INVESTOR PRESENTATION SECOND QUARTER 2018 TSX: HDI www.hdidist.com - PowerPoint PPT Presentation

INVESTOR PRESENTATION SECOND QUARTER 2018 TSX: HDI www.hdidist.com

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Forward Looking Statement Certain statements contained in this presentation, including all statements that are not historical facts, contain forward-looking statements and forward-looking information within the meaning of applicable securities laws. Forward-looking statements normally contain words like believe, expect, anticipate, plan, intend, continue, estimate, may, will, should and similar expressions. Such statements are not guarantees of future performance. They are based on management's expectations and assumptions regarding historical trends, current conditions and expected future developments, as well as other factors that we believe are appropriate in the circumstances. Management has based these statements on estimates and assumptions that they believed were reasonable when the statements were prepared. Actual results could be substantially different because of the risks and uncertainties associated with the Company's business. More information about the risks and uncertainties affecting the Company's business can be found in the "Risk Factors" section of our Annual Information Form dated March 15, 2018 which is available under the Company's profile at SEDAR (www.sedar.com). Although we have attempted to identify factors that would cause actual actions, events or results to differ materially from those disclosed in the forward-looking statements or information, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. Also, many of the factors are beyond the control of Hardwoods. Accordingly, readers should not place undue reliance on forward-looking statements or information. Hardwoods undertakes no obligation to reissue or update any forward-looking statements or information as a result of new information or events after the date hereof except as may be required by law. All forward-looking statements and information herein are qualified by this cautionary statement. 2 3

HDI is the #1 Distributor of Architectural Building Products in N.A. • Five year average annual sales Outstanding track record of growth growth 28%, EBITDA growth of 37%, and EPS growth of 42% • 42 US locations acquired in past Proven acquisitions strategy seven years • $550 million of annual revenue added • HDI market share estimated at 10% Highly fragmented industry Import: Guararapes MDF: Commercial fixtures • Five year total shareholder returns Attractive shareholder returns +138% (1) • Dividend has been increased every year for the past seven years • +50 year old business Disciplined business model • Experienced management team • Low debt leverage • No significant supplier/customer concentration Domestic Supplier: Arauco TFL: Residential Use 4 (1) Measured as at June 30, 2018

Critical Role in the Value Chain Approximately 1,000 Suppliers Worldwide Manufacturers 61 Distribution Locations North American Architects & Designers Sales Team 330 Strong Residential Commercial Customer Base Diversified 20% Customers 50% Customers 30% + 35,000 5

Comprehensive North American Network Estimated N.A market share = 10% Revenue by Country 15% 85% Canada U.S.  Proven market leader for 50+ years in a fragmented industry  Diversified customer and supplier base, no significant concentration  Experienced management team, on average 15+ years with the Company 6

Our Products Decorative • Includes high-pressure laminates (“HPL”), ~20% of sales thermally fused laminates (“TFL”), and engineered Surfaces panels such as medium density fiberboard and Composites (“MDF”) and particle board. Hardwood ~33% of sales • Extensive selection of plywood and veneer Plywood products, available on virtually any core. Includes private labelled products. Hardwood ~23% of sales • All species, cuts, and grades of hardwood lumber, Lumber includes specialty items from exotic markets. Other • Includes doors, millwork, mouldings, solid ~24% of sales Architectural surfaces, cabinet hardware, casework Building components, cabinets, countertops, adhesives, and coatings. Products 7

Latest Quarter – Summary Statistics HDI ($CAD) (millions) Q2 2018 Q2 2017 Chng Chng % +$20.6 +7.4% Sales $298.2 $277.6 US Organic ($USD) +$15.5 +8.6% US Acquisitions ($USD) +$6.9 +3.8% CAD Organic ($CAD) +$1.5 +4.1% Gross Profit $53.0 $51.5 $1.5 +2.8% Gross Profit % 17.8% 18.6% Operating Expenses $38.8 $36.0 $2.8 +7.7% Operating Expenses % 13.0% 13.0% Adjusted EBITDA $16.8 $17.2 ($0.4) (2.7%) $0.04 +8.9% Adjusted diluted EPS $0.49 $0.45 8

Track Record of Growing Sales with Stable Margins • Gross margin trades within a stable band Price changes passed through to customers Sales Growth % 21% 23% 25% 38% 31% 4% Sales Growth % 18% 10% 9% 5% 5% 5% excluding acquisitions and FX translation impact 8 9

Track Record of EBITDA Growth (1) “Adjusted EBITDA” and “Adjusted EBITDA Margin” are non-IFRS and non-GAAP measures. See the Company’s Annual Report filed on SEDAR.com for a reconciliation of these measures to IFRS and GAAP measures. 9 10

Accretive Growth For Shareholders % Increase 108% 6% 43% 11% 9% 6% (1) “Adjusted Profit” and “Adjusted EPS” are non-IFRS and non-GAAP measures. See the Company’s Annual Report filed on SEDAR.com for a reconciliation of these measures to IFRS and GAAP measures. 11

Growth Plan: Capitalizing on Opportunities 1) U.S. construction market improving, capture share 2) Additional market share in strategic product categories 3) Optimize the platform 4) Acquisitions, capitalize on significant opportunity Shinnoki: Dusk Frake Living Room Tafisa: Smoothwood Nutmeg Residential Kitchen 11 12

1. US Construction Market Improving, Capture Share Prolonged period of below-average Residential Construction construction, potential for catch up growth • Population growth / demographics suggest pent up demand • Supply of existing homes at an all time low Per National Association of Home Builders, August 2018 Commercial Construction • Consistent demand for new projects • Strong N.A economy Per FMI Consulting; Construction Outlook Q2 2018 Report Four-Quarter Moving Remodeling Activity Rate of Change • Homeowner improvements expected to increase 12 13 13 Source: Harvard Joint Centre for Housing

2. Additional Market Share, Strategic Product Categories Decorative Surfaces and Composites Wood Products • • High-growth product segment Core competency of HDI • • Design trends and market preferences Core products: Hardwood lumber, changing at a rapid pace Hardwood Plywood • • Under-represented from a Range of market share by brand, by location market share perspective • Optimize market share opportunity • Opportunity to take advantage  Size, scale - Wood Products Decorative Surfaces investments to Est. Market Share Est. Market Share  Product identify next trend knowledge 7% experts  N.A wide network 15% - attractive to  Long-term manufacturers industry relationships  Premier access to 85% 93% product - can be  Global sourcing on an exclusive advantage basis  Breadth of  Global sourcing product portfolio solutions - development of proprietary products 14

3. Optimize the Platform • HDI supports brands in the market place • Competitors generally will not have same support structure in place • HDI opportunity (represented by the grey color in circles below) to optimize the platform • Potential to build a sustainable competitive advantage Regional Competitor  Supply Chain Optimization  Collaborative Marketing  Professional Sales and Product Training  Specification sales channel  Strategic HR  Technology Solutions  Financial Strength 15 EBITDA Margin 5-7% 3-5%

4. Acquisitions, Capitalize on Significant Opportunity • Significant market share available, highly fragmented industry Successfully completed 7 acquisitions in the last 7 years • Robust acquisitions pipeline, dedicated internal resources • Financial capacity to execute 42 U.S. locations acquired in the last 5 years, approximately $550MM in revenue added Acquisition Date Target Price Paid Annual Revenues Notes (US $) at acquisition (US $) • Regional consolidation 2018 $3.7 M $13 M opportunity • Added key salespeople • Build on eastern US presence 2017 $6.0 M $25 M • Foothold in eastern US lumber market EAGLE • Took out a competitor 2017 $0.6 M $5 M • PLYWOOD Added key sales people • Increased eastern US presence 2016 $107.0 M $282 M • Increased presence in the commercial market • Increased commercial exposure 2014 $15.0 M $30 M • Diverse/International customers 2013 $2.8 M $4 M • Expanded import lumber capabilities • Increased commercial exposure, 2011 $13.5 M $40 M leverage imports • New geographic markets 16

Macro Outlook  U.S. Construction Market Growth Headwinds  Residential, non-residential, and renovation mid-to-high single digit organic growth  Favorable M&A Environment  Fragmented industry  Family owned businesses with limited succession plan  U.S. Government Policy  Significantly reduced corporate tax rate 17