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Q3 - Fiscal 25

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Q3 - Fiscal 25.pdf

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Selkirk Signs: Quarterly Report to Board of Directors Q3 2025 Meeting Date: July 17, 2025

To the Board of Directors,

This Q3 2025 quarterly report for Selkirk Signs highlights a period of developing performance, continuous improvement, and strategic growth, amidst fluctuating revenue projections. We've outlined our key financial and operational insights, challenges, and goals for the upcoming quarter below.

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1. Financial Performance

Year over Year

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Income Statement Q3 2022-2025.pdf

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Budget 2025 - Q3.pdf

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Revenue:

In Q3 2025, our total revenue was $2.37 million, marking a 14.36% decrease compared to the same period last year. This decline is primarily attributed to the lingering effects of reduced sales activity from fiscal year 2023, coupled with a longer-than-expected sales cycle. Additionally, significant delays in invoicing related to the IOL rebrand project further postponed revenue recognition, compounding the impact on our overall financial performance. These combined factors have materially contributed to the year-over-year decline in revenue.

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Gross Profit:

Our gross profit for the quarter stood at 39.58%, an improvement of 42.58% over Q3 2024. This notable increase is the result of sustained efforts to enhance manufacturing efficiency and strengthen project management practices. Additionally, a reduction in warranty claims contributed positively to margin performance. This improvement was achieved despite a significant rise in repairs and maintenance costs for shop equipment, which totaled $20,834.87 — a 143.10% increase compared to Q3 2024.

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Net Profit:

Our net profit for the quarter stood at $111,612.38 or 4.7%, reflecting a 190.9% improvement over Q3 2024. This increase is attributed to better cost control, improved project management margins, and stronger client retention.

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Operating Expenses:

Operating expenses came in at $820,032.61, which is 7.24% lower than the same period last year. This improvement is largely due to our continued cost cutting measures, such as reducing staff, reduced overhead costs (Calgary office) and minimizing travel and entertainment expenses.

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Cash Flow:

In Q3, despite low average revenue of $789,877 and a 40% collection rate, operational cash flow remained positive with $40,523 left after covering expenses. Strong customer down payments totaling $2.38M contributed significantly, leaving $490,830 in direct cash after paying COGS and AP. Together, operational and direct cash created a surplus of $531,353, helping reduce the line of credit by $1.59M. Looking ahead, while Q4 sales are expected to rise with IOL project completions, cash from these won't arrive until next fiscal year, making new revenue streams critical to sustaining cash flow.

Year to date:

Revenue:

In the first three quarters of the year, our total revenue amounted to $7.32 million, representing a 24.8% decrease compared to the same period last year. This decline continues to distance us from our annual revenue target of $13.5 million

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However, the revenue forecast for the fourth quarter of the year is still showing a substantial increase, projecting that we will meet our annual target by year-end. This spike is solely due to the 7-Eleven Rebrand, the original plan of 4 sites per month, has and will continue to be executed. The revenue for this project has yet to be recognized, as a number of issues have delayed our ability to invoice.

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Net Profit:

Our net profit for the year stands at $5,964.39, reflecting a 1.7% Improvement compared to the previous year. Despite the continuation of less than favorable figures, we are beginning to see the effects of recent strategic changes and the acquisition of new clients with higher profit margins. We are confident that these developments will enable us to achieve an overall profitable year.

Operating Expenses:

Our operating expenses for the year to date amount to $2,467,201.29, reflecting a 5.4% reduction compared to the same time last year. This continued decrease is contributing to break-even months or even profitable months and minimized losses during the most challenging periods. By maintaining these reduced operating expenses throughout the remainder of the year, we anticipate achieving higher-than-normal profits.

Inventory Management:

Q3 closing inventory valued at $2.4M, with normalized operating levels estimated around $2M < 2.2M.

Progress continues in reducing obsolete/repurposed stock, with approximately $270k depleted year-to-date and a further ~$20k reduction targeted in the Q4.

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Budget:

Our budget indicates that we have utilized only 52% of the anticipated cost of goods sold (COGS) for the year and 69% of our total expenses. The lower-than-expected revenue directly correlates with the reduced COGS. However, the expenses highlight that our cost-cutting measures are continuing to prove effective, ensuring better-than-expected cost management at this point in the year.

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2. Key Operational Achievements

Key Customer Updates:

7-Eleven to Esso Rebrand 26 sites queued for 2025 with projected $5M in revenue; $2.5M expected to be realized this fiscal.

Calgary CO-OP Service agreement in final client review; projected launch in FY2025–2026.

RBI (Burger King) In the final stages of Burger King RFI for national vendor status; currently executing 2 rebrands and 1 new build with expected volume growth next fiscal.

Subway After steady engagement since 2023, NDA submitted; onboarding anticipated by October 2025 with future access to portal bids.

Jersey Mike’s (Redberry Restaurants) Western Canada expansion is on hold due to economic uncertainty; branding package completed and pricing ready for future use.

SUNCOR/Petro Canada Positive vendor interview completed; awaiting further updates in September following internal departmental changes and slow onboarding process.

Cobs Bread Submitted RFP response in May; awaiting feedback and potential onboarding decision.

Edo Japan Submitted full spec pricing for new branding; pilot site underway with follow-up scheduled for late July.

BVD Petroleum Secured initial retrofit and minor repair jobs totaling ~$37K; slow but promising progress toward ongoing service relationship.

7-Eleven US Successfully completed two service calls; now in rate negotiations and being onboarded into their US vendor system.

Q3 Business Development Efforts:

Goal: Weeding out unprofitable accounts and assessing volume and margin on our most profitable, growing clients to maximize opportunities.

Outreach touches (calls, emails, in-person meetings) generated Q3:

429 Touches

Responses:

22 Responses (Response definition: Customer replies directly to outreach email/call indicating reception and interest, or lack thereof, to explore a partnership)

Notable Responses: BMO, Good Earth Coffeehouse, Gas King, IHOP, Chipotle, RBI head office (Firehouse Subs Construction Director), and Cobs Bread

Response rate: 5% of outreach efforts garnered a response

Recognized revenue from responses from Q3: No immediate revenue recognized from this quarter’s responses

Opportunity Creation

Opportunity creation increased overall in Q3, indicating improved lead generation and early-stage pipeline growth across key business lanes.

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Sales Order Creation

Sales Order creation rose in Q3, reflecting stronger conversion from opportunities and consistent customer demand.

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Sales Order Revenue Creation

Sales Order revenue saw a strong increase in Q3, largely driven by the Esso rebrand and higher-value deals.

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Market Analysis:

National Branding Auditions Still a viable long-term pipeline, though slow-moving; end of Q3 revenue from new national clients sits at $615K, on track to surpass last year’s $645K with one quarter remaining. Key contributors include Krispy Kreme, Versatile, and KFC.

Pricing Remains a Challenge Razor-thin margins persist in RFPs with major brands (e.g., Starbucks, KFC, Wendy’s, Burger King); ongoing rate adjustments and R&D efforts aim to balance competitiveness with profitability.

Technology & Innovation

Odoo 17

The upgrade from Odoo 13 to Odoo 17 has been successfully completed. All major issues have been resolved, and we are currently addressing a few minor items as we continue to adapt to the new version.

Our focus has now shifted to exploring additional capabilities within Odoo. The PMO is evaluating opportunities to streamline their daily organizational tasks by transitioning from Smartsheets to Odoo. This includes integrating daily reminders directly into the platform, which will enhance data accuracy and eliminate the need for duplicate data entry.

Odoo has been adopted as our primary internal communication tool for all project-related matters. For example, if the Finance team has a question about a specific invoice, it is now logged as a task within Odoo and assigned to the appropriate Project Manager, ensuring clear and traceable communication.

We are also assessing the potential of other Odoo modules to replace third-party tools, such as e-signature solutions and Paymate payroll software, with the goal of consolidating systems and improving operational efficiency.

Marketing Activities & Performance

Content Strategy & Results:

Similarly to Q2, our bandwidth for marketing activities in Q3 was limited, and we’ve continued to focus our efforts on our most engaging content, as well as strategically reusing content. We paused our Instagram paid strategy to allocate our budget to boosted LinkedIn posts, which resulted in a steep drop-off of Instagram follower growth, without any noticeable change in our LinkedIn follower growth trajectory. I believe boosting LinkedIn posts is a valuable strategy, but it requires high quality content purposefully crafted for a singular target (leads for channel letter customers etc).

As of the end of Q3, we’ve achieved our Follower Growth targets on all three platforms we chose to focus our efforts on, we’ve met our modest target of 2% net follower growth on Facebook, and beat our target by 120% on Instagram and 74% on LinkedIn.

Strategic Focus & Direction:

While we continue to build brand awareness and stay top-of-mind through consistent content, there remains some uncertainty around how best to align our marketing activities with business priorities. At present, the company's focus remains on nurturing relationships with national brands, which limits immediate opportunities for marketing-led conversions.

This dynamic presents a challenge for content strategy—particularly on platforms like Instagram and Facebook—where engagement tends to come from local or regional audiences. These platforms offer strong potential for inbound leads, but without a clear mandate to pursue these opportunities, we’re limited in how far we can tailor campaigns toward direct acquisition.

If business development efforts continue to strictly emphasize long-term enterprise accounts, we will need to pivot marketing activities to better support those efforts through targeted outreach support, rather than broad-based inbound strategies. Conversely, if there’s interest in exploring near-term revenue from other market lanes (local sales, bids, tenders), our team would benefit from clear direction to realign content and campaigns accordingly.

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3. Challenges Faced

Staffing Levels and Capacity Constraints

Manufacturing hired two new front line employees, one in each location, we are monitoring upcoming work and will adjust levels +/- as required

Manufacturing will be losing a key router operator in Cranbrook but have in-house replacement identified. We will assess if addition staffing is required to make up for this loss

Business Development And PMO Alignment

As we continue operating under a lean model, true BD scaling, in it’s current form remains dependent on parallel growth within PMO, design, and estimating functions. Currently, BD efforts are spread across national outreach, local networking, and small business intake—each showing promise, but collectively diluting focus and efficiency.

To address this, we are actively exploring deeper integration between PMO and BD, with an emphasis on aligning individual account managers to business lanes that best suit their strengths. The goal is to maximize output while reducing operational strain—ensuring each lane is strategically supported, capacity is optimized, and effort is streamlined.

Design & Drafting

Design Department - Key Concerns

The Design team’s most consistent challenge continues to be workload volatility. The chart below offers a rough gauge of Design capacity—while it doesn’t include revisions or master requests, a target of 1.20 typically indicates an ideal workload level—keeping the team engaged without exceeding capacity. In Q2, we experienced a sustained overload, prompting the temporary hire of an additional designer from May through August. Ironically, intake slowed shortly after the hire was finalized, underscoring just how unpredictable our workflow has become. While May rebounded to a healthy level, the fluctuation highlights the need for a more flexible staffing model. Going forward, we plan to build a small network of reliable freelancers to help absorb spikes without committing to permanent headcount.

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Another core issue remains the inconsistent quality of project intake. Designers frequently find themselves reverse-engineering job details due to incomplete surveys or unclear PM hand-offs. This not only eats into our capacity but also increases revision loops and delays downstream departments. A more structured, standardized intake process—ideally built around a survey tool and clearer hand-off requirements—would significantly reduce inefficiencies and improve team morale.

Lastly, some of our key tools are working against us. Adobe-related issues continue to create friction, and Odoo has introduced bottlenecks in areas like communication, document access, and task tracking. Identifying and resolving these inefficiencies will be important as we look to free up time and shift the team’s focus toward higher-value creative work. (See Strategic Initiatives for next steps)

Drafting Department

The Drafting team faces a unique set of constraints, primarily centered on scalability and leadership support. Unlike the Design department, where temporary help can be brought in relatively easily, Drafting work requires deep technical onboarding and familiarity with internal standards. Unfortunately, the department lacks internal capacity to support this. The two current drafters are highly skilled but not well-positioned to train a new hire, and the department lead does not have hands-on experience with the drafting tools or process.

This leaves us exposed when workload increases, as overtime becomes the only practical way to absorb the demand. The lack of predictability in our drafting volume only compounds this issue, as shown in the chart below.

Staffing presents an additional challenge. The local talent pool is limited, and attracting remote candidates may prove difficult due to both budget and support constraints. Without a more structured onboarding process and clearer internal ownership of training, expanding this team will remain difficult. (See Strategic Initiatives for next steps)

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Purchasing

Q3 presented fewer complications due to cash flow, however economic turmoil persisted if not increased overall through the global markets. Its anticipated that the turmoil will continue into Q4.

During the third quarter, spending was carefully managed to remain under budget in March, and well under in May. Reflecting a strategic approach to cash flow management, to help Q4 begin in an under budget position.

Q4 initiatives will include the pursuit of overseas material pricing. We have expanded an inquiry with a current vendor who has diversified their offerings, including aluminum sheet and plastic.

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Manufacturing hours

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We hit 84% of booked capacity average over Q3

Our goal is to have staffing levels to match a minimum of 90% or above

Ideal operating would be at 95% plus for booked to capacity hours

March - May

Total capacity 6906 hours

Total booked 5795 hours

Total actual 4711 hours

1084 hours under budget (19%)

(1084 hours x$84.50 shop rate = $91,598.00 under budget)

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March was still under capacity so did some value-added projects and R & D in prep for upcoming busier season, April hours spiked quickly, we hit capacity instantly, did not have time to do any internal projects, we hired up in April so more training and internal hours for the new staff in May

Our ideal internal hours should be in the range of 10% - 15%

Internal hours cover administration, clean up, maintenance, meetings, training, value added projects

Equipment Maintenance, End of Life and Capital Investment Planning for Manufacturing

Ongoing Maintenance: Costs for key production equipment totaled $55k YTD through Q3 Fiscal 25. 2major items were Flat Bed printer and Router both in Fort Sask location ($25K for those 2 major repairs in Q3) While these costs are significant, this year-to-date figure suggests we are trending in the right direction and on track for lower total spending compared to the $92k total cost incurred in Fiscal 24."

Impending Replacement: A primary concern is the Fort Saskatchewan flatbed printer, which is nearing its operational end-of-life and incurring substantial maintenance costs. Its replacement is projected within the next one to two years, or potentially earlier if current fixes do not extend its life span, requiring a capital allocation estimated between $120,000 (for a comparable unit) and $240,000 (for an enhanced model). A team will be created to review pros and cons of available models and to determine best use case for a new printer based on current needs and well as future business needs.

Future Capital Investments: Potential future equipment investments totaling ~$500k (e.g., laser cutter, channel letter equipment, Cranbrook paint booth) have been identified to enhance capacity or market access. These investments are currently deferred, pending robust business case development, prioritization in line with our cash flow strategy, and assessment of borrowing capacity.

Efficiency Focus: We continue to pursue operational efficiencies as alternatives to immediate capital spending, such as optimizing processes with key suppliers (e.g., utilizing pre-cut steel).

Shipping:

Q3 shipping volumes were up significantly, as predicted heading into construction season.

Year to date we have 479 shipments(1018 pieces) we had one claim, on one piece or 0.2%. Significantly below industry average, I believe this is a result of our excellent crating and our freight partner being so well-versed with our product.

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Cash Flow

Q3 Operational Cash Flow Overview

Average Revenue: $789,877

Average Aged Receivables: $1,327,518

Collection Rate: 40%

Cash Received: $315,951

Operational Expenses: $275,428

Remaining Cash for COGS: $40,523

Direct Cash Flow from Customer Down Payments

Average Customer Deposits: $2,381,754

Average Accounts Payable (AP): $1,413,679

Average COGS: $477,245

Remaining Cash: $490,830

Cash Surplus Applied to Line of Credit (LOC)

Operational Cash: $40,523

Direct Cash: $490,830

Total Surplus: $531,353

Total Q3 LOC Reduction: $1,594,059-

Key Observations

Despite relatively low sales revenue in Q3, our cash position improved significantly, driven largely by strategic timing of customer down payments midway through the quarter. These injections of upfront cash allowed us to cover operational expenses, contribute to COGS, and reduce our reliance on the line of credit. This demonstrates the importance of both timing and structure in our billing practices, and highlights the potential of leveraging customer deposits as a short-term liquidity tool.

One of the most critical metrics to watch is our collection rate, which currently sits at 40%. While this is workable for now, it must be viewed as a minimum threshold. Any decline could quickly erode our operational cash flow, whereas even modest improvement would substantially enhance our working capital position. We need to ensure that our collections team is supported and accountable, and that our terms are being enforced consistently across all customer segments.

Looking ahead to Q4, we anticipate a boost in sales as the IOL rebrand sites reach completion. However, it’s important to recognize that revenue recognition does not equate to immediate cash flow. The funds from these projects will not be realized until the next fiscal year, creating a temporary gap between revenue earned and cash collected. This lag must be actively managed to avoid overextending our resources based on misleading top-line performance.

As a result, we should expect a dip in direct cash inflow in Q4, while accounts payable may remain stable or even increase due to year-end commitments and delayed receivables. To offset this, it is essential that we diversify our income streams immediately. Generating revenue outside of the IOL project—whether through new business development, accelerated billing cycles, or strategic upselling—will be key to sustaining momentum and protecting our financial stability in the coming quarter.

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4. Strategic Initiatives for Q4 2025

Expansion into New Markets

U.S. Market Update Now officially onboarded for 7-Eleven service work, with three work orders successfully completed this fiscal.

Canadian QSR Market Expansion Now an accredited KFC supplier with major franchisees; actively pursuing supplier status with Burger King, Taco Bell, Jersey Mike’s, Subway, and Edo Japan, with several opportunities in late-stage negotiation.

Non-National lanes and Bid/Tender

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