Supremex Inc.

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Supreme Access Q1 2023 earnings conference call. At this time, all participants are in listen-only mode. Following the presentation, we will conduct a question and answer session. Instructions will be provided at that time for you to queue up for questions. If anyone has any difficulties hearing the conference, please press star followed by zero for operator assistance at any time. Before turning the meeting over to management, please be advised that this conference call will contain statements that are forward-looking and subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated. I would like to remind everyone that this conference call is being recorded on Wednesday, May 10, 2023. I will now turn the conference over to Stuart Emerson, President and CEO. Please go ahead.

Thank you, operator. Good morning, ladies and gentlemen. I'm here with Stephen Perot, Interim Chief Financial Officer of Supremex. Thank you for joining us for this discussion on the financial and operating results for our first quarter ended March 31st, 2023. Our press release reporting these results was published last evening. It can also be found on the investor section of our website at www.supremex.com, along with our MD&A. These documents will be available on CDAR as well. We also posted a presentation supporting this conference call. Let me remind you that all figures expressed on today's call are in Canadian dollars unless otherwise stated. Supremex had another strong quarter with revenue growth of nearly 40%, a 13th consecutive year-over-year improvement in adjusted EBITDA, and a 50% rise in net earnings. The revenue growth was both organic and by recent acquisitions, namely Royal Envelope and Paragraph, in the packaging segment. Stephen will provide additional details in a few minutes, but let me take a moment to discuss with you the business dynamics. Our envelope business had another exceptional quarter as we delivered on the solid bookings we had at the beginning of the period. Execution on a clear strategy also continues to bear fruit as we benefit from a better sales and customer mix in our U.S. activities. We continue to drive a greater proportion of our business from program-oriented and end-user customers, which tend to be stickier and have a higher margin profile. In doing so, we have moved up the distribution channel with less reliance on wholesalers and brokers. Q1 also marked the first full period with Royal Envelope, which contributed approximately $12 million in revenue. The operational integration has progressed well, and as I said in the last quarter, We see attractive growth opportunities, both in direct mail and conventional channels, and we are only beginning to tap this potential. As you are aware, the US market is of significant size, and with our scale, know-how, and expanded offering, we have been ambitious in looking for revenue synergy from cross-selling our respective product offerings to satisfy a wider range of needs for both existing and new customers. Excuse me. Turning to packaging, we have made considerable progress and continue to build impressive scale, but candidly, we expected more in the quarter. The shortfall was primarily due to residual inefficiencies following the relocation of the town of Mount Royal folding carton plant to the Lachine facility. This move, while a remarkable feat by our operations team, was a significant distraction and impacted productivity and efficiencies. Not surprisingly, the inefficiencies had a negative impact on packaging sales, absorption, and margins in Q1. We continue to make progress on the commissioning at a steady pace. The relocation constitutes an essential step in our packaging strategy, as this larger and more efficient facility will easily accommodate more equipment and volume to assist in reducing costs while building the business. Q1 was also our first quarter with ParaGraph, and it generated just less than $8 million in revenue. The integration has more moving pieces than a traditional single product acquired company, but we've made good progress and we believe these operations will yield important synergies within our expanded network. And on the topic of expansion, on Monday we announced the acquisition of GrafPak, a manufacturer of folding carton packaging solutions to several commercial markets, including food and cosmetics. Located on Montreal's West Island, GrappPak is a relatively small business with sales of approximately $6.7 million. It is a perfect synergy tuck-in with our existing operations in the greater Montreal area. In announcing the transaction, we informed employees that within 90 days, we intend to move their activities to the new Lachine facility, which is less than 15 kilometers away. We expect this tuck-in operation to rapidly yield synergies within our folding cart and group. With that, I turn the call over to Stephen for a review of the Q1 financial results.

Thank you, Stuart. Good morning, everyone. Q1 2023 was another record quarter for SPREMAX. Turning to our top line review, total revenue was up 39.8% to $88.4 million from $63.3 million last year. Revenue from the envelope segment rose 44.4% to $64.5 million. This solid growth includes a $12 million revenue contribution from the acquisition of Royal Envelope completed last November. Revenue was also favorably impacted by an average selling price increase of 40.1%, which mainly reflects more favorable customer and product mix in U.S. operations, as well as pricing adjustments to mitigate input cost inflation. Packaging and specialty product segment revenue amounted to $24 million, up 28.7 percent from $18.6 million last year. This increase reflects a $7.8 million contribution from Paragraph and higher e-commerce related sales, partially offset by the wind down of DuraBox operations and residual impact on sales of relocating the folding carton facility. Looking at EBITDA, consolidated EBITDA was $18.5 million in the first quarter of 2023 versus $12.1 million in Q1 2022, while adjusted EBITDA reached $18.8 million, up from $12.1 million last year. As a percentage of revenue, the adjusted EBITDA margin was 21.3%, up from 19.1% a year ago. Envelope segment adjusted EBITDA totaled $17.3 million compared to $10 million last year. The sharp increase primarily reflects the Royal Envelope acquisition, as well as higher margins related to a more favorable customer and product mix in the U.S. The adjusted EBITDA margin was 26.8%, up from 22.4% last year. In the packaging and specialty product segment, Adjusted EBITDA was $3.8 million compared to $4.2 million last year. This decrease reflects the residual effect on profitability from relocating the folding carton facility, partially offset by the contribution from paragraph. Adjusted EBITDA margin was 16.1% compared to 22.5% for the same period in 2022. Corporate and unallocated costs were $2.3 million in the first quarter of 2023, compared to $2.1 million last year. The slight increase is mainly due to higher compensation-related expenses. Now looking at net earnings, net earnings reached $9.5 million, or 37 cents per share, up from $6.3 million, or 24 cents per share, last year. Adjusted net earnings amounted to $9.8 million or $0.38 per share in the first quarter of 2023 versus $6.3 million or $0.24 per share a year ago. Turning to cash flow, net cash flows from operating activities were $7.5 million in the first quarter of 2023 versus $0.2 million in Q1 2022. The year-over-year variation is due to higher profitability and a reduction in working capital requirements. Pre-cash flow was $3.4 million in Q1 2023 compared to minus $0.1 million as the aforementioned factors were partially offset by higher capex this year compared to last. Looking at our financial position, our total debt amounted to $81.4 million as at March 31, 2023. versus $54.7 million as at December 31, 2022. This increase is essentially related to the acquisition of paragraph for consideration of $27.1 million. Net debt, which excludes deferred financing costs and cash, stood at $79 million. As a result, our net debt to trailing 12 months adjusted EBITDA ratio was 1.2 times as at March 31, 2023, versus 0.9 times as at December 31, 2022. At the end of the quarter, we had $39.9 million in available liquidity under our senior secured revolving credit facility of $120 million, leaving us sufficient flexibility to finance our investments and operations. Finally, the Board of Directors declared a quarterly dividend of 3.5 cents per common share payable on June 23, 2023, to shareholders of record at the close of business on June 8. I turn the call back to Stuart for the outlook. Stuart?