Q2 2026 Premium Brands Holdings Corp Earnings Call - Pre-Recorded

August 6, 2026

George Paleologou: Potential value to be created from our most recent capital spending cycle, which began in 2022 and involves a complete transformation of our manufacturing footprint and ability to service the US market. The issue of how ambitious this CapEx cycle was has at times been met with skepticism by the market at large. Today, I'm going to spend a few minutes explaining its merits and potential rewards. The capacity we've built over the past few years was not created to produce the foods of the past, but rather the foods of the future.

Speaker #1: Central Valley to be created from our most recent capital spending cycle, which began in 2022 and involves a complete transformation of our manufacturing footprint and ability to service the U.S.

Speaker #1: market. The issue of how ambitious this CapEx cycle was has at times been met with skepticism by the market at large, so today I'm going to spend a few minutes explaining its merits and potential rewards.

Speaker #1: The capacity we built over the past few years was not created to produce the foods of the past, but rather the foods of the future.

Speaker #1: This was done to position us to take advantage of the emerging new food order, which I talk about in my most recent letter to shareholders.

George Paleologou: This was done to position us to take advantage of the emerging new food order, which I talk about in my most recent letter to shareholders.

Speaker #1: Current consumer trends toward cleaner, healthier, and more nutrient-dense foods are disrupting the traditional CPG space in ways that we have not seen before, and in turn is creating white space selling opportunities for companies like ours.

George Paleologou: Current consumer trends towards cleaner, healthier, and more nutrient-dense foods are disrupting the traditional CPG space in ways that we have not seen before, in turn is creating white space selling opportunities for companies like ours. Demand for most of our core product categories such as meat sticks, cooked protein, sandwiches, artisan breads, and kettle-cooked meal solutions, is growing rapidly while demand for traditional, highly processed CPG foods is contracting. For this reason, we're enjoying the most robust business development pipeline in our history, consequently, we have never been more excited about our business and its prospects. More importantly, we're also starting to show tangible progress on several key financial metrics as we capitalize on these growth opportunities, including growing net free cash flow and an improving balance sheet.

Speaker #1: Demand for most of our core product categories, such as meat sticks, cooked protein, sandwiches, artisan breads, and kettle-cooked meal solutions, is growing rapidly, while demand for traditional highly processed CPG foods is contracting.

Speaker #1: For this reason, we're enjoying the most robust business development pipeline in our history, and consequently we have never been more excited about our business and its prospects.

Speaker #1: More importantly, we're also starting to show tangible progress on several key financial metrics, as we capitalize on these growth opportunities, including growing net free cash flow and an improving balance sheet.

Speaker #1: Over the next few quarters, we will continue to leverage the new production capacity we have built, as we onboard new business and new customers, which in turn will generate not only incremental free cash flow, but also improved margins and, most importantly, improved rates of return on our capital invested.

George Paleologou: Over the next few quarters, we will continue to leverage the new production capacity we have built as we onboard new business and new customers, which in turn will generate not only incremental free cash flow, but also improved margins and most importantly, improved rates of return on our capital invested. As part of this process, we're also rationalizing older plants that are at or near the end of their economic lives. Over the next 12 months, we expect to close four older facilities while commissioning two brand-new plants, one in the GTA area and one in Auburn, Maine, with this rationalization creating significant incremental shareholder value through productivity improvements and scale-related efficiencies. We are now on slide four, which outlines certain key highlights for the quarter and the year. As I mentioned earlier, we are showing significant improvements in both our steady-state and net free cash flows.

Speaker #1: As part of this process, we're also rationalizing older plans that are at or near the end of their economic lives. Over the next 12 months, we expect to close 4 older facilities, while commissioning 2 brand-new plants—one in the GTA area and one in Auburn, Maine—with this rationalization creating significant incremental shareholder value, through productivity improvements and scale-related efficiencies.

Speaker #1: We are now on slide 4, which outlines certain key highlights for the quarter and the year. As I mentioned earlier, we're showing significant improvements in both our steady state and net free cash flows.

Speaker #1: Will will discuss these more in detail later on. Our specialty food group's core U.S. growth initiatives delivered 10.7% organic volume growth for the quarter, driven by our protein group's leveraging of newly acquired or built capacity.

George Paleologou: Will will discuss these more in detail later on. Our Specialty Food Group's core US growth initiatives delivered 10.7% organic volume growth for the quarter, driven by our Protein Groups' leveraging of newly acquired or built capacity. Including acquisitions, Specialty Foods total US sales grew by CAD 432.2 million to CAD 1.2 billion for the quarter, representing 71.2% of its total Q2 sales, as compared to 63.5% in the Q2 2025. As I mentioned earlier, we now have the most robust pipeline of business development opportunities in our history, with a full slate of launches, LTOs, and new listings and rollouts scheduled over the coming quarters. This, along with our new production capacity and best-in-class innovation capabilities, will result in significant value creation over the next two years. For the record, we're not concerned about the exact timing of these activities, as this is often outside of our control.

Speaker #1: Including acquisitions, specialty foods total U.S. sales grew by 432.2 million, to 1.2 billion for the quarter, representing 71.2% of its total second-quarter sales, as compared to 63.5% in the second quarter of 2025.

Speaker #1: As I mentioned earlier, we're now have the most robust pipeline of business development opportunities in our history, with a full slate of launches, LTOs, and new listings, and rollouts scheduled over the coming quarters.

Speaker #1: This, along with our new production capacity and best-in-class innovation, capabilities, will result in significant value creation over the next 2 years. For the record, we're not concerned about the exact timing of these activities, as this is often outside of our control.

Speaker #1: During the quarter, we made significant progress in improving our balance sheet, with our debt to EBITDA ratio dropping to 3.8 to 1, from 4.3 to 1 at the end of 2025.

George Paleologou: During the quarter, we made significant progress in improving our balance sheet with our debt to EBITDA ratio dropping to 3.8 to 1 from 4.3 to 1 at the end of 2025. Overall, we are pleased with our progress so far and are very much on track to meet or exceed our five-year plan of CAD 10 billion in sales and CAD 1 billion of EBITDA by the end of 2027. Turning to slide five. This slide shows the depth of our manufacturing footprint. The red dots represent new capacity built or acquired over the last four plus years. You can see that the focus of our investment strategy has been the US market. We are now on slides 6 to 11. For this quarter, we are featuring our premium stick business. Meat sticks is a key product area for us and a core competence.

Speaker #1: Overall, we're pleased with our progress so far, and are very much on track to meet or exceed our 5-year plan of $10 billion in sales, and $1 billion of EBITDA by the end of 2027.

Speaker #1: Turning to slide 5, this slide shows the depth of our manufacturing footprint. The red dots represent new capacity built or acquired over the last 4 plus years.

Speaker #1: You can see that the focus of our investment strategy has been the U.S. market. We're now on slides 6 to 11. For this quarter, we're featuring our premium stick business.

Speaker #1: Meat sticks is a key product area for us, and a core competence. Our sticks are without question best-in-class, as we continue to lead the premium stick market in Canada, and are a leading player in the U.S.

George Paleologou: Our sticks are without question best in class as we continue to lead the premium stick market in Canada and are a leading player in the US market. For the Q2, our meat stick business grew by 83.2%. More recently, we have launched the Italia line of meat sticks made at our facility in Yorkton, Saskatchewan. The Italia sticks are a super premium dry cured stick that is also shelf stable and, going by my family's reaction to them, they are highly addictive. I will now pass the presentation to our CFO, Will Kalutycz, who will update you on our financial results for the quarter. Will?

Speaker #1: market. For the second quarter, our meat stick business grew by 83.2%, more recently we have launched a tally line of meat sticks, made at our facility in Yorkton, Saskatchewan.

Speaker #1: The tally of sticks are a super premium dry-cure stick that is also shelf-stable, and going by my family's reaction to them, they are highly addictive.

Speaker #1: I will now pass the presentation to our CFO, Will Kalutycz, who will update you on our financial results for the quarter. Will?

Speaker #2: Thanks, George. Before I begin, I would like to remind you that some of the statements made on today's call may constitute forward-looking information, and our future results may differ materially from what we discuss.

Will Kalutycz: Thanks, George. Before I begin, I would like to remind you that some of the statements made on today's call may constitute forward-looking information and our future results may differ materially from what we discuss. Please refer to our MD&A for the 13 and 52 weeks ended 27 December 2025, as well as other information on our website for a broader description of the risk factors that could affect our performance. Turning to slide 13. Our sales for the quarter from continuing operations were a record CAD 2.4 billion, up CAD 495 million or 26.3% as compared to the Q2 of 2025. This increase was primarily driven by three factors. The first and most significant was acquisitions, which accounted for CAD 354.5 million of the increase. Organic volume growth made up another CAD 74.5 million of our growth, and selling price increases, primarily relating to beef-based products contributed CAD 59.9 million.

Speaker #2: Please refer to our MD&A for the 13 and 52 weeks ended December 27, 2025, as well as other information on our website for a broader description of the risk factors that could affect our performance.

Speaker #2: Turning to slide 13, our sales for the quarter from continuing operations were a record 2.4 billion dollars, up 495 million dollars or 26.3% as compared to the second quarter of 2025.

Speaker #2: This increase was primarily driven by 3 factors: the first and most significant was acquisitions, which accounted for 354.5 million dollars of the increase. Organic volume growth made up another 74.5 million dollars of our growth, and selling price increases, primarily relating to beef-based products, contributed 59.9 million dollars.

Speaker #2: The main driver of organic volume growth was the continued success of our specialty food segment's U.S. market-focused initiatives. Which generated 82.4 million dollars in organic volume growth, representing an organic volume growth rate of 10.7% as mentioned by George earlier.

Will Kalutycz: The main driver of organic volume growth was the continued success of our Specialty Foods segment's US market-focused initiatives, which generated CAD 82.4 million in organic volume growth, representing an organic volume growth rate of 10.7%, as mentioned by George earlier. Slide 14 shows a breakdown of our core US growth initiatives by group. As you can see, our US Protein initiatives generated a very solid 25% organic volume growth rate in the quarter, driven by meat snacks and protein. This was partially offset by a contraction in our culinary custom solutions groups volumes due to a large limited-time sandwich promotion by a customer ending in the Q4 of 2025, and the replacement promotions not scheduled to launch until early next year. Turning to slide 15.

Speaker #2: Slide 14 shows a breakdown of our core U.S. growth initiatives by group. As you can see, our U.S. protein initiatives generated a very solid 25% organic volume growth rate in the quarter.

Speaker #2: Driven by meat snacks and protein. This was partially offset by a contraction in our culinary custom solutions group's volumes due to a large limited-time sandwich promotion by a customer ending in the fourth quarter of 2025, and the replacement promotions not scheduled to launch until early next year.

Speaker #2: Turning to slide 15, our adjusted EBITDA for the quarter was 225 million dollars, representing an increase of 51.2 million dollars or 29.5% as compared to the second quarter of 2025.

Will Kalutycz: Our adjusted EBITDA for the quarter was CAD 225 million, representing an increase of CAD 51.2 million, or 29.5%, as compared to Q2 of 2025. The major drivers of this improvement were acquisitions, organic volume sales growth, and past selling price increases coming into effect. These are partially offset by higher operating overheads associated with new production capacity brought online by our Protein Group and culinary custom solutions groups. Slide 16 shows our startup and restructuring costs by quarter for the last eight quarters. You can see that these costs have dropped dramatically in recent quarters as almost all the new capacity expansion projects associated with our four-year plus CAD 1.1 billion project CapEx plan are now achieving base operating parameters. Looking forward to H2 of 2026, we expect these costs to continue to decline.

Speaker #2: The major drivers of this improvement were acquisitions, organic volume sales growth, and past selling price increases coming into effect. These are partially offset by higher operating overheads associated with new production capacity brought online by our protein and culinary custom solution groups.

Speaker #2: Slide 16 shows our startup and restruction costs by quarter for the last 8 quarters. You can see that these costs have dropped dramatically in recent quarters, as almost all the new capacity expansion projects associated with our 4-year plus 1.1 billion dollar project capex plan are now achieving base operating parameters.

Speaker #2: Looking forward to the second half of 2026, we expect these costs to continue to decline. Turning to slide 17, our adjusted earnings and earnings per share from continuing operations for the quarter were 79.6 million dollars and $1.53 per share, respectively, with these metrics increasing by 37.2% and 17.7%, respectively, as compared to the second quarter of 2025.

Will Kalutycz: Turning to slide 17, our adjusted earnings and earnings per share from continuing operations for the quarter were CAD 79.6 million and CAD 1.53 per share respectively, with these metrics increasing by 37.2% and 17.7% respectively as compared to Q2 of 2025. The improvement in our profitability is due to the growth in our adjusted EBITDA, partially offset by higher depreciation, lease, and interest costs associated with the major investments we have been making in production capacity. Our net earnings for the quarter were CAD 70.9 million as compared to CAD 27.9 million in Q2 of 2025, representing an increase of CAD 43 million or 154%. This increase was driven by our higher adjusted earnings as well as a CAD 73.9 million gain on the sale of Shaw Bakers and a CAD 30 million fee received from Clearwater with respect to certain lobster-related assets and sales.

Speaker #2: The improvement in our profitability is due to the growth in our adjusted EBITDA partially offset by higher depreciation, lease, and interest costs associated with the major investments we have been making in production capacity.

Speaker #2: Our net earnings for the quarter were 70.9 million dollars as compared to 27.9 million dollars in the second quarter of 2025, representing an increase of 43 million dollars or 154%.

Speaker #2: This increase was driven by our higher adjusted earnings as well as a 73.9 million dollar gain on the sale of Shaw Bakers and a 30 million dollar fee received from Clearwater with respect to certain lobster-related asset and sales.

Speaker #2: These factors were partially offset by a loss of 53.1 million dollars in connection with the shutdown of a value-added beef processing facility in Ontario and our associated exit from certain unprofitable sales.

Will Kalutycz: These factors were partially offset by a loss of CAD 53.1 million in connection with the shutdown of a value-added beef processing facility in Ontario and our associated exit from certain unprofitable sales. Slide 18 shows our annual revenue from continuing operations for each of the last eight years, as well as our 2026 projected revenue based on our guidance range of CAD 9.1 billion to 9.3 billion. We revised our revenue guidance from last quarter based on three factors, namely delays in certain new product launches, including a customer's decision to push several large promotions originally planned for H2 of 2026 out to early 2027, exiting certain unprofitable sales in conjunction with the shutdown of the value-added beef processing facility I mentioned earlier, and weakening consumer demand in certain segments of the food service channel.

Speaker #2: Slide 18 shows our annual revenue from continuing operations for each of the last 8 years, as well as our 2026 projected revenue based on our guidance range of 9.1 billion dollars to 9.3 billion dollars.

Speaker #2: We revised our revenue guidance from last quarter based on 3 factors: namely, delays in certain new product launches, including a customers' decision to push several large promotions originally planned for the second half of 2026 out to early 2027; exiting certain unprofitable sales in conjunction with the shutdown of the value-added beef processing facility I mentioned earlier; and weakening consumer demand in certain segments of the food service channel.

Speaker #2: You can see from the chart that despite our revised guidance, we are still expecting to generate very strong growth in the back half of 2026.

Will Kalutycz: You can see from the chart that despite our revised guidance, we are still expecting to generate very strong growth in H2 of 2026. Slide 19 shows our annual adjusted EBITDA for each of the last eight years, as well as the trailing 12 months ended Q2 of 2026, and our 2026 projected adjusted EBITDA based on our guidance range of CAD 840 million to 870 million. We also revised our adjusted EBITDA guidance based primarily on our revised revenue forecast. Similar to what we showed in the previous revenue chart, you can see we are also expecting to generate very strong growth in our adjusted EBITDA in H2 of 2026. Slide 20 shows our project CapEx for the last 14 quarters.

Speaker #2: Slide 19 shows our annual adjusted EBITDA for each of the last 8 years as well as the trailing 12 months ended the second quarter of 2026, and our 2026 projected adjusted EBITDA based on our guidance range of 840 million dollars to 870 million dollars.

Speaker #2: We also revised our adjusted EBITDA guidance based primarily on our revised revenue forecast. Similar to what we showed in the previous revenue chart, you can see we are also expecting to generate very strong growth in our adjusted EBITDA in the back half of 2026.

Speaker #2: Slide 20 shows our project capex for the last 14 quarters. These expenditures peaked in 2023, 2024, and have been steadily coming down as we near the end of the major investment cycle we started in 2022.

Will Kalutycz: These expenditures peaked in 2023, 2024 and have been steadily coming down as we near the end of the major investment cycle we started in 2022. In Q2, we had total capital expenditures from continuing operations of CAD 59 million, consisting of CAD 18.3 million for project CapEx included in our CAD 1.1 billion investment plan, CAD 21.6 million for other project CapEx. Note the combined total of these two is shown in the chart, and CAD 19.1 million for maintenance CapEx. Looking forward, we have only CAD 41.6 million left to spend to complete our CAD 1.1 billion investment plan, which will in total have created over CAD 2 billion of new sales capacity. The next slide shows our steady-state free cash flow and steady-state free cash flow per share. These measures are based on our free cash flow before the impact of capital being invested for future growth.

Speaker #2: In the second quarter, we had total capital expenditures from continuing operations of 59 million dollars consisting of 18.3 million dollars for project capex, included in our 1.1 billion dollar investment plan; 21.6 million dollars for other project capex; note the combined total of these 2 is shown in the chart; and 19.1 million dollars for maintenance capex.

Speaker #2: Looking forward, we have only 41.6 million dollars left to spend to complete our 1.1 billion dollar investment plan, which will in total have created over 2 billion dollars of new sales capacity.

Speaker #2: The next slide shows our steady state free cash flow and steady state free cash flow per share. These measures are based on our free cash flow before the impact of capital be invested for future growth.

Speaker #2: In 2023 and 2024, these metrics were significantly impacted by additional lease and interest costs associated with the major investment cycle we started in 2022.

Will Kalutycz: In 2023 and 2024, these metrics were significantly impacted by additional lease and interest costs associated with the major investment cycle we started in 2022. You can see, however, that in 2025, we reached a key inflection point as we started leveraging the new capacity associated with this investment cycle in a meaningful way. This trend continued into H1 2026, and is expected to accelerate through the balance of the year. In terms of our net free cash flow, which is our free cash flow after investments made in working capital, startup and restructuring costs, and project CapEx, Q2 represents a major inflection point, with us generating CAD 68 million in net free cash flow after 4 years of negative net free cash flow.

Speaker #2: You can see, however, that in 2025 we reached a key inflection point as we started leveraging the new capacity associated with these investment cycle in a meaningful way.

Speaker #2: This trend continued into the first half of 2026 and is expected to accelerate through the balance of the year. In terms of our net free cash flow, which is our free cash flow after investments made in working capital startup and restructuring costs and project capex, the second quarter represents a major inflection point with us generating 68 million dollars in net free cash flow after 4 years of negative net free cash flow.

Speaker #2: Looking forward to the second half of 2026, we expect this trend to accelerate as we continue to leverage our new production capacity. This final slide shows our debt to EBITDA ratios for the last 6 quarters.

Will Kalutycz: Looking forward to H2 2026, we expect this trend to accelerate as we continue to leverage our new production capacity. This final slide shows our debt-to-EBITDA ratios for the last 6 quarters. As George mentioned earlier, you can see that we are making steady progress improving these ratios, with both ratios now within our short-term objectives of 3 to 1 or better for our senior debt ratio, and 4 to 1 or better for our total debt ratio. Looking forward, we expect to achieve our longer-term targeted total debt-to-EBITDA ratio of 3 to 1 or better by early to mid-2027. That concludes our presentation. Please join us on our Q&A conference call later today at 10:30 AM Vancouver time, or 1:30 PM Toronto time. Thank you.

Speaker #2: As George mentioned earlier, you can see that we are making steady progress improving these ratios, with both ratios now within our short-term objectives of 3 to 1 or better for our senior debt ratio and 4 to 1 or better for our total debt ratio.

Speaker #2: Looking forward, we expect to achieve our longer-term targeted total debt to EBITDA ratio of 3 to 1 or better by early to mid-2027. That concludes our presentation.

Q2 2026 Premium Brands Holdings Corp Earnings Call - Pre-Recorded

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