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Q4 - Fiscal 25

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Q2 - Fiscal 25.pdf

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ALL TEXT IN BLUE HAS BEEN COPIED FROM 2025 PLAN. ONCE EDITED CHANGE THE COLOUR TO BLACK SO WE ALL KNOW IT HAS BEEN UPDATED TO THIS YEARS PLAN.

Selkirk Signs: Quarterly Report to Board of Directors Q2 2025 Meeting Date: April 17, 2025

To the Board of Directors,

We are pleased to present the quarterly report for Selkirk Signs for Q2 2025. This quarter has been a period of solid performance, continuous improvement, and strategic development. Below, we have outlined key financial and operational highlights, challenges, and our goals for the upcoming quarter.

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1. Financial Performance

Year over Year

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Income Statement Q2 2022-2025.pdf

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Budget 2024 - Q2 Report.pdf

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Revenue:

In Q2 2025, our total revenue was $2.28 million, marking a 31.83% decrease compared to the same period last year. This decline is primarily due to insufficient sales activity from fiscal 2023, requiring significant efforts in fiscal 2024 to develop the new pipeline we are only beginning to experience now in fiscal 2025. Additionally, the sales cycle has proven to be longer than anticipated, further delaying revenue generation and exacerbating the impact on overall financial results. These factors combined have significantly contributed to the notable drop in revenue.

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Gross Profit:

Our gross profit for the quarter stood at 33.2%, an improvement of 17.2% over Q2 2024. This increase is attributed to more efficient manufacturing and project management processes, as well as reductions in warranty claims.

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Net Profit:

Our net profit for the quarter stood at $-51,798.77, reflecting a 49.9% improvement over Q2 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 $805,235.35, which is 6% lower than the same period last year. This improvement is largely due to our implementation of cost cutting measures, such as reducing staff, reduced overhead costs (Calgary office) minimizing travel and entertainment expenses.

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Cash Flow:

Despite efforts to improve financial performance, cash flow continues to be a significant challenge this quarter. Low sales order numbers are contributing to a reduced operating line of credit. The decline in sales has limited our cash inflows, asking the bank to lock in our margin. Addressing this issue is crucial to ensure we have the necessary financial resources to support ongoing operations and growth initiatives.

Year to date:

Revenue:

In the first half of the year, our total revenue amounted to $4.94 million, representing a 27.94% 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 second half of the year indicates a substantial increase, projecting that we will meet our annual target by year-end. This optimistic outlook suggests that our strategic initiatives and market conditions will drive the necessary growth to achieve our financial goals.

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Net Profit:

Our net profit for the year stands at -$105,708.99, reflecting a 148% decrease compared to the previous year. Despite these unfavorable figures, we remain optimistic that the recent strategic changes and the acquisition of new clients with higher profit margins will gain traction. We are confident that these developments will enable us to achieve our net profit target of $765,104 by year-end.

Operating Expenses:

Our operating expenses for the year to date amount to $1,628,476.67, reflecting a 5.55% reduction compared to the same period last year. This decrease has contributed to several break-even 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:

Q2 closing inventory valued at $2.4M, with normalized operating levels estimated around $2M.

Significant progress continues in reducing obsolete/repurposed stock, with approximately $250k depleted year-to-date and a further ~$50k reduction targeted in the second half of the fiscal year.

Ongoing cleanup and rationalization of inventory items within the Odoo system (item count reduced by ~14% from 2100 to 1807) is enhancing data accuracy, improving inventory control, and reducing ordering errors (further refinements planned).

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Budget:

Our budget indicates that we have utilized only 37% of the anticipated cost of goods sold (COGS) for the year and 46% 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 proving effective, ensuring better-than-expected cost management at this point in the year.

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2. Key Operational Achievements

New Projects:

7-Eleven to Esso Rebrand

The 7-Eleven to Esso rebrand is a continuation from Q2 with 26 locations in the queue for the remainder of fiscal 2025. This program is projected to bring approximately $5M in revenue with 70% ($3.5M) to be realized this fiscal.

We have partnered with Pattison ID as a Starbucks supplier, providing $54k in pended bids in Q2 and being awarded $36k thus far in our growing relationship.

We have completed a bid for a new Calgary CO-OP location (Greystone) of approximately $506k in revenue. This has been approved; completion anticipated for Q3.

We have engaged and activated KFC bid opportunities with Soul Foods, FMI, Canbian, Pirani Group, and Hi-Flyer Foods as an officially accredited vendor. This has resulted in $461k in bid opportunities and $155k in newly awarded revenue (Q2 numbers only)

RBI (parent company of Tim Hortons, Burger King, and Popeyes) has engaged us to become an official Western Canada vendor for Burger King. In addition to our Burger King Wetaskiwin location ($82k in revenue), we’ve been engaged by other franchisees (Crossfield, AB and Cranbrook, BC) to service their branding refreshes

Win/Loss Ratio of BD projects:

Q2 Funnel Data: Based on BD data for 62 opportunities tracked in Q2: 26% Won, 37% Lost, 38% Still in Negotiation.

Loss Driver - Price Sensitivity (43% of losses): Lost opportunities due to price often occurred where strong client relationships were not yet established, leading us to quote protectively higher margins (e.g., Foot Locker US specifically indicated our pricing was uncompetitive). Our strategy continues to prioritize relationship-building pre-bid.

Loss Driver - Competitor Relationships (22% of losses): Existing strong relationships between prospects and competitors, particularly regional incumbents in the KFC market (e.g., involving franchisees like Soul Foods or FMI), were another key factor. Differentiation through superior service and process efficiency is crucial here.

KFC Market Strategy (Sales Focus): Successfully engaging new KFC franchisees requires meeting demands for rapid response times, lean installation/permitting costs, and fast production turnaround. To improve win rates, we are actively streamlining internal processes (project overview, estimating, design packages) and emphasizing proactive customer service.

Reporting Enhancements: Improved reporting and analytics for BD performance are anticipated following the stabilization of the Odoo 17 system.

Market Analysis:

Local Competition Obstacles: Will be addressed by emphasizing Selkirk’s quality, warranty, and full turnkey service differentiators against price-focused local competitors.

Ontario KFC Market Entry: Hurdles for securing work include overcoming established relationships and ensuring cost competitiveness. Actions being explored include faster internal quotation/revision turnarounds, implementing leaner margins on outsourced services (install/freight), and identifying new Eastern installation partners.

Client Margin Variability: Significant differences exist in client pricing expectations (e.g., standard rates accepted by clients like Reitmans/Panago versus slim margins demanded by others like FDF Brandz/BarBurrito).

Client Viability Assessment: New client opportunities ("auditions") are assessed systematically based on key criteria: projected profit margin, quality of communication, potential for partnership (vs. purely transactional vendor relationship), and alignment on expectations (timelines, scope).

Technology & Innovation:

The upgrade from Odoo 13 to Odoo 17 was successfully completed this quarter. Despite the extensive time and effort invested by the team in testing and preparing for the new version, the transition encountered several challenges. A significant portion of these issues originated from Bista's end, where functionalities that worked in the test environment failed to perform as expected in the live environment. While there are still some issues to resolve, the day-to-day functionality is nearly perfect, with occasional unexpected problems.

During our initial period with Odoo 17, our primary focus has been on ensuring its successful implementation. In the upcoming quarters, we will concentrate on leveraging the new features now available to us. This will include more comprehensive financial and KPI reporting, accessible in real-time. Additionally, we will renew our efforts to integrate all teams into using Odoo as the central hub for information and data storage. This transition will reduce our reliance on Smartsheets and other applications, thereby enhancing cross-departmental communication and visibility.

Marketing Activities & Performance

Resource Allocation: Marketing bandwidth continues to be constrained, particularly with increased support required for recent business development opportunities. Resources are prioritized towards activities demonstrating the highest return on investment.

Content Strategy & Results: Focusing on identified high-engagement content (primarily short-form video) combined with strategic paid promotion on key platforms enabled the achievement of Q2 social media growth goals (including 6% follower growth on Instagram and meeting LinkedIn targets).

Industry Recognition: We continue to receive positive feedback from industry contacts regarding our marketing initiatives, affirming effective brand visibility and positioning within our sector.

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3. Challenges Faced

Staffing Levels and Capacity Constraints

Lean Staffing Levels: Both Manufacturing and Design/Drafting have operated under intentionally lean staffing models for approximately two years (Design currently at ~50% of peak levels).

Recruitment Difficulties: Securing skilled production personnel remains challenging, particularly in the Cranbrook labor market. Standard recruitment avenues like job fairs have shown limited effectiveness.

Capacity Strain & Impact: Recent increases in workload (late Q2/early Q3) have significantly strained Design/Drafting capacity. This has resulted in project backlogs, extended turnaround times impacting PMO schedules, and has prompted negative feedback from customers regarding delays.

Purchasing

Managed Q2 purchasing activities amidst significant challenges including tight cash flow, specific material needs for the 7-Eleven project, tariff threats, and unfavorable currency exchange (CAD weakness). Many of these pressures are expected to continue into Q3, & Q4.

Spending was consciously constrained early in the quarter (Dec/Jan under budget) due to cash flow limitations, followed by a necessary, strategic over-budget material acquisition in February for the 7-Eleven project. This early purchase secured materials, mitigated tariff risks, and supported manufacturing workflow.

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