Corby Q1 2027 Earnings Call - DEFI TECHNOLOGIES INC

Good morning. Welcome to Corby Spirit & Wine's Fiscal Year 2027 Q1 Financial Results Conference Call for the period ended September 30, 2026. Joining me on the call this morning are Florence Tresoriu, President and Chief Executive Officer, and Juan Alonso, Vice President and Chief Financial Officer. Hopefully, you have had the opportunity to review the press release which was issued yesterday. Before we begin, I would like to inform listeners that information provided on today's call may contain forward-looking statements which can be subject to risks and uncertainties that could cause actual results to differ materially from those anticipated. Risks and uncertainties about the company's business are more fully discussed in Corby's materials, including annual and interim MD&A, filed with the security's regulatory authorities in Canada as required. At this time, all participants are in a listen-only mode. Following management's commentary, we will conduct a question-and-answer session. Instructions will be provided at that time for you to queue up for questions. If you have any difficulties hearing the conference, please press R0 on your phone for operator assistance or click the help button on your screen now i would like to turn the call over to miss trezor you good morning everyone and thank you for joining us to review corby's spirits and wines first quarter fiscal 2027 results for those of you who may be joining us for the first time my name is florence president and ceo of corby joining me today our key financial officer, Juan Alonso. Corby delivered a solid start to fiscal 2027 with continued growth in RTDs and improved earnings despite a challenging market environment. Organic revenue grew plus 1%, supported by our RTD portfolio and higher commission income, mitigating a soft domestic experience market, while reported revenue declined minus 4%, reflecting the sale of the Lamp's Rump brand. Adjusted net earnings grew plus 18% significantly ahead of revenue, reflecting gross margin improvements on RTD brands and disciplined investment behind our brands with a continued focus on cost. Supported by a strong cash generation, our balance sheet remains strong, with net debt to adjusted EBITDA of 0.6 times or 0.8 times if we include the 18.7 million upfront fee payment for the Pernod Ricard Representation Agreement signed on October 1, 2026. The Board declared a quarterly dividend of 25 cents per share, up plus 9% compared with Q1 last year. This performance very much reflects the resilience of our portfolio, the quality of our execution across multiple categories, and our continued focus on creating sustainable long-term value for our shareholders. While this is a steady start to the fiscal year, we remain prudent, given continued pressure on the spirits market, an evolving consumer environment, and macro and geopolitical uncertainties. We can turn now to the market context. Complete first-quarter Ontario market data was not available at the time of reporting. Given the significance of Ontario within the Canadian spirits and RTD market, presenting results without Ontario would not provide a representative view of national trends. For that reason, the following slides reflect the latest available market data for the period ending August 31, 2026. Furthermore, per LCBO November 6th, 2026 update, Ontario data for weeks 1 to 20, encompassing April 1st through August 15th, are being republished to address known discrepancies with completion expected by the end of December 2026. As a result, retail sales data may be subject to change based on the restatement. Over the most recent three-month period, ending August, market conditions have remained challenging, with some of the FY26 tailwinds normalizing. The spirits market declined 3.7%, while our spirits portfolio declined 6%. RTB remained resilient, with Corby outperforming the category, and wine was softer. This is a normalization, as we lacked very strong performance last year, and we remain very much focused on the longer-term strength of our portfolio and the opportunities ahead look at that looking at the rolling 12 months corby continued to outperform the markets across all three categories in spirits we outperformed the market by two and a half percent in spans our rtd portfolio grew seven point seven percent point sorry five points ahead of the category while one grew six point three percent this demonstrates the benefit of for device for portfolio and the strength of our positions across categories in particular in our cities looking more closely at spirits the category remain under pressure but Corby continues to perform ahead of the market although the rolling 12 months we outperformed across major search category particularly strong recipe performance in Canadian whiskey tequila vodka and rum this reflects the strength for brands and discipline commercial execution and we remain focused on continuing to gain share in a challenging market in recent months we've seen a sharp increase in promotional activity in vodka in Canadian whiskey we're also seeing a decline as we lap the strong rules from last year following the removal of US products from shelf taken together these factors explain some of the recent toughness in our spirits portfolio. Over the last 12 months, our RTD brands have continued to gain share, supported by innovation, strong commercial execution and an expanded route to market. In the short term, Corbi RTD Brands continue to outperform as category growth normalized. Nationally, Corbis RTD volume grew plus 3.8% in the last six months and achieved a market share of 10%. Kodak Springs maintained its position as the number one RTD brand in Ontario, while Ace Beverage Group continued to deliver strong momentum in Western Canada. Also, Canada Dry Mott's CDMI partnership added France's meaningful scale to our RTD portfolio. Innovation remains important. Kodac Springs and JP Weiser Canada Dry were among the leading RTD innovations in Ontario. demonstrating our ability to stay close to consumers and response quickly to changing preferences our strategic direction remains very much unchanged we will continue to invest behind our strong brands and opportunities to gain sharing spirits accelerate our purchasing position in RTD and other attractive growth categories we will remain disciplined and pricing promotion investments and cost while continuing to actively manage our portfolio and direct resources towards areas with the greatest potential the market remains dynamic we're confident in the fundamentals of our business and our ability to adapt execute with discipline and create sustainable long-term value with that I will end it over to one to take us through the financial results. Thank you, Florence, and good morning everyone. I'm Juan Alonso, Corby CFO, and I'm going to walk you through our financial results before we get into the numbers. You're going to notice reference to adjusted metrics and organic revenue growth throughout this section. We believe that these no IFRS financial measures support a better understanding of our underlying business performance and trends. We provide the detailed explanations for each of those elements in our Q1 FY27 and B&A and I invite you to refer to this document for any questions related to it. Corby delivered a solid first quarter with revenue of $72.5 million down minus 4% year-over-year due to the sale of LEMS brand on August 5th. Excluding the impact from disposed brand, organic revenue grew 1% lapping very strong Q1 revenue growth in the prior year of 16%. This performance was driven by R2D portfolio growth and despite a soft spirit market and a high prior year base from the removal of US products from shelves. With the strategic investments behind key brands and diligent control of expenses, our adjusted earnings from operations reached 18.9 million, up 15% year-over-year. Adjusted earnings per share was $0.46, up 18% year- over-year, while your reported earnings per share was $0.97, up 171% year-over-year due to the inclusion of the gain on sale of land. In Q1, Corby generated cash from operating activities of $7.4 million, which is $1.8 million more compared with the same quarter last year. Lastly, the Boarder approved a quarterly dividend of $0.25 per share, which represents a $0,02 or 90% increase versus the dividend declared in Q1 FY26. This reflects our confidence in our outlook and ongoing commitment to shareholder returns. Turning to the drivers behind our $72.5 million Q1 revenue, down 4% on a reported basis while up one percent on an organic basis firstly domestic case goods which accounted for 82 of core with q1 at sales performance reached 59.4 million reflecting a minus three percent reported contraction but plus three percent organic growth versus q1 fy26 this was driven by continued growth in rtd brands driven by price gains from our cup changes in ontario and alberta partially offset by soft domestic spirits performance against a strong prior year period total commissions made up 12 percent of q1 at sales and was 9 million dollars an increase of 10 versus the prior year impacted by the addition of kdp commissions and higher agency commissions under the VINARQI representation agreement. This more than offsets software performance from Pernod Ricard brands. Lastly, export revenue, which contributed 4% to total net sales, landed at $3.2 million, a decrease of 35% on a reported basis versus Q1 FY26, and 44% on an organic basis. This was driven by the transition to new distributors in the U.S. market and unfavorable order phasing in Sweden and Turkey. Moving to the next slide, Corby achieved a strong Q1 adjusted earnings per share growth of 18%, reflecting continued RTD revenue growth and cost rationalization initiatives. operating expenses decreased 7%, primarily reflecting gross margin optimization in RTD brands and lower overhead costs from efficiency gains, despite being impacted by one-time restructuring costs in Q1. With this, Corby delivered Q1 adjusted earnings from operations at 18.9 million, which is of 15% year-over-year and reported earnings from operations of $35.9 million of 118% year over year, which was impacted by the recognition of one-time gain from the sale of land. In Q1, Corby generated cash from operating activities of $7.4 million, which is $1.8 million compared with the same quarter last year. Consistent cash flow generation reflecting increased earnings and expected seasonal shifts in working capital balances, specifically accounts receivable and inventories offset by slightly higher tax payments. Free cash flows include proceeds from the sales of of the land-run brand of $37.4 million during the quarter, which is net of transaction-related costs. Our net debt position was $51.6 million, which benefited from the proceeds from the land run brand sale during the period. As a result, our net debt to adjusted ABT day reduced to 0.6 times from 1.3 times at the end of Q4 FY26, demonstrating a strong solvency position and reinforcing our financial health. As mentioned earlier, on October 1, 2026, subsequent to the period ending September 30, 2027, Corby paid the upfront fee related to the representation agreement with Pernod car of $18.7 million. With this cash out considered, Corby's mass EBITDA ratio is 0.8 times. Our Q1 performance is a demonstration of the strengths of a diversified portfolio, disciplined execution, and a clear strategy. Before I hand back to Florence, a quick look at what's ahead for Corby. Corby is well-positioned to continue driving earnings growth and delivering shareholder returns despite facing a more challenging comparison basis following its strong performance in FY26. We also believe we may narrow the gap between earnings growths and revenue growth over the coming quarters. Our R2D portfolio remains a major growth engine and we see significant potential to expand across Canada, led by strong traction from IBG. Our own experience, our ambition is to continue to fight for market share despite a declining category. Our diversified portfolio, leading brands, and strong local footholds continue to support our resilience in a dynamic market. In Ontario, we are going to continue capitalizing on route-to-market modernization, meeting evolving consumer preferences with agility and breadth, taking an agile approach to navigate softer spirits with daily start traffic, and pricing pressure from the removal of the minimum pricing. On the financial side, our focus remains on protecting margins and disciplining investments to drive profitable growth. Now, back to Florence for closing remarks. Thank you very much, Juan. As we look ahead, we remain confident in the fundamentals of our business, while staying prudent about the market environment. Corby has a diversified portfolio of leading brands across spirits, RTDs, and wine, supported by our partnership with Pernod Ricard and strong positions across Canada. We've demonstrated our ability to adapt to changing marketing conditions, invest behind the areas with the greatest potential, and execute with discipline. With a strong balance sheet and continued momentum in RTDs, we're well positioned to invest for future growth while delivering attractive returns to shareholders. Ultimately, our focus remains consistent, building a stronger, more resilient business and creating sustainable long-term value. Thank you once again for joining us today. Juan and I are now very happy to take some of your questions. I can see that some questions are already posted on the chat so I'm happy to answer them yeah so maybe I'm going to read them out loud and I will share with one so the first question from Nick Cochran from Ackman polarized underperform the market in the quarter will you invest in price to try to win volume or protect margin and maintain current share I can start answering and and I will let one comment further. So, of course, I'm not going to be commenting specifically on the pricing actions, as I'm sure you will appreciate this is commercially sensitive. What I can say is that I don't think we're satisfied with the polarized performance, and this is very much a priority of the management at Corby to make sure we are restoring the volume goals or at least improving the trajectory while maintaining the volume and maintaining the profits. Yeah. Yeah, and we see as a total portfolio strategy, so if there are some brands that we need to react to protect volume, we will do, and we have other brands that can compensate and offset it. It's today the margin improvement that we have in the ready-to-drink segment, and that is linked to the second question. I'm going to read the second question so also from Nick strong margin performance in the quarter how should we expect margins to track for the balance of the year so so we we did have a very strong margin improvement versus a q1 I think the first thing to highlight is q1 last year when it comes to our TV it was a low basis in terms of margin performance due to some technical events in one last year so we do have a strong margin improvement and our earnings are growing much ahead of revenue in the first quarter for the following quarters we are going to intend to maintain the margin that we have in this in this quarter but the the gap between earnings growth and revenue growth will probably narrow we are not going to be able to grow earnings much ahead of revenue as we did in q1 because we are going to be overlapping already some high quarters in terms of margin improvements thank you so i don't know if there are any other questions either on the on the chat or or by phone we're very happy to take them if you have any Over the phone lines, if you'd like to ask a question, please press star, then the number one on your telephone keypad. And if you would like to withdraw a question that will be star, than the number two. Again, that will star, and then the one on the telephone key pad if you want to ask question over the phone line. We have your first question, comes from Warren Goldblum from Harbor Front Wharf. Please go ahead. Hi. Hello. Hi, can you hear me? Yes. Okay, perfect. Sorry, I seem to get the message again. Sorry, yes, go ahead. So I wonder if you could just give some kind of commentary on the cadence. So if you look at Mott's commentary around the... Sorry, the line is actually quite bad. So you are cutting us? You got disconnected. Again, if you would like to ask a question, please press star, then the number one on your telephone keypad. Okay. Maybe if you can write. Yeah, I think it's disconnected, right? Yeah. as of the moment there are no other questions over the phone lines okay that's fine so I don't know if Warren has the opportunity to reconnect otherwise we will connect with him if there is no further questions again I would like to thank you for attending this morning thank you for your interest in Corby I wish you a very good day ahead and a good weekend bye bye Ladies and gentlemen, this concludes today's conference call Thank you for participating You may now disconnect