Release Date: October 18, 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 a 1.5% growth in distribution sales during the third quarter of 2024, contributing to a market share increase to 11.1% from 10.3% year-over-year.
- The company successfully renewed a significant contract with an institutional customer, representing approximately 11% of expected revenues for fiscal 2024.
- Colabor Group Inc (COLFF) reported higher cash flows from operations, allowing for a reduction in net debt from $61.5 million at the end of 2023 to $50.7 million.
- The company is effectively managing its customer mix and product portfolio, which has allowed it to raise gross margins over the past few years.
- Colabor Group Inc (COLFF) is expanding its distribution platform both organically and through accretive acquisitions, demonstrating a strong competitive position in a challenging market.
Negative Points
- Overall sales for the third quarter of 2024 were down 1.6% to $162 million, with wholesale activities declining by 10.1%.
- Consolidated adjusted EBITDA from continuing operations decreased to $9.5 million or 5.9% of sales, compared to $11 million or 6.7% in the third quarter of the previous year.
- The company faced higher operating expenses due to underutilization of the new distribution center and investments in sales and marketing, impacting profitability.
- The renewed institutional contract was awarded at lower margins, which will impact future earnings, although mitigation measures are being implemented.
- The restaurant industry, a significant part of Colabor Group Inc (COLFF)'s customer base, is experiencing a challenging macroeconomic environment, affecting customer spending and growth potential.
Q & A Highlights
Q: Can you quantify the year-over-year volume impact from new wins and new territories?
A: Louis Frenette, President and CEO, stated that they estimate about 4% new volume from existing and new customers, with 2.2% from a small M&A and 1.1% from inflation.
Q: Are you continuing to see new independent restaurant wins into Q4 despite the macro environment?
A: Louis Frenette confirmed that they are positioned to win more business in Q4 and into 2025, continuing to develop in new and existing territories, particularly in Western Quebec.
Q: What is causing the increase in other operating costs?
A: Pierre Blanchette, CFO, explained that the increase is due to higher volume rebates given to participants of a purchasing group, which is a positive sign of increased purchasing group volume.
Q: Can you explain the margin impact of the renewed institutional contract?
A: Louis Frenette noted that the contract was renewed at a lower margin, typical in bid processes, but they have identified mitigating measures to reduce the impact over time, including focusing on private label products and operational efficiencies.
Q: How do you assess credit risk when adding new independent restaurant clients?
A: Pierre Blanchette mentioned that the risk is minimal as payments are typically made before the next order is sent, and they have strong credit checks in place.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
