Release Date: July 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Colabor Group Inc (COLFF, Financial) achieved higher gross margins at 18.6% of sales versus 18% in the equivalent quarter last year.
- Adjusted EBITDA grew by $400,000 to $9.7 million despite lower revenues.
- The company has reduced its debt, with the leverage ratio down from 2.4 times to 2.1 times adjusted EBITDA.
- Successful transition to a new hybrid distribution facility in St. Louis, improving operational efficiency.
- Continued growth in new markets and customer base, with a focus on locally sourced products and private labels.
Negative Points
- Sales were down 1.8% at $161.3 million, with wholesale activities declining by 8.4%.
- Net earnings decreased to $1.7 million from $3.2 million in the second quarter of 2023, mainly due to higher financial charges.
- Cash flows from operating activities dropped to $5 million from $11.3 million in the equivalent quarter last year.
- Inventory levels have expanded despite flat to down sales, indicating potential inefficiencies.
- The restaurant and retail channels continue to face macroeconomic headwinds, affecting overall performance.
Q & A Highlights
Q: Can you provide an update on the progress of new territory development and client conversions in Quebec?
A: Yes, we are continuing to grow organically and gaining new customers month after month. Our strategy of selling more locally made products versus our American competitors is working well, and we are seeing positive momentum in client conversions.
Q: Will you be adding more sales reps throughout the rest of the year?
A: While we don't disclose our strategic plans publicly, I can confirm that we are gaining new territory and will need more people to support this growth.
Q: Your inventory levels have expanded quarter-over-quarter despite flat to down sales. Can you explain this dynamic?
A: The increase in inventory is mainly due to the transition of our distribution customers to the new facility in St. Bruno, which required additional inventory. This is combined with the seasonal dynamics of stocking up for the summer season.
Q: Are there any changes to your CapEx plan for the year?
A: No significant changes. We continue to guide our total CapEx in the range of $1.5 million to $2 million for the year, primarily for maintenance and small optimization projects.
Q: Are all your Western Quebec distribution clients now being serviced from the new St. Bruno facility?
A: Yes, all Western Quebec distribution clients are now being serviced from the St. Bruno facility, and the transition has been completed.
Q: How has the market reception been in Western Quebec now that Colabor is more active there?
A: The reception has been positive. We are gaining new customers, including independent restaurants and chains, and our ability to serve well is being recognized in the market.
Q: Have you noticed any competitive response to your expansion into new territories?
A: The competitive environment remains stable in terms of pricing. While competitors are aware of our market share gains, our strategy and execution continue to yield positive results.
Q: Can you comment on your pipeline for potential accretive acquisitions?
A: We have a significant number of opportunities at different stages. While the current environment in the restaurant channel hasn't generated additional opportunities, we continue to prudently evaluate M&A strategies to ensure they are accretive.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
