Corby Spirit and Wine Limited (CSW-B.TO) Earnings Call Transcript & Summary

Mr. Chair, I second the motion.

You have heard the motion. Is there any discussion? As a reminder, to submit a question, please select the messaging icon at the top of your screen.

There is no discussion at this time.

As there is no discussion, I now call for a vote on the motion before the meeting. Would all those eligible to vote, please enter your votes in Lumi now. [Voting]

The polls are now closed. Based on preliminary voting results, I can confirm that all resolutions have been approved. Final results will be posted online at SEDAR+. It's my pleasure now to call upon our President and CEO, Nicolas Krantz, to present a report on the corporation's activities. As part of his presentation, Juan Alonso, Vice President and CFO, will report on the corporation's financial performance. Nicolas?

Thank you, Lucio, and good morning, everyone. It's a privilege to be here with you today and to connect with our valued shareholders. FY '25 was indeed another dynamic year for Corby, and I'm grateful for your continued trust in our teams and in our vision. I would also like to acknowledge our Board of Directors who are joining us today for their ongoing guidance and collaboration throughout the year. Thank you. And lastly, of course, to our dedicated employees, customers and consumers, your passion and commitment to our brands continue to inspire us. So by now, you've likely seen our annual report, Spirited moments coast to coast. And these themes reflect more than our national presence, it capture how our brands, people and partners bring Canadians together because that's what Corby is about, creating moments of conviviality across the country. So looking back at FY '25, it was a year that called for leadership. In a time of uncertainty, Corby led with purpose. And we closed the year with a strong momentum, gaining share in spirit, rapidly expanding on RTD business. It was a solid year for us, driven by bold innovations, operational excellence, cultural relevance and disciplined investments. And in a competitive market, we deliver sustainable growth powered by our brands, our people and our strategy. Corby is a company in motion, agile, ambitious, and we focus on what's ahead. But before we go deeper and let's start to have a quick look at the year's market dynamics. As many of you know, of course, volatility defined the marketplace in FY '25. Across Canada, we faced evolving provincial regulations, significant disruption and challenges such as changing route to market in Ontario, which included the addition of over 5,000 new outlets for beer wine and RTD and ongoing U.S. trade tension, of course, and all contributing to a complex environment. But it wasn't all headwinds. Strong foundation remained, and we saw positive shift. The removal of U.S. origin product from shelf in most provinces across Canada created new opportunities for visibility and shelf space for Canadian and international brands. We saw as well opportunities in moderation trends with No/Low alc and premiumization, and we are actively leveraging both opportunities. So how did these conditions impact the Canadian market? While the landscape was marked clearly by pressures across categories. Spirits declined by 4.9%, with challenges in both retail and on-premise channels. However, it's worth noting that this decline was largely driven by Ontario, which was impacted by a series of disruption, such as the LCBO labor strike and the modernization changes, while the rest of Canada proved to be more resilient with only a moderate decline of minus 1%. In contrast to spirits, the RTD category remained the fastest-growing segment, growing at plus 7%, driven by consumer demand for convenience and innovation. And finally, wine, like spirits was also in decline by minus 4%. However, despite the challenging market conditions, Corby delivered a strong performance, proving our ability to adapt and manage through uncertainty. Now let's take a closer look at Corby's performance. Well, I am very proud to share that for the third consecutive year, Corby outperformed the market. This is a clear reflection of our strategic focus, execution excellence and our commitment to sustainable growth. So in the spirits segment, Corby limited its decline by minus 1.8%, therefore, significantly outperformed the market. And this resilience speaks to the strength of our diversified portfolio and strong innovation pipeline. We remain the second largest spirits player in Canada with a 17.6% market share. Now in the ready-to-drink segment, Corby posted a plus 10.4% increase in retail value, again, outperforming significantly the category. Corby has now established itself as a major player in the RTD category with a diverse portfolio across Corby and Ace Beverage Group brands as well, of course, as those of Pernod Ricard. So what is driving our performance? Well, we can break it down to 6 key factors. The first is leveraging the strength of our portfolio. Our portfolio of brands spend across every category and price points and allowing us to focus on the key battleground that will deliver maximum impact and results. Number two is innovation. I talk a lot about it. Across the industry, new product innovations in spirits remain a critical growth driver. And at Corby, we delivered consumer-led innovation by tapping into trends such as new innovation formats, premium ready-to-serve cocktail, exciting brand collaboration. Our J.P. Wiser 10-year-old continue to capture attention, and we are responding to the premiumization trend with an amazing Glenlivet 40-year-old. So as you can see, innovation continue to be critical to our strategy and success and deliver approximately 25% of our value growth. Next, of course, is our dynamic RTD portfolio. In just a few years, we went from being a small player to becoming one of the top 4 RTD companies in Canada. Our specialized route to market and strong brand like Cottage Springs, which is now #1 in Ontario, are driving momentum alongside, of course, the successful integration of Nude and our incredible innovation pipeline. Our ambition is very clear to become the #1 RTD category in Canada. But of course, none of this will be possible without commercial execution excellence. Our commercial and sales team drive growth in retail by optimizing every team, shelf position and display. We are putting the right brands in the right accounts, building strong consumer partnership and creating better consumer experience. In Ontario, the new route to market has also -- has been challenging for spirits, but has been a strong opportunity for wine and RTD. Of course, our marketing and promotional effectiveness is also a key success factor. This year, we focus on creating high-impact moments to build brand equity and deepen consumer connection. For example, from activations like Malibu Clock Off [ Elevated ] Bar to powerful partnership with music and sports across many of our key strategy brands. And all that is enhanced with technology as we are also experimenting with AI to maximize impact and optimize them. Finally, we continued to bring to life our good time from good place road map. Most notably, this year, we officially launched the Drink More Water in Canada at Osheaga, Canada's largest music festival. It is clear that moderation remains indeed a cornerstone initiative for Corby. So all these efforts reflect our values and strengthen our business for the long term. But as a company in motion, we keep moving forward. So let's take a quick look at some of our upcoming standout brand activation. Our first success story is ProdiCanadian, a strategy that turned heritage into a growth driver. When U.S. products were removed from shelves, we moved fast to capitalize on our strong Canadian-made portfolio. A few highlights here included the strong growth of our Canadian whiskey portfolio, illustrated by the outstanding performance of Lot 40 growing by plus 39% in retail value. We also executed high-impact communication and in-store execution. Our team worked tirelessly to win new shelf space, more displays and support customers in updating menus or back bar with a world-class portfolio. So far in FY '26, we are continuing this path as we go big with J.P. Wiser's and its Ontario Made story, including the release of the J.P. Wiser legacy 200 Birthday Limited edition. But the excitement of the brand doesn't stop here. We are now year 2 of our NHL partnership, a key platform for driving brand awareness and engagement, So J.P. Wiser's is a whiskey for Game Night. And this year, we are going all out with our new that's [indiscernible] platform integrated across all touch points. That includes, of course, live NHL broadcast, TV, digital and of course, in-store activation supported by limited edition bottles. But we are also elevating J.P. Wiser's through our prestige range with exciting innovation like J.P. Wiser Decade series and the Mizunara Oak, the most premium Canadian whiskey expression in history. Now on to Polar Ice Vodka, another flagship. Polar Ice remained the leading Canadian vodka in the market. And this year, the brand delivered a solid growth outpacing significantly as well the category. Our Nofus vodka platform continued to resonate, supported by engaging activation like our Compass Ambassador program and the unforgettable summer dockside deliveries. Innovation continue a key driver for the brand and drive momentum, and we are exciting to launch the Polar Ice cookies and cream tapping into the nostalgia and trend flavors that perfectly reflect the holidays. Now turning our attention to ready-to-drink, which continued to be one of our biggest growth drivers. Well, this summer delivered strong results powered by standout innovation and new exciting formats. Cottage Springs Rocket Berry bagketbox was the #1 spring innovation at the LCBO. And now we own 3 of the top 10 national innovation and single Canadian innovation. We are also responding to moderation trend with the Cottage Springs Zero, a nonaloholic option, which will be launched in Costco starting in December, very exciting. So as you can see, it's been an impressive start to H1 with more exciting things to come. With that, I would like now to hand it over to our Chief Financial Officer, Juan Alonso, to share an overview on the financial results. Juan, over to you.

Thank you, Nicolas. Good morning, everyone. I'm Juan Alonso, Corby's CFO, and I'm very pleased to present to you today Corby's financial results for the full year FY '25 that was disclosed to the market in August and give you a glimpse at our first quarter's results for fiscal 2026 released yesterday after markets close. Very quickly, before we talk about our financial performance, you noticed some mentions of adjusted metrics and organic revenue growth. We believe that those non-IFRS financial measures support a better understanding of our underlying business performance and trends. We provided detailed explanations for each of those elements in our Q4 FY '25 and Q1 FY '26 MD&A and invite you to refer to these documents for any questions related to it. So fiscal year '25 marked a full year of earnings growth and continued market share gains in a volatile market environment. Over fiscal '25, Corby generated $247 million in revenue, a plus 7% increase over FY '24 with a plus 2% like-for-like growth. This performance achieved in a challenging retail environment represents the highest annual revenue recorded in Corby's history, highlighting the strength of our diversified portfolio and our agility in responding to market shifts. With our record top line performance, coupled with the strategic investments behind key brands and diligent control of expenses, Corby also delivered a record high annual adjusted EBITDA, reaching $64 million, up plus 7% and adjusted earnings per share were $1.08 with reported EPS at $0.96, representing a robust plus 15% growth in reported earnings and plus 7% in adjusted earnings. Our cash from operating activities totaled $45 million, a $13.3 million increase year-over-year. This was supported by earnings growth, disciplined cost management and the lapping of acquisition-related costs from ABG and Nude. We also strengthened our balance sheet, reducing our net debt to adjusted EBITDA ratio to 1.4x, down from 1.8x at the end of FY '24. This reflects our strong solvency and financial discipline. Total dividends declared for FY '25 were $0.91 per share, up 7% from FY '24, reinforcing our commitment to consistent and growing returns for our shareholders. Now let's go to the next slide and delve deeper into our full year fiscal '25 revenue growth. So to reinforce, Corby delivered an all-time high annual revenue of $247 million in FY '25, representing a 7% reported increase over FY '24. This record revenue can be broken into 3 key segments. First, domestic case goods reached $197.3 million, reflects a plus 1% organic growth and plus 9% total growth. This is highlighted by ABG brands growing plus 10% organically, capitalizing on new channel expansion in Ontario and also Western Canada. Our case goods portfolio remained resilient despite the negative impacts of the LCBO strike in Q1 FY '25 and soft underlying consumer trends. Commission revenue grew double digit to reach $30.6 million, driven by imported RTDs and wines tapping into the route-to-market modernization opportunities with the opening of grocery and convenience channels across Ontario. Export revenue was $14.9 million, down 12% as we lapped a strong pipeline fill in FY '24. Despite this, we remain encouraged by the rebound in J.P. Wiser's performance in the U.S. So to summarize our P&L results for FY '25, Corby had solid reported revenue growth of 7%, bolstered by the strength of our portfolio, the new channel expansion in Ontario and the full year effect from the acquisition of Nude brands, leading to the best financial result in Corby's history. Our total operating expense increased by 6% at a slower pace compared to the growth in our revenue, with targeted investments behind key strategic brands and disciplined spend management. As a result, Corby delivered a solid growth of 7% in adjusted EBITDA, another record high, underscoring our ability to effectively manage costs while expanding our revenue base. On a per share basis, our adjusted net earnings was $1.08 and reported net earnings was $0.96, reflecting growth of 7% and 15%, respectively, versus FY '24. Moving to cash flow. In FY '25, Corby generated $44.8 million of cash from operating activities, supported by higher net earnings, the full year effect of Nude acquisition as well as favorable working capital changes that was mainly driven by the timing of spend. Our free cash flow turned positive and improved significantly year-over-year, benefiting from the lapping of FY '24 $148 million cash outflow related to the ABG and Nude acquisitions. As a result, our net debt position was $91 million at the end of the year, a $15 million improvement compared to FY '24. And our net debt to adjusted EBITDA ratio remained low at 1.4x, demonstrating a robust solvency position and reinforces our financial health. Corby has an attractive dividend payout ratio at 57% on a rolling 12-month basis, highlighting the sustainability of the company's quarterly dividend. Notably, quarterly dividend payment increased by 10% in Q4 FY '25 compared to Q4 FY '24. These actions have contributed to a high dividend yield over recent years at 6.7% at the end of the fiscal, marking a consistent improvement from FY '23 and FY '24. We are proud of our strong performance recorded in FY '25, and we remain focused on delivering long-term value for our stakeholders and shareholders. With a strong portfolio, disciplined execution and a clear strategy, Corby is well positioned to continue driving growth and shareholder returns. Now let's share a word on our results for the first quarter of fiscal year 2026 released yesterday after the market closed and invite you as well to join our quarterly earnings conference call tomorrow morning at 9:00 a.m. Eastern Time for more details. In the first quarter, Corby delivered strong results with record quarterly revenue and adjusted EBITDA, sustained by the expansion of our RTD business and the acceleration of our spirits market share gain. Corby generated $75.4 million in revenue, a plus 16% increase over Q1 of fiscal year 2025. With strategic investments behind key brands and diligent control of expenses, our adjusted EBITDA also reached a record high, totaling $20.3 million, up plus 4%, leading to solid plus 9% growth in reported earnings per share and plus 8% in adjusted EPS. Our cash from operating activities totaled $5.6 million, a $1.9 million increase year-over-year. This was supported by earnings growth, disciplined management of costs and favorable working capital. Finally, the Board of Directors declared yesterday a dividend at $0.23 per share for the first quarter of FY '26, is staying consistent to the fourth quarter of fiscal year 2025, which represented an increase of $0.01 or plus 5% compared to the first quarter of fiscal year 2025. The Board of Directors assesses the dividend on a quarterly basis. And as a reminder, the quarterly dividend was last increased in Q2 FY '25. Now I hand over to Nicolas for the conclusion note.

Thank you very much, Juan, and strong financials indeed. Before I hand back to Lucio, I wanted to share a few words. As most of you know, we recently announced upcoming leadership change at Corby. This means that today is my last time hosting our AGM as the President and CEO of Corby. I'm extremely proud of what we've accomplished together over the past 5 years and of the incredible moments I've shared with our Board, our customers and our team from coast to coast. And when I look back at where we started and where we are today, I see a company that's stronger than ever and full of momentum. Together, we've navigated challenges, strengthened our portfolio, accelerated FTE growth and build a more agile and consumer-centric organization. I will continue to work closely with Florence Tresarrieu, the incoming President and CEO, as we transition. I know she will lead Corby with energy, strength and passion. So with that, I would like to say thank you to our shareholders, our Board of Directors, our customers and most importantly, our employees for your trust and commitment over the years. Corby's future is bright, and I look forward to seeing the continued success of the team and the company. Now handing over to our Chair to close today's AGM. Thank you.

Thank you, Nicolas and Juan. Is there any further business to be brought before the meeting? Not hearing any. On behalf of the Board, I would like to express our sincere appreciation to all Corby employees for their continued dedication and hard work throughout the year. As Nicolas mentioned, we recently issued a press release announcing leadership changes at Corby effective January 1, 2026. I want to extend our heartfelt thanks to Nicolas Krantz for his leadership and many contributions to Corby. His transformative vision has strengthened our portfolio strategy and accelerated our growth. We are grateful for his many contributions and look forward to his continued insight as we're pleased that he will remain on the Board as a Nonexecutive Director. We are excited to welcome Florence as our new President and Chief Executive Officer in January. Florence's significant global financial and leadership experience will be invaluable as she guides Corby into our next chapter driving growth and innovation. Finally, to my fellow directors, thank you for your ongoing support and counsel. I would also like to express our deepest gratitude to Claude Boulay for his 17 years of service on the Corby Board. His thoughtful perspectives and collaborative spirit have been instrumental in our growth and transformation. We are truly grateful for the time, energy and expertise he has shared with us. Thank you all for your continued dedication and support as we embark on this next chapter for Corby. I would now ask Jordan Giurlanda to propose a motion for the termination of the meeting.

Mr. Chair, I move that the meeting be terminated.

May I have the motion seconded?

Mr. Chair, I second the motion.

Ladies and gentlemen, the meeting is now concluded. The floor is now open for questions on any matters raised in the report on the corporation's activities. As a reminder, if any voting shareholder or proxy holder would like to submit a question, please select the messaging icon at the top of your screen, type in your message and then click the send button. We may direct your question to our CEO, CFO or Corporate Secretary, whomever can best answer it. Just pausing here for giving you an opportunity to ask questions. Okay. As I see that there are no further questions, I would like to sincerely thank you for joining us today. Have a great day, and hopefully, you'll join our conference call tomorrow morning on Q1 results. Thank you, everyone.