Q4 2024 Premium Brands Holdings Corp Earnings Call - Q&A

Operator: Good morning and welcome everyone to our 2024 fourth quarter and year-end conference call.

Good morning, and welcome everyone to our 2020 for fourth quarter and year end conference call.

Operator: With me here today is our CFO, Will Kalutycz. Hopefully you've had a chance to listen to our pre-recorded call posted on our website this morning. We will now take your questions.

Speaker Change: With me here today is our CFO will collude itch.

Speaker Change: You've had a chance to listen to her prerecorded call posted on our website. This morning.

Speaker Change: We will now take your questions.

Speaker Change: <unk>.

Speaker Change: Okay.

Operator: Thank you, and ladies and gentlemen, we will now begin the question and answer session. To ask a question, you may press star, followed by the number one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, you may press star, followed by the number two.

Speaker Change: Thank you and ladies and gentlemen, we are allowed to begin the question and answer session to ask a question you May press star followed by the number one I'll go telephone keypad, if youre using a speakerphone. Please pick up your handset before pressing anarchy do we do all your question you May Press Star followed by the number that you and Les.

Operator: And ladies and gentlemen, just wanted to introduce our speakers for today, will be George Paleologou, CEO and President of Premium Brands, and Will Kalutycz, CFO of Premium Brands. And with that, our first question comes from the line of Kyle McPhee with Cormark Securities. Please go ahead. Hey, Kyle. Hi, everyone.

Speaker Change: And gentlemen, I just wanted to introduce our speakers for today will be George Boggy logo, CEO and president of premium brands and we'll see if all of the new beds and with that our first question comes from the line of Kyle Mcphee with core Mark Securities. Please go ahead.

Speaker Change: Take care everyone.

Kyle McPhee: First, I want to talk through some of the moving parts feeding your 2025 revenue guidance. Your guidance implies $830 million of revenue gains, more like $500 million if we exclude the contribution of your recent acquisitions. So, for that organic revenue gain of around $500 million, how much of that is linked to the contributions from your U.S. growth programs versus other things like the clawback of revenue losses in 2024 linked to your large QSR client and maybe the Canadian consumer Edwin's clawback. Maybe as part of your answer, you can tell us whether or not timing for those major U.S.

Speaker Change: I'll take that.

Speaker Change: First I wanted to talk through some of the.

Speaker Change: Moving parts feeding your 2025 revenue guidance.

Speaker Change: You got to supply $830 million of revenue games more like 500 million exclude the contribution of your recent acquisitions. So for that organic revenue gain of around 500 million how much of that is linked to the contributions from your your U S growth programs versus other things like the claw back of revenue.

Speaker Change: The losses in 2024 linked to your large T with our clients and maybe the Canadian consumer headwinds Clawback.

Speaker Change: And maybe that's part of your answer you can tell us whether or not timing for those major U S growth programs has changed for better or worse. Since you gave us that slide back in Q3, I think you add up to $1 billion left U S growth programs starting to turn on this year.

Will Kalutycz: growth programs has changed for better or for worse since you gave us that slide back in Q3. I think you have a good answer. I think $830 million of U.S. growth programs starting to turn on the Yeah, so it, the US component is probably 60 to 65% of that organic growth, Kyle, and obviously Canada being the balance, a little bit of exports included in the Canada number to Asia. In terms of the timing, it's similar to what we've talked about last quarter, it is really heavily weighted to the back half of the year. We now have good clarity on a number of the bigger initiatives with planned launch dates, and those launch dates range from sort of late in Q2 to early to Q3, and hence the heavy weighting towards the back half of the year.

Speaker Change: So it's the U S component is probably.

Speaker Change: 60% to 65% of that organic growth call.

Speaker Change: And obviously, Canada being the balance a little bit of exports included in that the Canada, Canada number to Asia.

Speaker Change: In terms of the timing it it's similar to what we've talked about last quarter. You know it is really heavily weighted to the back half of the year. You know we now have a good clarity on a number of the bigger initiatives with planned launch dates and those launch dates range from sort of late in Q2 to early Q3.

Speaker Change: Three.

Speaker Change: And hence the heavy weighting towards the back half of the year.

Speaker Change: Yeah.

Will Kalutycz: Okay, that's helpful. And then... For your 2025 EBITDA guidance, again, if we back out these acquisitions, it seems like you're assuming around 13-14% contribution margin to the organic revenue growth this year. That seems a bit low, given the sources of your revenue growth by segment and category. Are you just being conservative with margins, or has something changed with your assumption for contribution margin to the US growth? No, no, our contribution margins, while we have been conservative in our outlook around them, when you do the math, should be about 27-28% blended. Again, being conservative, given that, you know, certainly protein and bakery groups contribution is much higher, you know, I don't know how much you take into account.

Speaker Change: Got it Okay. That's helpful and then.

Speaker Change: For your 2025 EBITDA guidance again, if we back out the acquisition it seems like you're assuming around 13, 14% contribution margins to the organic revenue growth. This year that seems a bit low given the sources of your revenue growth by segment and category are you just being conservative with margins or has something changed with your assumption for contribution.

Speaker Change: U S growth programs.

Speaker Change: No our our contribution margins are while we have been.

Speaker Change: <unk> in our outlook around I'm sure when you do the math should be about 27, 28% blended.

Again being conservative given that are you know certain proteins and bakery group's contribution is much higher I don't know how much you've taken take out we do have additional.

Will Kalutycz: We do have additional. offsetting amounts. We do have continuing wage inflation across many businesses, some incremental plant overhead with new plants brought up in part way through 2024 and the new plants coming on in 2025, new capacity coming on 2025. And then we've got to help drive that growth, certainly a lot more S&M selling and marketing to get things going. So that's offsetting that and that's probably why you're coming to your lower contribution margin. But a lot of those costs should wash through for 2026. Got it.

Speaker Change: Offsetting amounts yeah, we do have continuing wage inflation across many businesses.

Speaker Change: Some incremental plant overhead with new plants brought up in partway through 2024, and and the new plants coming on in 2025, new capacity coming on 2025, and then we've got to help drive that growth you know certainly a lot more S N M <unk> selling and marketing to.

Speaker Change: To you know get.

Speaker Change: Get get get things going so that that that's offsetting that and that's probably why you are coming to your lower contribution margin, but a lot of those costs are sheep washed through for 2026.

Speaker Change: Got it okay. Thanks for those details I'll pass along.

Operator: Okay. Thanks for those details.

Operator: I'll pass.

Derek Lessard: And your next question comes from the line of Derek Lessard with TD Cowen, please. Yeah, good afternoon, everyone. And great to see some some momentum from these initiatives coming through.

Derek Lazard: And your next question comes from the line of Derek Lazard that TD times. Please go ahead.

Derek Lazard: Yeah, good afternoon, everyone and a great to see some momentum from these initiatives coming through.

George Paleologou: Hey Derek. I'd like to maybe just hit more on the sandwich organic volume growth. Obviously, you did point it out that it was below your historical growth levels, but I'm curious, you said due to some project or product launches taking effect in 2025, just maybe if you could add some color around those launches and maybe the timing as well. Yes, so a lot of it is planned LTOs with specific customers and a couple of listings coming online with a major retail customer, a club retail customer, so again, similar to my comment on the last question, we've got planned launch dates, we've got good visibility, and it's just sort of, we're in the lull between when those start kicking in and when some of our previous big launches are now lapping.

Derek Lazard: Oh, Hey, there hey, there.

Derek Lazard: I think maybe just to hit on the more on the the sandwich organic volume growth. Obviously, you did pointed out that it was below.

Derek Lazard: Below your historical growth levels, but.

Derek Lazard: Curious are you said due to some.

Derek Lazard: Some some project or product launches taking effect in 2025, just maybe if you could add some color around that around those launch it and maybe the timing as well.

Derek Lazard: Yeah. So you know it's a lot of it is planned L. T OS with specific customers and a couple of listings coming online with a major retail customer a club retail customer.

Derek Lazard: So we again similar to my comment on the last question.

Derek Lazard: Got planned launch dates we've got good visibility.

Derek Lazard: And it's just sort of will it we're in a lull between when those start kicking in and when some of our previous big launches are now lapping.

George Paleologou: The other comment I would make, Derek, is that even with some of the well-known challenges we've had with in the food service channel in the U.S., we had a record year in sandwiches in 2024. So both in terms of top line as well as EBITDA and EBITDA margin. So, you know, the numbers are pretty good. Yeah, absolutely.

Derek Lazard: The other comment I would make a derek is that even with some of the <unk>.

Derek Lazard: Well known challenges we've had with them.

In the foodservice channel in the U S. We had a record year in sandwiches.

Derek Lazard: In 2024.

Derek Lazard: So both in terms of topline as well as our EBITDA and EBITDA margin. So.

Derek Lazard: Numbers are pretty good.

Derek Lazard: Yeah, absolutely and maybe just one.

Will Kalutycz: And maybe just one housekeeping for me in terms of your working capital. You increased about $86 million in Q4, and it looks like it came a lot from receivables and inventory. Just maybe some color around that and what's driving those, and how should we be thinking about working cap in 2025? Yes, so our receivables are very clean, the agings are good, the day sales outstanding ratio in the ratio got distorted a little bit because of the acquisitions at year end, so you've got the receivables on our balance sheet but essentially no sales in the quarter, so obviously that distorted the ratios, but otherwise we're happy where receivables are at.

Speaker Change: One housekeeping for me in terms of your working capital.

Derek Lazard: About $86 million in Q4, and it looks like it came a lot from our receivables.

Derek Lazard: Receivables and inventory just maybe some color around that and what's what's driving those and how should we be thinking about working cap in 2025.

Derek Lazard: Yeah, So our receivables are very clean.

Speaker Change: The agents are good.

Speaker Change: Days sales outstanding ratio in sale in the ratio got distorted a little bit because of the acquisitions at year end. So you got the receivables on our balance sheet, but essentially no sales in the quarter. So obviously that that distorted the ratios, but otherwise we're happy where were received.

Speaker Change: Both are at when you look at inventory you know Theres a little more.

Will Kalutycz: When you look at inventory, there's a little more of a story there, certainly there was the acquisitions element, when we looked at our days purchases in inventory, they came in in the quarter at about 62 days, way above our expectations or normal levels, which were closer to 54 days. Three of those days was the acquisition impact I talked about earlier with the receivables, we had the inventory but not the sales on our income statement. This is something that's feeding into our 2025 projections. There were a couple of factors. We had several businesses with some very significant opportunity buys in the beef space.

Speaker Change: I have a story there certainly there was the acquisitions element you know what.

Speaker Change: When we looked at our days purchases and inventory they came in in the quarter at about 62 days way above our expectations are at normal levels.

Speaker Change: Which were more closer to 54 days.

Speaker Change: Three of those days was the acquisition impact I talked about or you know with the receivables. It was we had the inventory, but not the sales on our income statement.

Speaker Change: And then this is something that's feeding into our 2025 projections there were a couple of factors.

Speaker Change: Had a several businesses with some very significant opportunity buys in the B space.

Will Kalutycz: The beef commodities market has been incredibly inflationary, incredibly high, and there did come an opportunity at year-end and our businesses leaped on it. That should help us going into 2025 from those all happening in Q4. Also, we started building a little bit of inventory for some promos. We've got some plant projects that we were building some inventory prior to shutting down lines. Also, we had some lobster sales that got pushed into 2025. There was you strip out all that noise and we came in at about 54.5 days purchases in inventory, which is pretty close to where we want to be.

Speaker Change: It's been the beef commodities market has been incredibly inflationary incredibly high and they're did come in opportunity at year end and our business has leapt on it so that that should help us going into 2000, Twenty's 25 from those all happening in Q4 also.

Speaker Change: We you know we started building a little bit of inventory for some promos. We've got some plant projects that we are building some inventory prior to shutting down lines. So there and also we had some lobster sales. They got pushed into 2025. So there was a you strip out all that noise and we came in at about 50.

Speaker Change: 54, and a half days purchases and inventory, which is pretty close to where we want to be so it was higher than what you would like but it was for good reasons.

Will Kalutycz: It was higher than we would like, but it was for good reason.

Operator: Okay, thanks for that, Culler, everybody. Okay, thanks, Derek.

Speaker Change: Okay. Thanks for that color everybody.

Speaker Change: Okay. Thanks Darren.

Martin Landry: And your next question comes from the line of Martin Landry with Stipple. Please go ahead. Hi, good morning, George and well.

Speaker Change: And your next question comes from the line of Martin Landry with Stifel. Please go ahead.

Martin Landry: Alright, good morning, George and well.

George Paleologou: Hey, Mark. I would like to just dig a little further in your revenue guidance for 2025, given consumer confidence in Canada looks like it's declining a little bit given the trade tensions. Can you tell us what organic revenue growth rate you've assumed for 2025 in Canada? We've been relatively conservative, Martin. The reality is the growth rate we are projecting is a little higher than in our guidance. We have backed it down for our guidance specifically for the reasons you point. I suspect ultimately it's probably in the 2% to 3% range, organic volume growth, but like I say, our internal expectations are actually a little higher than that.

Martin Landry: Hey, Mark.

Speaker Change: Yeah.

Speaker Change: I would like to just dig a little further in your in your revenue guidance for 25.

Speaker Change: Kevin.

Speaker Change: Consumer confidence in Canada, it looks like it's declining a little bit more tension.

Speaker Change: Tension so.

Speaker Change: Can you tell us what.

Speaker Change: Organic revenue.

Speaker Change: Growth rate you've assumed for 'twenty five in Canada.

Martin Landry: We've been relatively conservative Martin.

Speaker Change: The reality is the growth rate, we are projecting is a little higher than in our guidance.

Martin Landry: We have backed it down four for our guidance specifically for the reasons you.

Speaker Change: You point.

Speaker Change: I suspect ultimately, it's probably in the 2% to 3% range organic volume growth.

Speaker Change: But.

Speaker Change: Like I say, our internal expectations are actually a little higher than that.

Okay. Okay.

George Paleologou: And then maybe on your balance sheet, there's discussions about acquisitions. I know that you've paused your dividend increase because of some of the uncertainties on the macro level. I mean, why don't you pause acquisitions as well, reduce your leverage, and maybe reduce also the risk premium that investors are applying, given your high leverage. Yeah, I think that's a fair comment, Martin. And It is conceivable that this would happen, as we've stated in the prepared remarks, is that We are not going to make any acquisitions that would certainly deteriorate the balance sheet. That's not going to happen.

Speaker Change: And then maybe.

Speaker Change: On your on your balance sheet.

Speaker Change: There's discussions about our acquisitions.

Speaker Change: I know that you've pause your dividend increase because of the some of the uncertainties on the macro level I mean, why don't you pause acquisitions as well.

Speaker Change: Reduce your leverage and you.

Speaker Change: Maybe you reduce also the risk premium that investors are applying given your risk leverage given your high leverage.

Speaker Change: Okay.

Martin Landry: Yeah, I think that's a fair comment Martin.

Speaker Change: And.

Speaker Change: It is conceivable that this would happen as we've stated in the prepared remarks is that.

Speaker Change: We are not going to make any acquisitions that would certainly.

Speaker Change: Deteriorate the balance sheet, that's not going to happen.

George Paleologou: Ultimately, we're trying to grow the business and we're trying to improve our existing businesses. The four acquisitions that we've done will be incredibly accretive ultimately for our businesses and they didn't deteriorate the balance sheet in any way. So, as we find acquisitions like that, of course, that would contribute to our growth and improve our profitability and enhance the competitiveness and the competitive position of our other businesses, we would probably do them. We're not aggressive with regards to acquisitions and we will be disciplined. And I would add Martin that The reality is we do expect to see significant growth in our EBITDA over the next year, driven by all the capital investment we've made, and that's going to naturally deleverage the balance sheet.

Speaker Change: Ultimately.

Speaker Change: We're trying to grow the business and we're trying to improve our existing businesses.

Speaker Change: The four acquisitions that we've done.

Speaker Change: We will be incredibly accretive ultimately for our businesses.

Speaker Change: And they didn't.

Speaker Change:

Speaker Change: Deteriorate the balance sheet in any way so.

Speaker Change: As we find acquisitions like that of course that would contribute to our growth and improve our profitability and enhance the competitiveness and the competitive position of our other businesses, we would probably do them right. So.

Speaker Change: No were not aggressive with regards to acquisitions.

Speaker Change: And we will be disciplined.

Speaker Change: And I would add Martin debt.

Speaker Change: The reality is we are we do expect to see significant growth in our EBITDA over the next year driven by all the capital investment we've made and that's.

Speaker Change: That's going to naturally deleverage the balance sheet.

Will Kalutycz: So in the interim, we certainly don't want to miss out on these opportunistic buys that George is mentioning, with the fact that it's relatively short in our sights getting the balance sheet down to our ultimate target. Ultimately, Martin, we're managing the business for the long term and we're assessing all acquisitions in a conservative way. We're not going to be aggressive in terms of valuation and as I said, if we find acquisitions that help our growth, they're very accretive and improve the profile of our various businesses, we will do that.

Speaker Change: In the interim we certainly don't want to Miss out on these opportunistic buys that George was mentioning with with the fact that it's relatively short in our sites getting the balance sheet down to our ultimate targets.

Speaker Change: Optimally Martin we're managing the business for the long term.

Speaker Change: And we're.

Speaker Change: Testing.

Speaker Change: All acquisitions in a conservative way and we're not going to be aggressive in terms of valuation and.

Speaker Change: I said, if we find acquisitions that helped our growth, they're very accretive accretive in <unk>.

Improve the profile of our various businesses.

Speaker Change: We will do with it.

Martin Landry: Just to follow up on that, your leverage is around five turns when we include leases right now. When you say that acquisitions have not deteriorated the balance sheet, does that mean that you paid less than five times EBITDA to acquire the recent acquisition? Yeah, well, Martin, we've talked about this before, we are very dubious of the calculation with the leases because of how our REIT structure distorts that. We look at it as we disclose inter-MDNA based on a pre-IFRS basis, and our target is any acquisitions, the debt associated with it will be less than three times EBDOT.

Speaker Change: Just just to follow up on that.

Speaker Change: Leverage is around five turns when we include leases right now and when you say that acquisitions have not deteriorated the balance sheet does that mean that you.

Speaker Change: Paid less than five times EBITDA to acquire their recent acquisitions.

Speaker Change: Well Martin we've talked about this before we we are very dubious of the calculation with the leases because of how our REIT structure distorts that.

Speaker Change: We look at it as we disclosed in our MD&A based on pre I FRS basis, and our target is or any acquisitions the debt associated with it will be less than three times.

Speaker Change: EBITDA.

Will Kalutycz: The other comment I have, Martin, is that, again, we've stated in our prepared remarks is that we spend in excess of $800 million on capital investments, and that debt is on our balance sheet, but the cash flow is not. So you'd have to normalize things if you were to assess our balance sheet. That's fair. Okay.

Speaker Change: The other comment I have that Martin is that again, we've stated in our prepared remarks is that we spent in excess of $800 million on capital investments.

Speaker Change: You know that that is on our balance sheet, but the cash flow is not so.

Speaker Change: It has to normalize things if you were to.

Speaker Change: Uh huh.

Speaker Change: Assets are.

Speaker Change: Our balance sheet.

Speaker Change: That's fair Okay. Thank you for your help.

Martin Landry: Thank you for your help. Thanks, Martin.

Speaker Change: Thanks Marty.

Ty Cullen: And your next question comes from the line of Ty Cullen with CIBC, please go ahead. Hi, thanks for taking my question, guys. For my first one, I'm just wondering if you could maybe update us on the latest you're hearing from your big food service customer and I guess the potential impact of their SKU rationalization on your program with them. Maybe it would also be helpful to understand exactly what assumptions you've kind of baked into your guidance around that specifically. Yeah, we can't talk specifically about customers, but as I said earlier, obviously we do a lot of business in the food service channel in the US.

Speaker Change: And your next question comes from the line of Pie, calling with CIBC. Please go ahead.

Speaker Change: Hi, Thanks for taking my question guys I'm for my first one I'm just wondering if you could maybe update us on the latest Youre hearing from your big foodservice customer and I guess the potential impact of the SKU rationalization on your program with them.

Speaker Change: Maybe it would also be helpful to understand exactly what assumptions, you've kind of baked into your guidance around that specifically.

Speaker Change: Yeah, we can talk specifically about customers, but.

Speaker Change: As I said earlier.

Speaker Change: Obviously.

We do a lot of business in the foodservice channel in the U S.

George Paleologou: We had some challenges in that channel specifically, as I said earlier, not in sandwiches because we've made a lot of progress in the club channel. We've got two more SKUs in that channel, and every one of those SKUs is between $30 and $50 million, so we've made some really good progress with regards to the club channel, also in the C-Store channel and other channels as well. What we're seeing in the food service channel today is encouraging. Things are improving. The trends are favorable. Again, we're very optimistic that we will get back to growth in that channel.

Speaker Change: Had some challenges.

Speaker Change: In that channel specifically as I said earlier not in sandwiches, because we've made a lot of progress in the club channel.

We've got.

Speaker Change: Two more skus in that channel and every one of those skus is between 30 and $50 million. So we've made some really good progress with regards to the club channel.

Speaker Change: Also in <unk>.

Speaker Change: The C store channel and other channels as well.

Speaker Change: What we're seeing in the foodservice channel today is encouraging.

Speaker Change: Things are improving.

Speaker Change: Fans are favorable so so again, we're very optimistic that we will get back to growth in that channel.

Ty Cullen: And Ty, in terms of the projections, we continue to expect some contraction in the first couple of quarters and then a return to growth in the back half of the year. Okay, got it. That's helpful. Thanks.

Speaker Change: And tie in terms of the projections yes.

Speaker Change: We continue to expect some contraction in the first couple of quarters, and then a return to growth in the back half of the year.

Speaker Change: Okay got it that's helpful. Thanks, and then I'm wondering within Canada, whether you've noticed any trends towards buying Canadian products and I guess, given the Canadian roots of many of your brands is there anything that they're doing are looking to do to maybe seize that opportunity from a promotional perspective or a pack.

George Paleologou: And then I'm wondering within Canada, whether you've noticed any trends towards buying Canadian products? And I guess given the Canadian roots of many of your brands, is there anything that they're doing or looking to do to maybe seize that opportunity from a promotional perspective or a packaging perspective, anything like that? Yeah, at this point, again, there is certainly that noise. There's been inquiries. I wouldn't say we've noticed anything materially different, but yeah, you know, there's a lot of talk about Canadians buying Made in Canada products, but again, nothing material that we can talk about. Okay, thanks.

Speaker Change: Getting perspective anything like that.

Speaker Change: Yes at this point again, there is certainly that noise.

Speaker Change: There has been inquiries I wouldn't say, we've noticed anything materially different.

Speaker Change: But yeah. It is.

Speaker Change: Lot of talk about Canadians buying made in Canada products.

Speaker Change: Again, nothing material that we can talk about.

Speaker Change: Okay. Thanks, I'll jump back in the queue.

Ty Cullen: I'll jump back in the queue. Thanks, Todd.

Todd: Thanks Todd.

Chris Lee: And your next question comes from the line of Chris Lee with Desjardins, please go ahead. Good morning, George and Will, hope you're both doing well. Good morning. Hi, Chris.

Speaker Change: And your next question comes from the line of Chris Lee with <unk>. Please go ahead.

Chris Lee: Good morning, George.

Speaker Change: It's doing well.

Chris Lee: Hi, Chris Yes, maybe it's a question on tariffs can you just maybe share remind us roughly what percentage of your revenues are cross border. Currently and then how quickly can you reduce that percentage by using some of those manufacturing redundancies that you noted in the press release.

George Paleologou: Yeah, maybe start with a question on tariffs. Can you just maybe share or remind us roughly what percentage of your revenues are cross-border currently and then how quickly can you reduce that percentage by using some of those manufacturing redundancies that you noted in the press release? Thanks. Yeah, so Chris, we have two key exposures currently. One is in our specialty foods group. and the other in our premium food distribution group. In our specialty foods group, we export, in general, as we've talked about in the past and as we disclosed in the press release, we try to manufacture, our strategy is to manufacture in the market we sell.

Chris Lee: Yes, so Chris we have two key exposures currently one is in our specialty foods group.

Chris Lee: And the other in our premium food distribution group in our specialty Foods group, we export.

Chris Lee: In general as we've talked about in the past and as we disclosed in the press release.

Chris Lee: We try to manufacture our strategy is to manufacturer in the market we sell.

George Paleologou: But occasionally, like what's happened with our cooked protein programs, we'll have plans that will have excess capacity, so they'll explore new selling opportunities on other markets. And in cooked protein, because there's been such a dearth of capacity in the U.S. and the success of our Canadian-based manufacturing programs, we do have a lot of cooked protein that crosses the borders, about $300, $300 plus million a year. But we are well-positioned through a combination of capital investments we've made over the last year, year and a half, as well as our recent acquisitions, that if we needed to, a lot of that production could be done in the U.S., so we're well-positioned to mitigate against that.

Chris Lee: But occasionally like what's happened with our cook protein programs.

Chris Lee: We will have plants that'll have excess capacity, so that will explore new selling opportunities on other markets.

Chris Lee: And cooked protein because theres been such a dearth of capacity in the U S. R.

Chris Lee: And the success of our Canadian based manufacturing programs, we do have a lot of cooked protein across the borders.

Chris Lee: 300, 300 plus million dollars a year.

Chris Lee: But we are well positioned through a combination of capital investments we've made over the last.

Chris Lee: A year year, and a half as well as our recent acquisitions that if we needed to.

Chris Lee: A lot of that production could be done in the U S. So we're well positioned to mitigate against that.

George Paleologou: You know, there'd be a quarter or two of noise getting things settled out, and we've already sort of started that process, so we're well-positioned to do it when the time comes, if it needs to happen. So, on the specialty foods side, we feel we're well-positioned. We got a little bit of exposure in artisan breads and deli meats, but those are very minor. Like I say, they're generally situations where businesses had a little excess capacity, and so they pursued some opportunities in the U.S. On the premium foods distribution side of our business, we really have one exposure and that's in processed lobster.

Chris Lee: There'd be a quarter or two of noise.

Chris Lee: Getting getting things settled out and we've already started that process. So we're well positioned to do it when the time comes if it needs to happen. So so on the specialty foods side, we feel we're well positioned we got a little bit exposure and artisan breads.

Chris Lee: Deli meats, but those are very minor.

Chris Lee: Like I say, they're generally situations, where business has had a little excess capacity and so they proceed small opportunities in the U S.

Chris Lee: On the premium food distribution side of our business, we really have one exposure and thats in process lobster and there we feel we're very well positioned to mitigate any impacts of a tariff issue.

George Paleologou: And there we feel we're very well positioned to mitigate any impacts of a tariff issue. For one, we are actually one of the largest lobster processors in the U.S., so clearly our U.S. operations would be well positioned in a tariff battle. And in terms of our Canadian production that goes into the U.S., the reality is our lobster products are produced from a wild, scarce resource. And it's not like because of a tariff you can grow more lobsters in the U.S. That's just not how it works. So it is a scarce resource, so we think between pricing the Canadian dollar, maybe a little depreciation there, and maybe a little bit of savings in the supply chain, again, we feel we're well mitigated to manage that situation as well.

Chris Lee: For one we are actually one of the largest lobster processors in the U S. So clearly our U S operations.

Chris Lee: Be well positioned in our tariff battle and in terms of our Canadian production that goes into the U S. The reality is lobster lobster products are produced from a wild scarce resource and it's not like because of a tariff you can grow more lobsters in the U S. That's just not how it works. So it is a scarce resource.

Chris Lee: We think between pricing the Canadian dollar, maybe a little depreciation there and maybe a little bit of a savings in the supply chain.

Chris Lee: Again, we feel we're well mitigated to manage that situations as well.

George Paleologou: In addition to that, Chris, we also have sandwiches and pastries that are made in the U.S. that come to Canada as well. And for example, in the case of sandwiches, we have redundant capacity in Canada. We've built a brand new facility in Edmonton recently that can accommodate some production if we needed to. So redundancy on both sides of the border is a big asset for us.

Chris Lee: In addition to that Chris we also have sandwiches and pastries that are made in the U S that come to Canada as well and for example in the case of sandwiches, we have redundant capacity in Canada was built a brand new facility in Edmonton recently that can accommodate some production.

Chris Lee: And if we need it to so redundancy.

Chris Lee: On both sides of the border.

Chris Lee: A big asset for us.

George Paleologou: Okay, well, thanks for your very helpful detailed answers. My follow-up question is, I'm just wondering, you know, with quarter one almost over, how are the results trending so far? Are you seeing kind of similar trends that you saw in Q4? And have you noticed any notable changes in consumer behavior as a result of the tariffs? Thanks. Well, we don't provide quarterly guidance, Chris, so I don't want to comment on the quarter specifically, but in general, consumer behavior in Canada has hung in there. We've seen sort of a continuation of what we saw in Q4 there, so that's been a positive, and similarly in the U.S., at least to the consumer base we are catering to, we really haven't seen any changes in behavior there either.

Chris Lee: Got it okay, well thanks for your very detailed answers.

Speaker Change: Follow up question is I'm just wondering.

Chris Lee: Quarter, one almost over.

Chris Lee: The results trending so far are you seeing kind of similar trends that you saw in Q4 and have you noticed noticed any notable changes in consumer behavior.

Chris Lee: As a result of the tariffs.

Chris Lee: Thanks.

Speaker Change: Well, we don't provide quarterly guidance, Chris So I don't want to comment on the quarter, specifically, but in general consumer behavior has in Canada has hung in there.

Speaker Change: We've seen sort of a continuation of what we saw in Q4, there. So that's been a positive and and and similarly in the U S. At least to the consumer base. We are catering to we really haven't seen any changes in behavior there either.

Operator: Great.

Operator: Okay. Thanks and all the best. Thanks for listening.

Speaker Change: Great. Okay, Thanks, and all the best.

Chris Lee: Thanks, Chris.

Stephen Macleod: And your next question comes from the line of Stephen MacLeod with VMO Capital Markets. Please go ahead. Thank you. Good afternoon, guys. Morning for you guys. Hi, Stephen. Hi. Lots of great colors so far, so thank you. But I just wanted to pick up on a couple of things. One is with respect to the 2025 sort of sales pipeline in the U.S. and you talked about some of the delays and I know, Will, you gave a little bit of color around your visibility. On the last call, you said that you indicated the pipeline was like, you know, $1.4 billion with $700 million highly likely in 2025.

Speaker Change: And your next question comes from the line of Stephen Macleod BMO capital markets. Please go ahead.

Steven Macleod: Thank you good afternoon, guys. Good morning for you guys. It's Steven.

Speaker Change: Lots of great colors with parcel. Thank you, but I just wanted to pick up on a couple of things.

One is with respect to the 2025 sort of sales pipeline in the U S and when you talked about some of the delays and I know you gave a little bit of color around your visibility.

Speaker Change: On the last call you said that.

Speaker Change: Indicators the pipeline was like $1 $4 billion with 700 million hardly likely in 2025 I'm just curious if that's still.

Will Kalutycz: I'm just curious if that's still... That's kind of the rough magnitude of what you're expecting when you talk about these new launches coming in late Q2, early Q3. Yeah, yeah, there's really been no change in the pipeline Steve, you know, in fact, if anything it's grown since we've talked last. and particularly in the highly likely, so we still feel very good about the pipeline and there's a lot of opportunities being pursued, again, primarily in the U.S. market. And there's a lot of exciting new initiatives, Stephen, in sandwiches, protein and bakery. These are sort of the three areas where we've had a lot of growth and a lot of exciting stuff going on.

Speaker Change: Kind of a rough magnitude of what you're expecting when you talk about these new launches coming in late Q2 early Q3.

Speaker Change: Yeah, Yeah, Theres really been no change in the pipeline Steve.

Speaker Change: In fact, if anything it's grown since we've talked last.

Speaker Change: And particularly in the highly likely so we still feel very good about the pipeline and there's a lot of lot of opportunities being pursued again, primarily in the U S market.

Speaker Change: And there's a lot of exciting new initiatives, Stephen in sandwiches protein and bakery.

Speaker Change: Sort of the three areas, where we've had a lot of growth.

Speaker Change: Yeah, a lot of exciting stuff going on.

Will Kalutycz: Okay, that's great.

Speaker Change: Okay, that's great and then just the overall lobster business.

Stephen Macleod: And then just the overall lobster business. Could you just remind us how big that business is? Because I know it's sort of been had some headwinds for the last two quarters. We're just trying to want to confirm the magnitude of loss. Yeah, our lobster business live and process, Steve, I want to say is about $300 to $400 million. It's a good-sized business, like we're one of the largest in North America. Yeah. Okay. That's, that's great. That's all I had. Thanks, Dave Stevens.

Not not not not to cross border portion, but could.

Speaker Change: Could you just remind us how big that business is because I know, it's sort of been.

Speaker Change: <unk> had some headwinds for the last two quarters I'm, just trying to want to confirm the magnitude of lobster.

Speaker Change: Yeah, our our lobster business life and process, Steve honestly is about $3 million to $400 million, it's a good sized business like.

Speaker Change: We're one of the largest in North America.

Speaker Change: Yes, okay.

Speaker Change: That's great. That's all I had thanks guys.

Steven Macleod: Thanks, Steve.

Vishal Shreedhar: And your next question comes from the line of Vishal Shreedhar with National Bank Financial B.C.

And your next question comes from the line of Vishal <unk> with National Bank Financial. Please go ahead.

Speaker Change: And Sean you might be on mute.

Will Kalutycz: Vishal, you might be in mute. Hi, thanks for taking my questions. There were some facility delays that I've observed. I was just wondering on the cause of the delays and management's confidence that the facilities will come up in accordance to the schedule. So Scranton and Ferndale were pushed back and also the Montreal facility, I don't know if that's been completed or removed. Just wondering your thoughts. Yeah, nothing significant there Vishal, they're just sort of minor delays, I think things maybe got pushed out a quarter, various technical reasons, but certainly nothing material to point out. Okay, and the Montreal 75,000 square foot facility, do you have any...

Vishal: Hi, Thanks for taking my questions. There were some facility delays that I have observed.

Speaker Change: I was just wondering on the cause of delay the delays and managements confidence at the facilities.

Speaker Change: We will come up.

Vishal: According to the schedule, so Scranton and Ferndale were pushed back.

Vishal: Also the Montreal facility I don't know if thats been completed or removed just wondering your thoughts on that.

Vishal: Yes, nothing significant there vishal theyre, just sort of minor delays I think things maybe got pushed out a quarter.

Vishal: Various technical reasons, but certainly nothing material to point out.

Speaker Change: Okay, and the Montreal at 75000 square foot facility do you have any updates on that.

Will Kalutycz: Um, the Montreal facility, I have to go back to the MD&A, Vishal, is that the cooked protein line? Yes, yes. Yeah, yeah, that was removed. Yeah, I think that is one where we're reassessing the project, it's either one where we're reassessing the project or it is complete now. I'd have to go back to the detail and refresh myself.

Speaker Change: The Montreal facility I have to go back to the MD&A. The shell is that the cook protein line.

Speaker Change: Yes, yes, yes, yes, I'm, sorry that was removed.

Speaker Change: I think that is one where we're reassessing that.

Speaker Change: Either one where we're reassessing the project.

Speaker Change: Or it is complete now I'd have to go back to the detail and refresh myself.

Will Kalutycz: Okay. Yeah. And. Yeah, go ahead, Vishal. Oh, no, no, please continue. Yeah, that project is being reassessed, again, we're building a very large facility in Toronto and that particular project you're referring to is being reassessed as we speak. Yeah, I'm not sure he's talking line 4 or 5, but I'm going to have to go back. Line 4 is complete.

Speaker Change: Okay, Yes.

Speaker Change: Inc.

Speaker Change: Yeah go ahead Sean.

Speaker Change: Oh no no. Please continue.

Speaker Change: Yes that project is being reassessed again, we're building a very large facility in Toronto and.

Speaker Change: That particular project Youre, referring to is being reassessed as we speak.

Speaker Change: Yes, Im not sure Youre talking like four or five.

Speaker Change: <unk> expense line force complete, yes, yes, yes, but thats expansion.

Speaker Change: In addition to the building.

Vishal Shreedhar: Go ahead, Vishal. Thank you.

Michelle: Okay go ahead Michelle color.

Vishal Shreedhar: With respect to the dividend, I just wanted to get more perspective there. The dividend increase, at least historically, the ones that you provided, wouldn't have been a substantial... Cash outlay on a year-to-year basis, or even if it was a smaller one. And obviously, the guidance commentary that management seemed to provide suggested a confidence and a conservatism, but the dividend statement seemed to oppose that a little bit. So, wondering if you could just put some color around and how we should seemingly look at those messages, which at face value could be due to. Well, again, Vishal, I think that, as we've always said, at the beginning of the year, we sit down with the board.

Speaker Change: And with respect to the dividend just wanted to get more perspective there.

Michelle: A dividend increase at least historically the ones that you've provided wouldnt have been substantial.

Michelle: The cash outlay on a year over year basis, or even if it was a smaller one and obviously the guidance commentary that management seem to provide suggested our confidence in our conservatism, but the dividends statements seem to oppose that a little bit. So I'm wondering if you could just put some color around how we should seemingly look at those messages, which at face value could be viewed as contracted.

Michelle: Sure.

Michelle: Yeah.

Michelle: Well again vishal.

Michelle: Think that as we've we've always said at the beginning of the year, we sit down with the board.

Will Kalutycz: We talk about Acquisition Opportunities, Capital Allocation, Capital Projects. I thank you. Okay, and that gets reassessed quarter by quarter. That gets reassessed quarter by quarter, yes. Thank you for that.

Michelle: We talk about.

Michelle: <unk>.

Michelle: Acquisition opportunities capital allocation capital projects.

Michelle: Our projected cash flow free cash flow all of those things and we make decisions based on our assessment of the risks and obviously the opportunities we see in terms of employing capital in the business and.

Michelle: This time around given some of the noise around tariffs, we just felt that.

Michelle: The responsible thing to do is just to hold back.

Michelle: <unk>.

Michelle: Okay, and that gets reassessed quarter by quarter.

Michelle: That that gets reassessed quarter by quarter, yes.

Michelle: Okay.

Michelle: For that.

Michelle: Yeah.

John Zamparo: And your next question comes from the line of John Zamparo with Scotiabank. Thanks. Good morning, George. And welcome. Good morning.

Speaker Change: And your next question comes from the line of Johnson borrow that Scotiabank. Please go ahead.

Jordan: Thanks, Good morning, Jordan.

Michelle: Good morning morning.

George Paleologou: I wanted to come back to the trade topic for a couple of questions. In thinking about reciprocal tariffs or potential for reciprocal tariffs, PBH typically sources at least some of its products globally. I appreciate the commentary about being able to produce locally, but when it comes to sourcing inputs, how should we think about PBH's ability to source locally as well? What type of opportunities do you have to buy inputs locally and what are some inputs where you can source locally? Our overall philosophy around manufacturing, obviously, is to own facilities in the markets that we sell to and we do.

Speaker Change: I wanted to come back to the trade topic for a couple of questions and then thinking about reciprocal tariffs or potential for reciprocal tariffs PVH typically sources at least some of its products globally and I appreciate the commentary about being able to produce locally but when it comes to the sourcing inputs. How should we think about PVH has ability to source.

Michelle: <unk> as well.

Michelle: Type of opportunities do you have to buy inputs locally and what are some inputs for that might be more challenging.

Michelle: Yes, so our overall philosophy around manufacturing.

Michelle: Obviously is to own facilities in the markets that we sell to and we do.

George Paleologou: We have a lot of smaller plants in smaller markets. That's part of our strategy and our point of difference in the marketplace is that we want to be the number one local or regional brand in a geographic area of Canada and the U.S. That's one of the reasons why we've been successful because we've differentiated ourselves this way from the national brands and the national players. Sometimes when you look at this strategy, you might say, well, there's some inefficiency to that, but again, we understand that, but at the same time, because we're regional and local, we're able to charge a premium because we get local support and consumers are willing to pay a little premium for a regional or local brand.

Michelle: We have a lot of smaller plants in smaller markets.

Michelle: As part of our strategy and our point of difference in the marketplace is that we want to be the number one.

Michelle: Local or regional brand.

Michelle: In a geographic area of Canada, and the U S.

Michelle: One of the reasons why we've been successful because we've differentiated ourselves this way from the national brands and the national players.

Speaker Change: Sometimes when you look at this strategy and I would say well but.

Michelle: Sure.

Michelle: There is some inefficiency to that but again.

Michelle: We understand that but at the same time.

Because of our regional and local we're able to charge a premium because we get local support and.

Michelle: Consumers are willing to pay a little premium for.

Michelle: Regional or local brands. So so in general in general terms.

George Paleologou: In general terms, that's our overall strategy. That applies with sourcing as well. To the extent possible, we source locally if we can. The other comment I have is that you have to understand that given our size and given who we are, we source globally as well. Our inputs tend to be global in nature. We source from Europe, from Asia, from Australia, New Zealand, Asia as well. We have global supply chains in general, so we prefer local inputs. If we can't find them, then we'll source globally.

Michelle: So the overall strategy that applies with sourcing as well too.

Michelle: To the extent possible.

Michelle: We source locally if we can.

Speaker Change: The other comment I have is that you have to understand that that given our size and given who we are.

Michelle: We source globally as well.

Michelle: Our inputs tend to be global in nature, we source from Europe from Asia from Australia, and New Zealand Asia as well.

Michelle: We have global supply chains in general right. So we prefer locally inputs. If we can't find them then we'll source.

Michelle: Globally.

George Paleologou: Okay, is it fair to say the majority of your inputs are also sourced in the countries that they're produced whether Canada or the US? That's a fair comment. Okay. That's good. Certainly the majority. Not all of it, of course, but the majority.

Speaker Change: Okay is it fair to say the majority of your inputs are also sourced in the countries that they're produced whether Canada or the U S.

Michelle: That's a fair comment.

Michelle: Okay. That's good yeah, certainly the majority the majority not all of it of course, but the majority.

Michelle: Okay.

George Paleologou: I wonder how you're thinking about the expected impact of tariffs on lobster to China. This is probably not a significant part of your lobster business, but had represented some of the growth. Are there other potential countries you're looking at to export to as a result? We don't actually export, in the premium brands, I'll get back to Clearwater in a sec, but we don't consolidate them. But in our consolidated sales and EB-DA numbers, there are no export sales of lobsters from Canada. Our ready business in the U.S. does export, but obviously they're not subject to the tariff being impacting Canada.

Michelle: I wonder how youre thinking about the expected impact.

Michelle: Tariffs on lobster to China.

Michelle: Probably not a significant part of your lobster business, but had represented some of the growth or are there other potential countries youre looking at to export too as a result.

Michelle: We don't actually export.

Michelle: In the premium brands.

Michelle: I'll get back to Clearwater in effect, but we don't consolidate them, but in our consolidated sales and EBITDA numbers.

Michelle: There are no export sales of lobsters from Canada are ready business in the U S does export, but obviously they are not subject to the tariff being impacting Canada.

George Paleologou: In terms of Clearwater, historically they have exported some lobster to China, but it's a small part of their business.

Michelle: In terms of clear water historically they have.

Michelle: Have exported some lobster too to China, but it's a small part of their business.

Michelle: Okay that clears that up thank you for that.

George Paleologou: I wonder if you could tell us a bit more about the acquisitions you did to end the year, and also the one with the recent Convert deal.

Michelle: I Wonder if you could tell us a bit more about the acquisitions you did to end the year.

Michelle: Also the one with the recent convert deal what specific platforms or products does that help you grow into and how does that protect you against potential trade barrier concerns.

George Paleologou: What specific platforms or new products does that help you grow into, and how does that protect you against potential trade barriers? Well, again, we made four acquisitions, three in December and one in the first quarter. NSP is generally a cooked protein business with three facilities. The main facility is in Tulsa. It's a very large facility in the cooked chicken space. And it's now part of Concord Meats, which is one of our largest platforms, mainly focusing on cooked protein. They do have an Italian meats business as well as a fresh meats business as well. But again, we're currently in that facility adding lines and equipment, and it'll help us continue to grow our business in that market.

Michelle: Well again the.

Michelle: We made.

Michelle: For acquisitions.

Michelle: The tree in December and one in.

Michelle: In the first quarter.

Speaker Change: NSP is generally a cooked protein business with three facilities.

Michelle: The main facility is in Tulsa.

Speaker Change: And.

Speaker Change: It's a very large facility in the cooked.

Speaker Change: Chicken space.

Speaker Change: And it's now part of <unk>.

Speaker Change: Concord meet switches say aye.

Speaker Change: One of our largest platforms mainly focusing on.

Speaker Change: Protein.

Speaker Change: They do have an Italian meat business as well as say, a fresh meats business as well but.

Speaker Change: But.

Speaker Change: Again.

Speaker Change: We're currently in that facility, adding lines and equipment and it'll help us continue to grow our business in that market and we've had a lot of growth in.

George Paleologou: And we've had a lot of growth in the U.S. market in that business. The Vineland facility which is outside of Philadelphia, it's actually in New Jersey but very close to Philadelphia, it's one of the largest cooked meatball facilities in the U.S. We have a growing cooked meatball business. We make meatballs in other facilities in the U.S. and this gave us the scale that we needed to continue to expand the business. There's plenty of room there to add more lines as well in other parts of the cooked protein space. Again, a very nice facility, great location, very close to the northeast of the U.S., which has substantial potential for us.

Speaker Change: In the U S market in that business.

Speaker Change: The Vineland facility.

Speaker Change: <unk>.

Speaker Change: Outside of Philadelphia, It's actually in New Jersey, but very close to Philadelphia. So one of the largest cooked meepo facilities in the U S.

Speaker Change: We have a growing cooked meat business, we make me both in other facilities in the U S.

Speaker Change: This gave us the scale that we needed to continue to expand the business, there's plenty of room, there to add more lines as well in other parts of it.

Speaker Change: Cooked protein space again, a very nice facility great location.

Speaker Change: Very close to.

Speaker Change: The northeast of the U S, which.

Speaker Change: Which has substantial potential for us.

George Paleologou: Itala Salami is a smaller Italian meat company based in the Toronto area, again part of Concord Meats. And Denmark Foods is the largest. Fresh Meats Company in the fifth-largest metropolitan area in the U.S., in the Phoenix area. We have a very similar company in the Seattle area called Icerneos. We've done very well with that. And anyway, that just gives us the opportunity to expand into a fast-growing market in the U.S. Really excited with that acquisition as well. That's a good color.

Speaker Change: <unk> allow me, it's smaller Italian meats company based in the Toronto area again part of Concord meats.

Speaker Change: And in Denmark Foods is.

Speaker Change: The largest.

Speaker Change: Fresh meats company.

Speaker Change: In the fifth largest metropolitan area in the U S. In the in the Phoenix area, we have a very similar company in.

Speaker Change: The Seattle area called <unk>, we've done very well with that and.

Speaker Change: Any way that this gives us the opportunity to expand in.

<unk>.

Speaker Change: It's a fast growing market in the U S really excited with that acquisition as well.

Speaker Change: Alright, Thats good color and then just one last one for me a modeling question or are you still expecting around $250 million or $250 million to $300 million in sale leasebacks later this year.

Will Kalutycz: And then just one last one for me, a modeling question, are you still expecting around $250 million or $250 to $300 million in sale leasebacks later this year? Yeah, absolutely. We are planning for, you know, the plan today is in Q3 to do a sale lease back around our Tennessee, new Tennessee sandwich facility when it's completed, and then towards the end of the year for our GTA initiative. The Tennessee facility will be a much larger transaction, obviously, given the size of that project, but absolutely.

Speaker Change: Yes, absolutely.

Speaker Change: We are planning for.

Speaker Change: The plan today is in Q3 to do a sale leaseback around our Tennessee, New Tennessee Sandwich facility when its completed and then towards the end of the year for.

Speaker Change: For GTA.

Initiative.

Speaker Change: Tennessee facility will be a much larger transaction, obviously, given the size of that project, but absolutely.

Operator: Okay, that's great.

Speaker Change: Okay, that's great I'll leave it there thank you very much.

Operator: I'll leave it there. Thank you very much. Thank you. Great. Thanks.

Speaker Change: Thanks.

Michael Glenn: If your next question comes from the line of Michael Glenn with Raymond James, please go ahead. Okay, I will enjoy just just following up on the on the Tennessee facility. Can you just give us some sense as to when that opens? Like, how should we think about the ramp taking place? As you fill capacity? Will it contribute much in 2025? Or is it more of a 2026 type scenario? Yeah, so completion of the first phase should be mid-year, end of June to the... You know, maybe June, July, so the project is going well and, you know, we see basically a 12-month ramp up, you know, in terms of the business we lined up and the business we are lining up for it.

Speaker Change: And your next question comes from the line of Michael Glen with Raymond James. Please go ahead.

Speaker Change: Okay.

Speaker Change: I will just just following up on the on the Tennessee facility can.

Speaker Change: Can you just give us some.

Speaker Change: Sense as to when that opens.

Speaker Change: How should we think about the ramp taking place.

Speaker Change: Fill capacity will it contribute much in 2025 or is it more of a 2026 type scenario.

Speaker Change: Okay.

Speaker Change: Yes, so completion of.

Speaker Change: The first phase should be.

Speaker Change: MIT.

Speaker Change: Year end of June.

Speaker Change: To the.

Speaker Change: Okay.

Speaker Change: May be.

Speaker Change: June July.

Speaker Change: So it's the.

Speaker Change: The project is going well.

Speaker Change: And.

Speaker Change: We see basically a 12 month ramp up in terms of.

Speaker Change: The business, we lined up in the business, we are lining up for it.

Will Kalutycz: It's a very large facility. It will be probably the best, most modern, state-of-the-art automated facility of its kind. We'll have some new technology in it and anyway, yeah, we're really excited by it and, you know, things are going well at this point. Yeah, and for our projections, we've sort of a conservative, like George says, a late June, early July start-up. We're giving it a quarter of just working out the bugs.

Speaker Change: It's a very large facility.

Speaker Change: It'll be.

Speaker Change: Probably the best most modern state of the art automated facility of its kind.

Speaker Change: We'll have some new technology in it.

Speaker Change: Anyway, Yes, we're really excited by it and <unk>.

Speaker Change: <unk>.

Speaker Change: Things are going well at this point.

Speaker Change: Yes.

Speaker Change: For our projections, we have sort of a conservative like George says.

Speaker Change: Late June early July startup, we're giving it a quarter of just working out the bugs. This will be our largest sandwich production facility ever and so really not starting to meaningfully contribute until the fourth quarter.

Will Kalutycz: This will be our largest sandwich production facility ever, and so really not starting to meaningfully contribute until the fourth quarter. Okay, and in terms of the capacity coming on there, are you able to provide any indication of how much you have been able to allocate at this point in time? The total capacity of this first phase is close to $300 million, but we blended that into our general sales outlook. And I should add, Michael, because there will be, we do this quite often, is we'll work with our customer base. Tennessee is strategically located, a new geographical area of the U.S., and so we'll strategically work with our customers to shift production around between the different plants to minimize freight costs for them.

Speaker Change: Okay and in terms of the capacity coming on there are you able to provide any indication how much how much you have been able to allocate at this point in time.

Speaker Change: Yeah, No we don't.

Speaker Change: The total capacity of this first phase is about close to $300 million.

Speaker Change: But it's just we blended that into our general sales outlook.

Speaker Change: Okay and then.

Speaker Change: And I should add Michael because there will be we do this quite often is we'll work with our customer base, Tennessee.

Speaker Change: Tennessee is strategically located in new geographical area of the U S and so we will strategically work with our customers to shift production around between the different plants to minimize freight cost for them.

Speaker Change: Okay. Okay.

Will Kalutycz: And then just in terms of the guidance, I'm just trying to get a better... Read on what your SG&A expense might look like next year, given you did close the acquisition. Should we expect SG&A expense to, on a gross dollar basis, are you able to give any commentary surrounding what level you might be expecting in 2025? Yeah, well, from the earlier question, our contribution margins under growth, we built them into our projections that we feel it's a fairly conservative number at 20, 28%, 27-28%, and then to get to the expected EBDI, you're going to have a little bit of plant overhead and then, yes, SG&A.

Speaker Change: And then just in terms of the guidance I'm, just trying to get a better.

Speaker Change: Read on what your SG&A expense might look like next year, given you did close the acquisitions.

Speaker Change: Should we expect SG&A expense to on a gross dollar basis.

Speaker Change: Okay are you able to give any commentary surrounding.

Speaker Change: What level you might be expecting in 'twenty five.

Speaker Change: Yes.

Speaker Change: From the earlier question.

Speaker Change: Contribution margins on our growth.

Speaker Change: We built them into our projections that we feel it's a fairly conservative number at 20 <unk>.

Speaker Change: 20, 28%, 27% to 28%.

Speaker Change: And.

Speaker Change: And then to get to the expected EBITDA, you're going to have a little bit of plant overhead and then SG&A.

Speaker Change: Yeah.

Will Kalutycz: Okay, and any, just on those acquired businesses, is there any seasonality with those that we should take into consideration as we build them into the model? Yeah, absolutely. There's two factors you need to think about, Michael. One is they do have a similar level of seasonality, some less than others, like Denmark's and Arizona, so it's a less seasonal business. But certainly, the other acquisitions have a similar seasonality to our other protein businesses, i.e. Q1, weak Q4, and strong Q2, and strongest Q3. Also, what you have in there is the NSP acquisition, which was really a capacity acquisition for us to a large extent.

Speaker Change: Okay and any just on those acquired businesses is there any seasonality with those that we should take into consideration as we built them into the model.

Speaker Change: Yeah, absolutely Theres two factors you need to think about Michael one is they do have a similar level of seasonality some less in others like Denmark, and Arizona, So it's a less seasonal business.

Speaker Change: But certainly the other acquisitions have a similar seasonality to our other protein businesses, a weak Q1 with Q4 and strong Q2 and strongest Q3.

Speaker Change: But also what you have in there is the MSP acquisition.

Speaker Change: Which was really a capacity acquisition for us to a large extent.

Will Kalutycz: A big part of its sales expectations is leveraging that capacity. On top of the seasonality, you have to build up a ramp-up of the facility over the course of the year as we figure out how to produce different SKUs in that facility and then launch sales initiatives around those SKUs. But to a large extent, Michael, that facility... the expansion of already successful products. that are doing well in certain geographic regions. to go national, right? That's kind of really the key. to a longer term, but there will still be a ramp up over the years.

Speaker Change: So a big part of its sales expectations is leveraging that capacity. So on top of the seasonality you have to sort of build up a <unk>.

Speaker Change: <unk> up at the facility over the course of the year as we move.

Speaker Change: Figure out how to produce different skus in that facility and then launch sales initiatives around those skus.

Speaker Change: Okay, but to a large extent Michael.

Speaker Change: That facility.

Speaker Change: We will support.

Speaker Change: The expansion of already successful products.

Speaker Change: That are doing well in certain geographic regions.

Speaker Change: To go National right, that's kind of really the key.

Speaker Change: Two longer trials, but there'll still be a ramp up over the year absolutely absolutely.

Operator: Okay, perfect. Thank you for taking the questions. Thanks.

Speaker Change: Okay perfect. Thank you for taking my questions.

Speaker Change: Thanks, Michael.

Derek Lessard: And we do have a follow-up question coming from the line of Derek Lessard with TDKOM, please go ahead. Yeah, just a couple for me guys. I was curious on sort of the aid crises in the US on how you guys are dealing with whether it's the sourcing or pricing or what have you.

Speaker Change: And we do have a follow up question coming from the line of Derek Lessard TD Cowen. Please go ahead, yes.

Speaker Change: Yes, just a couple for me guys I was curious on sort of the eight crises in the US on how you guys are dealing with whether it's the sourcing or pricing or what have you.

Will Kalutycz: Sorry, you cut out there. Oh, the egg crisis. Yeah. So I don't know if you follow the price of eggs. Of course, I think that since 2022, I think they had to euthanize about 47 million layers in the U.S. It's a substantial number. The price of eggs went up substantially, but has come off in the last few weeks. You know, most of the egg usage we have is in our sandwich division, where, you know, basically our pricing is cost plus, right? So we basically pass it on to the customer. But yeah, the price has come off more recently, substantially.

Speaker Change: Sorry, you cut out there a crisis or the air crisis, yet so I don't know if you follow.

Speaker Change: The price of <unk> of course.

Speaker Change: I think that over the since 2022, I think to add to euthanize about 47 million layers in the U S. It's a substantial number.

Speaker Change: The price of eggs went up substantially.

Speaker Change: But it has come off in the last.

A few weeks.

Speaker Change: Most of the usage, we have is in our Sandwich division.

Speaker Change: We're <unk>.

Speaker Change: Basically our pricing is cost plus right. So we basically pass it onto to the customer.

Speaker Change: But yes.

Speaker Change: Yes, the price has come off more recently substantially okay.

George Paleologou: And maybe just one final one for me, you know, maybe if you could just add some color around the Denmark sausage, how it fits in, you know, the quality of the product, etc. Yeah, as I mentioned earlier, we have a business similar to Denmark based in Washington State. The business is called Acernios and it's truly a best-in-class iconic brand. It's all fresh meats, fresh sausage, fresh grinds, has a tremendous consumer following, sells at a premium to other similar products. And Denmark has the same brand positioning in the Arizona market. They do well with a couple of retailers.

Speaker Change: Okay, and maybe just one final one for me.

Speaker Change: Maybe if you could just add some color around the Denmark lawsuits, how it fits in the quality of the product et cetera.

Speaker Change: Yes.

Speaker Change: As I mentioned earlier.

Speaker Change: We love we have.

Speaker Change: The business similar to Denmark based in Washington State.

Speaker Change: <unk> called <unk>, it's truly a best in class iconic brand, it's all fresh.

Speaker Change: Meat fresh sausage fresh grinds.

Speaker Change: Tremendous consumer following.

Speaker Change: Sells at a premium to other <unk>.

Speaker Change: Similar products and and Denmark has the same breadth brand positioning in India.

Speaker Change: <unk>.

In the.

Speaker Change: Arizona market.

Speaker Change: With a couple of retailers.

George Paleologou: The entrepreneur that built the business into a successful company didn't want to expand any further, although there's more demand for the products. We're already talking to other banners and they're interested in a best-in-class fresh program.

Speaker Change: The intrapreneur that built the business.

Speaker Change: A successful company.

Speaker Change: Didn't want to expand any further although there is more demand for the products.

Speaker Change: We're already talking to other banners and they're interested DNA.

Speaker Change: Best in class fresh program so.

George Paleologou: So again, we want to build Denmark similarly the way we built Acernios since we purchased it. I think Acernios is four times bigger today than when we bought it a few years ago. And we see similar growth opportunities with Denmark. We love the Phoenix market. We obviously, it's a market that's growing immensely. It's one of the fastest growing demographic regions in the U.S. and we love owning the number one local brand in that area. Appreciate the color. Thank you. And once again, if you would like to ask a question, simply press star followed by the number one on your cell phone keypad.

Speaker Change: Again, we want to build Denmark. Similarly, the way we built our Sarnia since we purchased it I think.

Speaker Change: So in the US is four times bigger today than when we bought it.

Speaker Change: A few years ago, and we see similar growth opportunities with Denmark, We love the Phoenix market.

Speaker Change: <unk>.

Speaker Change: We.

Speaker Change: Obviously, it's a market that's growing immensely it's one of the fastest growing demographic regions in the U S and we will.

Speaker Change: Owning the number one local brand.

Speaker Change: In that area.

Speaker Change: I appreciate the color.

Speaker Change: Congrats guys.

Speaker Change: Thank you Sir.

Speaker Change: And once again, if you would like to ask a question simply press star followed by the number one I guess telephone keypad.

George Paleologou: Our next question comes from the line of Chris Lee with Data 10. Oh, thanks again. You mentioned recurring consumer spending in the convenience store channel, and I'm just wondering, is that still more confined to Beef Jerky or has it expanded to other products as well? I would say for us, it only impacts us with regards to demand for food jerky. Our stick sales are doing extremely well in the U.S. market, and I don't know if you follow some of the trends, but as we predicted, sticks, I think, is the highest growth category in grocery today and in other channels as well.

Speaker Change: Our next question comes from the line of Chris <unk> with data again. Please go ahead.

Chris Lee: Thanks again.

Chris Lee: You mentioned, then we could consumer spending in the convenience store channel and I'm. Just wondering is that still more confined to beef shaquille has it expanded to other products as well.

Chris Lee: I would say for us it only impacts us with regards to demand for.

Speaker Change: Food Cherokee are stick sales are doing extremely well in in the U S market.

Chris Lee: Ken I don't know if you follow some of the trans fat.

Chris Lee: As we've predicted sticks that thing has the highest growth category in grocery today and in other channels as well we've invested in a lot of capacity for sticks.

George Paleologou: We've invested in a lot of capacity for sticks in Canada and the U.S. over the last few years, and obviously we're benefiting from the growth in the demand for premium sticks.

Chris Lee: In Canada, and the U S over the last few years and obviously, we're benefiting from the growth in the demand for premium stick. So yeah. Just just in terms of jerky I would say at this point.

George Paleologou: So, yeah, just in terms of jerky, I would say at this point. Okay, so nothing really has weakened in terms of other products that you sell. Seasport Channels. We're only seeing it in demand. Okay, okay. No, thanks for that.

Chris Lee: Okay. So nothing really has we can in terms of other products that you sell into the seasonal channel supplier.

Chris Lee: We're only seeing it in Germany demand okay. Okay. No. Thanks for that and then maybe just a question on Capex for you will.

Will Kalutycz: And then maybe just a question on CapEx for you, Will. Are you still targeting, I think, total CapEx of roughly $250 million this year? Am I remembering that correctly? Yeah, yeah.

Chris Lee: Are you still targeting I think total capex of roughly $250 million. This year I remember that correctly, yes.

Will Kalutycz: So, you know, we talk about our CapEx in three buckets, Chris. One is our maintenance CapEx, which our guidance for $25 to $60 to $65 million. Then we have our major CapEx projects that have been approved, all of which are outlined in our MD&A, and as we mentioned in the formal presentation, there's about $145 million left to spend on those projects. And then we have our third bucket, which is a range of smaller project CapEx, i.e. things that will generate a 15% or better IRR after tax unlevered, and that can fluctuate quite a bit. Right now, because we approve these projects on an individual basis over the course of the year, there's smaller automation and smaller capacity addition projects, and so that can range anywhere from, last year I think it was about $60 million to $80 million a year.

Chris Lee: Yes, yes so.

Speaker Change: We talked about our capex in three buckets, Chris one is our maintenance capex, which our guidance for $25 to $60 million to $65 million.

Chris Lee: Then we have our major capex projects all of which.

Chris Lee: <unk> been approved all of which are outlined in our MD&A and as we mentioned in the formal presentation theres about $145 million left to spend on those projects and then we have our third bucket, which is a range of smaller project Capex I E things that will generate a 15% or better.

Chris Lee: Our after tax Unlevered and that can fluctuate quite a bit and so right now and because we approve these projects on an individual basis over the course of the year the smaller automation and smaller capacity addition projects and so that can range anywhere from.

Last year I think it was about $60 million 60 to $2 $80 million a year.

Will Kalutycz: So your number's in the ballpark. Okay.

Chris Lee: So your numbers in your numbers in the ballpark.

Will Kalutycz: And then maybe another one just on maybe on switching to free cash flow. If we include sort of total CapEx, so not just maintenance and, you know, free cash flow calculation, I think last year was negative. You know, based on what you said, if CapEx is coming down this year and EBITDA grows the way that you envision, do you expect free cash flow to be maybe slightly positive this year, just based on the same calculation, or is it going to be still in the negative territory for this year?

Chris Lee: Okay, and then maybe another one just on maybe on switching to free cash flow.

Chris Lee: If we include sort of total capex will not just maintenance.

Chris Lee: Free cash flow calculation I think last year.

Chris Lee: Negative.

Chris Lee: Based on what you said Capex is coming down this year and EBITDA grows the way that you envision do you expect free cash flow to be maybe slightly positive. This year just based on the same calculation or is this going to be still in the <unk>.

Chris Lee: Territory.

For this year.

Will Kalutycz: The way we look at free cash flow, Chris, is, you know, free cash is really just financing our maintenance capex. So that's all we subtract in calculating our free cash flow. Project capex, i.e., things that are going to generate a return of 15% or better, are effectively over time self-funding. So on that basis, you know, we just look at free cash flow after maintenance capex, and we do expect to hit record levels of free cash flow this year, which is a term from the prior couple of years because of the impacts of both the high-interest environment and all the investment we've been making and the costs associated with that investment, interest, additional depreciation, additional lease costs.

Chris Lee: The way, we look at free cash flow Chris's.

Chris Lee: Free cash is really just financing our maintenance capex. So that's all we subtract in calculating our free cash flow project Capex I E things that are going to generate a return of 15, 15% or better effectively overtime self funding.

Chris Lee: So on that basis.

Chris Lee: We just look at free cash flow after maintenance Capex and we do expect to hit record levels.

Chris Lee: Free cash flow this year.

Chris Lee: Which is a turn from the prior couple of years because of the impacts.

Chris Lee: The high interest in this.

Chris Lee: Environment and all of the investment we've been making and the costs associated with that investment interest additional depreciation the additional lease costs, but yes, we expect to see a significant turnaround in our free cash flow this year.

Will Kalutycz: But yeah, we expect to see a significant turnaround in our free cash flow this year.

Operator: Okay, great. Thanks for the colors and have a great weekend.

Chris Lee: Okay, great. Thanks for the color and have a great weekend.

Operator: Thanks, Chris.

Chris Lee: Thanks, Chris Thanks.

Ryland Conrad: Your next question comes from the line of Ryland Conrad with RBC Capital Markets. Please go ahead. Hey, good morning. Hey, Ron. Good morning. So, just a couple of questions.

Speaker Change: Your next question comes from the line of Ireland, Conrad with RBC capital markets. Please go ahead.

Rob Simone: Hey, good morning, Hey, Rob Simone.

Rob Simone: So just a couple of questions firstly on premium food distribution, just curious to hear your thoughts around your expectations for organic volume growth for that segment going forward and should we expect any further improvements there or even perhaps a return to positive growth.

George Paleologou: Firstly, on premium food distribution, just curious to hear your thoughts around your expectations for organic volume growth for that segment going forward. Should we expect any further improvements there or even perhaps a return to positive growth? Yeah, we are expecting some growth in Premium Food Distribution Group in 2025 with the stabilization of Canada. And the big unknown, Ryland, will be what happens in the lobster fisheries, both Canada and the US, because that's really been the major headwind for that group. So, watch the lobster industry closely, how the fishing goes, and that'll determine the level of growth in our Premium Foods Distribution.

Rob Simone: Yes, we are expecting some growth in premium food distribution group in 2025 with the stabilization of Canada and the big unknown Rylan will be what happens in the lobster fisheries, both Canada and the U S. Because that's really.

Rob Simone: The major tailwind or headwind for that group. So watch the lobster undersea closely how the fishing goes and that will determine the level of growth in our premium food distribution group.

George Paleologou: Got it, thank you.

Rob Simone: Got it. Thank you and then just secondly, with the reiteration of your 2027 targets, obviously implies a pretty strong growth trajectory over the next few years. So could you maybe just speak a bit about your confidence around achieving those and as well maybe any additional color.

George Paleologou: And then just secondly, with the reiteration of your 2027 targets, obviously it implies a pretty strong growth trajectory over the next few years. So could you maybe just speak a bit about your confidence around achieving those and as well, maybe any additional color around maybe the organic and inorganic contribution to achieving them? I think you, again, if you look at, by the way, this is, I think, our 25th year of being in business as Premium Brands, and Will and I are co-founders of Premium Brands, and we've gone from very little to $6.5 billion in sales, and I think that the next $6.5 million will come a lot sooner than in the past.

Rob Simone: Around maybe the organic and inorganic contribution to achieving them.

Rob Simone: I. Thank you again.

Rob Simone: If you look at by the way. This is I think are 20 to 50 year being in business.

Speaker Change: As premium brands and will and I are cofounders of premium brands.

Rob Simone: We've gone from very little.

Rob Simone: To $6 5 billion in sales.

Rob Simone: I think that the next $6 5 million will come a lot sooner.

Rob Simone: Then done in the past.

George Paleologou: So, if you look at how our different platforms have grown, it's very easy to make the assumption that if we had capacity, or the right capacity, we would continue to grow. For example, our sandwich platform grew from very little to $1.5 billion in sales, Canadian dollars. If we had capacity, we would be bigger. We understand the opportunities. We see the opportunities. Similarly, with our protein business. Our protein business is world-class. It's probably the best protein business in North America, in terms of the brand, the quality of the products, the manufacturing expertise, the know-how we have in that business.

Rob Simone: So if you look at how our different platforms have grown.

Rob Simone: It's very easy to make the assumption that if we had capacity.

Rob Simone: Or the right capacity, we would continue to grow.

Rob Simone: For example, our sandwich platform grew from very little to $1 5 billion.

Rob Simone: In sales Canadian so if we had capacity.

Rob Simone: We would be bigger we understand the opportunities we see the opportunities.

Rob Simone: Similarly, with our protein business our protein business is world class is probably the best protein business in North America in terms of the.

Rob Simone: The brands the quality of the products.

Rob Simone: The manufacturing expertise.

Rob Simone: They know how we have in that business and because of that we have a lot of inquiries from customers and channels for our products. So we see that every day, our bakery group, which is small.

George Paleologou: And because of that, we have a lot of inquiries from customers and channels for our products. So, we see that every day.

George Paleologou: Our bakery group, which is small, is doing extremely well. In the last recent quarter, it grew its business in excess of 20% because they had capacity. So, again, we look at it at the micro level. We run very good businesses. They're best in class. And because of that, we keep getting more and more opportunities with our customers.

Rob Simone: Yes.

Rob Simone: Is doing extremely well and.

Rob Simone: And the last recent quarter grew its business in excess of 20% because of the head capacity.

Rob Simone: So.

Rob Simone: Again, we look at it at the micro level, we run very good businesses. They are best in class and because of that we keep getting more and more opportunities with with our customers.

George Paleologou: Awesome. I appreciate the color. Thank you.

Rob Simone: Awesome I appreciate the color. Thank you.

Operator: All right, thank you, and I'm showing no further questions at this time.

Rob Simone: Alright, Thank you and I'm showing no further questions at this time I would like to turn it back to George <unk> for closing remarks, yes. Thank you Luke I'd just like to thank everyone for.

George Paleologou: I would like to turn it back to George Paleologou for closing remarks. Yeah, thank you, Ludi. I'd just like to thank everyone for attending today. We hope that common sense will prevail when it comes to tariffs and all the best to everybody. Thank you.

George Boggy: Attending today, we hope that common sense will prevail when it comes to tariffs and.

Rob Simone: All the best to everybody.

Speaker Change: Thank you and ladies and gentlemen. This concludes today's conference call. Thank you all for joining you may now disconnect.

Operator: And ladies and gentlemen, this concludes today's conference call. Thank you all for joining. You may now disconnect.

Speaker Change: Okay.

Speaker Change: Yeah.