For the three months ended June 30, 2023, Adentra Inc. generated total sales of $585.9 million, as compared to the record $700.3 million achieved in a period of unusually high demand and increasing prices in Q2 2022. The $114.3 million, or 16.3%, year-over-year decrease primarily reflects lower volumes in the current period, and to a lesser extent, the impact of product price deflation. Sales results also include a $2.3 million unfavorable foreign exchange impact related to the translation of Canadian sales to US dollars for reporting purposes.
Adentra reports Q2 2023 gross profit of $119.4 million, as compared to $153.8 million in the same period last year. The $34.4 million, or 22.3%, decrease reflects lower sales and a reduced gross profit percentage. At 20.4% Q2 2023 gross margin percentage did not match the unusually strong 22.0% performance achieved in Q2 2022, but was slightly higher than the 20.2% generated in Q1 2023. Q2 2022 gross profit percentage was temporarily elevated due to favorable market dynamics, including strong demand and tight supply.
Adentra generated Q2 2023 Adjusted EBITDA of $46.2 million, as compared to $78.6 million during the same period in 2022. The $32.4 million, or 41.3%, year-over-year change largely reflects the $34.4 million decrease in gross profit, partially offset by the $1.9 million decrease in operating expenses (before changes in depreciation and amortization, LTIP expense, and transaction expenses).
Net income for the Q2 2023 was $9.4 million, as compared to $41.9 million in Q2 2022. The $32.5 million, or 77.7%, decrease primarily reflects $34.7 million lower EBITDA, the $6.3 million increase in net finance expense, and the $1.2 million increase in depreciation and amortization, partially offset by the $9.7 million decrease in income tax expense.
"Adentra performed well in the Q2 as we leveraged our strategies and proven business model to achieve positive financial results, increase operating cash flow, and pay down debt even in a challenging macroeconomic environment," said Rob Brown, Adentra's President and CEO.
"While our Q2 results did not keep pace with the record results generated during the exceptional conditions of fiscal 2022, we achieved sequential quarterly improvement in sales volumes, gross margin and EBITDA margin percentage as compared to Q1 2023. Our performance in a period of reduced demand and product price deflation underscores the success of our strategies to grow and broaden our end-market participation, expand our channels to market, diversify and strengthen our product mix, and deepen our geographic coverage."
"We also continued to demonstrate our business's ability to convert a high percentage of adjusted EBITDA into operating cash flow before changes in working capital, and to release working capital and generate additional cash flow in periods of reduced economic activity. Q2 operating cash flow grew to $52.8 million, a year-over-year increase of $26.1 million, supported by a further $35.9 million reduction in inventory."
Results from Operations - Six Months Ended June 30, 2023
For the six months ended June 30, 2023, Adentra generated total sales of $1.17 billion, as compared to $1.35 billion in the same period in 2022. The $179.4 million, or 13.3%, decrease primarily reflects a $201.4 million reduction in organic sales, partially offset by $27.3 million of incremental revenue from acquisitions of Mid-Am and Rojo.
Adentra generated gross profit of $236.4 million in the first half of 2023, as compared to $301.6 million in the same period last year. The $65.2 million, or 21.6%, year-over-year decrease reflects lower organic sales and a gross profit percentage of 20.3%, as compared to 22.4% in the same period in 2022. The gross profit percentage in the prior-year period was temporarily elevated due to favorable market dynamics, including strong demand and tight supply.
Adentra generated Adjusted EBITDA of $89.0 million in the first half of 2023, as compared to $158.4 million during the same period in 2022.
Net income for the first half of 2023 was $19.0 million, as compared to $85.4 million in the same period in 2022. The $66.4 million, or 77.8%, decrease primarily reflects $71.3 million lower EBITDA, the $3.0 million increase in depreciation and amortization, and the $13.2 million increase in net finance expense, partially offset by the $21.1 million decrease in income tax expense.
Adentra is one of North America's largest distributors of architectural building products to the residential, repair and remodel, and commercial construction markets. The Company currently operates a network of 86 facilities in the United States and Canada.
