Premium Brands (PBH) Q3 2024 Prepared Remarks earnings summary

Executive summary

• Achieved record Q3 revenue of CAD 1.67 billion, up 1.3% year-over-year, driven by strong U.S. growth in protein and bakery segments, but offset by a material sales shortfall in the sandwich group due to a key customer decline.

• Record Q3 adjusted EBITDA of CAD 159.4 million, up 0.3%-0.4% year-over-year, with a 9.6% margin.

• Announced sale of redundant land for CAD 26 million and a non-binding LOI for a sale-leaseback of a Washington facility for approximately CAD 92 million.

• Declared a quarterly dividend of CAD 0.85 per share and remains confident in achieving CAD 10 billion in revenue and 10%-12% EBITDA margins by 2027.

• Free cash flow per share projected to reach a record in 2024, with a 17.1% CAGR in FCF since 2006.

Financial highlights

• Quarterly sales reached a record CAD 1.67 billion, up 1.3% year-over-year, with growth driven by CAD 29.8 million in price increases, CAD 7.8 million in currency gains, and CAD 5.5 million from acquisitions.

• Adjusted EBITDA was CAD 159.4 million, up 0.3%-0.4% year-over-year; adjusted EBITDA margin was 9.6%.

• Adjusted EPS for Q3 2024 was CAD 1.11, down from CAD 1.27 in Q3 2023; adjusted earnings were CAD 49.4 million.

• Free cash flow for the trailing four quarters was CAD 250.2 million, with a payout ratio of 59.2%.

• Gross margin held steady at 19.5% in Q3; Q3 net earnings were CAD 25.4 million, down from CAD 39.4 million a year ago.

Outlook and guidance

• No longer expects 2024 revenue and adjusted EBITDA to meet prior guidance due to sales challenges and delayed U.S. product launches.

• Expects to accelerate revenue and adjusted EBITDA growth in coming quarters, with a five-year target of CAD 10 billion in sales and CAD 1 billion adjusted EBITDA by 2027.

• Sales to the key sandwich group customer are expected to recover and return to historical growth rates.

• Highly probable that CAD 700 million of new U.S. market-focused opportunities will launch in 2025 or sooner.

• Expect to close several acquisitions before year-end.