Corby Spirit and Wine Limited

Good morning. Welcome to Corby's Period and Wine's Fiscal Year 2026 First Quarter Financial Results Conference Call for the period ended September 30, 2025. Joining me on the call this morning are Nicola Krantz, President and Chief Executive Officer, and Juan Alonso, Vice President and Chief Financial Officer. Hopefully, you've 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 securities 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 star zero on your phone for operator assistance or click the Help button on your screen. Now, I would like to turn the call over to Mr. Krantz.

Thank you very much, and good morning, everyone.

I am Nicolas Krantz, and it's a pleasure to connect with you today, joined by Juan Alonso, our CFO, to share Corby, Spirit, and Juan's Q1 results as we kick off fiscal year 2026. In a few minutes, Juan will walk you through the financials in more detail, but I will begin by highlighting the key drivers that are a strong start to the year in what continues to be a volatile and evolving market environment. Indeed, it's been a good start, strong start, with a record high quarterly reported revenue and net earning growing plus 16% and 9% respectively, fueled by continued share gains in spirits and the rapid expansion of our RTD business. This marked our third consecutive year of outperforming the overall spirit market, a testament to the strength and resilience of our strategy and diversified brand portfolio. Our RTD strategy continues to deliver. Corby is now positioned as one of the key players in the Canada fastest growing RTD category. Importantly, we are outpacing category growth as well. Part of the success for the RTD portfolio and our wine portfolio has been successfully capitalizing on the Ontario route to market modernization, creating new opportunities for consumer engagement. Now turning to market dynamics, the Canadian spirits landscape is evolving. and we've seen some reduced purchasing patterns in Ontario as the new channel expands, and we are now lapping the LCBO labor strike from July 2024. But despite these factors, we have delivered consistent profitability margins against a dynamic backdrop, reflecting strong operational execution. Notably, our Q1 performance reflects the excellence of our sales execution, with a strong share across the total portfolio, and within the context of the U.S.-origin products being removed from shelves. also benefiting from favorable order-facing effects expected to normalize in Q2, but more on that to come. Beyond top-line growth, we continue to actively manage our portfolio to enhance Corby's growth profile, and during the quarter, we completed the disposal of certain non-core ABG brands, and also one we'll give a bit more detail, allowing us to sharpen our focus on priority categories and accelerate our growth. Finally, from a financial perspective, we deliver strong cash flow generation, supporting by attractive capital returns to shareholders. Our balance sheet remains healthy, and the net debt to adjusted EBITDA at 1.4 is proving to show our flexibility for balance sheet. In line with our confidence in the outlook, we maintain our quarterly dividend at 23 cents per share, consistent with our Q4 FY25, and up 5% relative to the Q1 FY25, signaling the sustainability of our dividend policy.

But before Juan digs a bit more into the details of our financial, let me give you a quick glimpse of the wider market context. As I mentioned, Corby saw an acceleration of our share gains across all categories in Q1.

And a lot of this is pointing towards the excellence of our sales execution, as we plan to capture shares following the U.S.-origin products being removed from shelves. In the rolling three-month period ending end of September, while the Canadian spirits market declined by minus 0.9%, Corby's values performance outpaced the market by 6.8 points, delivering a 5.9% growth in value. Our wine portfolio as well delivered a very strong result, achieving plus 20% growth against a fairly flat market at 0.7%. And as I've explained previously, we can specifically highlight the RTD category that continues to be, of course, in good growth. But Corby has firmly established itself as a major player, consistently outperforming the market with 44% growth, which is, of course, an outstanding 27 points for the market. For Markey as well, if you look at the first quarter of the year, this has been, of course, a very strong result.

But also, if you move to the R12, it continues to be also a very resilient market.

Effectively, the broader market on the R12, we can see that the spirits market is declining by 3.8%, and we are almost flat, slightly growing. So again, with a strong performance versus the spirits. On the RTD, the market remains in double digits, and we are outperforming as well the category.

And on the wine side, slight decline, and we are also outperforming the category.

Now, deep diving a bit more on the spirits category, we can see that we continue to outpace the market in almost all spirits category over the last 12 months. We share gain acceleration in the last two quarters as we benefit from this U.S. origin product being removed from shelf. And we have, of course, a uniquely diverse portfolio across every price point in every category, across spirits, RTD, and wine, and this is very much a competitive advantage of Corby right now that we are leveraging with impact. Turning a bit more on the RTD portfolio, which is very important for us, Corby's RTD growth has accelerated over the last 12 months with a sustained share gain driven by strong innovation and strategic execution. In Q1, as I mentioned earlier, our RTD portfolio delivered outstanding plus 44 value growths, significantly outplacing the category nationally. And over the last three months, the RTD portfolio took share in every region, reinforcing the strength of our brand and the effectiveness of our strategy. Specialized route-to-market now approach remains a key advantage, with ABG proving strategy reached from Ontario, but also new strengthening presence in Western Canada. In that category, innovation continues to be a core strength, and our pipeline is robust. We see now that we have a lot of new brands willing to share, allowing Corby to rapidly attack white space and capture further growth opportunities. In Ontario, we've been capitalizing on the route-to-market modernization since September 2024, leveraging the breadth and the depth of our RTD portfolio. And this has translated into growing prominence in grocery stores, where our brands continue to lead and benefit from the strong consumer demand. Of course, our flagship brand, College Springs, is at the forefront of that success and remains the number one RTD in Ontario. Finally, we've taken the advantage of the strategy step to enhance our RTD portfolio and growth profile. And this quarter, we have also announced that we've increased our ownership of ABG by adding 5%, bringing our ownership to 95% subsequent to this co-option being exercised. And I've mentioned before that we are also taking the opportunity to streamline the portfolio from ABG and we dispose of non-core assets, particularly Eshil Beer and the Liberty Village Cider. So non-strategic assets have been divested to refocus the portfolio on a core strategic SKU. Finally, before I hand over to Juan, and I don't want to dwell too long on our strategy since it was already well covered in previous pages, but I want to make clear that our goal remains to really focus on market share gain to grow sustainability and also in a profitable way so we can create value for our shareholders.

Now, with that, I hand over to Juan to highlight our Q1 financial results.

Thank you, Nicola, and good morning, everyone. I'm Juan Alonso, Corbis CFO. I'm pleased to walk you through our financial results today. Very quickly, before we talk about our financial performance, you are going to notice some mentions of adjusted metrics and organic revenue growth. We believe that these non-IFRS financial measures support a better understanding of our underlying business performance and trends. We provide the detailed explanations of each of those elements in our Q1 FY26 MD&A, and invite you to refer to this document for any questions related to it. So let's start with Q1 results. 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 2025. This performance marks Corby's highest quarterly revenue, achieved in a challenging retail environment. I will go over Decrease Driver in more detail shortly. 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%, and adjusted earnings per share were $0.39, with reported at $0.36, representing a solid plus 9% growth in reported earnings and plus 8% in adjusted earnings. Our cash flow from operating activities totaled $5.6 million, a $1.9 million increase year over year. This was supported by earnings growth, discipline management of costs, and working capital . On Wednesday, the board of directors declared a dividend at $0.23 per share for the first quarter of FY26, consistent with the previous quarter, which represented an increase of one cent, or 5%, compared to the first quarter of fiscal year 2025. The Board of Directors assessed the dividend on a quarterly basis, and as a reminder, the quarterly dividend was less increased in Q2 FY25. Now let's go to the next slide and delve deeper into our year-to-date revenue growth. To reinforce, Corby delivered an all-time high quarterly revenue of $75.4 million in Q1, representing a 16% increase over Q1 of FY25. And this growth can be attributed to, firstly, domestic case goods performance reached $61.3 million, reflecting a plus 15% growth. This is highlighted by improved shelf prominence of Corbis Beery, capitalizing on the removal of U.S. origin products in key provinces. ABG brands grew plus 33%, with continued strong momentum on new channel expansion in Ontario and Western Canada. Secondly, commission revenue rose to $8.2 million, a growth of plus 7% versus last year, driven by imported RTD staffing into routes to market modernization opportunities with the openings of grocery and convenience channels across Ontario. In addition, represented brands lapped the LCBO labor extract impact last year, and benefited from favorable LCBO order savings in Q1 this year, which is expected to normalize in Q2. Lastly, export revenue increased to $4.9 million, or plus 55%, reflecting a strong recovery of shipments across all markets, also benefiting from favorable shipment savings in the U.S. So, to summarize our P&L results for Q1, Corby saw a strong 16% revenue growth leading to a record quarterly performance bolstered by the strength of our portfolio, specifically the accelerating RPD portfolio tapping into new channel expansion in Ontario and the spirits gaining additional shares in the spirits market. Our total operating expenses increased by 18% to support the continued growth and expansion of our RTD business, in addition to strategic investments behind key brands, such as the JP Weiser's NHL partnership, and also discipline people cost management. As a result, Corby delivered a record quarter adjusted EBITDA, marking 4% increase versus last year, growing at a lower pace than revenue due to an adverse portfolio market and channel mix, along with lapping very low marketing spend levels last year to mitigate the business impact of the LCBO strike last year. For the sake of clarity, when we talk about adverse portfolio mix, it refers to RTDs growing at a faster pace than the rest of the portfolio. and notably our more profitable experience. The adverse market mix refers to a standout recovery of our export business across all markets, less profitable on average than our domestic markets. Lastly, the adverse channel mix deals with the increase of direct delivery sales of RTD products following the route to market modernization in Ontario. That is more costly than the retail channel. Finally, on a per share basis, our adjusted net earnings was $0.39 and reported net earnings was $0.36, reflecting growth of 8% and 9% respectively versus last year. Moving to our cash flow performance, In Q1, Corby generated $5.6 million in cash from operating activities supported by higher net earnings and favorable working capital movements, partially offset by higher interest and tax payments. These working capital benefits were primarily driven by timing of spend. Our free cash flow also improved, increasing by $1.3 million compared to the prior year. As a result, our net debt position was $93 million at the end of the quarter, representing a $16 million improvement versus Q1 FY25. Our net debt to adjusted EBITDA ratio improved at 1.4 times, down from 1.8 last year, demonstrating robust solventing and reinforcing our financial health. Corby maintains an attractive dividend payout ratio at 55% on a rolling 12-month basis, highlighting the sustainability of the company's quarterly dividend. Notably, quarterly dividend payment increased by 5% in Q1 FY26 compared to Q1 FY25. These actions have contributed to a high dividend yield over recent years at 6.6%, at the end of the quarter, providing consistent returns over FY24 and FY25. We are proud of our performance in Q1, 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. Before I finish, I want to share our outlook and priorities for the remainder of the year. After all you've heard today, you can see that Corby is well positioned to continue outperforming the market in FY26, even as the environment remains dynamic. Our ambition is to continue to gain market share in spirit despite the challenge of a potential slight market decline. We are going to remain agile and respond appropriately whenever U.S. products are permitted back on shelves. We are confident in our resilience, leveraging leading brands, local footholds, top-tier marketing, and advanced tools like AI-based prioritization to stay ahead. Our R2D portfolio remains a major growth engine, and we see significant potential to expand across Canada, led by strong traction from ABG. In Ontario, we will continue to capitalize on routes to market modernization, meeting evolving consumer preferences with agility and breadth. From a financial perspective, we remain focused on protecting margins, driving profitable growth, and generating long-term shareholders. Finally, regarding the outlook for the next quarter and beyond, we expect Q2 results to be softer than Q1 due to the normalization of LCBO orders from Q1 and the impact of BC labor strikes that elapsed over September and October. We anticipate these effects will normalize over time and will not impact Corby's ability ability to execute on its market-leading strategies. Now, I hand over to Nicolas for some closing remarks.

Thank you very much, Juan. Strong financial indeed and good clarity for Outlook.

Well, I want to leave you with the core reasons you should invest in Corby, really. And for us, it's really the backbone. Corby remains, at the end of the day, Canada's largest publicly listed multi-beverage alcohol company in Canada, with the most diversified portfolio in the market, and that's something really to anchor. Add to that, our close partnership with Pernod Écartes gives us strategic advantages and, of course, access to global breakfast issues, and the portfolio is, of course, extremely – the diversity of the portfolio and the strength of the portfolio is supporting us as well. We have a clear strategy, strong execution, and a proven ability to outpace the market in value growth. Our innovation pipeline, marketing strength, and recent acquisition continue to drive performance and operational excellence. And finally, we have consistent financials. It means that we have resilient revenue, strong cash flow, and a healthy balance sheet that supports attractive and growing dividends. Now, as you know, we recently announced upcoming leadership changes at Corby. This means that today is my last day hosting our earnings conference call as the President and CEO of Corby. I am extremely proud of what we have accomplished over the past five years, and leading Corby has been an honor. I will continue to work closely with Florence Trezario, the incoming President and CEO, as we transition. I know she will lead Corby with energy, strength, and passion, and she is looking forward to connecting with Corby's shareholders. With that, thank you once again for joining us today and for your continued interest and support in Corby.

Juan and I, of course, are not happy to take any of your questions. Thank you.

Thank you, ladies and gentlemen. Should you have a question, please press the star followed by the one on a touch-down phone. Should you wish to cancel your request, please press the star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys.

Once again, that is star one, should you wish to ask a question. Okay, so I think we have a question here.

Thank you very much regarding the export opportunity. So listen, the export today is a relatively small part of our business. It's an opportunity because at the end of the day, from a small base, it's showing on the regular basis, of course, a good growth. In terms of our, I would say, battleground, we really have two types of battleground. The first one, of course, mainly for whiskey business, it's the U.S. The Canadian whiskey category is actually a large category in the U.S., and GP Weiser's and the rest of our COVID portfolio is relatively small. So we are showing good trajectory from a small base, but this is something which we'll continue to do. The rest is more in Europe, where we export GPWisors and LensROM, LensROM in particular in the UK, but also GPWisors is showing some good traction in countries like Sweden and Central Europe, so that's also something that we are going to do. Now, regarding the commercial opportunity for the RTD, For the moment, we think we have plenty of opportunity to scale up the business in Canada. That has been the focus in terms of resource allocation and the team. But listen, there is no doubt that the U.S. is, of course, a large playground as well for RTD. I think for us, it's a matter of timing, of maturity. And in the long run, of course, the U.S. may also represent a good opportunity for Cottage Spring. or for that matter, for any other brand or innovation, what we call new-to-market brand, that could be developed for the U.S. market. So in the short term, I would say probably not the focus for the RTD portfolio. In the mid to long term, likely to be also an opportunity for us.

Maybe, Juan, you're okay to take the questions on the debt and the cash flow?

Yes, yes. Thanks for that. The question is related to the increase of the cash flow and if the company intends to prioritize debt repayments or other potential use such as dividend increase. So our idea is to continue one more time. Our debt is straight to me. We have 10 years to pay our intercompany debt with Pernod Ricard that was taken in 2023 for deposition of Ace Beverage Group. for the amount of $120 million. And we have a 10-year attempt to amortize this debt, and we have been amortizing straightly across the years. At the same time, this enables us flexibility to continue to increase dividends as our earnings from profit increase. So that's both. So continue to repay the debt, and continue to assess dividend increase as the business profit grows.

Is there any further questions? There are no questions on the phone lines. Okay.

So with that, again, thank you very much for your attention. I usually close specifically on Friday to say the best way to get to know Corby is to get to know Portfolio and enjoy your brand responsibly, specifically before the weekend.

So with that, I wish you a very good day and a very good weekend. Thank you, everyone.

Thank you, ladies and gentlemen. The conference has now ended. Thank you all for joining me on this connector line.