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, and record adjusted EBITDA of CAD 159.4 million, up 0.4% year-over-year, driven by strong U.S. protein and bakery growth, but impacted by a significant sales shortfall in the sandwich group due to a temporary decline from a key customer.

• Excluding the key customer, Specialty Food Group's major U.S. initiatives saw 8.1% organic volume growth.

• The company remains confident in its five-year plan, targeting CAD 10 billion in revenue and 10%-12% EBITDA margins by 2027, despite revising 2024 guidance downward due to sales challenges and delayed U.S. product launches.

• Announced sale of a redundant property for CAD 26 million and a sale-leaseback of a facility for up to CAD 92.5 million, with net proceeds of about CAD 80 million.

Financial highlights

• Quarterly sales reached a record CAD 1.67 billion, up 1.3% year-over-year, with adjusted EBITDA of CAD 159.4 million, up 0.4% year-over-year, and adjusted EPS of $1.11, down from $1.27 in the prior year.

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

• Sales growth was driven by price increases, currency gains, and acquisitions, partially offset by volume declines in both segments.

• Gross margin held steady at 19.5% in Q3; consolidated adjusted EBITDA margin was 9.6%.

Outlook and guidance

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

• Significant pipeline of nearly CAD 1.5 billion in U.S. market-focused opportunities, with CAD 700 million highly probable to launch in 2025 or sooner.

• Targeted long-term annual organic volume growth rate of 4% to 6%, with a five-year target of CAD 10 billion in sales and CAD 1 billion adjusted EBITDA by 2027.

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