DAVIDsTEA, Inc. Stock

Good morning, ladies and gentlemen. Welcome to DAVIDsTEA's Second Quarter Results Webcast for Fiscal 2026. Today's webcast is being recorded and is in a listen-only mode.

Before we get started, I would like to remind you of the company's safe harbor language. This webcast includes forward-looking statements about expectations for the performance of the business in the coming quarter and year. Each forward-looking statement contained in this webcast is subject to risks and uncertainties that could cause actual results to differ materially from those projected in such statements. Additional information regarding these factors appears under the heading Risk Factors and Uncertainties in the Management's Discussion and Analysis of Financial Condition and Results of Operations, the MD&A, which was filed with Canadian regulatory authorities and is available on www.sedarplus.ca.

Forward-looking statements in this discussion speak only as of today's date, and the company undertakes no obligation to update or revise any of these statements. If any non-IFRS financial measure is used during this webcast, reconciliation to the most directly comparable IFRS financial measure will be detailed in the MD&A. As a reminder, all dollar amounts referred to are in Canadian dollars, unless otherwise indicated.

Now, I would like to turn the call over to Sarah Segal, Chief Executive Officer and Chief Brand Officer of DAVIDsTEA.

Good morning, everyone, and thank you for joining us today. While Q2 is generally our seasonally weakest period, we are pleased with our performance in the quarter. Sales from our brick-and-mortar stores were up 9.6%, including comparable store sales growth of 4.4% and strong contributions from new stores, while we expanded our gross margin by 320 basis points. We achieved this during a challenging consumer environment, and I think that speaks to the strength of our brand, the resilience of our business and the discipline of our operating strategy and team.

We completed the consolidation of our operating footprint in Montreal and continued executing our store-led growth strategy with the opening of 2 new locations in the Greater Toronto area, including Oshawa Centre in June and at Square One Shopping Centre in Mississauga shortly after the quarter end. These flagship stores featuring a full assortment of loose-leaf teas, signature collections and seasonal Tea Bar offerings, have enabled DAVIDsTEA to reengage with communities where the brand has historically had a strong presence. Consumer response has been very positive, and both stores have delivered strong early performance.

The company also plans to reopen stores at Southgate Centre in Edmonton and at Metropolis at Metrotown in Burnaby, British Columbia this fall, bringing our total number of new stores since we launched this growth program to 5, 4 of them in fiscal 2026 alone and positioning us to reach the objective we set at the beginning of the year, which was to grow our footprint to 25 locations by year-end. Looking ahead to 2027, we are still in the planning phase, but our initial assessment suggests a store expansion similar to 2026. We see significant white space in Canada and the pace of expansion will be determined by market conditions and our capacity to fund that growth.

It's worth reiterating that the unit economics of our new stores are highly attractive. Each new location requires an investment of approximately $450,000, and the payback period ranges between 15 and 18 months. Our store-led growth strategy is performing exactly as designed, and we expect it will generate a positive spillover effect on both our online and wholesale channels as our footprint grows.

Behind this store-led expansion strategy rests our unmatched value proposition. First, we offer the broadest loose-leaf tea collection in the specialty tea market with over 200 proprietary blends along with single origin and organic teas. Our product portfolio is not only wide but deep with more than 30 SKUs of matcha sourced from premium growing regions in Japan, for example.

Second, we boast an in-house R&D team dedicated to developing new recipes aligned with wellness, immunity, sleep, health and energy needs. This market-driven focus on innovation represents a key differentiator for DAVIDsTEA, both in our product pipeline, brimming with new fall flavors such as Carrot Cake, Pu'erh, Chai on the Rocks, and Electric Lemonade; and unique gift collections like Fresh & Fruity Sachet Tea Wheels, Haunted House Tea Samplers and Matcha Advent Calendars.

Third, we're committed to ethical sourcing and eco-friendly packaging. As a proud member of the Ethical Tea Partnership, we source from trusted partners that offer ethically sourced ingredients to ensure all sustainability boxes are checked. We are deepening our commitment to reduce plastic consumption and recover plastic waste, partnering with CleanHub on verified plastic recovery.

On packaging, we introduced 100% industrially compostable loose-leaf tea packaging for our Garden to Cup collection, as well as plant-based biodegradable tea sachets. In short, we provide tea drinkers with innovation they can taste and love. We are excited to continue to enhance our customer experience, especially in this time of the year and elevate our tea experience through retail journeys, improved offerings and more connections with customers wherever they are.

We remain committed to the strategic plan we put in place earlier in the year, and these efforts have contributed to stronger retail performance and a good start to our next quarter. We are equally focused on making sure our online customers and Frequent Steepers and Super Steepers are given as many perks and benefits and continue to be celebrated in their tea journey. We look forward to leveraging our market-driven innovation and broad product portfolio to delight customers in the more revenue-intensive second half of fiscal 2026.

And with that, I will turn the webcast over to Frank Zitella, President, Chief Financial and Operating Officer of DAVIDsTEA.

Thank you, Sarah, and good morning, everyone. Our sales performance for the quarter varied greatly by geography and channel. In Canada, sales grew 5.5% to $10.5 million, representing 91.5% of total revenue for the quarter. The higher sales reflected contributions from the Laurier Quebec City store opened in December 2025, and the Oshawa store opened in June 2026, as well as growth across the existing store base.

In the U.S., our sales were down 15.2% to $1 million, primarily due to trade tensions and tariff-related pressure on our cross-border e-commerce channel. To address these challenges, we transitioned U.S. order fulfillment to a third-party logistics partner in Chicago in late March 2026. And with the transition now complete, we expect U.S. fulfillment to reduce cross-border friction and support improved U.S. sales for the balance of the fiscal year.

As Sarah mentioned, our brick-and-mortar sales increased 9.6% to $5 million or about 43.5% of total sales compared to 41% a year ago. This growth was led by comparable store sales, which increased 4.4%, a significant acceleration from 0.6% growth in the second quarter of last year, supplemented by contributions from our 2 new Greater Toronto area stores.

Online sales increased 1.1% to $5.2 million, representing 45% of total sales, compared with 45.9% a year ago. Meanwhile, wholesale sales were down 8.8% to $1.3 million, primarily reflecting the timing of replenishment orders across our grocery and convenience store partners.

Gross profit increased 9% to $7.1 million, outpacing sales growth and driving gross margin expansion of 320 basis points to a record 61.9%. This improvement reflects lower unitized freight and inbound shipping costs as well as the benefits of our internalized fulfillment model. Importantly, we achieved this margin expansion while managing tariff-related cost pressures and successfully transitioning to U.S.-based fulfillment in the quarter.

Our selling, general and administrative expenses as a percentage of sales decreased to 59.8% from 60.9% a year ago, reflecting the operating leverage in our rebuilt cost base. Now looking at profitability for the quarter. We had EBITDA of $0.2 million, representing an improvement of $0.5 million, while adjusted EBITDA improved by $0.7 million, reaching $0.5 million in our Q2. Our net loss narrowed to $1.2 million compared to $1.6 million a year ago.

Turning briefly to our balance sheet. At the end of the quarter, we had working capital of $17.1 million, including cash of $10.2 million, compared with working capital of $17.7 million and cash of $16.5 million at the end of the fiscal 2025. The decreases are consistent with seasonality in our business, where cash is typically deployed in the first 3 quarters to build inventory ahead of our fourth quarter peak selling season. Compared to the second quarter of last year, our working capital increased by $5.7 million, and our cash position is $2.6 million higher.

Last quarter, I briefly mentioned that we were transitioning to a consolidated operations in Montreal, including administration, storage and production under a single modernized roof at our Mont-Royal facility. That process is now complete and ahead of our peak inventory build season. With the move now behind us, we expect to realize the full run rate benefit of the consolidated footprint beginning in the third quarter.

To sum things up, our Q2 results show that our strategy is working and that our business model continues to be resilient. The acceleration in comparable store sales this quarter is encouraging and a signal that our store-led growth strategy is translating into broader customer demand, not just additional square footage. Our investments in brick-and-mortar stores is paying off, while our strong gross margins continue to benefit from our internalized fulfillment model. In the U.S., we expect our fully operational Chicago fulfillment platform to support improved sales through the balance of the year.

And as usual, I'll end by encouraging investors who want to learn more about DAVIDsTEA to contact Investor Relations. We'll be happy to coordinate access to management. To all, thank you for joining us today, and have a great day.

Welcome to DAVIDsTEA's 2026 Annual Meeting. The meeting will come to order. I am Pat DeMarco, Lead Director of DAVIDsTEA. Again, this year, DAVIDsTEA asked all shareholders to vote by proxy prior to the meeting, which many of you have done and to participate in this meeting by audio webcast. Thank you for joining us. We will now start the meeting. With the consent of the meeting, I will act as Chairman. Also with the consent of the meeting, I will ask Neil Wiener of Baskin to act as Secretary of the meeting and Isabel Vexxel and Cassandra VieraLopes of TSX Trust Company to active scrutineers -- to report on the shareholders present in person and the number of shares represented in person or by proxy at this meeting, to compute the votes on any ballot taken at this meeting and to report thereon to me as Chairman.

We will first conduct the official business of this meeting, after which Sarah Segal, Chief Executive Officer and Chief Brand Officer of DAVIDsTEA, will provide an update on the company. There are several routine matters to be dealt with at this meeting. To expedite matters, I have arranged for certain persons to make and second the various motions. The election of directors and the special resolution to amend articles will be by ballot. Unless a ballot is requested by a registered shareholder or a proxy holder, all other votes at this meeting will be conducted by voice vote. Based on proxy forms and voting information form submitted prior to the meeting, I can report that all matters to be considered today will be adopted. I now ask the scrutineers to present their report, and I direct that the report be annexed to the minutes of this meeting as a schedule.

Mr. Chairman, we, the undersigned engineers from TSX Trust Company, thereby record that there are at least 58 shareholders and/or proxy holders present at this meeting, representing in person or by proxy 19,585,594 common share being 64.0% of the total 30,566,01 common shares issued and outstanding of David T Inc. in Isabella and Cassandra. .

Thank you. The scrutineers' report shows a quorum to be present. I declare the meeting to be regularly constituted. The notice calling this meeting together with the proxy form, management information secular and related documents have been mailed or made available to the company's shareholders and mailed to the company's auditor. With the consent of the meeting, we will dispense with the reading of the notice and with the reading of the minutes of the last meeting of shareholders held on July 9, 2025, and I direct that the minutes be taken as read and approved and that they be signed as being correct.

The first item of business is the presentation of the annual report and financial statements and the auditor's report thereon. I now present to the meeting the annual report and consolidated financial statements of the company for the fiscal year ended January 31, 2026, and the auditor's report. Copies of such documents have been made available to shareholders. We will now proceed with the election of directors. I declared a meeting open for nominations and ask Frank Zitella to present his nominations.

I nominate [indiscernible] , Susan Burkman, at Samarco and Peter Robinson as Directors of the company, hold office until the next Annual Meeting of Shareholders.

I declare the nominations closed. We will vote by ballot in order for to be accurately compiled. Frank Zitella has already signed and submitted a ballot tides capacity as proxy holder as did other proxy holders. As all ballots have been submitted and tabulated, I now call upon the scrutineer to present the results of the vote on the election of directors.

Chairman, I report that each of the 5 nominees have received a vote of at least 97% of all shares voted.

Thank you. Based on those results, I declare that the 5 nominees have been elected as Directors of DAVIDsTEA Inc. to hold office until the next Annual Meeting of Shareholders or until their successors are like or appointed. David, Steve will issue a press release announcing the results shortly after this meeting. The next item of business is the appointment of an auditor. I ask Frank Zitella to present this motion.

It resolved at Victor LLP, Chartered Professional accounts be and they are hereby appointed auditor of the company to hold office until the next Annual Meeting of Shareholders at such remuneration as may be fixed by the directors and the directors be they are hereby authorized to fix such remuneration.

I second that motion.

All those against, please say no.

[Voting]

I declare the motion carried and director LLP charter professional accountants have been due appointed auditor of the company. The next item of business is a special resolution authorizing an amendment to the articles of DAVIDsTEA -- in order for DAVIDsTEA to obtain B-Corp certification is deemed advisable by the Board of Directors of Bitt. I ask Frank Zitella to present his motion.

At a special resolution in the form Schedule A to the management information circular at DAVIDsTEA 2026 authorizing an amendment to the articles of DAVIDsTEA in order for DAVIDsTEA obtain B-Corp certification is deemed advisable by the Board of Directors of DAVIDsTEA B, and it is hereby adopted.

I second the motion.

We will vote by ballot in order for the votes to be accurately compiled. Frank Zitella has already signed a ballot in his capacity as proxy holder as have other proxy holders. As all ballots have been submitted and tabulated, I now call upon the scrutineer to present the results of the vote on the special resolution to amendment of the articles of DAVIDsTEA.

Mr. Chairman, we report that 17,977,716 shares were voted for the resolution, representing 99.47% of all shares voted and [indiscernible] shares were voted against the resolution, representing 0.7% of all shares voted.

I declare special resolution adopted -- we've reached the end of the official business. We'll now turn to an update from Sarah Segal, Chief Executive Officer and Chief Brand Officer of DAVIDsTEA.

Thank you, Pat and good morning, everyone. I am Sarah Segal, CEO and Chief Brand Officer, DAVIDsTEA. Now that the formal part of the meeting is over, we will move on to our management presentation. The slides for this presentation were posted this morning on our website under Investor Relations. Before I begin, I will direct you to our customary disclaimer regarding forward-looking statements on Slide #3. Please note that the forward-looking statements in our presentation speak only as of today's date, and we undertake no obligation to update or revise any of these statements unless required by law.

If any non-IFRS financial measure is used in this presentation, a reconciliation to the most directly comparable IFRS financial measure will be detailed in our MD&A, which has been filed with Canadian regulatory authorities and is available on sedar.ca as well as in the Investor Relations section of the company's website. As a reminder, all dollar amounts in this presentation are in Canadian dollars unless otherwise indicated.

Fiscal 2025 reflects a fundamental reset in our business with a return to profitability on an IFRS basis, driven by disciplined execution, leaner cost structure, stronger margins and a retail store led omnichannel model. Net income reached $2.9 million on consolidated revenue of $61 million in 2025. Alongside IFRS profitability, sales increased 10.4% year-over-year, while comparable store sales improved 6.8%. For their part, online sales and wholesale channel revenues declined from last year, more on segmented channel sales later in my presentation.

In terms of cash and cash equivalents, we closed the fiscal year in a solid position. We held cash of $16.5 million at year-end supported by a private placement of $3 million and revenue-linked financing of $2.7 million to invest in growth. Turning to our revenue breakdown on Slide #5. Brick-and-mortar sales grew 10.4% in fiscal 2025, driven by the continued pickup of in-store shopping behavior and the addition of 3 new stores in the province of Quebec during the past 2 years. Online sales meanwhile eroded during the past year due to the trade conflict between the United States and Canada.

Accordingly, online sales decreased 7.6% in 2025 as trade tensions and tariff-related headwinds adversely affected cross-border volumes throughout the year. Following the U.S. government's decision to eliminate the de minimis trade exemption, which allowed goods under USD 800 to enter the country without paying duties or taxes shipping orders from Canada into the United States became more complex and costly.

The resulting customs friction created significant delays and a diminished consumer experience that contributed to a decline in U.S. sales to align ourselves with new trade realities and build for growth in the United States market. We established a distribution platform in Chicago through a third-party logistics partner in March 2026. This fulfillment platform in Chicago, which complements our warehouse and logistics operations in Montreal brings inventory closer to U.S. customers, improved service levels and strengthens the company's ability to grow profitably south of the border.

As a result, we anticipate U.S. sales will recover in fiscal 2026. In terms of wholesale channel sales, revenues decreased 8.4% in 2025, primarily reflecting the timing of replenishment orders across Kousta convenience stores and DAVIDsTEA's grocery store partners. The underlying wholesale distribution footprint remains intact, and we're evaluating opportunities to expand our wholesale presence at strategic locations. In terms of geographic revenue mix on Slide 6, sales in Canada, which accounted for 88% of total sales in 2025 improved by $0.8 million year-over-year on revenues from 3 new stores during the past 2 years and a higher comparable stores sales growth.

These factors were partially offset by lower online and wholesale channel sales. In the United States, sales decreased by $1.6 million or 18.4% year-over-year, weighed down by the elimination of the de minimis rule exemption that adversely affected cross-border volume to the U.S. Looking ahead to fiscal 2026 on Slide #7, our plan is clear, retail is the growth engine of our omnichannel strategy.

We believe the Canadian market can support a meaningfully larger DAVIDsTEA store footprint. If you recall, we operated more than 190 stores across Canada prior to the pandemic and the majority were profitable. Following the opening of a new store at Laurie, Quebec Mall in December 2025, 4 additional stores were planned across Canada in 2026. One store already held its grand opening at the Ashua Center in early June, while another store is scheduled for next month at the Square One Shopping Center in Mississauga.

In the second half, the intent to expand at the Southgate center in Edmonton and Metropolis and Metrotown in the Vancouver area. These high-profile, high-traffic locations are expected to generate strong unit level returns. Our typical store is approximately 750 square feet with budgeted capital expenditures of $400,000 to $475,000. Based on the performance of our existing store portfolio, we are targeting annual sales of $1.2 million to $1.4 million per location with a 4-wall contribution margin of approximately 25%.

These projections imply a payback period of 15 to 18 months. Each new store also reinforces our omnichannel growth model, serving as a brand, billboard and a demand driver across all channels. Once completed, they will raise our store count to 25 locations by the end of the fiscal year. Ultimately, with increased scale, our objective is to deliver sustained quarterly profitability. Last month, we reported our financial results for Q1 2026.

On Slide 8, we provide a summary of our performance. These latest results demonstrate the resilience of the business model that we built over the last 2 years. Despite a soft top line affected by U.S.-Canada trade tensions and a more cautious consumer on both sides of the border. We held our gross margin at 59.7% and expanded adjusted EBITDA margin by approximately 100 basis points to 12.5%. Overall, DAVIDsTEA generated adjusted EBITDA of $1.6 million on revenue of $13 million in the first quarter of 2026.

Net income reached $0.1 million, a $0.3 million increase over the same period in 2025. Finally, as mentioned earlier, we established a U.S. fulfillment center with a third-party logistics partner in the first quarter, and we announced the consolidation of our Canadian operations at our Mount Royal facility next month to strengthen overall operational efficiency.

Turning to our financial position on Slide 9. We exited the first quarter with $11.2 million in cash and cash equivalents, working capital of $18 million and our revenue-linked financing balance was reduced to $0.4 million. We also benefited from the private placement secured last November to begin funding our store-led omnichannel growth strategy [indiscernible] in 2026.

Moving on to our sustainability efforts on Slide #10, we proposed a special resolution at our annual meeting to seek certification for DAVIDsTEA. This certification process, which requires an amendment to the articles of the company involves a rigorous third-party verification of social, environmental, and governance practices. It compels company to balance purpose with profit. DAVIDsTEA is currently a member of the Ethical Tea partnership, a global organization, initiating systemic change for everyone involved in the tea industry but we want to take the next step to build on years of sustainability efforts across our organization.

By amplifying our sustainability commitment to our customers, we are driving a better understanding of our values. It's a win-win proposition and core to the brand's mission. Let's conclude with our key takeaways on Slide #11. We returned to profitability in fiscal 2025 with net income of $2.9 million, and we intend to sustain that momentum in upcoming years with a disciplined profitable growth strategy.

The opening of 4 new stores across Canada in 2026 is underway with the recent launch at the Oshawa Center that will raise our store count to 2025 by the end of the fiscal year. These new stores will continue to serve as brand billboards and demand drivers for our online and wholesale channels in their respective communities. We have taken decisive action to counter the erosion of online sales in the U.S. through the establishment of a fulfillment center in Chicago, which should initiate a gradual recovery in 2026 and we're encouraged by our adjusted EBITDA margin of 12.5% in the seasonally weak first quarter of 2026. This bodes well for delivering profitable growth for the rest of the fiscal year.

Before opening the discussion for questions, I want to take this opportunity to give a heartfelt thanks to our employees returning DAVIDsTEA to profitability in 2025. I would also like to thank our Board members for their counsel and support during the past year. Finally, many thanks to our shareholders for believing in our management team and store-led omni-channel growth strategy. We would now be happy to take your questions. Over to you, Pat.

Okay. So we now come to the question period. Are there any questions from shareholders or proxy holders either present at the meeting or through the webcast platform. All right. If there is no further business, I will ask Frank Zitella to present his motion.

The meeting be terminated.

I second the motion.

All those in favor, please say aye. All those against, please say no.

[Voting]

I declare the motion carried and that this meeting is terminated. Thank you for your support of DAVIDsTEA.

Good morning, ladies and gentlemen. Welcome to DAVIDsTEA's First Quarter Results Webcast for fiscal 2026. Today's webcast is being recorded and is in a listen-only mode. Before we get started, I would like to remind you of the company's safe harbor language. This webcast includes forward-looking statements about expectations for the performance of the business in the coming quarter and year. Each forward-looking statement contained in this webcast is subject to risks and uncertainties that could cause actual results to differ materially from those projected in such statements.

Additional information regarding these factors appears under the heading Risk Factors and Uncertainties in the Management's Discussion and Analysis of Financial Condition and Results of Operations, the MD&A, which was filed with Canadian regulatory authorities and is available on www.sedarplus.ca. The forward-looking statements in this discussion speak only as of today's date, and the company undertakes no obligation to update or revise any of these statements.

If any non-IFRS financial measure is used during this webcast, reconciliation to the most directly comparable IFRS financial measure will be detailed in the MD&A. As a reminder, all dollar amounts referred to are in Canadian dollars, unless otherwise indicated. Now I would like to turn the call over to Sarah Segal, Chief Executive Officer and Chief Brand Officer of DAVIDsTEA.

Good morning, everyone, and thank you for joining us today. Our first quarter results demonstrate the resilience of the business model that we rebuilt over the last 2 years. Despite a soft top line affected by U.S.-Canada trade tensions and a more cautious consumer on both sides of the border, we held our gross margin at 59.7%, expanded adjusted EBITDA margin by approximately 100 basis points to 12.5% of sales and delivered a return to net income. Said differently, on a quarterly decline in sales, we expanded adjusted EBITDA margin by approximately 100 basis points and swung from a net loss to net income.

That is exactly the operating leverage we built the business to deliver, and it is the same leverage that drove our return to IFRS profitability in fiscal 2025. The first quarter is seasonally lighter, but the message it sends about the durability of this cost structure is, in our view, among the important takeaways from today's presentation. Overall, DAVIDsTEA generated adjusted EBITDA of $1.6 million or 12.5% of sales on revenues of $13 million in the first quarter of 2026. Net income reached $0.1 million, a $0.3 million improvement over the prior year quarter, and we ended the quarter with $11.2 million in cash, $0.8 million higher than at the same point last year.

Given current trade tensions, coupled with ongoing macroeconomic uncertainty, sales decreased 5.2% year-over-year in Q1 2026. Online sales, which declined by $0.4 million or 6% were pressured by cross-border trade frictions during a quarter in which we were actively transitioning to a new U.S. fulfillment model. Our new Chicago fulfillment partner, which came aboard in late March, is now fully operational. This brings inventory closer to our U.S. customers and is designed to restore the fast, seamless delivery experience they have always loved, bypassing the customs delays that have weighed on our cross-border shipments since the U.S. moved from de minimis to formal entry midway through last year.

With the new model operational for the entirety of the second quarter, we expect this improved experience to support a recovery in U.S. sales through the balance of fiscal 2026. For their part, wholesale channel sales, which dropped by $0.3 million or 12.1% in the first quarter, were mainly impacted by the timing of replenishment orders across DAVIDsTEA's grocery partners. The underlying wholesale distribution footprint remains intact and continues to provide a meaningful platform for replenishment-driven revenue for the rest of the year. Finally, brick-and-mortar sales, which declined by $0.1 million or 1.5% year-over-year, reflected the same cautious consumer environment we saw across the rest of the business, partially offset by the contribution of the Laurier Quebec City store we opened in December 2025, which continues to perform in line with the unit economics underpinning our broader store-led growth strategy.

Our store-led growth strategy is no longer a plan. It is gaining in momentum and on track. Our typical new store is approximately 750 square feet with budgeted capital of $400,000 to $475,000 and we are targeting annual sales of $1.2 million to $1.4 million per location at a 4-wall contribution margin of approximately 25%, implying a payback period of 15 to 18 months. The Laurier store is performing against that template, and we are using it as a proof point of reopening as we roll the program forward. Against this backdrop, we intend to build on our store base through revenue contributions from 4 new openings over the course of the year. Our new Oshawa Centre location will open in early June, followed shortly after by a second location at the Square One Shopping Centre in Mississauga, bringing back the DAVIDsTEA shopping experience to 2 important retail centres in the Greater Toronto area.

We are equally excited about returning to Edmonton Southgate Centre and Burnaby Metropolis at Metrotown this fall. Each new store represents a high-traffic, high-profile location that will serve as both a brand billboard and a demand driver across our online and wholesale channels. By fiscal year-end, we expect that our Canadian network will reach 25 stores, and our analysis indicates that the incremental free cash flow generated by new stores will, over time, make the next phase of expansion essentially self-funding. Each new store also reinforces our omnichannel model with measurable spillover into our e-commerce and wholesale channels. Beyond fiscal 2026, the Canadian market, in our view, can support a meaningfully larger DAVIDsTEA footprint. Recall that prior to the pandemic, we operated more than 190 stores in Canada, the majority of which were profitable. And our near-term objective is to double our current store count from that base. Underpinning all this expansion is a product portfolio anchored by the broadest specialty organic matcha assortment in the Canadian specialty tea market, all sourced from premium Japanese origins.

Specialty tea is the fastest-growing segment of the multibillion-dollar global tea category. And as consumers continue to shift towards health, wellness and functional beverages, we believe DAVIDsTEA is uniquely positioned to capture that tailwind. In short, the first quarter validated the cost structure we rebuilt in fiscal 2025, our store-led growth program is moving from planning into execution mode, and our U.S. fulfillment platform is now fully operational. We have the strategy, the capital and the team to execute it.

That said, we are not satisfied with the early year softer-than-expected top line while we gain momentum on sales growth levers that will grow the business through the balance of the year. We are focused on comping positively in the second quarter and beyond through compelling product introductions, store openings and the use of our omnichannel presence to drive in-store conversion. With our U.S. fulfillment platform now fully operational, we are focused on recovering the lost ground. We recognize important opportunities in curating country-by-country marketing and assortment and continue to optimize the levers, including advertising to drive profitable revenue growth.

I will now turn the webcast over to Frank Zitella, President, Chief Financial and Operating Officer of DAVIDsTEA.

Thank you, Sarah, and good morning, everyone. Sales for the first quarter of fiscal 2026 decreased by $0.7 million or 5.2% to $13 million compared to the prior year quarter. Sales in Canada of $11.7 million, representing 89.6% of total revenue, decreased by $0.2 million or 1.6% compared to the same quarter last year. The modest decline reflects the more cautious Canadian consumer in light of macroeconomic uncertainty, partially offset by the contribution of our new store in Quebec City, which opened in December of 2025.

Canadian results in the quarter remained consistent with the broader consumer backdrop and provide a constructive base from which to layer the impact of 4 new store openings scheduled for the balance of fiscal 2026. U.S. sales of $1.4 million decreased by $0.5 million or 27.7% compared to the prior year quarter, driven primarily by U.S.-Canada trade tensions and tariff-related headwinds on our cross-border e-commerce channel. In response and in light of the elimination of the U.S. de minimis import rule, the company commenced fulfillment of U.S. orders from a third-party logistics partner in Chicago on March 26, 2026, with just over 5 weeks remaining in the 13-week quarter. The first quarter, therefore, reflects the partial transition period during which a portion of U.S. demand continued to be fulfilled under the legacy cross-border model and remain exposed to border delays and the de minimis related friction.

With the new fulfillment model now operational, shipping from within the United States is expected to meaningfully improve the customer experience and support a sequential recovery in the U.S. through the balance of fiscal 2026. Turning to gross profit, gross profit decreased 4.8% to $7.8 million in the first quarter of 2026, but improved as a percentage of sales to 59.7% from 59.5% in Q1 of 2025. Holding gross margin substantially flat in a quarter that included the U.S. fulfillment transition and a softer top line is a direct reflection of the durability of gross margin gains from fiscal 2025 and the continued benefit of our internalized fulfillment model.

Selling, general and administrative expenses decreased by $0.7 million or 10.7% year-over-year to $6.3 million in Q1 of 2026. The reduction was primarily driven by a $0.6 million decrease in marketing expenses, reflecting a more disciplined and targeted approach to consumer acquisition, and a $0.2 million reduction in other SG&A expenses. These savings were partially offset by a $0.2 million increase in wages, salaries and employee benefits to support our expanded retail footprint.

As a percentage of sales, SG&A expenses dropped to -- sorry, 48.2% in the first quarter of 2026 from 51.2% in the same period of 2025, reflecting the operating leverage in our rebuild cost base. In terms of profitability, net income improved by $0.3 million to $0.1 million in Q1 of 2026 compared to a net loss of $0.2 million for the same period last year. EBITDA totaled $1.5 million, up $0.4 million or 31.6% year-over-year. Adjusted EBITDA remained stable year-over-year at $1.6 million, representing 12.5% of sales versus 11.5% in the prior year quarter, approximately 100 basis points of margin expansion on a smaller revenue base.

Before turning to my summary, I want to highlight one operational milestone in the near-term horizon. As we previously disclosed, the lease on our separate production and assembly facility expires on June 30. And effective July 1, all of our operations, administration, storage and production will be consolidated under a single modernized roof at our Mont-Royal facility in a fully upgraded environment. The transition is timed to be completed ahead of our peak inventory build season, and we have a detailed execution plan in place to maintain continuity production throughout the move. We expect this consolidation to further support our operational efficiency as we execute on the fiscal 2026 store opening program.

In summary, our first quarter results demonstrate the resilience of the business model we have built. To recap the key points, on a 5.2% decline in sales, we expanded adjusted EBITDA margin by approximately 100 basis points and reported net income. The operating leverage in this rebuilt cost base is real and beneficial. Gross margin held at 59.7% through a quarter that included a mid-period U.S. fulfillment transition and SG&A declined by $0.7 million or 10.7%. We exited the quarter with $11.2 million in cash, working capital of $18 million, up 42% year-over-year and the revenue linked financing balance reduced to $0.4 million. Our Chicago fulfillment platform is now fully operational and is expected to support a sequential recovery in U.S. sales through the balance of the year.

And finally, we are on track to open 4 new stores across Canada in fiscal 2026, raising our store count to 25 with unit economics validated by the Laurier store opening and a financial framework that we believe becomes increasingly self-financing as the portfolio scales. We operate in a large and growing addressable market with specialty tea benefiting from secular wellness trends. We have a distinctive in-store experience that consumers across Canada have been asking us to bring back to their communities.

We have proven store economics with a clear path to becoming self-funding. We have demonstrated through fiscal '25 and again this quarter that this management team can execute against the plan that we have laid out. We believe all of this makes DAVIDsTEA a compelling investment story today.

With that, we encourage investors wishing to learn more about DAVIDsTEA to contact Investor Relations, who will be pleased to coordinate access to management. On behalf of the entire DAVIDsTEA team, thank you for joining us today.

Good morning, ladies and gentlemen. Welcome to DAVIDsTEA's Fourth Quarter and Full Year Results Webcast for fiscal 2025. Today's webcast is being recorded [Operator Instructions]

Before we get started, I would like to remind you of the company's safe harbor language. This webcast includes forward-looking statements about expectations for the performance of the business in the coming quarter and year. Each forward-looking statement contained in this webcast is subject to risks and uncertainties that could cause actual results to differ materially from those projected in such statements.

Additional information regarding these factors appears under the heading Risk Factors and Uncertainties in the Management's Discussion and Analysis of Financial Condition and Results of Operations, the MD&A, which was filed with Canadian regulatory authorities and is available on www.sedarplus.ca. The forward-looking statements in this discussion speak only as of today's date, and the company undertakes no obligation to update or revise any of these statements.

If any non-IFRS financial measure is used during this webcast, reconciliation to the most directly comparable IFRS financial measure will be detailed in the MD&A. As a reminder, all dollar amounts referred to are in Canadian dollars, unless otherwise indicated.

Now I would like to turn the call over to Sarah Segal, Chief Executive Officer and Chief Brand Officer of DAVIDsTEA.

Good morning, everyone, and thank you for joining us today. Fiscal 2025 results reflect a fundamental reset in our business with a return to profitability on an IFRS basis, driven by disciplined execution, leaner cost structure, stronger margins and a retail store-led omnichannel model. Net income reached $2.9 million on consolidated revenue of $61 million in 2025. Alongside IFRS profitability, we are pleased to report that the retail store sales increased 10.4% year-over-year, while comparable store sales improved 6.8%.

In the revenue-intensive fourth quarter, the leverage in our operating model was even more apparent. We generated net income of $5.3 million on revenue of $23.5 million or 22.4% of sales. Similarly, retail store sales and comparable store sales grew 11.9% and 6.6%, respectively. These data points are strong indicators that our retail store-driven growth strategy is performing as intended.

Looking ahead, our plan is clear. Retail is a key discovery element in our brand experience. Our omnichannel growth will be fueled by our experiential retail model. We believe the Canadian market can support a meaningfully larger DAVIDsTEA footprint. Recall that prior to the pandemic, we had over 190 stores in Canada and that the majority were profitable. Our near-term objective is to double our current store count, and our analysis indicates that the incremental free cash flow from new stores will make the expansion self-funding beyond the initial phase.

Each new store builds DAVIDsTEA's brand awareness in its market and drives e-commerce and wholesale channel sales, creating a compounding effect as our footprint grows. Accordingly, we have ambitious plans for retail store growth in 2026. Following the opening of a new store at Laurier Quebec Mall in December 2025, we intend to roll out 4 additional stores across Canada in 2026.

We are targeting 2 new store openings in the Greater Toronto area for the first half of the fiscal year, 1 store at the Oshawa Center and another at Square One Shopping Center in Mississauga. In the second half, we plan to expand in Western Canada at the Southgate Center in Edmonton and at the Metropolis at Metrotown Mall in Vancouver, BC. These high-traffic locations are expected to generate strong unit level economics and build on past performance in these areas. Our typical new store is approximately 750 square feet with budgeted capital expenditures of $400,000 to $475,000.

Based on the performance of our existing store portfolio, we are targeting annual sales of $1.2 million to $1.4 million per location with a 4-wall contribution margin of approximately 25%, which implies a payback period of 15 to 18 months. Each new store also reinforces our omnichannel growth model, serving as a brand billboard and demand driver across all channels.

Once completed, these new stores will raise our store count to 25 locations by the end of the fiscal year. These new retail stores are being financed by a $3 million private placement completed in November 2025 through the issuance of 3.3 million units at $0.90 per unit. Each unit includes 1 common share and 1/2 of a warrant exercisable at $1.25 in year 1 and $1.50 in year 2, providing an additional source of capital should the pace of our store openings require it.

On a fully diluted basis, including warrants, total shares outstanding would be approximately 29 million. We are confident that the value created by our store expansion plan will be more than -- will more than offset the dilutive impact of this financing.

Turning to online sales. The trade conflict between the United States and Canada negatively impacted U.S. revenue levels during the past year. E-commerce sales decreased 7.6% in 2025, driven primarily by an 18.4% decline in U.S. sales as trade tensions and tariff-related headwinds weighed on cross-border volumes throughout the year.

Following the U.S. government's decision to eliminate the de minimis trade exemption, which allowed goods under USD 800 to enter the country without paying duties or taxes, shipping orders from Canada into the United States became more complex and costly. The resulting customs friction created significant delays, unpredictable deliveries and a diminished consumer experience that contributed to a decline in U.S. sales.

To align ourselves with new trade realities and build for long-term growth in the U.S. market, we began fulfilling U.S. e-commerce orders in late March through a third-party logistics partner in Chicago. This fulfillment platform in Chicago, which complements our warehouse and logistics operations in Montreal, brings inventory closer to U.S. customers, supports improved service levels and strengthens the company's ability to grow profitably south of the border.

Supported by a centrally located fulfillment center in the U.S., a curated assortment of SKUs that can be shipped at a lower cost and an enhanced customer experience, we anticipate U.S. sales will gradually recover in the second half of fiscal 2026 based on a positive experience so far.

In terms of wholesale channel sales, revenues decreased 8.4% in 2025, primarily reflecting the timing of replenishment orders as the initial stocking associated with our convenience store expansion was substantially completed in fiscal 2024. Our Tea-2-Go program currently reaches over 1,500 convenience stores locations across Canada, and we continue to evaluate opportunities to expand our wholesale presence at strategic locations.

Turning to our market opportunity. Specialty tea is the fastest-growing segment within the multibillion-dollar global tea market with addressable markets expanding at mid-single-digit rates annually. As consumers continue to shift towards health, wellness and functional beverages, DAVIDsTEA is well positioned to benefit from these tailwinds.

Matcha continues to be a meaningful growth driver for DAVIDsTEA. With more than 30 custom blended flavors sourced from established supply partners in premium Japanese growing regions, our Matcha portfolio is one of the broadest in the Canadian specialty tea market and positions us well to capture the ongoing consumer shift towards functional wellness beverages, including organic ceremonial grade and organic natural flavored drink mixes, taking advantage of demand tailwinds to grow this category.

We have an exciting product pipeline for fiscal 2026, including new seasonal collections and innovations in functional tea formats that we look forward to sharing with our customers in the months ahead.

In summary, DAVIDsTEA fundamentally reset its business mode -- model in fiscal 2025 through revenue-driven and cost control measures to achieve IFRS profitability. Both retail store sales and comparable store sales improved meaningfully year-over-year, demonstrating our store-led omnichannel growth strategy is headed in the right direction.

We recently established a fulfillment center in Chicago to mitigate the elimination of the de minimis trade exemption and improve online customer experience and sales in the U.S. We have plans to open 4 new stores across Canada in fiscal 2026, raising our store count to 25, with each location targeting $1.2 million to $1.4 million in annual sales at a 24% 4-wall contribution margin and 15- to 18-month payback on invested capital.

We expect these openings to also create a spillover effect on online and wholesale channel sales. And our product portfolio anchored by the broadest matcha assortment in the Canadian specialty tea market provides DAVIDsTEA with a differentiated position in the growing functional wellness beverage category.

Finally, I would like to thank our employees whose dedication made our return to IFRS profitability in 2025 possible. As we expand into new markets, we look forward to welcoming new team members and creating opportunities for our existing employees to continue to grow with us.

I will now turn the webcast over to Frank Zitella, President, Chief Financial and Operating Officer of DAVIDsTEA.

Thank you, Sarah, and good morning, everyone. Fiscal 2025 highlighted a meaningful improvement in the underlying business model with net income of $2.9 million, adjusted EBITDA of $7.6 million or 12.4% of sales, working capital of $17.7 million and a cash position of $16.5 million. Free cash flow for the year was $1 million, reflecting an intentional buildup of inventory and the timing of supplier payments as we position the business for a return to revenue growth.

We also drew $2.7 million under a revenue-linked financing arrangement to support working capital heading into the peak season, of which $1.1 million remained outstanding at year-end. Full year SG&A expenses decreased $4.8 million year-over-year to $28.8 million. Approximately $3.1 million of that reduction reflects the absence of a onetime charge incurred in fiscal 2024 to terminate legacy IT contracts, with the balance representing ongoing structural savings from our replatform technology infrastructure and a more disciplined marketing spend. In addition, we will be reducing our operational footprint from 2 to 1 building in Montreal. More on this subject later in my presentation.

Given that infrastructure expenses and our cost base are largely fixed, incremental revenue from our omnichannel growth strategy will flow through the P&L at higher margins, creating meaningful operating leverage as we scale. Importantly, our analysis shows that the store-led growth plan becomes self-funding as the portfolio grows. The incremental free cash flow from new stores provides the capital required to fund subsequent openings, reducing our reliance on external financing over time. These latest initiatives position us to generate sustained profitability, supported by disciplined expansion and a strong real estate pipeline.

Now let's take a closer look at our financial results in the fourth quarter of 2025. Consolidated sales improved 1.2% year-over-year to $23.5 million in the fourth quarter of 2025. This modest growth masks significant different dynamics across geographies and channels, Sales in Canada, which represented 88% of total revenue, increased by $1.2 million or 6.1% from the fourth quarter of 2024, demonstrating healthy domestic demand across our retail stores and online platform during the holiday season.

On the other hand, sales in the United States decreased by $0.9 million or 25.2% year-over-year, mainly due to the U.S.-Canada trade tensions and tariff-related headwinds affecting our e-commerce channel. As Sarah indicated earlier, we expect to see a marked improvement in this area beginning in the second half of 2026, given our establishment of a fulfillment center in the United States with a third-party logistics partner.

On a channel basis, retail store sales grew by $1 million or 11.9% to $9.6 million in Q4 of 2025, reflecting the continued recovery of in-store holiday shopping behavior, the contribution of 2 new stores that opened in the Montreal area during fiscal 2024 and the opening of a new store at Laurier Quebec Mall in Quebec City in December 2025. These results are consistent with our target of $1.2 million to $1.4 million in annual sales per location and validate the unit economics underpinning our 2026 store expansion plan.

Online sales, meanwhile, declined by $0.6 million or 4.7% to $11.8 million, mainly due to the impact of U.S. tariff headwinds on cross-border shipments, partially offset by healthy domestic online demand during the latest holiday period. For their part, wholesale channel sales decreased by $0.2 million or 7.6% to $2.1 million in the fourth quarter of 2025. The year-over-year decline can be attributed to the timing of wholesale replenishment orders.

On a comparable store basis, sales rose 6.6% in the fourth quarter of 2025 and 6.8% for the full fiscal year. DAVIDsTEA opened 1 new store in the fourth quarter of fiscal 2025 with 4 additional ones planned for fiscal 2026. Gross profit as a percentage of sales rose by 430 basis points to 58.9% in the fourth quarter of 2025, our strongest gross margin performance in recent memory. This improvement was driven by 3 key factors: a higher proportion of full margin product sales within our holiday assortment, reduced freight and inbound shipping cost per unit and lower fulfillment cost per order.

Selling, general and administrative expenses decreased by $0.4 million or 4.4% year-over-year to $8.5 million in the fourth quarter of 2025. The decline in SG&A expenses can mainly be attributed to lower marketing expenses year-over-year, partially offset by higher wages, salaries and employee benefits as well as greater professional and consulting fees. As a percentage of sales, SG&A expenses dropped to 36.2% in the fourth quarter of 2025 from 38.3% in the same period of 2024.

In terms of profitability, net income more than doubled to $5.3 million in the fourth quarter of 2025 from $2.5 million in the fourth quarter of 2024. This strong performance on an IFRS basis reflects the flow-through of gross margin expansion and cost discipline during the revenue-intensive fourth quarter, which contributed to our positive net income results for the full fiscal year. This milestone validates our store-driven growth strategy on the road to delivering sustained profitability and long-lasting value for our shareholders. As investors are aware, our business is highly seasonal with the fourth quarter representing the majority of our annual profitability. Managing working capital and inventory position across the full fiscal year remains a key focus as we scale.

Adjusted EBITDA reached $5.4 million in the fourth quarter of 2025 compared to $4 million in the same period last year. This improvement was mainly driven by higher gross margin, supported by a favorable product mix and lower input costs, combined with a better absorption of SG&A expenses during the holiday season. Looking ahead, the financial framework for our store-led growth plan is straightforward. Based on the unit economics Sarah described, doubling our store count over the medium term would generate meaningful incremental revenue and free cash flow.

We are targeting a sales CAGR of more than 10% over the next 3 years, driven by new store openings, a recovery in the U.S. e-commerce channel and continued wholesale expansion. We believe achieving an adjusted EBITDA margin in the low double digits on a sustained basis is attainable as incremental revenue flows through our largely fixed cost base.

On the cost control side, we've completed most of the heavy lifting to deliver sustained profitability, but we intend to consolidate our operating footprint in 2026 to generate additional cost savings and enhance operating efficiency. More specifically, we will be consolidating all operations, administration, storage and production into a single modernized facility of approximately 160,000 square feet in the Mont-Royal area of Montreal.

Our administrative office and storage warehouse had already been located in this facility in recent years. By early July, we will move all production and assembly operations into a fully-upgraded SQF and HACCP-qualified environment under the same roof while not renewing our lease at the other location. The transition is expected to be completed by early July, ahead of our peak inventory build season, and we have a detailed execution plan in place to maintain continuity of production throughout the move.

The end result should be reduced costs and an increased efficiencies through a fully upgraded production and assembly environment, coupled with having everybody working under a single roof. We will initially be occupying approximately 140,000 square feet and with the options to extend up to the full 160,000 square feet of the facility, if the business need arises.

Before we conclude, I want to be direct about why we believe now is the right time to invest in DAVIDsTEA. We operate in a large and growing addressable market with specialty tea benefiting from secular wellness trends. We have a distinctive in-store experience that consumers are asking for us to bring back to their communities. We have proven store economics with a clear path to self-funding growth, and we've demonstrated through the results we reported today that this management team can execute.

We encourage investors wishing to learn more about DAVIDsTEA to contact Investor Relations, who will help coordinate access to management. On behalf of the entire DAVIDsTEA team, thank you for joining us today.

Good morning, ladies and gentlemen. Welcome to DAVIDsTEA's Third Quarter Results Webcast for fiscal 2025. Today's webcast is being recorded [Operator Instructions].

Before we get started, I would like to remind you of the company's safe harbor language. This webcast includes forward-looking statements about expectations for the performance of the business in the coming quarter and year. Each forward-looking statement contained in this webcast is subject to risks and uncertainties that could cause actual results to differ materially from those projected in such statements. Additional information regarding these factors appears under the heading Risk Factors and Uncertainties in the Management's Discussion and Analysis of Financial Condition and Results of Operations, MD&A, which was filed with Canadian regulatory authorities and is available on www.sedarplus.ca.

The forward-looking statements in this discussion speak only as of today's date, and the company undertakes no obligation to update or revise any of these statements. If any non-IFRS financial measure is used during this webcast, reconciliation to the most directly comparable IFRS financial measure will be detailed in the MD&A. As a reminder, all dollar amounts referred to are in Canadian dollars, unless otherwise indicated.

Now I would like to turn the call over to Sarah Segal, Chief Executive Officer and Chief Brand Officer of DAVIDsTEA.

Thank you, operator. Good morning, everyone, and thank you for joining us today. The company has maintained the focus on its retail store-driven omnichannel growth strategy with brick-and-mortar sales increasing 3% year-over-year. Despite lower sales in Q3, the focus is on ensuring positive revenue trends continue in Q4.

More impressively, in the quarter, comparable store sales were up 3%, which is meaningful given that we were lapping an exceptionally strong prior year performance when comparable store sales surged more than 18%. In other words, we delivered growth on top of exceptional growth the year before, underscoring the strength and momentum of our retail business. For their part, online and wholesale channel sales declined in the third quarter of 2025 due to a combination of soft economic conditions, imposition of U.S. tariffs and the end of the de minimis exception that had previously spared most of our orders to the United States from duties and taxes. Timing of wholesale accounts continue to make it difficult to determine full year performance by quarter. Online demand slowed in our U.S. market as a result of these additional challenges as well as less spending on digital marketing initiatives in order to have more budget for the end of the year and Black Friday.

Overall, we reported a net loss of $0.6 million on sales of $12.6 million in the quarter, bringing DAVIDsTEA closer to its goal of generating profitability on an IFRS basis. Heading into the revenue-intensive fourth quarter, which includes the recent Black Friday, Cyber Monday shopping frenzy and gift-giving holiday season, early indicators have been encouraging, and we're focused with brick-and-mortar sales up mid-single digits year-over-year in the first 5 weeks of the quarter. Despite a cautious consumer landscape and a value-driven economic environment, DAVIDsTEA continues to be a wellness-driven unique gifting option in the market. Strong gift assortments, competitive matcha variety as well as seasonal loose-leaf tea flavors continue to drive the momentum towards a strong holiday season.

Moving through the holiday season, DAVIDsTEA has seen success with the in-demand 24 days of tea advent calendar that contains handpicked blends ranging from fruity herbal tees to rich aromatic chai and everything in between. This year's version sold out quickly and exceeded performance targets. Many other gifting options were available to build on the high demand for limited edition gifts and flavors. Strong gifting categories continue to drive performance with caffeine-free herbal options, traditional Earl Grey and black tea seasonal twists and our limited edition Candy Cane collection. Innovation in the beverage offering for the company with the opening of 3 matcha-themed drink bars in stores across Canada has demonstrated a consumer interest in enhanced beverage offerings. The matcha category overall and another reason to increase frequency in our brick-and-mortar locations.

On the operations front, renovations at our flagship store in Montreal South Shore were completed ahead of schedule last quarter, enabling the new look store to reopen in October and generate healthy revenue. We also unveiled a new retail store at Laurier Quebec Mall in Quebec City last week, raising the number of DAVIDsTEA locations in the provincial capital to 2 and a total of 10 in Quebec. In addition, we are on track to open at least 6 additional premises in fiscal 2026. Consequently, we remain on track to have 27 DAVIDsTEA stores within our portfolio by the end of 2026 and double our footprint over the next 3 years.

We believe concentrating our growth strategy around retail stores will not only expand our footprint in communities across Canada, but also enhance online and wholesale channel sales based on increased brand exposure, a positive in-store experience and an increased ability to discover our wide highly sensory assortment in person. I cannot stress enough the importance of our expert tea guides leading consumers along an exploratory journey, having them smell and sample our premium teas and curated blends to create an unmatched discovery experience. This exploration phase is key to generating sales in store while multiplying opportunities across online and wholesale platforms for repeat business. Ultimately, with a continued focus on reentering communities across Canada through our retail store-driven omnichannel growth strategy, combined with the disciplined management of our costs, should return the company to sustained profitable growth.

I will now turn the webcast over to Frank Zitella, President, Chief Financial and Operating Officer of DAVIDsTEA.

Thank you, Sarah, and good morning, everyone. Before reviewing our third quarter results, I'd like to say a few words about our liquidity position.

To support our working capital requirements and the opening of new stores in Canada, we entered into a $2.7 million revenue linked financing arrangement. And post quarter end, closed on a private placement of $3 million. The private placement will be reflected in our Q4 financial results. These initiatives together strengthen our liquidity position and financial flexibility and will enable DAVIDsTEA to execute against its value creation strategy, creating value for all shareholders. As at November 1, 2025, DAVIDsTEA had a cash position of $8.1 million and working capital of $10.7 million.

Now turning to our quarterly results. Sales decreased 10.2% to $12.6 million in the third quarter of 2025. This year-over-year decline can be attributed to lower online and wholesale channel revenues based on factors that Sarah outlined earlier, partially offset by higher brick-and-mortar sales. On a channel basis, brick-and-mortar same-store sales grew by 2.9% to $4.9 million in Q3 2025. Online sales decreased by $1.1 million year-over-year to $5.3 million, while wholesale channel sales declined by $0.5 million to $2.5 million. Geographically, Canada represented 89% of total sales in the third quarter of 2025, while the U.S. accounted for 11%.

Revenue south of the border decreased by $0.6 million year-over-year. Gross profit decreased to $5.9 million or 47% of sales in the third quarter of 2025 from $7.2 million or 51.5% of sales in Q3 of 2024. The decline in gross profit can be attributed to lower sales, a marginal drop in product margins and a slight increase in fulfillment costs. These factors were partially offset by reduced delivery costs. Selling, general and administrative expenses were reduced by $2.3 million or 26.5% to $6.4 million in the third quarter of 2025. The significant year-over-year improvement was mainly driven by lower IT expenses, resulting from the successful conversion of our technology stack to a lower-cost operating system in November of last year. These factors were partially offset by a net reversal in impairment charges on property and equipment and intangible assets incurred in Q3 of 2024 as well as an increase in wages, salaries and employee benefits in the most recent quarter.

In terms of profitability, net loss totaled $0.6 million in the third quarter of 2025 compared to a net loss of $1.6 million in the third quarter of 2024. Adjusted EBITDA, meanwhile, amounted to $0.8 million in the third quarter of 2025 compared to $1 million for the same period last year. Finally, cash flow used from operations totaled $0.6 million in the third quarter of 2025 compared to cash flow provided by operations of $2.8 million in Q3 of 2024. The variation is mainly due to higher inventory and lower trade and other payables compared to the prior year quarter. These items were partially offset by lower net loss, along with a decrease in the impairment of property, equipment and intangible assets year-over-year.

In closing, DAVIDsTEA has many reasons to be optimistic about the upcoming fourth quarter. Retail store momentum, which has been building throughout the fiscal year continued early into the revenue-intensive fourth quarter. On top of the 1 new store opening earlier this month in Quebec City, there are plans for at least 6 more locations in 2026. Our cost structure has been aligned with our revenue level as reflected by significantly reduced SG&A expenses in the third quarter. And the recently closed private placement, coupled with the revenue-linked financing arrangement has strengthened our balance sheet to pursue our retail-driven omnichannel growth strategy. As a result, we believe key building blocks are in place to deliver profitability in fiscal 2026 and beyond.

This concludes our review of third quarter results for fiscal 2025. We encourage investors wishing to obtain additional color about DAVIDsTEA to contact Investor Relations, who will help coordinate access to management. Thank you for joining us today.

Good morning, ladies and gentlemen. Welcome to DAVIDsTEA's Second Quarter Results Webcast for fiscal 2025. Today's webcast is being recorded [Operator Instructions] Before we get started, I would like to remind you of the company's safe harbor language. This webcast includes forward-looking statements about expectations for the performance of the business in the coming quarter and year.

Each forward-looking statement contained in this webcast is subject to risks and uncertainties that could cause actual results to differ materially from those projected in such statements. Additional information regarding these factors appears under the heading Risk Factors and Uncertainties in the Management's Discussion and Analysis of Financial Condition and Results of Operations, the MD&A, which was filed with Canadian regulatory authorities and is available on www.sedarplus.ca.

The forward-looking statements in this discussion speak only as of today's date, and the company undertakes no obligation to update or revise any of these statements. If any non-IFRS financial measure is used during this webcast, a reconciliation to the most directly comparable IFRS financial measure will be detailed in the MD&A.

As a reminder, all dollar amounts referred to are in Canadian dollars unless otherwise indicated. Now I would like to turn the call over to Sarah Segal, Chief Executive Officer and Chief Brand Officer of DAVIDsTEA.

Thank you, operator. Good morning, everyone, and thank you for joining us today. DAVIDsTEA stayed the course with its omnichannel growth strategy in the second quarter of 2025, supported by retail stores and wholesale channel sales increases of 9.1% and 2.5% year-over-year, respectively. Overall, we reported a net loss of $1.6 million on sales of $11.1 million in the second quarter, which is typical of our seasonally driven business.

While our online sales have not grown to target, we are encouraged by the halo effect of our retail locations, which continue to drive brand awareness and customer engagement. As we expand our store footprint, we are intensifying our community and brand marketing efforts across both digital and physical media to ensure we remain top of mind with consumers heading into our peak selling season.

If you recall, we generate more than 60% of our annual sales volume in the third and fourth quarters. For example, we have invested in online advertising, billboard ads, wellness influencers, affiliate programs and promotional events to raise brand awareness with consumers as they seek to buy gifts for themselves and their friends during the upcoming holiday period.

We expect these initiatives to generate a strong return on investment and contribute to profitable growth. Against this backdrop, our business continues to operate in a challenging environment characterized by the imposition of tariffs in the U.S., higher unemployment and inflationary pressure, but our brand has demonstrated remarkable resiliency against these macroeconomic headwinds.

Looking ahead, we fully intend to make retail stores the focal point of our omnichannel growth strategy. After all, the best advertising for DAVIDsTEA is a new store, which continues to provide a superior personal experience through our knowledgeable tea guides. We believe this positive in-store consumer experience in turn, will continue to convert non-tea drinkers or casual tea drinkers into devoted tea lovers.

Accordingly, we are currently renovating our flagship store in Montreal South Shore and remain on track to reopen in mid-November. This represents an exciting first step in our renewed retail expansion strategy. We have also signed a second lease agreement in Quebec City. The opening of a store at Laurier in Quebec City's provincial capital will supplement our current offering at Les Galeries de la Capitale.

In addition, we are planning to unveil a third store at the Square One Mall in Mississauga, one of the premier shopping centers in Canada come July 2026. This store will be based on a new concept that is more open, including an accessible tea bar that enables consumers to sample a wide variety of premium teas and blends with curated signature drinks that change seasonally.

So notwithstanding these 3 store openings over the next 12 months, we are currently negotiating with high-end mall owners across Canada to introduce additional new stores within our portfolio and be well on our way to significantly increasing our store footprint over the next 3 years.

In summary, DAVIDsTEA stayed the course with its omnichannel growth strategy in the second quarter of 2025. We reported as expected financial results in what can best be described as a stable quarter with preparations to conclude the year on target.

More importantly, we are firmly on a path to increasing our store footprint over the next 12 months while also increasing our marketing efforts in new and exciting demographics with a focus on experiential marketing to ensure that DAVIDsTEA brand is top of mind with consumers.

Ultimately, with these actions, we have our sights set on delivering sustained and profitable growth in the periods ahead. I will now turn the webcast over to Frank Zitella, President, Chief Financial and Operating Officer of DAVIDsTEA.

Thank you, Sarah, and good morning, everyone. Consolidated sales improved 0.5% to $11.1 million in the second quarter of 2025. This slight year-over-year increase can be attributed to higher brick-and-mortar and wholesale channel sales, partially offset by lower online revenues.

On a channel basis, brick-and-mortar sales grew by $0.4 million or 9.1% to $4.6 million in Q2 of 2025, driven by the contributions of 2 additional stores in the Montreal area and positive comparable store sales growth of 0.6%. Wholesale channel sales, meanwhile, rose by $0.1 million or 2.5% to $1.5 million in the second quarter as we restocked grocery stores, pharmacy chains and big box stores with our core products.

For their part, online sales decreased by $0.4 million year-over-year or 6.7% to $5.1 million as macroeconomic headwinds and noise surrounding tariffs were a drag on e-commerce revenues. Geographically, Canada represented 90% of total sales in the second quarter of 2025, while the U.S. accounted for 10%. Revenue south of the border decreased by $0.3 million year-over-year.

Gross profit remained stable at $5.3 million or 47.2% of sales in the second quarter of 2025 as a slight decline in product margin was offset by lower freight, shipping and fulfillment cost per unit. Selling, general and administrative expenses decreased by $0.1 million or 1.9% to $6.6 million in the second quarter of 2025.

The slight year-over-year improvement was driven by improved IT expenses, resulting from the successful conversion of our full technology stack to a lower cost operating system. During the quarter, we also reversed previously incurred IT expenses. In addition, we reported an impairment charge on property, equipment and intangible assets in Q2 of 2024 that did not reoccur in the most recent quarter.

These savings were mostly offset by increased marketing expenses in the second quarter of 2025, which Sarah referred to in her prepared remarks, along with higher wages and employee benefits. In terms of profitability, net loss remained stable at $1.6 million in the second quarter, while adjusted EBITDA amounted to negative $0.2 million compared to negative $0.3 million in the same period last year.

Moving on to liquidity and capital resources. DAVIDsTEA's cash position improved to $7.6 million in the second quarter of 2025 from $6.7 million in the second quarter of 2024. On a sequential basis, our cash declined from $10.4 million in the first quarter of 2025 due to the seasonality of our business.

Cash flow used from operations, meanwhile, amounted to $1.5 million in the second quarter of 2025 compared to $1 million in the same period of 2024. The year-over-year increase in cash used was mainly due to higher inventories in preparation in the upcoming selling season, partially offset by greater trade and other payables compared to the prior year quarter.

In closing, the entire DAVIDsTEA team is brimming with excitement for the upcoming selling season with brand-new collections and innovative gifts prepared for our loyal customers. Behind the relentless push to elevate the wellness of tea drinking across our brick-and-mortar online and wholesale channel sales, we remain focused on delivering profitability on a sustainable basis.

Consequently, all investments undertaken, including those to raise brand awareness and to be top of mind with consumers are judiciously scrutinized to deliver significant ROI over time. Finally, we announced that Ernst & Young LLP, Chartered Professional Accountants, resigned as auditors of DAVIDsTEA at the company's request and that the Board of Directors appointed Richter LLP Chartered Professional Accountants as the company's new auditors.

DAVIDsTEA thanks Ernst & Young for its service as auditors since fiscal 2011. This concludes our review of second quarter results for fiscal 2025. We encourage investors wishing to obtain additional color about DAVIDsTEA to contact Investor Relations to coordinate access to management. Thank you for joining us today.