Corby Spirit and Wine Limited (CSWA) Earnings Call Transcript & Summary

Good morning, everyone. Welcome to Corby Spirit and Wine's conference call covering fiscal year 2026 Q4 financial results, for the period that ended on June 30th, 2026. With me this morning are Florence Tresarrieu, our President and Chief Executive Officer, and Juan Alonso, Vice President and Chief Financial Officer. I hope you've all had a chance to look over the press release, which came out yesterday. Before we get started, I want to let listeners know that the information shared on today's call may include forward-looking statements, and those can be subject to risks and uncertainties that might cause actual results to differ materially from what is anticipated. Risks and uncertainties relating to the company's business are discussed more fully in Corby's materials, including the annual and interim MD&A filed with the securities and regulatory authorities in Canada, as required. At this point, all participants are in listen-only mode. After management's commentary, we'll hold a Q&A session. Instructions will be provided at that time for you to queue up for questions. Should you have any trouble hearing the conference, please press star zero on your telephone to reach operator assistance, or click the Help button on your screen. I'd now like to turn the call over to Ms. Tresarrieu.

Thanks, Elie. Appreciate it. Good morning, everyone, and thanks for being here as we go through Corby Spirits and Wine's results for the fourth quarter and the full 2026 fiscal year. Even with a tough market, fiscal 2026 was very much a record year for Corby, with strong top-line growth, continued momentum in RTDs, and further market share gains in spirits. We delivered double-digit revenue growth, with net sales up 10% on a reported basis and 11% organically, driven by continued momentum in RTDs and ongoing market share gains in spirits. These results reflect the strength of our portfolio and the consistency of our execution. Across both spirits and RTD, strong sales execution drove market share gains across our portfolio, supported in part by the removal of US origin products from shelves. From a financial perspective, earnings growth outpaced revenue growth, reflecting purposeful investment behind our key brands and careful resource management. Our RTD portfolio remained a significant growth driver. RTD now represents circa 40% of Corby's revenue, making us one of the leading Canadawide players in this very fast-growing category. We continue to outpace category growth while capitalizing on route-to-market expansion opportunities. We also generated solid cash flow and continue to deliver attractive long-term shareholder value.

We closed out the year with net debt to adjusted EBITDA at 1.3 times, which speaks to the strength of our balance sheet and our financial discipline. Given our solid financial position and ongoing confidence in Corby's outlook, I'm happy to report that we declared a quarterly dividend of $0.25 per share, a 4% increase over the prior quarter, and delivered a one-year total shareholder return of 19% as of June 30th. After year-end, we announced two significant developments. The first, which reflects our continued portfolio discipline, is the August 5th announcement that we completed the sale of the Lamb's rum brand for aggregate consideration of $39.2 million. This sharpens our focus on priority growth platforms while freeing up capital and resources for higher return opportunities. It is very much consistent with our long-term strategy of simplifying the portfolio to drive growth and shareholder value. The second development is that, as of yesterday, we renewed our representation agreement with Pernod Ricard for a further three years to September 2029, with the potential for an additional two-year extensions after that, subject to the terms of the agreement. This renews our exclusive Canadian rights to represent Pernod Ricard key brands, including Absolut, Jameson, and The Glenlivet.

This agreement highlights how strong our long-standing partnership with Pernod Ricard is, and it also gives us ongoing access to a world-class brand portfolio within the Canadian market. Now let's move on to market performance. Regrettably, full fourth-quarter Ontario market data wasn't available when we reported. Because Ontario is so significant in the Canadian spirits and RTD market, showing market performance without Ontario wouldn't give a representative picture of national market trends. So please refer to the Q3 press release, MD&A, and earnings call presentation for market trend analysis covering the nine months ending March 2026. Turning now to our growth strategy. As I've said before, RTDs remain among Corby's more significant growth engines and a key contributor to our overall performance. During the last 12 months, our RTD business has delivered strong acceleration with sustained share gains in every province, backed by strong innovation and market expansion. Corby kept outperforming the RTD category nationally, with our strong innovation performance and expanded distribution driving an outstanding 18 volume growth, compared to category growth of 7%. We also keep capitalizing on Ontario route-to-market modernization, where Cottage Springs grew market share across every channel in fiscal 2026, and held its position as the number-one brand in RTD in Ontario, retaining the number-one brand position in grocery and LCBO channels.

Out in Western Canada, ABG kept up impressive momentum with volume up 14.3%, even as the category fell 2.7% — another sign of just how strong our brands and portfolio are. Our specialized RTD route-to-market approach keeps widening our national footprint. Thanks to our Canada Dry Mott's partnership, we've brought on meaningful scale and dedicated coverage throughout Alberta, Manitoba, and Saskatchewan, which further bolsters our national presence. As I noted, innovation is a key category driver, and across our Ontario portfolio it keeps beating expectations. Cottage Springs captured two of the top three innovation spots with Vodka Soda Freezie and CanBee Kee-Bag in a box, and J.P. Wiser's Canada Dry RTD stood among the province's leading innovations. Lastly, on the RTD side we keep actively shaping and improving our portfolio to support long-term growth as well. We raised our ownership stake in ABG to 95% and exited non-core RTD and beer brands, which further streamlines the business and sharpens ABG's strategic focus. These results show the strength of our RTD strategy and bolster our confidence in the strategic priorities that keep guiding our business. Our strategic direction is very much unchanged. We stay focused on gaining share in spirits through strong brand activation, innovation, and commercial execution, while speeding up our presence in the fastest-growing categories and continuing to drive value ahead of volume.

Meanwhile, we're proactively steering our portfolio so that capital flows toward the best opportunities and the business is set up for lasting growth. In addition, we keep finding upside in important export markets, where focused efforts and regional activations are assisting in rooting J.P. Wiser's within local culture. Fiscal 2026 showed just how those priorities turn into results. Our wide portfolio, ongoing innovation, expanding RTD capabilities, and consistent execution together leave us confident in Corby's capacity to hold onto and extend momentum and to generate long-term value for shareholders. On that note, I'll pass things over to Juan, who will walk you through the financial results.

Thanks, Florence, and good morning to all of you. I'm Juan Alonso, CFO of Corby, and it's a pleasure to take you through the financial results we posted. Before diving into the figures, you'll see adjusted metrics and organic revenue growth mentioned as we go along. In our view, these non-IFRS financial measures help paint a clearer picture of how the underlying business is performing and the trends behind it. Each of those elements is explained in detail in our Q4 FY26 MD&A, and I'd encourage you to consult those documents with any questions you may have about them. Let's begin with the Q4 results. I'm happy to report that Corby posted a resilient Q4, with revenue of $71.1 million, a modest decline of 1% year-over-year, even with the unfavorable effect of LCBO order phasing. Once the impacts of our disposed brands were excluded, organic revenue was flat year-over-year in Q4. That performance was driven by the continued RTD momentum Florence mentioned earlier, as well as solid export uh export results in in the quarter. Adjusted earnings from operations came to $11.8 million, up 3% versus last year, while our reported earnings from operation grew 4%. That outpaced revenue growth, reflecting our disciplined cost management. On the bottom line, adjusted earnings per share were 26 cents, and reported earnings per share were 23 cents, reflecting a 1% contraction and a 4% increase year-over-year, respectively.

During Q4, Corby brought in $17.7 million in cash from operating activities, an amount that tops the same quarter a year ago by $2.2 million. The main force behind this favorable result was a positive swing in net working capital balances, which benefited from the earlier build-up of ABG inventory in Q3 prior to the peak summer RTD season. Payables likewise added a positive contribution, thanks to the year-over-year move in A&P phasing into June and the LCBO late billing on Q4 sales reductions, leaving a greater number of payables open at year-end than was the case last year. Finally, the board approved a quarterly dividend of 25 cents per share, representing an increase of $0.01, or 4%, versus the dividend declared in the prior quarter. This speaks to our confidence in our outlook and our continuing commitment to shareholder returns. Now, moving to what drove our $71.1 million in Q4 revenue, which fell 1% on a reported basis and was flat on an organic basis. First, domestic case goods, which made up 81% of Corby's Q4 net sales performance, came in at uh $57.7 million, reflecting a reported contraction of -3% and an organic contraction of -2% versus Q4 FY25. The cause was unfavorable LCBO order phasing in Q4 after orders were pulled forward in Q- into Q3 ahead of an ERP system upgrade.

That said, growth in the RTD segment helped counterbalance this, fueled by LCBO pricing adjustments and route-to-market modernization, along with spirits market share gains stemming from diminished competition of US origin. Commission accounted for 10% of Q4 net sales in total, amounting to $7.3 million, down 5% from the prior year, hit by weaker results in imported spirits, RTDs, and wines, plus the represented wines portfolio facing a tough comparison base from last year. Yet the Canada Dry Mott's RTD portfolio addition provided partial offset. Finally, export revenue, contributing 7% of total net sales, came in at $5.2 million, up 37% against Q4 FY25, on robust US and UK shipment growth compared with the prior-year period, which had been adversely affected by phasing-related supply disruption. Now, let's turn to fiscal year-to-date performance, moving to full-year performance. Corby posted record full-year results in fiscal 2026. During FY26, Corby brought in $271.6 million in revenue, a 10% reported rise over last year, including 11% organic growth. This came even while operating against a difficult industry backdrop, underscoring the strength of our d- diversified portfolio and our capacity to respond with agility to shifting market dynamics. Further details will follow in the next slides.

The main force behind our top-line growth was the rapid acceleration of our RTD business — RTD is right now the fastest-growing category within the Canadian alcohol market — along with market share gains in spirits. Although this RTD mix and higher input costs for spirits created some margin pressure, strong cost discipline helped us offset those effects. Consequently, total operating expenses rose more slowly than revenue, at 9%, and Corby posted fiscal-year adjusted earnings from operations of $53.7 million, which is up 12% year-over-year, along with reported earnings from operation of $53.7 million, up 16% year-over-year. On the bottom line, adjusted earnings per share came to $1.23, while reported earnings per share was $1.17, representing strong growth of +15% and 22%, respectively. Now, the drivers behind that full-year growth. Turning to what drove revenue growth. First, domestic case goods, which made up 81% of Corby's net sales performance, reached $220 million point $220.7 million, reflecting 12% reported growth and 13% organic growth. This stems from the ongoing acceleration of the RTD business and better shelf prominence for Corby's spirits, as we capitalize on the removal of US products in key provinces. Total commission accounted for 11% of net sales and came in at $29.4 million, a slight decline of 4% versus last year, with the represented wines portfolio lapping a strong comparison basis last year, which reflected a higher commission rate and strong pipeline fill to grocery and convenience store channels in Ontario.

That was partly balanced out by the addition of the Canada Dry Mott's RTD portfolio. And finally, export revenue made up 7% of total net sales and rose to $18.2 million, a 22% increase year-over-year, mainly thanks to strong shipment expansion into Turkey and Eastern Europe as well as robust growth of J.P. Wiser's in the US. In fiscal year 2026, Corby produced $37.1 million in cash from operating activities, which was $7.7 million lower than last year, owing to working capital increases tied to higher receivables and RTD inventory, along with higher income tax payments. Even with the lower cash flow relative to last year, Corby's ability to generate cash is still strong, backed by growth in our underlying earnings. That let Corby pay strong dividends, raise our stake in ABG to 95% at the start of the fiscal year, and still bring net debt down to $88.4 million, a $2.6 million improvement versus FY25 after loan repayment. Consequently, our net debt to adjusted EBITDA ratio fell to 1.3 times from 1.4 at the end of Q4 FY25, which shows a strong solvency position and reinforces our financial health. Corby has an attractive dividend payout ratio of 72% of cash flow from operating activities on a rolling 12-month basis. Total dividends declared for FY26 came to 96 cents per share, up 5% from FY25, reflecting our commitment to delivering consistent and predictable returns to shareholders.

We feel good about what we achieved in fiscal year 2026, and as we move into fiscal year 2027, our attention stays on creating long-term value for stakeholders and shareholders. Corby has a diversified portfolio that is strong, execution that is disciplined, and a clear strategy — all of which leave us well placed to keep driving growth and shareholder returns. Before I turn things back to Florence, here's a quick preview of what lies ahead for Corby. We have confidence in our strategy and in our capacity to produce earnings growth in FY27, even though the comparison base is more challenging after the strong results delivered in FY26. Our RTD portfolio continues to be a major engine of growth, and we see substantial room to expand throughout Canada, led by strong traction from ABG. When it comes to spirits, our ambition is to keep fighting for market share gains, even with the category declining. That said, we expect the gap in share gains versus the market to narrow as US products may come back to shelves. A diversified portfolio, leading brands, and a strong local foothold keep supporting our resilience in a dynamic market. In Ontario, we will keep capitalizing on route-to-market modernization, meeting changing consumer preferences with agility and breadth, and taking an agile approach to navigate softer store traffic and pricing pressure resulting from the removal of minimum price.

Regarding the financial side, our emphasis stays on safeguarding margins and making investments with discipline. Now, returning to Florence for closing remarks.