have since that call. But first, let me provide a couple of key financial highlights to start things off. First, our metal fence business showed year-over-year growth, albeit small, for the first quarter. This is despite the challenges of tariffs and continuing negative consumer sentiment throughout the year.

Our Greenwood subsidiary experienced growth as well in the first quarter. This growth was offset by decreased sales of lumber and pet, two areas in which we previously announced initiatives to sell off excess inventory due to challenging market conditions and changes in customer programs. In addition to the tariff impacts, our reported gross margins were further negatively affected by a write-down on certain pet and lumber inventory, along with liquidation sales of already reserved inventory that, in essence, carried zero margin. Without these factors, our gross margins would have shown improvement. We are also making progress in pricing alignment with customers, which, when fully implemented, should better highlight the opportunity for margin improvement going forward.

Third, our wages and employee benefits dropped significantly to $1.2 million from $1.7 million as we continue to reduce our headcount. We did incur some one-time fees during the quarter associated with the engagement of consultants and increases in our lumber warehousing costs, which impacted overall OpEx. But we are making the necessary moves to align our go-forward cost structure with our efficiency strategy. So certainly, a lot of challenges in the first quarter financial results, some of which are a continuation from earlier in the calendar year. But we believe that there are positive developments that will be more evident in the quarters to come. Mitch will go into more detail on the financials in a moment.

Let us turn to an update on how the initiatives we outlined on that year-end call are progressing and how we are positioning the company as we navigate a challenging operating environment. While many of the broader headwinds impacting the business over the past nine months continue to persist, we believe the actions we have taken, and continue to take, are strengthening the foundation of the company and improving our long-term outlook. At the center of our strategy remains our strong metal fence business, which continues to be our largest, most successful product category. As discussed previously, this category has demonstrated resilience across market cycles and remains an area where we believe we have a clear competitive advantage.

Importantly, we saw encouraging signs of renewed momentum in this business, reinforcing our confidence in its long-term growth potential and providing optimism as global trade conditions gradually stabilize. Metal fencing will continue to be a primary focus of our operations, capital allocation, and innovation efforts, while we work to optimize sales of our other product categories. Building on the initiatives outlined in the fourth quarter, we remain focused on expanding our retail footprint and enhancing our in-store presence. We continue to work closely with retail partners to deploy additional display units, improve product visibility, and strengthen merchandising execution.

Programs such as Lifetime Steel Post and Adjust-A-Gate displays exemplify how differentiated products combined with effective in-store presentation can drive engagement and adoption. While we have made meaningful progress, we continue to view our current footprint as being at an early stage relative to the broader opportunity ahead. We continue to align our costs with the prices we charge for our differentiated offerings. We have successfully renegotiated agreements with most of our customers. While this work has taken time and careful collaboration, it represents a meaningful step toward improving margin and building a more durable and resilient operating model. Operational efficiency and organizational alignment also remain key priorities.

Over the past several months, we have accelerated initiatives designed to streamline the business, reduce complexity, and improve execution. Disciplined cost control and effective inventory management remain central to how we are navigating current conditions. I mentioned a moment ago the significant decrease in our wages and employee benefits, to $1.2 million from $1.7 million, as we reduce our headcount. It remains our commitment to reduce annual operating expenses by $1 million to $3 million and our intent to exit fiscal 2026 with a business model that is sustainable in the long term.

Further, as we reduce our inventory in several of our business lines, mainly pet and lumber, we will reduce our warehouse expenses, which will have a beneficial impact on cost as well as bolster our balance sheet. In addition, as announced previously, we are actively working to monetize non-core assets. This includes evaluating strategic partnerships and collaborations and exploring potential divestitures along select businesses and real estate assets. These efforts are primarily focused on our industrial lumber subsidiary, selected pet assets, our wood fencing business, and sale of our seed processing and storage facility and innovation studio property.

There is not a lot to report since early December given the holiday season, but we are highly engaged in advancing these initiatives in the new calendar year. We recently entered into a revised lending agreement that provides additional flexibility to support our operational realignment. This increased flexibility is important as we continue to streamline the organization, prioritize core initiatives, and thoughtfully deploy resources in support of our long-term strategy. The revised structure enhances our ability to execute planned changes while maintaining stability as we navigate an uncertain external environment. Mitch will provide more details on the specifics in just a moment.

Uncertainty surrounding tariffs remains a significant factor influencing cost and purchasing behavior across the market, and weak consumer sentiment continues to weigh on discretionary spending. That said, we have made progress on a number of the strategic activities we presented in early December, and those efforts are beginning to take shape as we move forward into the new calendar year. As we look ahead, our objective is clear: to exit fiscal 2026 with a business model that is sustainable over the long term, focused on our strongest product categories, supported by disciplined operations, and positioned to deliver enhanced value to shareholders.

While the external environment remains complex, we believe the progress we are making across our strategic initiatives reinforces the direction we are taking and the opportunities ahead. I will now turn the call over to Mitch Van Domelen for the financial results.

Mitch Van Domelen: Thank you, Chad, and good afternoon to everyone on the call today. My comments will focus on adding a little color to the key areas and events that had material influence on the first quarter. Let us start on the revenue line. Revenue for 2026 was $8.3 million compared to $9.3 million in 2025, a decrease of 7%. Sales in our core metal fence business, our largest product category, were up slightly compared to a year-ago first quarter, despite the challenges of tariffs and continuing negative consumer sentiment, providing optimism as global trade conditions stabilize.

Sales of our Greenwood industrial wood business increased 45% as demand by municipalities and transit operators continues to strengthen and were further boosted by the addition of a new non-transit industrial customer. This growth was offset by decreased sales of lumber and pet products, two areas in which we previously announced initiatives to sell excess inventory due to challenging market conditions and changes in customer arrangements. As we discussed last quarter, our primary lumber customer gave notice of their intention to transition away from our consignment arrangement in calendar 2026. We are currently in discussions with this customer, as well as other third parties, regarding the purchase of our excess lumber inventory.

Gross operating profit margins during Q1 2026 were negative 12.5% compared to a positive 18.3% in 2025. The largest impact on the change in gross operating margins was $2.2 million in additional inventory write-downs taken during the current quarter, primarily related to the reduction in the fair market value of pet and lumber inventory. Without these negative impacts, we believe that our gross operating margins would be significantly improved, but are still not where they need to be.

Chad mentioned, but I will reiterate, we have made strenuous efforts to adjust our selling prices to appropriately recapture the additional new tariff costs, but the rapid and unpredictable announcements of new rates have made that process extremely difficult, which is largely dependent on our customers consenting to these higher prices in a timely manner. Progress has been made, and we expect prices to normalize as the global economic situation stabilizes. Operating expenses during 2026 were $2.7 million compared to $2.6 million in 2025. Breaking it down, wages and employee benefits dropped significantly to $1.2 million from $1.7 million as we continue to reduce headcount.

SG&A expenses rose to $1.4 million from $809,000, primarily due to higher professional fees related to the engagement of some additional consultants in the period and increases to our lumber warehouse costs, primarily as a result of excess inventory. As Chad mentioned, we have initiated a plan to further reduce annual operational expenses by $1 million to $3 million going forward. Primarily as a result of inventory write-downs, net loss for 2026 was $3.9 million, or $1.12 per basic and diluted share, compared to a net loss of $658,000, or $0.19 per basic and diluted share, in 2025. Finally, a few comments on the balance sheet.

Our inventory balance at 11/30/2025 was $13.5 million, which compares to $15.9 million at August. As mentioned, we increased the allowance of our inventory to $3.05 million, which is up $1.85 million from August. This increase reflects a reserve adjustment of $2.2 million, partially offset by usage during the first quarter. As discussed in December, we remain in discussions with the lumber customer as well as other third parties regarding the purchase of our remaining lumber inventory. We are also working with third-party liquidators to sell our high-quality but slow-moving inventory, which will provide us with cash, clear our warehouse, and reduce warehousing and maintenance costs for these products.

One of the key initiatives we have completed since our call in December was the amendment to our agreement with NorthRim to increase our borrowing capacity under the credit line. Under the amended agreement, the maximum amount of accounts receivable that NorthRim will purchase at one time is increased from 80% to 90% of the maximum eligible accounts and is not to exceed $8 million, which has increased from $6 million. Advances against the company's inventory were increased from 25% to 50% of eligible inventory, and the maximum amount the company may borrow was increased from $4 million to $6.5 million.

Amounts provided by NorthRim will be secured by certain of the company's real estate assets, and proceeds from the sale of any such assets will be used to pay down the credit line, and therefore, the funding arrangement will revert to the original conditions and limits set forth prior to the recent amendments. The increase in the company's line provides us with temporary additional flexibility to provide funds to help our operational realignment and the purchase of inventory ahead of our traditionally busier spring and summer seasons. All that said, as of 11/30/2025, we had borrowed $4.2 million against our credit line with NorthRim. This is consistent with what we communicated back in our December call.

As Chad discussed, we will continue to focus on our operational strengths while reducing costs where possible in our efforts to increase our sales and margins and return to profitability. In addition, we are currently evaluating several different strategies to strengthen our liquidity position, many of which we discussed during this call and are otherwise detailed in our public reports. I will now turn the call back to Chad Summers for closing remarks.

Chad Summers: Thanks, Mitch, for the overview. To reiterate, our clear objective is to exit fiscal 2026 with a business model that is sustainable in the long term, leveraging the current value of non-core assets to fund our core growth strategy and deliver enhanced value to shareholders. We remain focused on steady progress, thoughtful decision-making, and building a stronger, more focused company for the future. I want to thank our employees for their continued commitment and execution as well as our customers, partners, and investors for their collaboration during a period of significant challenge and change. We will now open the call for questions. Robert, can you let me know if there are any questions?

Robert Blum: Yes, Chad, just a couple of questions here. First off, can you expand upon the renegotiated pricing agreements you have entered into?

Chad Summers: Certainly. We shared previously that negotiating price increases, especially with our larger customers, takes time, and the adoption takes time for their adoption. The volatility of the changes throughout the summer, with the tariffs coming and changing so rapidly, definitely increased that challenge. However, I am pleased to report that we were successful in getting new pricing accepted to minimize the margin erosion of the increased tariffs going forward, and most of that implementation began in 2026.

Robert Blum: Okay. Now one other question here. If you could provide a general breakdown of your inventory by product category.

Chad Summers: Certainly. We do not disclose that detail exactly, but I can say that our metal fence remains our highest-velocity inventory, and a portion of our pet inventory has been our slow-moving inventory. We have been disclosing that for quite some time. I also shared previously in other disclosures that we have been making progress in moving some of that pet inventory. Mitch highlighted that we are beginning to move some of the lumber excess inventory. It did increase the lumber that was highlighted in our December call, to support that customer program throughout the summer, and it was a good portion of our inventory in Q1.

Robert Blum: All right. Very good. Well, Chad, I will turn it over to you for any closing remarks.

Chad Summers: Great. Thank you again for your interest in Jewett-Cameron Trading Company Ltd., and I look forward to communicating with you all in the months to come as we continue on these reformulated strategic initiatives.

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

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