Premium Brands Holdings Corp Aktie

Good afternoon, ladies and gentlemen, and welcome to the Premium Brands Holding Corporation First Quarter 2026 Earnings Conference Call. Our speakers today will be George Paleologou, CEO and President of Premium Brands; and Will Kalutycz, CFO of Premium Brands. I will now turn the call over to George Paleologou. Please go ahead.

Thank you, Joanna. Good morning, and welcome, everyone, to our 2026 first quarter conference call. With me here today is our CFO, Will Kalutycz. Hopefully, you've had a chance to listen to our prerecorded remarks posted on our website this morning. We will now take your questions. Joanna?

[Operator Instructions] The first question comes from Kyle McPhee from ATB Cormark.

Great update and nice to see all the moving pieces increasingly coming together here to push earnings up. I want to dig in on some of the moving pieces that will allow us to better understand your free cash flow profile in the coming quarters and into next year. So I have some CapEx budget questions. You've already given the larger project CapEx budget for the next 4 quarters, $55 million. What is -- what will that larger project bucket look like beyond that? Is it essentially going to 0 given the larger projects are done? And then for the smaller projects, how should we think about that? You didn't give a budget for it. Will it stay around $70 million a year in line with prior comments? Or will that also tail off for a period of time?

Yes. So in terms of the major projects, the current -- as we've talked about in the presentation, we've got about $55 million left to spend on that, and then we're through all the things that have been proved and are in the pipeline. Our intent is that in the future, any projects we manage will be in that bucket of other, which right now we refer to the smaller bucket. You're right, that's $70 million. So what will happen over time, maybe that bucket will creep up a little bit, $70 million, $80 million as we have to add capacity here and there. But you're not going to see a repeat of what we've been through in the last 4 years. We just don't see anything like that in the next couple of years. We're exiting 2025 with about 1.5 -- close to $1.5 billion of sales capacity once the GTA project is online. So we're well positioned for the next couple of years.

Okay. And just to confirm, while you're thinking the remaining large project budget, do you also expect to still be thinking the $70 million-ish per year this year for the solar stuff?

Yes, yes, absolutely. That -- those are just a wide -- we've got over 110 plants in the system, and they're always adding a line or doing an improvement to a line to increase efficiencies. Those types of projects are constantly ongoing. We're always looking to improve the plants refined capacity, and that's just part of that. And -- but we do consider a project CapEx because all of these smaller projects, they are smaller projects, do generate returns. They're not like maintenance CapEx where you're really just replacing an old machine with a new machine and you're no better off. These smaller projects are incremental cash flow to the company in the future.

Got it. Okay. And okay. And beyond everything we've just talked about, the only other bucket is maintenance CapEx, $70 million to $75 million a year. Maybe just confirm that there's nothing else, but maybe a capital release from one last sale leaseback this year. Is that right?

Yes. Yes. We do expect to complete the GTA facility sale and leaseback in the fourth quarter of this year. That will be our expectation is there's $60 million to $65 million in proceeds from that.

Got it. Okay. And then last thing impacting free cash flow conversion, the plant start-up and restructuring costs. Nice to see it was down a lot in Q1. Will it stay down in Q2 and beyond to very thin numbers? Or will it spike back up with some of the big product launches?

Yes, absolutely. We expect it to continue to trend down from the Q1 level. So if you took Q1 and annualize that 4x, we'll be well below that for 2026.

The next question comes from Martin Landry from Stifel.

I want to just dig a little bit into some of the call-outs you've made in your press release, you're calling out delays in timing of promotional events and also of new product launches. Just wondering if you could give us a bit more color on that and if it's possible to quantify the impacts.

Yes. So the biggest item, Martin, is we did have a very successful promotion through the course of 2025 with a customer in the QSR channel, and that came to an end in 2025. We had expected new programs to replace it coming in towards the end of Q1,Q2. Those have now been pushed out to Q3, Q4. So yes, we did see that impact of that falling off, and we still -- we're not going to see the impact of the benefit to Q3, Q4 this year. It was really the one big program that was the challenge. The other factor is -- and this is in our sandwich group or what we call now our Custom Culinary Solutions group.

And the other factor was another major QSR customer, just the timing of shipments to them. We had a significant increase in sales to them in the fourth quarter of last year. We thought most of that was related to just inventory builds, but it turns out some of it was the timing of sales. And so that's been pushed -- that impacted Q1, but that should largely go away in Q2.

The bottom line, Martin, is that we have a very robust pipeline of LTOs in the U.S. with retail and Foodservice customers, right? This is an environment where customers in food service and -- and retail are looking for LTOs to drive traffic to their locations. So we have capacity now. Again, we build inventory for these LTOs.

Ultimately, we don't control the exact timing of these LTOs, right? So to the extent that they happen, then it gets kind of lumpy for that particular period, right? But if it's delayed, again, we see the impact of that, right? But we are in a lot of LTO type of activities in our platform.

Understood. Okay. And just if you can share any color on Q2 so far. Some grocers are talking about Canadians trading down, discount banners doing better than traditional banners. Just trying to see if you're seeing anything impacting your sales.

We would generally agree with those comments, Martin. Again, this is not new to Canada. I would say that our mix with regards to both retail and Foodservice is changing a little bit for the reasons that you mentioned. So no issues there.

Okay. Are you still under-indexed with discount banners? Or is your distribution in discount banners in Canada more or less the same as traditional banners?

I would say that we're not as under-indexed as before. We picked up a lot of business. As you saw, our business in Canada has grown in the quarter. Organic growth was a little bit above what we expected. That's because we're picking up business in the discount channel.

Next question comes from Chris Li with Desjardins.

My first question is I was wondering on the cost side in terms of obviously, fuel, freight, packaging and et cetera. I was wondering if you can share with us like how are you guys managing those cost pressure? And then what's the potential impact on the business for this year?

Yes. Again, Chris, I think we've talked about it in the past. We obviously try to, as much as possible, provide dynamic pricing to our customers. It's not that we're not familiar with inflation with regards to some of our core commodities like beef, for example, and with chicken last year, we saw tremendous inflation. But ultimately, we take actions with regards to pricing and obviously, restore our margins through pricing.

Okay. That's very helpful. My follow-up question is just in terms of the non-core investment. In the press release, you mentioned that's still ongoing. I was curious, I think you did disclose a number of $1 billion in net proceeds over the longer term. I was wondering if you can elaborate on the timing on that and the reason for putting a number in the press release.

Yes. We're in a number of discussions, Chris. So -- and we've got a pretty good idea as to where we'll end up. It will probably take a couple of years -- but again, we're in a number of monetization type of discussions. In some cases, we're taking on partners in some of our platforms. And we felt very comfortable with that number. So we wanted to convey that to the market.

Next question comes from George Doumet with Ventum.

I want to talk a little bit about the Specialty Food margins, a really strong performance there. So I just wanted to know, are we caught up on beef? And can you quantify the increase from the plant overhead costs and the higher storage costs? And maybe, Will, when do you expect those to go away?

So in terms of the higher costs, George, they're not going to go away. The -- well, sorry, the storage costs, which was a smaller component of it will, as we work through the inventories we built in Q1 through the course of the year. But the plant overhead is associated with the additional capacity coming on. So really now the key is to leverage that overhead, right? So those plant expenses are -- they'll continue to grow, but at a very lesser rate relative to the growth we're expecting in our contribution margin is from sales growth. So it's really leveraging that capacity, that expense now to grow our EBITDA. In terms of the overall margins in Specialty Foods, yes, they were generally in line with our expectations. We've been catching up as we've talked over the last couple of quarters. with beef pricing. A lot of that is in effect. It came into effect by the -- during the first quarter. We have a little bit more still to work on going forward. But really, it's been just -- it's a catch-up play on beef pricing.

The other comment I have, George, in regards to margins, again, as you know, we've built a lot of new capacity, invested in many, many new lines to support our growth. And with regards to the ramp-up of plants, we're starting to basically see the light at the end of the tunnel with regards to running the plant at scale, which obviously helps. And then we're in the process now of driving what we call internally operational excellence, right, which basically get the metrics right, get the productivity right, the yield right, the quality right and all of those things. And those should drive margin expansion in the future.

Okay. That's helpful. And George, in your prepared remarks, you mentioned the Kettle business. I think the sales are running north of $100 million. There's a plan for that platform to become the next $1 billion platform. I'd love to hear your thoughts on that. Like how do we get there? Where can we see M&A to support that growth? You just want to pay attention, you guys have done that in the past, and you've seen a lot of growth in other platforms. So I just want to -- I'd love to unpack that a little bit if you can.

Yes. So the run rate of that business today is in excess of $100 million, George. And again, we love that business. It exports globally, exports to Asia. We lack capacity. When we invested in our supply chain with the acquisition of our 50% ownership of Clearwater and also our -- then 50% ownership of North Delta Seafood, I think we told the market that we were looking to basically guarantee our access to best-in-class supplies. And we're probably the only company in the space that has guaranteed access to exceptional raw material, mainly coming from the seafood side of our business. We've leveraged that to grow substantially. And we have a lot of demand for our soups, sauces and dips in the U.S.

Unfortunately, we don't have a lot of capacity. So we're in the latter stages of completing our expansion in Auburn, Maine of the plant there. We put together a great management team. And we have -- as we speak, we probably have $100 million pipeline of opportunities that we're looking at. So again, the plant will be ready in the fall, and we're looking forward to executing that capacity.

What should we think about the margin profile of those products superior to kind of Specialty Foods in line? Or any thoughts there?

Yes, yes. They're sort of -- yes, they're about average, George. Their contributions margins are in the 25% range. Some of the more unique specialty products get as high as 30%. And we view that business long term consistent with our other legacy Specialty Food businesses should be averaging EBITDA of 13% to 14%.

Just one quick one, if I may, just a follow-up to Kyle's question earlier. On working capital, can you maybe help us -- that's fluctuated. It's been a drag the last couple of years. But can you maybe help us just frame that line item, I guess, for the year?

Yes. Well, it's interesting, George. We used in working capital in the quarter, I think it was about $113 million in the quarter. Of that, our Stampede business, our recent acquisition was $96 million of it. Stampede's business is -- they have a large component of it that is fixed pricing for their customers on an annual basis. And so a core part of their strategy for hedging the margins on that business is they do take these large inventory positions at the beginning of the year and then use that inventory over the course of the year to service their customers. So it's a bit different than most of our other businesses and hence, the big impact on Q1.

The interesting thing, and I think this is a real indication for how you're going to see our free cash flow in 2026 because as 2026 unfolds, that working capital is going to be converted to cash by the end of the year. And year-over-year, you're not going to see that impact by the end of Q4. But so if you look at Q1 and you strip out the impact of Stampede, we actually showed what we call our net free cash flow, positive net free cash flow. And it's been a while since we've had that. We always talk about what we've defined in the presentation is our steady-state free cash flow where we exclude our investment in the future. So we exclude project CapEx, restructuring and net working capital usages.

Well, even once you subtract those to come up with what we call net free cash flow, in Q1, it was actually a positive number taking out the Stampede effect. And like I say, it's a unique situation to their business. And we feel looking forward to 2026, it's going to be the first time in 5 years that we generate substantial net free cash flow.

The next question comes from Ty Collin with CIBC.

So just to start off, lobster margins were a pretty material drag within distribution this quarter again. I think previously, you talked about working through some higher cost inventories in Q1. So just looking for an update on how far through that process you are and what sort of improvement you're expecting in Q2 and throughout the rest of the year?

Yes. So we -- really, Ty, it's going to depend on how the fisheries go. Year-over-year, their margins were relative -- they were down slightly, but they're relatively stable. You had some pluses and minuses on mix versus catch rates. But really, it's going to be catch rates that drive it because it's a situation where when you have poor catches, it drives up the share price and that creates margin challenges for the group. Now the positive is we're in some fisheries now, the Canadian fisheries, and they seem to be going well. So that's setting the stage for better margins for Lobster. But yes, it's really going to be a function of the fisheries.

Also, Ty, I just want to remind everybody that there's still tariffs to China as well, which appear to be coming off at some point. So those should help as well.

Okay. Great. That's helpful. And then I think last quarter, you guys were kind of indicating your expectation that Specialty Foods or organic volume growth would land around 10% for the full year. I'm just curious whether that view has changed at all given some of the dynamics discussed on the call today around promo timing and whatnot.

Yes. Two comments there, Ty, is we do as -- due to the LTO discussion we had earlier, we do expect to push some growth that we were expecting in Q2 into Q3, Q4. So that will take a little bit of growth out of our Specialty Foods for the year, but we're still expecting high single digits for the Specialty Foods Group. It has come off a little bit because of the timing of those LTOs, but it's still going to have strong growth for the year.

Next question comes from Luke Hannan with Canaccord Genuity.

I just wanted to follow up on the promos or the LTOs. Was this -- what was this driven by, I guess, it was just a change in scheduling on behalf of Foodservice customers that in response to what's going on with the consumer? Or is there something else at play there?

There's always different dynamics, Luke, depending on the customer and the channel. I would say, from my perspective, given the war, which appears to be over, hopefully, it's over and also the high gas prices, probably they -- some of the customers decided to delay. But there's always different reasons depending on the customer and the channel.

Yes. And the big one that impacted Q1, Ty, the business itself had some internal issues, nothing to do with the program that they were just working through. They're largely through them now that's stabilized. So that's what gives us confidence that they will happen in the back half of the year. But yes, like George says, there's just -- there's a whole number of factors that are driven by the customer that goes into that timing.

Our view, [ Luke ], and my sort of advice is that what's important is really the LTO pipeline, and there's not much we can do ultimately about the timing of the launch. I mean the launch of our biggest launch in our history was delayed a couple of quarters. But ultimately, it took place. We've executed it and it's done extremely well, right? So we're not in control of the timing. We're not going to pretend that we are. But our pipeline of LTOs is very healthy.

Got it. And then I did want to follow up also, George, I think you had mentioned that the organic volume growth rate that you saw in Specialty Foods in the Canadian business was above your expectations. That was in part because of the exposure that you guys have to discount as well. But also how much of that growth can be explained by the new meat pick program that you guys launched late last year and the rollout amongst the Canadian store base there?

Yes. It's a small component, Luke, because the launch was towards the end of the year. Oh, actually, no. it was towards the end of January. -- so that was a component, but a small component of it. The biggest component, if you wanted to call out one single factor was actually our Kettle business. It -- like George says, we're doing really well in that channel. and particularly with some of the large club chains. And yes, so that was probably the biggest single growth driver in the quarter.

Okay. And maybe on the...

And sorry, just to clarify, Luke, in Canada.

Yes. Got it. And then I did want to dig in a little bit deeper there as well. Just on the meat pick program, you guys have been very happy with it. I think your customers have been very happy with it. Is it too early to now be thinking about potential expansion there, I guess, just as far as maybe different flavors or other SKUs that can be added there?

Yes. We've -- actually, we recently did some taste tests on some new innovation that we want to bring to market. And again, some very, very exciting products. I think it's well established now that we have great knowledge and expertise in this area. This stick has done extremely well. It is best-in-class. We're challenged a little bit by capacity. Again, we have capacity left in the system, but some of these launches are very large as we found out. So yes, there's a lot going on. We're excited to say that there is more coming, more flavors, more species. We're actually launching an amazing Bison stick in the U.S. under the Roam Free brand, which we think will do really, really well. Yes, we love the stick category. We produce the best quality consistently in North America in our view. And yes, we're seeing lots of opportunities there.

Great. Last one, and then I'll pass the line. Just on Stampede, if I remember correctly, it's $8 million synergies that you guys were targeting for this year. Just curious if you can share anything on that front.

Yes. We're well on our way to hitting that target for the year.

The next question comes from Stephen MacLeod with BMO Capital Markets.

I just wanted to follow up quickly on the Specialty Foods outlook for 2026 on the top line. So understanding around the promotional shift into Q3 and Q4. But on top of the kind of high single-digit volume growth that you're talking about for '26, do you also still have price to pass through? Or is most of that price now passed through the end of Q1?

Yes. And just to be clear, that high single digits is volume growth, right, Steve, not dollar growth. Yes. Yes, absolutely. As I mentioned, on the beef side, we've caught up a lot as you saw and that drove some of our Specialty Foods margin expansion year-over-year in the quarter.

But there's still some work to do there. So you will still see some price gains. I don't suspect it's going to be as large as it was in Q1, but there still will be continued gains. And as George talked earlier, we are sort of -- we are working through potential pricing around other inflationary factors like fuel.

Right. Okay. That's helpful. And then just kind of high level or taking a step back, just thinking around the commentary around you're through your CapEx cycle, executing on the capacity initiatives you have in place. Is it now reasonable to think that, that 13% to 14% Specialty Foods margin may come into view sometime over the next, I don't know, 12, 18, 24 months, something like that?

Yes. Well, absolutely on the back end of your estimated range. It's really now leveraging that remaining $1.4 billion, $1.5 billion of capacity that we've built. that's what's going to margin up the business. And so that will unfold over '26, '27. So I would suspect by the end of '27, we're at run rates like that.

And Stephen, from my perspective, as I said earlier, as I look at our portfolio today, our products and our margins and operations, I would say that operational excellence will get us there.

Right. Okay. That's helpful. And then maybe just a clarifying point, just on the $1.5 billion of sales capacity. Is that currently -- is that reflecting capacity that is currently not filled at all? Or is there a portion of it that is sort of being ramped up.

No, that's what was available at the start of 2026, including the capacity of our new GTA facility, which won't come online until the end of the year. But I'm looking at that total CapEx spend of about $1.1 billion, and that's created about $2 billion of sales capacity. And between '24 and '25, we've used about -- roughly $0.5 billion of that sales capacity.

Your next question comes from John Zamparo with Scotiabank.

I wanted to return to your production footprint. So I appreciate the details so far. I wonder if you could give us an idea approximately, let's fast forward maybe 1 or 2 quarters or maybe even to year-end, but I wonder what capacity utilization you're at on some of your key categories like meat sticks and sandwiches and bakery and charcuterie.

Yes. So again, it depends on many factors, John. I would say we have a lot of capacity left in our sandwich platform with the build-out of the Cleveland, Tennessee plant and the addition of lines there and some reconfigurations of the other plants. We have quite a bit of capacity left in our stick business, but we believe that we will fill it relatively quickly given the innovation pipeline we have in place. So we should -- we will probably be tapped out by the end of the year with regards to stick capacity. And we're actually looking at maybe some opportunities to purchase more capacity or add more capacity. Again, I haven't made any decisions yet, but we're looking at that.

The rest is basically covers different areas like obviously, our Kettle business and our bakery business and our processed meats business. In general terms, as Will said, at the beginning of the year, we had $1.5 billion of capacity left, and I've commented on some of the high-growth areas.

Okay. I want to follow up on the OVGR question. And I wonder, should we interpret your answer as the likeliest outcome is Q4 is probably going to be the highest result for OVGR this year followed by Q3 followed by Q2? And is that comment you made earlier, was that relevant to specialty or U.S. specialty?

Yes. So yes, they'll be close. But yes, probably Q4 will be weighted larger. Q3 is a better seasonal quarter. So you've got that tailwind. But yes, Q4, we would expect to be on a percentage year-over-year basis higher than Q3.

Okay. And that's U.S. or consolidated with that.

No. That's Specialty Foods consolidated. But U.S. is the big driver.

Got it. Okay. And then lastly, I wonder if you could say for this quarter where incremental margins landed relative to your typical range on incremental sales. I think it's 25% to 40% is typically the range where that landed in Q1?

Yes. It was roughly in line. It was a little bit low. I think it worked out for the Specialty Foods Group around 22% to 23%, which we would have expected sort of 25% to 30% range. The factor being sales mix. The jerky category, which we've been talking about was down quite a bit in the quarter. It's just more and more customers are shifting shelf space to sticks on top of the high beef prices, consumer sensitivity challenges. So that was a fairly big number in the quarter, and that's a very high-margin product. So that's what brought the overall contribution margin down maybe a little bit lower than what you would expect.

The next question comes from Vishal Shreedhar from National Bank.

On Duso is that about $100 million in terms of the value anticipated that I'm getting from the balance sheet? And what is the magnitude of Duso in the P&L?

Sorry, so all the value in that, that you're extra [indiscernible], Vishal, is an shop acres. Our Duso's is a very small business. It's really -- I hate to say this, but it's almost a rounding [indiscernible]. Less than 1/10 of that, Vishal.

Okay. And of the divestitures planned that greater than $1 billion, do you anticipate a large portion of that more to come in 2026? Or is that -- how should we think about it over the years to come?

Yes. Again, we need to be careful, Vishal, because we didn't use the words dispositions or sales. We use the word monetizations, right? So we expect to have complete the process, as I mentioned earlier, over the next couple of years. Not sure as to timing, but we are in a lot of robust discussions with regards to taking on partners in some of our platforms.

Okay. George, off the top, you suggested that you are seeing, and I think you pointed more so to Canada, some trade down behavior on behalf of consumers within your segments. Are you noticing in the markets when you're looking for acquisitions, softer valuations for potential files and/or some of the monetizations that you're looking at, some hesitation on behalf of those partners or those potential buyers for those assets?

Yes. So again, Vishal, we want to be careful with regards to trade down by channel, right? We're seeing trade down by channel or customer, right, by customer and channel, right, not trade down in terms of -- generally, people don't change their eating choices in a recession. -- right? They just buy elsewhere where they can get it cheaper, right? That's what we see. So it's really important to convey that and for you guys to understand that, right? So we're seeing some changes in terms of where the consumer shops. But they're still buying the same items they were buying before.

And then Vishal, our margins in those different channels are very similar. So we're relatively agnostic on where we sell that product.

With regards to the M&A environment, I would say that there's a lot of assets for sale. Some of them are owned by PE. Some of them are being sold by large CPG as they're trying to sharpen their portfolios. So there's a lot of assets for sale. We're looking at 2 or 3 opportunities every week. So I would say that leads to a general softening of valuations, not much, but some softening. There's a lot of assets for sale.

Okay. And with respect to your monetization indications, are you seeing a similar softening on your side or not really?

What we've said before, Vishal, is that as you saw with the sale of Shaw Bakers, right, we don't -- we're comfortable with our balance sheet. We don't feel the need to discount anything to sell it, right? Our assets are in good shape. They're doing well. They're growing. They're leading the industry in many areas, including innovation and growth. And again, we expect to be able to get fair prices for them, right? But we're not going to discount them to move them, right? That is not going to happen.

Got it. Okay. And lastly, the nudging up of 2027 expectations, is that on the basis of the expectation of more acquisitions to come? Or is that just on an organic basis of the business currently today?

It's when we last talked about 2027, we talked about meeting or exceeding our targets. Before Stampede, to hit our -- at least our sales target, not necessarily EBITDA target, hit our sales target, we needed to complete an acquisition. With Stampede now completed from here to the end of '27, we'll hit our targets just organically. We don't need to complete any more acquisitions. That's really the key message we're trying to say.

The next question comes from Michael Glen with Raymond James.

Can you -- Will, can you just characterize the organic volume growth in Q2? Should we expect a similar level? I know you gave the back half of the year color, but on Q2 itself, should we expect a similar level to Q1 given what you're seeing?

Q2 is -- like Q1 is generally a slower quarter for seasonal purposes, and it's just tougher to grow in for that same purpose. So we do see -- we do expect to see some pickup in Q2. It will be a bit stronger, but it's not going to be as strong as we originally expected because of the LTO issue that we've been talking about, but it will be stronger than Q1.

Okay. And then just carrying that over to margins, we should expect that margins in specialty follow a similar cadence to how we model the organic volume growth through the year?

Correct. Absolutely. The biggest -- now that most of our pricing is where it needs to be, like I say, a little bit more work to do in Q2, but most of it is where it needs to be, assuming there's no crazy inflation in Q2, but we sort of continue beef, we do expect to be inflation, but mildly. Under those assumptions, then the biggest driver is going to be contribution margin growth, i.e., sales growth. And we've talked about it. Our contribution margins in the Specialty Foods Group are anywhere from some -- a low on some of our co-pack business of 20% up to as high as 40% in certain categories. So that is the big driver of that expansion in our margin.

Okay. And then just coming back to some of the items discussed in the release itself in terms of the asset sales or the partnerships and the M&A and then the leverage targets themselves, how do we think about all of these items in conjunction with one another? Because you're talking about hitting leverage of 3x in -- by mid-2027. But at the same time, you're referencing the M&A environment and the asset monetization process. Like I'm just trying to think for myself how this all comes together.

Yes. No, fair question, Michael. Let's be clear. We expect to hit our 3:1 or better total debt-to-EBITDA ratio target by early to mid-2027. And the only asset dispositions built into that is the sale leaseback I talked about earlier. Outside of that, it's only through growing our free cash flow and paying down our debt and growing our EBITDA, which favorably hits the ratio, obviously. There's no business dispositions built into that target. Anything we do on that side will only accelerate it, how quickly we achieve it.

Okay. And is that a firm target to hit before you look at M&A or an M&A opportunity could come in before that?

No, no. We'll continue to manage M&A as we've been doing for the last year, 1.5 years. And that is any transaction we do will be structured that it either doesn't hinder or helps us achieve that target. So we've been doing our transactions with some contingent consideration, maybe issuing some shares to the ownership group and using other mechanisms to make sure that any acquisitions we do not put us behind schedule in achieving that target.

The next question comes from Derek Lessard. from TD Cowen.

I just want to follow up on your last comment. I do think it's the first time, though, that you have given a time line on getting below that 3x leverage. I was just curious on how much visibility you have on that time line.

Yes. Again, I think us giving it -- we've had that objective for a while now. But we wanted to see a few of these pieces fall in place like the recovery for the beef inflation, just the cadence of the growth in our various initiatives, U.S. initiatives and particularly, the stability of the Canadian market. We just -- we have more confidence now, and that's why we started communicating it as a specific target.

Okay. That's fair. Maybe just to follow up on George's working capital question way back. The $96 million increase in inventories due to Stampede, do you expect that to start reversing in Q2?

Well, I want to be clear on that $96 million, just so in case somebody starts crunching the math, it's $56 million in actual inventory increases and then the balance is prepaid inventory for international shipments. So it's all inventory, but it's not necessarily in the inventory bucket. Just to make sure anyone sort of checking all the details, they're trying to figure it out. So the net impact is the $96 million. So in terms of how that unwinds, yes, it should start unwinding in Q2 and Q3 accelerating. Q4 then by that point, I would expect they're through most of it, and they're actually starting to buy to support the sales programs at that part. The strategy is always the beef market peaks in Q2, Q3, the summer months growing, all that stuff. If you look at any charts of the key beef cuts they use, you'll see that sort of goes up. It has a traditional seasonal cycle of increasing in Q2, Q3 and then coming off in Q4. So that is what the buying is meant to do. So Q2, Q3 is when it will all be used up or the primary -- most of it used up.

Okay. That's helpful. And just one last one for me. And again, strong, I think, considering that you were lapping a tough comp or promo comp last year in the U.S. at 10% organic volume growth. Just do you have a sense of what it would have been excluding that promo?

Yes. So yes, I do. I think it turns out -- our culinary -- Custom Culinary Solutions growth would have been pretty close to 6% versus a 1% contraction. And then overall, I think that put us at about 12% for the entire U.S. initiative group. So relative to last -- and again, this is really important to understand when you're looking at this metric is you have to look at it on a year-over-year basis, not a quarter-over-quarter basis just because of the seasonality of the business. So on a quarter-over-quarter business, you're looking at 9.7% last year, 9.9% this year including the impact of that customer initiative. And then normalizing for that, you're probably at that 12% to 13%. So showing good momentum year-over-year in that growth rate.

The next question is a follow-up from Kyle McPhee from ATB Cormark.

Are you able to give us some color on Stampede's EBITDA margin in Q1 just to get a feel for how quickly their margins are normalizing higher and kind of allow us to feel out the Specialty Food margin with and without that mix impact? I assume they're taking price to offset beef inflation like you are, but any color appreciated.

Yes, yes. They're around the 9%, a little over 9% cow. So they are below the average -- and we knew that, right? That was one of the reasons why our 10% EBITDA target is a little bit behind schedule is just the mix with Stampede coming into that mix. But yes, so around 9%, a little over 9%.

[Operator Instructions] Next question comes from Ryland Conrad with RBC Capital Markets.

Just to start off, I know last quarter, you acknowledged that beef pricing was set a bit below the absolute peak. So I guess heading into the growing season, could you just give us a sense of how much of that buffer remains in your current pricing versus your beef input costs?

You should be -- like the seasonality is built into the pricing structures, right? So we don't look at that seasonality as inflationary. It's really the year-over-year comparison on a quarterly -- year-over-year basis, that's the important number. And we do expect that to continue to be inflationary. Our expectation is mild inflation, but we'll see with all the chaos in the world, who knows what's going to happen.

And it's not one commodity, right? It's many, many commodities. Again, you have the processing cuts and the retail cuts, of course, and then you've got domestic and international, and there's different pricing, right, for different commodities. a lot of the press that you see is based on domestic pricing, which is very different than imports.

Okay. Got it. I appreciate the color there. And then it would just be great to get an update on Stampede and the cross-selling opportunities there and the extent to which we might see any of that kind of flow through later this year or into next year?

Yes, listen, we are -- we couldn't be happier with Stampede. It's a great business, great management team. We've had a number of conferences to introduce the Stampede management team to the Premium Brands ecosystem. We had a leadership conference. We had a procurement conference. We're having an operations conference in about 10 days' time. There has been all kinds of conversations around introducing them to our product lines and vice versa. And they've introduced our companies to some of their customers and again, vice versa. So lots of positive movement there over the last 3 months. And again, we're very pleased with how things are going. Obviously, they're focused on managing their business overall, but we couldn't be more excited about Stampede and having the management team join Premium Brands.

Okay. Great. And then just last for me. In your slide deck, the acquisition pipeline appears to still be relatively thin versus last year. And with your ongoing focus on delevering, can you just share your latest thoughts on M&A in this macro environment? And maybe taking that a step further, if you are still active, should we expect any near-term acquisitions to maybe be smaller tuck-ins rather than, let's say, another Stampede sized transaction?

Yes. So we will always do tuck-ins and smaller acquisitions. We try to support our different platforms with their different initiatives in terms of access to capacity or a product line that they want to sell or they want to get into and those type of things. So we will always be in discussions with regards to the smaller type of acquisitions. As Will said, we're going to be disciplined. To the extent that we do any, they will not stretch the balance sheet in any way. or weaken the balance sheet in any way. So we will do lots of those, and we have a lot of those in the pipeline. Again, we're in a lot of discussions. With regards to anything larger, a lot of stars need to line up for us to do a larger acquisition.

Are we in discussions with regards to larger acquisitions? Of course, we are. We're always in those type of discussions. But again, we don't see anything imminent. But as I said earlier, a lot of stars need to line up for us to do that.

We have no further questions. I will turn the call back over to George Paleologou for closing comments.

Yes. Thank you, Joanna. I just want to say that we have never been more excited about our future, and we look forward to reporting to you on our progress in the quarters to come. As I keep mentioning in my CEO letters, my CEO letter for this year should be coming out in the next couple of weeks. And in my prepared remarks, the food industry is at an inflection point, and consumers are moving away from ultra-processed foods to foods that contribute to their well-being.

Over the past couple of years, we completely transformed our business model, adding substantial capacity to our plant network in the U.S., as you know. Although we have grown a lot in this market over the past 5 years, we still believe that we're -- that our business there is still at its early innings, and we have incredible growth runways ahead of us. So thank you for attending today. Back to you, Joanna.

Ladies and gentlemen, this concludes our conference call for today. We thank you for participating, and we ask that you please disconnect your lines.

Welcome, everyone, to our 2026 first quarter conference call. With me here today is our CFO, Will Kalutycz. Our presentation today will follow the deck that was posted on our website this morning. You can also access it by clicking on the link of our press release issued this morning.

Since our founding back in 2000, 2001, we evolved from a small Western Canadian food company to a much larger organization with operations across North America, producing great foods with clean and natural ingredients and leading positions in many specialty and other on-trend food categories sold in diverse geographies in multiple channels.

Over the past couple of years, we faced not one but many black swan events, including, of course, tariffs, commodity hyperinflation, supply chain disruptions and consumer confidence-related challenges. Despite these headwinds, we continue to pivot, adjust and move forward and always emerge bigger, stronger and more profitable.

This is evidenced by the fact that our sales and EBITDA for the first quarter in 2026 came in at $2.1 billion and $171.5 million, respectively, up substantially from just 2 years ago when our first quarter sales and EBITDA came in at $1.46 billion and $121.5 million. So despite the many challenges we faced over the last couple of years, our sales grew by 40%, while our EBITDA increased by 41.1%.

Today, we're bigger, more resilient and more diversified and combined with our strong culture and our passionate partner entrepreneurs, we're very well positioned to accelerate our growth in North America and in some cases, even globally. We continue to be in the early innings in the U.S. market, and we see many more opportunities to continue to grow our business there organically and by acquisition.

Our strategy continues to be to look for white space opportunities driven by identifying enduring and emerging consumer trends and investing in them before everyone else, and we will continue on this path for the foreseeable future. In most of our core categories like sandwiches, cooked and raw skewers, meat sticks and meat snacks, specialty bakery and much more, we have established ourselves as a leading player either in Canada or the U.S. or both and have scaled them substantially.

Looking forward, we have never been more excited about our product innovation pipeline and our ability to execute it with existing and new customers and channels. We're now on Slide 3, which outlines certain key highlights for the quarter. We executed Specialty's Foods Group's core U.S. growth initiatives well during the quarter, delivering 9.9% organic volume growth, driven by our sandwich, protein and specialty bakery groups, leveraging newly acquired or newly built capacities.

Including acquisitions, Specialty Foods total U.S. sales grew by $363.9 million to $1.5 billion for the quarter, representing 73% of its total first quarter sales. This percentage as well as our organic volume growth would have been even higher had certain national product launches and LTO events with key customers not being delayed to later quarters this year.

In Canada, our Specialty Food segment generated 3.8% organic volume growth and is slightly ahead of plan for the year. We also made excellent progress ramping up new capacities across the company, and we're very pleased to report that our restructuring charges for 2026 will come in substantially lower than in the last couple of years.

As volume, throughput and product mix are optimized, we expect our operating margins to show material improvements, and we will begin to compare favorably with the operating margins at our legacy facilities. Overall, we're pleased with our progress so far, and we're on track to exceed our 5-year plan of $10 billion in sales and $1 billion of EBITDA. We will be providing further details and guidance on our 2027 targets and beyond later this year as geopolitical challenges and related uncertainties begin to subside.

Our CFO, Will Kalutycz, will give you more color on our quarter and our annual results later in the presentation. We're now on Slide 4. As you can see, our acquisition pipeline remains very active, and we expect to complete many more transactions in the months and in years to come. We will, however, ensure that any transactions completed in the near term will not stretch our balance sheet in any way.

We are now on Slide 5. The map on Slide 5 shows the locations of our various operations in North America. The red dots represent the locations of production facilities that were built, added to or acquired over the past couple of years to mainly support our U.S. growth. You can see that we have completely transformed our manufacturing footprint across North America.

We're now on Slides 6 to 8. For this quarter, we're featuring our Kettle business, which is relatively a new business in our portfolio and is part of our custom culinary solutions platform. Its new facility in Auburn, Maine, is nearing completion and will complement its two Canadian kettle facilities that are operating at near capacity.

Once in operation, the new facility will help support our overall growth in the U.S. for many years to come and will leverage its proprietary access to best-in-class inputs from our seafood and protein businesses. Overall, our Kettle business will do in excess of $100 million in revenue this year, selling its best-in-class products globally and is well on its way to becoming our next $1 billion platform. I will now pass the presentation to our CFO, Will Kalutycz, who will update you on our financial results for the quarter. Will?

Thanks, George. Before I begin, I would like to remind you that some of the statements made on today's call may constitute forward-looking information, and our future results may differ materially from what we discuss. Please refer to our MD&A for the 13 and 52 weeks ended December 27, 2025, as well as other information on our website for a broader description of the risk factors that could affect our performance.

Before getting into our results for the quarter, please note that we have accounted for Shaw Bakers as a discontinued operation and accordingly restated prior year's numbers to reflect this. We completed the sale of Shaw in late April. Turning to Slide 10. Our sales for the quarter from continuing operations were a record $2.1 billion, up $405 million or 24.6% as compared to the first quarter of 2025.

This increase was driven by 3 factors. The first and most significant was acquisitions, which accounted for $280 million of the increase. Organic volume growth made up another $95 million of our growth, and selling price increases primarily related to beef-based products contributed $59 million. These increases were partially offset by a currency translation impact of $29 million, resulting from year-over-year strength in the Canadian dollar.

The main driver of our organic volume growth was the continued success of our Specialty Foods segment's U.S. market-focused initiatives in premium protein, sandwiches and artisan baked goods, which generated $72 million in organic volume growth, representing an organic volume growth rate of approximately 10%.

The balance of our organic volume growth came from a variety of successful sales initiatives in Canada, partially offset by the continued contraction of our Jerky sales as this product category is being impacted by several factors, including high beef costs and consumer price sensitivity. Slide 11 shows a breakdown of our core U.S. growth sales initiatives by group.

Note that based on the sale of Shaw Bakers, we have consolidated our previously reported sandwich, bakery and culinary platforms into a single new group called Custom Culinary Solutions or CCS. The Kettle business George mentioned earlier is part of this group.

As you can see, our U.S. protein initiatives generated a very solid 22.7% organic volume growth rate in the quarter, driven by meat snacks and cooked protein. This was partially offset by a small contraction in our CCS group's volumes due to a large limited time sandwich promotion by a customer ending in the fourth quarter of 2025 and the replacement promotions not scheduled to launch until later this year.

Looking forward, we expect our U.S. sales initiatives to continue to be the major driver of our organic volume growth. Turning to Slide 12. Our adjusted EBITDA for the quarter was $171 million, representing an increase of $36 million or 26.7% as compared to the first quarter of 2025. The major drivers of this improvement were acquisitions, organic volume sales growth, past selling price increases coming into effect and improved plant efficiencies.

These are partially offset by higher operating overheads associated with new production capacity brought online by our protein and CCS groups. Slide 13 provides a breakdown of our start-up and restructuring costs by initiative by quarter for the last 7 quarters. You can see, as George mentioned earlier, our start-up and restructuring costs in the quarter fell dramatically as compared to the fourth quarter of 2025.

This is due to most of our major capacity projects now achieving base operating parameters. Correspondingly, we expect our start-up and restructuring costs for 2026 to be dramatically lower as compared to 2025, which was a very busy year for commissioning new capacity and launching new sales initiatives. Turning to Slide 14. Our adjusted earnings and earnings per share from continuing operations for the quarter were $42.6 million and $0.83 per share, respectively, with these metrics increasing by 36.1% and 18.6%, respectively, as compared to the first quarter of 2025.

The improvement in our profitability is due primarily to the growth in our adjusted EBITDA and to a much lesser extent, lower interest rates. These factors were partially offset by higher depreciation, lease and interest costs associated with the major investments we have been making to support our U.S. growth initiatives. Slide 15 shows our annual revenue from continuing operations for each of the last 8 years as well as our 2026 projected revenue based on our guidance of $9.25 billion to $9.55 billion, which is unchanged from last quarter.

You can see that we have a solid track record of consistent growth, generating a 7-year compounded annual growth rate at the end of 2025 of almost 14% or if acquisitions are excluded, 9.6%. Furthermore, in each year, we reached a new record high. Slide 16 shows our annual adjusted EBITDA for each of the last 8 years as well as our 2026 projected adjusted EBITDA based on our guidance range of $870 million to $910 million, which is also unchanged from last quarter.

Similar to our revenue story, we have a solid track record of consistently growing our adjusted EBITDA, generating a 7-year compounded annual growth rate at the end of 2025 of over 13%. Slide 17 shows our project CapEx for the last 13 quarters. You can see that these peaked in 2023, 2024 and have steadily been coming down as we near the end of the major investment cycle we started in 2022.

In the first quarter, we had total capital expenditures of $51 million, consisting of $18 million of major project CapEx, $16 million for smaller project CapEx. Note the combined total of these is shown in the chart and $17 million for maintenance CapEx. Looking forward, we have only $55 million left to spend on major project CapEx, after which we will have invested approximately $1.1 billion in new production capacity capable of supporting over $2 billion of sales growth.

The next slide shows our steady-state free cash flow. We define this as our free cash flow before the impact of capital being invested for future growth. In 2023 and 2024, our steady-state free cash flow was significantly impacted by additional lease and interest costs associated with the major investment cycle we have been in. You can see, however, that in 2025, we reached a key inflection point as we started leveraging the new capacity associated with this investment cycle.

This trend continued into the first quarter and is expected to accelerate through the balance of 2026. This slide also shows another important point, and this is just how steady the core cash flow is from our legacy operations. You can see that despite all the challenges of the past 4 years, our legacy operations continue to generate a solid level of cash flow.

This is why we've been able to declare almost $1.3 billion in dividends since we started paying them back in 2005. The final slide shows our debt-to-EBITDA ratios for the last 5 quarters as well as a pro forma first quarter ratio that reflects the impact of the Shaw Bakers divestiture. You can see that we are making steady progress improving these ratios with the pro forma ratios being within our short-term objectives of 3:1 or better for our senior debt ratio and 4:1 or better for our total debt ratio.

Looking forward, we expect to achieve our longer-term targeted total debt-to-EBITDA ratio of 3:1 or better by early to mid-2027. That concludes our presentation. Please join us on our Q&A conference call later today at 10:30 a.m. Vancouver Time or 1:30 p.m. Toronto time. Thank you.

Good afternoon, ladies and gentlemen. My name is Bruce Hodge, and I am the Chairman of the Board of Directors of Premium Brands Holdings Corporation. I will be chairing this meeting. From coast to coast to coast and country to country, I would like to begin by acknowledging the indigenous peoples of all of the lands that we are on today. Here in Richmond, BC, I would like to acknowledge that we are gathered on the traditional territory of the Coast Salish peoples.

Welcome to the Annual Meeting of the Shareholders of Premium Brands Holdings Corporation, which is being held in person and virtually by webcast. In order to ensure that this meeting covers all required business in an efficient manner, we have prearranged with Will Kalutycz, our Chief Financial Officer; and Gwun Yee, our Director, Legal, to move and to second, respectively, the motions of business at this meeting. This procedure is in no way intended to discourage any comments or questions from shareholders who are present today.

Shareholders and proxy holders who have logged into the LUMI Web platform with their control numbers may ask questions during the meeting by clicking on the Ask a Question button displayed on their screens and following the instructions to submit them in writing. Shareholders who are attending the meeting in person may ask a question directly to the Chairman. Please note that only eligible shareholders are entitled to vote at this meeting. Eligible shareholders are defined as registered shareholders who held their shares in their name at the close of business on Tuesday, March 17, 2026, the record date of this meeting or their validly appointed proxy holders.

If any shareholder or proxy holder who is present in person and has not yet registered their attendance with TSX Trust Company, please do so now. Registered shareholders and duly appointed proxy holders who have logged in the LUMI Web platform with their control numbers and who have not voted and wish to vote during the meeting may vote live throughout the meeting until the voting is closed. Voting is now open online for any eligible shareholders to vote their shares if they have not already submitted a proxy. We encourage you to vote your shares prior to the start of the meeting using the instructions found on Pages 11 through 16 of the management information circular.

If you are an eligible shareholder and attending this meeting in person, ballots for each matter were provided by the scrutineer to all registered shareholders and proxy holders when you registered. If you did not receive ballots upon registration, please raise your hand and the scrutineer will provide them to you now. To complete your ballots, if you are in favor of the motion, mark an X in the box opposite the words for. If you are against the motion or wish to withhold your vote on the motion, mark an X in the box opposite the words against or withhold, as the case may be. Please sign your name and if you're a proxy holder, indicate the name of the shareholder for whom you are a proxy and confirm that the number of voting shares you or your ballot represents.

The ballots will be collected by the scrutineer following the last motion once the online polls have closed. Appendix D of the management information circular sets out the text of 2 shareholder proposals. Proposal 1 requests that the Board adopt and disclose a policy, which provides that if any director nominee received votes representing 20% or more of the votes cast against or withheld in an uncontested election that the Board conduct a formal review of the circumstances underlying such vote and publicly disclose a summary of findings and any responsive actions taken. Proposal 2 requests the Board adopt and disclose a policy requiring the company to regularly disclose individual director voting records on material Board decisions. Material Board decisions are defined in the first paragraph of proposal #2.

Appendix D of the management information circular also sets out the Board's responses to both shareholder proposals and the recommendation that shareholders vote against proposal #1 and proposal #2. The corporation is proposing that formal reading of the 2 shareholder proposals be waived and that both proposals proceed directly to a vote. The meeting will now come to order. Douglas Goss will be acting as Secretary and Counsel for this meeting. Deanna Guilfoyle of TSX Trust Company will be acting as scrutineer.

The notice and access notification to shareholders respecting this meeting was mailed to shareholders of the corporation in accordance with Instrument 54-101 on April 1, 2026, as evidenced by the confirmation of mailing of TSX Trust Company, the registrar and transfer agent of the corporation. The confirmation of mailing of TSX Trust Company will be annexed to the minutes of this meeting as Appendix 1. As you have all received a copy of the notice calling this meeting, I would request a motion dispensing with the reading of the notice.

I move that reading of the notice of the meeting be dispensed with.

I second the motion.

Are there any objections to this motion?

As no objections have been raised, I declare the motion carried. And with proof of service of the notice calling for this meeting duly tabled, I direct a copy of the notice, together with proof of service, be kept by the Secretary with the records of this meeting. The bylaws of the corporation provide that a quorum for the transaction of business at any meeting of shareholders shall be 2 persons present in person or by means of telephonic, electronic or other communication facility that permits all participants to communicate adequately with each other during the meeting. And each entitled to vote at the meeting and holding or representing by proxy not less than 10% of the votes entitled to be cast at the meeting.

I have received the scrutineers' report on attendance and confirm that this criterion has been satisfied. I therefore declare that there is a quorum present at the meeting. The scrutineers' report will be attached to the minutes of this meeting as Appendix 2. I now declare that this meeting is regularly called and properly constituted for transaction of business. There will be an opportunity to ask questions regarding each resolution in turn, noting that if a shareholder is not attending the meeting in person, questions may only be submitted by eligible shareholders or their validly appointed proxy holders -- proxy holder appointees via text through the LUMI AGM platform. Instructions on how to submit your questions can be found on Page 16 of the management information circular.

We would ask that all questions or comments, whether submitted online or in person, be related to the matters currently before the meeting. If there are questions pertinent to meeting matters that are unanswered this afternoon due to time constraints, management will post answers to a representative set of such questions online. As Chair, I will pause for the appropriate amount of time to allow eligible shareholders and/or their proxy holders to submit their questions. Once discussion on all items have been -- of business have been concluded, I will give you a minute to enter your votes and then declare voting closed on all resolutions. The results of the meeting will be released today and will be available on our website. We will run through each of the items on the agenda in turn, responding to questions on each item of business while it is before the meeting. I now declare the poll open on all resolutions.

The next item of business is presentation of the corporation's audited financial statements for the financial year ended December 27, 2025, together with the accompanying report of the auditors. The corporation's financial statements for the financial year ended December 27, 2025, together with the auditor's report thereon and the management's discussion and analysis regarding same were filed on SEDAR on March 19, 2026, and are available for viewing and/or printing at no charge on the SEDAR+ website at www.sedarplus.ca. Copies of the corporation's financial statements, together with the auditor's report thereon were also made available on the TSX Trust Company's website. As you no doubt have had an opportunity to review this material, I would request a motion dispensing with the reading of the financial statements and auditor's report.

I move that reading of the corporation's financial statements for the financial year ended December 27, 2025, together with the auditor's report thereon be dispensed with.

I second the motion.

Are there any objections to the motion?

As there are no objections to the motion, I declare the motion carried.

The next item of business is the appointment of PricewaterhouseCoopers LLP as auditors of the corporation, and I ask for a motion in this regard.

I move that PricewaterhouseCoopers LLP, chartered professional accountants of Vancouver, British Columbia, be appointed as auditors of the corporation until the close of the next annual meeting or until a successor is appointed at a remuneration to be determined by the Board of Directors of the corporation.

I second the motion.

The motion is now open for discussion. You have heard the motion. And if there is no further discussion, I would ask that anyone who has not previously voted their shares in this regard, please do so. The results of this vote will be announced later in the meeting once all of the votes have been tabulated.

The next item of business is fixing the number of positions on the corporation's Board of Directors. I would request a motion in this regard.

I move that the number of directors of the corporation to be elected at this meeting be fixed at not more than 8.

I second the motion.

You have heard the motion. And if there's no further discussion, I would ask that anyone who has not previously voted their shares in this regard, please do so. The results of this vote will be announced later in the meeting once all the votes have been tabulated.

It is now in order to proceed with the election of directors. Management's nominees for election as directors of the corporation are listed on Pages 17 through 30 of the management information circular, together with information on their relevant experience. They are Johnny Ciampi, Thomas Dea, Dr. Marie Delorme, John Hatherly, myself, Bruce Hodge, Hugh McKinnon, George Paleologou and Mary Wagner. The shareholders of the corporation have been asked to either vote for or against their vote for the election of each of management's individual nominees.

Each director elected today will hold office effective as of the completion of this meeting until the close of the next Annual Meeting of Shareholders or until their successor is duly elected or appointed, unless their office is earlier vacated in accordance with the articles of the corporation or unless they become disqualified to act as a director. Proxies have been received sufficient to elect all of management's nominees. If any shareholders present have other nominees they wish to propose for consideration, the Board would be pleased to receive their names for consideration for future elections.

In light of this, are there any further nominations? Okay. I now declare the nominations closed.

I move that Johnny Ciampi, Thomas Dea, Dr. Marie Delorme, John Hatherly, Bruce Hodge, Hugh McKinnon, George Paleologou and Mary Wagner be appointed as directors of the corporation to hold office until the close of the next Annual Meeting of Shareholders or until each of their successors is elected or appointed.

I second the motion.

You have heard the motion, and I would ask that anyone who has not previously voted their shares in this regard, please do so now. The results of this vote will be announced later in the meeting once all of the votes have been tabulated.

The next item of business is approval of the advisory resolution respecting the corporation's approach to executive compensation. As outlined on Page 9 of the management information circular, the Board, through the Compensation and Human Resources Committee is responsible for formulating and monitoring the effectiveness of the corporation's executive compensation. The Board believes that the corporation shareholders should have an opportunity to express their opinion on the corporation's executive compensation program by voting for or against the resolution as set out on Page 9 of the information circular.

As this is an advisory vote, the results of this vote will not be binding upon the Board. However, the Board and the Compensation and Human Resources Committee will consider the outcome of the vote as part of their ongoing review of the corporation's executive compensation program. In order to meet the requirements of the Canada Business Corporations Act, this resolution must be passed by a majority of votes cast by the shareholders of the corporation. As you have all had a chance to review the resolution prior to this meeting, I would request a motion dispensing with the formal reading of this resolution.

I move that formal reading of the resolution approving the corporation's approach to executive compensation found on Page 9 of the management information circular be dispensed with.

I second the motion.

Are there any objections to this motion?

As there are no objections to the motion, I declare the motion carried. I would ask that anyone who has not previously voted their shares regarding this resolution, please do so. The results of this vote will be announced later in the meeting once all the votes have been tabulated.

The next item of business is consideration of the shareholder proposal #1 as set out forth in Appendix D of the management information circular. As you have all had a chance to review the shareholder proposal #1, I would ask a motion dispensing with the formal reading of shareholder proposal #1.

I move that formal reading of shareholder proposal #1 found in Appendix D of the management information circular be dispensed with.

I second the motion.

The Board of Directors carefully considered shareholder proposal #1 and on the basis of their review and for the reasons outlined in Appendix D, the Board recommends that shareholders vote against this proposal.

The next item of business is consideration of shareholder proposal #2 as set forth in Appendix D of the management information circular.

I move that formal reading of shareholder proposal #2 found in Appendix D of the management information circular be dispensed with.

I second the motion.

The Board of Directors carefully considered shareholder proposal #2. For all of the reasons outlined in the response to proposal #2, the Board of Directors continues to recommend that shareholders vote against shareholder proposal #2. I would ask that anyone who has not previously voted their shares regarding either shareholder proposal #1 or shareholder proposal #2, please do so at this time. The results of this vote will be announced later in the meeting once all the votes have been tabulated.

I would now advise that we are closing the polls. It is 2:00 p.m. Pacific Time. I will close the polls with respect to all resolutions in 30 seconds to allow all online votes to catch up.

[Voting]

The online polls are now closed. The scrutineer will now collect all the ballots. While the ballots are being tallied, we will receive a brief update on the corporation's operations from George Paleologou, our President and Chief Executive Officer; and Will Kalutycz, our Chief Financial Officer.

Thank you, Bruce, and welcome, everyone, to our 2026 AGM. Our CFO, Will Kalutycz and I are going to take you through a formal presentation followed by Q&A. On Slides 2 and 3, we have our standard disclaimers as usual. Slide 4, our sales for fiscal '25 came in at a record $7.5 billion, up from $6.5 billion in '24 and $182 million back in 2004 when we started this journey. Our guidance for 2026 projects our revenue to be in the $9.25 billion to $9.55 billion range and includes Stampede Culinary Partners, which was acquired on January 4 this year.

Our free cash flow per share was $6.60 per share for the year. We're making great progress towards our 5-year targets, and we're confident that including the acquisition of Stampede and after the sale of Shaw Bakers, we will exceed both revenue and EBITDA targets for '27 of $10 billion and $1 billion in EBITDA, respectively. We have shared some of the value created over the years by returning over $1.3 billion of capital back to our shareholders as dividends.

We're now on Slide 5. We remain true to our vision no matter the black swan events that come our way. We invest in entrepreneurial food companies run by great people that are making delicious nutrient-rich products with a passion for their communities and what is best for our planet. All of our investments and capital allocation decisions are consistent with this vision.

Slide 6. Despite the recent weakness in our share price, we have delivered a 16.5% compound annual return to our long-term shareholders since 2004 through dividends and capital appreciation. We're now on Slide 5 (sic) [ Slide 7 ]. We invest capital in targeted segments of the food industry and help to bring transformational change to the businesses we invest in and their industries. We partner with talented people, and we support them over the long term as they transform their good food businesses into great food businesses.

Slides 8 and 9. We have been executing our core strategies as listed on Slide 8 for over 20 years now. And our growth, as shown on Slide 9, speaks for itself. Since 2004, our revenue has grown 37fold. And given our recent capital investment program and as demonstrated by our recently reported results, we expect this growth to continue and even accelerate in the future.

Slide 10. Our sixth ESG report is due to come out later this year. We're making good progress in all areas of ESG, and we will continue our ESG journey as it is based on sound business and ethical principles. In our view, aspiring to make the world healthier and a better place is a good thing. We're very proud to be producing authentic food that is healthy, nutrient dense and minimally processed.

Now on Slide 11. These are some of the resources and services that we bring to our new partners that join the PB Ecosystem. All resources and services are offered to our partners free of charge.

We are now on Slide 12. Our global supply chain is shown here on Slide 15 (sic) [ Slide 13 ]. Our supply chain teams travel the world, looking for partners that share our values, and these relationships are leveraged for the benefit of the entire PB Ecosystem. On this slide, the map shows the locations of our various operations in North America. Our U.S.-based sales and footprint continue to grow. For Q1 '26, sales of our U.S.-based businesses comprised 73% of the sales of our Specialty Food division, up from 68% in Q1 '25 and 62% in Q1 '24. We expect this number to continue to grow substantially. The red dots are facilities that we have constructed, added to or acquired in the past couple of years. You can see clearly here that over the past couple of years, we have completely transformed our manufacturing footprint.

Slide 14. We remain active on acquisitions. Our acquisition pipeline remains full, and we're in many discussions and conversations with companies that wish to partner with us or join our unique ecosystem. In early 2026, we completed the acquisition of Stampede, which was our largest acquisition in history.

Slide 15. This slide shows you the size of each one of our platforms. 3 of our 4 platforms now exceed $1 billion in sales. Slide 16. We have unparalleled knowledge of the food space at the senior management level. We know that we're being subjective on this point, but we're certain that our deep bench and extensive experience in the food business is second to none.

In Slides 17 to 20, this year, we are featuring our Kettle and our Stick businesses. Our Kettle business sells soups, sauces and dips globally and is currently expanding its manufacturing footprint in the U.S. Our Stick business leveraged new capacity we've added last year in Canada and the U.S. to successfully execute the largest launch in our company's history.

I will now pass it to Will for the financial part of the presentation.

Thanks, George, and welcome, everyone. Turning to Slide 22. This chart shows our annual revenue for each of the last 8 years as well as our 2026 projected revenue based on our guidance of $9.25 billion to $9.55 billion. You can see that we have a solid track record of consistent growth, generating a 7-year compounded annual growth rate at the end of 2025 of almost 14% or if acquisitions are excluded, 9.6%.

Furthermore, in each year, we achieved a new high with our 2025 sales coming in at a record $7.5 billion, as George mentioned earlier. These results are despite facing many significant challenges over the years, including the pandemic, recessions, high inflation, trade disputes and various industry-specific issues. Looking out beyond 2026 to 2027, which is the last year in our current 5-year plan, we are expecting to exceed our revenue target of $10 billion through a combination of organic growth and our recent acquisition of Stampede Culinary Partners.

Slide 23 provides a breakdown of the drivers of our growth in 2025. Organic growth made up $661 million of the increase, consisting of $463 million in volume gains, representing an organic volume growth rate of 7.6% and $198 million in pricing. Acquisitions were the other major factor, which contributed almost $300 million to our growth last year. The major driver of our organic volume growth was our various protein sandwich and baked goods initiatives in the U.S. market, which generated $370 million of growth, representing an organic volume growth rate of 14.8%.

As a result of our continued strength in this market, in 2025, it accounted for almost 67% of our Specialty Foods segment's total sales. We also generated $103 million of organic volume growth in the Canadian market and $19 million of growth from a variety of other initiatives, including our Lobster product strategies. Partially offsetting these gains was a $29 million decrease in our Turkey sales as this product category continues to be challenged by several issues, including high feed prices and consumer price sensitivity.

Slide 24 shows our annual adjusted EBITDA for each of the last 8 years as well as our 2026 projected adjusted EBITDA based on our guidance range of $870 million to $910 million. Similar to our revenue story, we also have a solid track record of consistently growing our adjusted EBITDA, generating a 7-year compounded annual growth rate at the end of 2025 of over 13%. Furthermore, in each year, we also achieved a new record high, including in 2020 when the pandemic caused significant chaos in our industry, albeit the 2020 year-over-year increase was modest.

For 2025, our adjusted EBITDA is a record $672 million, resulting in an adjusted EBITDA margin of 9%. Despite our consistent posting of record results, our adjusted EBITDA and margins have been negatively impacted in recent years by 2 major factors. The first, which I will talk more about later in the presentation, is the major capital investment cycle that we embarked on in 2022. This has resulted in significant increases in production overhead and other ramp-up costs in advance of leveraging the new capacity to grow our sales and adjusted EBITDA. The second factor is a number of very unusual events that I mentioned earlier. These events, all in a very narrow time frame added a lot of the noise to our results, which were already being impacted by our major capital investment cycle.

As we look forward to 2026 and 2027, we expect the growth in our adjusted EBITDA to accelerate as we leverage new investments in production capacity and emerge from the recent unusual challenges. Correspondingly, we are expecting to exceed our 5-year planned adjusted EBITDA for 2027 of $1 billion.

This next slide shows our adjusted earnings and EPS for each of the last 8 years. Here, the story gets a little more complex. Unlike the consistent trends in our revenue and adjusted EBITDA, our earnings have been much more volatile as the capital investment cycle I mentioned earlier hit our earnings even harder than our adjusted EBITDA because of incremental depreciation, lease expense and interest. High interest rates at the peak of our investment cycle further compounded the situation. The positive news is the inflection point you can see in 2025 with our adjusted earnings and EPS increasing by 15.8% and 14.8%, respectively. As we look forward and continue leveraging our expanded capacities, we expect this positive trend to accelerate.

The next 3 slides show why for the last 4 years, our net free cash flow has been negative and why we are expecting this to reverse to being significantly positive in 2026 with this trend accelerating in 2027. We define net free cash flow as our free cash flow after deducting investments made to generate future incremental cash flows. These investments consist of capital expenditures to support future growth, which we call project CapEx, start-up and restructuring costs needed to bring new investments up to base operating parameters and incremental net working capital needed to support growth.

This first slide shows our project CapEx for the last 12 quarters. You can see that these peaked in 2023, 2024 and have steadily been coming down as we near the end of this investment cycle. At the end of 2025, we had only $67 million left to spend on major projects, after which we will have invested approximately $1.1 billion in new production capacity capable of supporting over $2 billion of sales growth.

Turning to the next slide. This slide shows our start-up and restructuring costs over the last 4 years, which totaled almost $177 million. At the end of 2025, almost all of our major projects were achieving base operating parameters, which means no more start-up and restructuring-related costs. And for those projects that weren't, we're close to doing so. Correspondingly, we expect our start-up and restructuring costs for 2026 to drop dramatically.

Slide 28 shows our investments in net working capital over the last 4 years, which totaled $523 million. Looking forward, we expect the growth in our net working capital to slow significantly now that the volatility associated with new product launches and incremental production capacity is built into our net working capital profile. So as you can see from the last 3 slides, over the last 4 years, we have invested approximately $1.8 billion in the future, which is why we have been generating negative net free cash flow. This slide shows that we are starting to generate a return on this investment.

The chart shows that what we define as our steady-state free cash flow. This is essentially our cash flow before the impact of capital being invested in future growth. Similar to what you saw in our adjusted earnings slide, 2025 shows that we are at a key inflection point with our steady-state free cash flow and steady-state free cash flow per share increasing by 17.5% and 16.7%, respectively. As we leverage our new production capacity to grow our sales and adjusted EBITDA, we expect these trends to accelerate. Furthermore, the combination of the acceleration of our steady-state free cash flow and us nearing the end of our investment cycle is going to result in us generating significant net free cash flow.

This slide also shows another very important point, and this is just how steady the core cash flow is from our legacy operations. You can see that despite all the challenges of the past 4 years, our legacy operations continue to generate a solid level of cash flow. This is why we've been able to declare almost $1.3 billion of dividends since we started paying them back in 2005. For 2005, we maintained our dividend rate at $0.85 per share per quarter or $3.40 per share annually.

This final slide shows our debt-to-EBITDA ratios. During 2025, we made some progress on improving these. However, the impact of a major Avian influenza outbreak earlier in the year and record beef input costs in the later part of the year resulting from major changes to U.S. trade policies put us a bit behind plan. We estimate the impact of these events on our adjusted EBITDA resulted in our ratios being approximately 0.2 turns higher than they would have been otherwise. We also show on a pro forma basis the impact of our debt ratio -- on our debt ratios of our recent sale of Shaw Bakers, which closed in 2026. Looking forward, we are targeting to get our total debt-to-EBITDA ratio to 3.0:1 or better by early to mid-2027.

This concludes the formal management presentation. I will now turn the meeting back to Doug.

Thanks, Will. There isn't any questions online. And if there isn't any questions here, seeing none, I'll proceed to let you know what the vote is. The shareholders have voted by a margin of 98.48% to fix the number of directors at 8. And accordingly, effective upon completion of the annual meeting, each will hold office until the next Annual Meeting of Shareholders or until their successor is duly elected or appointed unless their office is earlier vacated in accordance with the articles of the corporation.

Accordingly, I congratulate each of Johnny Ciampi, Thomas Dea, Dr. Marie Delorme, John Hatherly, Bruce Hodge, Hugh McKinnon, George Paleologou and Mary Wagner on their reappointment to the corporation's Board of Directors. I'd also advise that shareholders have approved the corporation's approach to executive comp by margin of at least 98.4%, which meets the required standard for the passage of the resolution. I declare the resolution to be carried and ask that a copy of the resolution be attached to the minutes.

The shareholders have also rejected shareholder proposal #1 by a margin of at least 87.3%, which means the majority standard required for passage of this resolution has not been met. The shareholders have also rejected shareholder proposal #2 by a margin of at least 99.1%, which means the majority standard required for the passage of this resolution has also not been met. A full complete report of voting results with respect to this meeting will be prepared and filed on SEDAR+ later this afternoon.

Bruce, I'll turn it back to you.

Thanks, Doug. I would ask the Secretary of this meeting to attach the direction of votes received by proxy from TSX Trust Company to the minutes of this meeting as Appendix 4.

Before we wrap up today, I'd like to take a moment to recognize 2 valued members of our Board who are stepping down, Kathleen Keller-Hobson and Sean Cheah. Kathleen, after 11 years of dedicated service, we want to thank you for the incredible impact you've had on this organization. Your background as a lawyer and your deep expertise in corporate governance has helped shape how we operate at a fundamental level. You brought clarity, rigor and best practices to the Board, and your influence will continue to be felt long after your departure. We're truly grateful for your commitment and the steady guidance you have provided over the years.

Sean, thank you as well for your 6 years on the Board. You brought thoughtful perspective and energy to our discussions, and we've all benefited from your contributions. While we're sorry to see you go, we're also excited for what's ahead. Your decision to pursue building a company focused on healthy organic baby food is both inspiring and very much in line with your entrepreneurial spirit. We wish you every success in the next chapter. Both of you, thank you for your time, your insight and your dedication to this organization. It's been a privilege to work alongside you, and you leave with our sincere appreciation and wishes.

If there's no further business to be brought before the meeting, I would ask for a motion to terminate the meeting.

I move that the meeting be terminated.

I second the motion.

Are there any objections? As there are no objections, I declare the motion carried. I declare the meeting terminated. Thank you for all participating in the meeting today.

Good morning. Ladies and gentlemen, welcome to the Premium Brand Holdings Corporation Fourth Quarter 2025 Earnings Conference Call.

[Operator Instructions]

And also note that this call is being recorded on Thursday, March 19, 2026. Our speakers today are George Paleologou, CEO and President of Premium Brands; and Will Kalutycz, CFO of Premium Brands. At this time, I would like to turn the call over to George. Please go ahead.

Thank you, Sylvie. Good morning, and welcome, everyone, to our 2025 Fourth Quarter and Year-end Conference Call. With me here today is our CFO, Will Kalutycz. Hopefully, you've had a chance to listen to our prerecorded remarks posted on our website this morning. We will now take your questions. Back to you, Sylvie.

[Operator Instructions]

First, we will hear from Martin Landry at Stifel.

I would like to start with your revenue guidance for '26. You're calling for revenues of $9.4 billion at the midpoint. It represents a revenue growth of around 26% year-over-year. So I was wondering if you can talk about what type of cadence do you expect on a quarter basis? Is this going to be -- is this revenue growth going to be evenly distributed? Or is it going to be a little bit more front-end loaded?

Yes. It will be -- again, a lot of our growth is ramping up. So you'll have a sort of a ramp-up across the year, Martin, and then within that, there's obviously the seasonality, Q1 being the softest quarter of the year and Q4 being the next office and then 2 and 3 sort of being our strong seasonally strong quarters.

Okay. Just to be clear, Will, does that mean that the revenue growth is going to be more -- is going to be higher in Q2 and Q3 when we look at this on a year-over-year basis.

In dollar terms, absolutely.

Okay. Okay. And then what does the EBITDA cadence looks like/Again, when we look at your EBITDA dollars growing on a year-over-year basis, when do you expect the biggest growth? Is this going to be back loaded given the commodity cost pressure you've had in H2 of '25.

Yes. We're -- like on a product basis, by Q2, we're expecting -- and we're talking mainly 2 groups, our protein group and our lobster group. So I'll separate those and talk about them separately. On the protein group, by the end of Q1, we expect their margins on a per product basis to be back to normal levels. Our final price increases will have impacted by the end of the quarter. So that noise is kind of not going into Q2. So on the specialty food side then, the rest of the margin expansion is primarily driven by volume growth, which will be the major driver.

In terms of the lobster group, 2025 was an incredibly tough year in that segment with the main fishery. So it's really going to be a factor of how the fishery goes. We're a little more optimistic. Q1 will still be tough because we're carrying through the issues of 2025, but we'll be through all of our high-cost inventory by that point. And so again, on the Premium Food Distribution group side or in the Lobster Group, in particular, you should start seeing normalization margins. And so their margins getting back to more normal levels in Q2 and then being steady for the rest of the year.

And what he meant, Martin, is Q1 will be tough for the lobster group, not Premium Brands.

Premium rest food distributions.

With this part of it, yes.

Yes. Okay. So in terms of EBITDA cadence, a little of a slower start that ramping up starting Q2.

Exactly.

Because of seasonality, mainly Martin, right? Because [indiscernible] seasonality and the beef costs are going to be -- and the lobster cost.

[indiscernible] which you've explained.

Yes.

Next question will be from Derek Lessard at TD Cowen.

Congrats on the quarter given the volatility that's going on out there. George, I just want to hit on your comments from the call this morning. You talked about a shift or a consumer shift to buying lower cost -- some of the lower-cost products. Could you maybe talk about that shift and how that impacted you? And what product categories were you referring to specifically?

Derek, what specifically are you referring to in my prepared remarks. I was I think that the point there is that there is definitely a shift away from purchasing ultra processed foods. I think you're seeing it in all the stats that's coming out. Again, the new U.S. food guide, obviously, a narrative from there talks a lot about it. In the U.S., it's quite significant because a lot of the school lunch programs the food programs for the military and the SNAP program as well is changing. A lot of ultra processed foods do not qualify under those programs. So again, there is definitely a shift towards more wholesome foods with more natural ingredients, definitely a shift towards protein particularly clean protein, which is where we play.

And we're seeing that with all the requests we're getting from different customers to provide them with innovation sessions around our products, right, which is what is driving our growth.

Yes. Sorry, sorry, George. Maybe I wasn't clear. I think I was talking -- I'm talking more about the challenging consumer backdrop and if there's been any trade down?

Again, Derek, as we've said before, from our perspective, over the past year or so, we have seen changes in the channels that the consumers are shopping for their food, right? For example, there's been some transition from mainstream retail to club, for example. Again, you're seeing it in some of the reported numbers from some of the publicly traded companies in the space. We're not seeing a lot of changes in regards to the way the consumer eats. The trends that we've been investing in -- again, what I mentioned earlier in terms of eating cleaner food, less ultra processed foods. So those are continuing. I was just at a conference in Washington, D.C., which showed all the statistics from '25. And all of the trends, 9 out of 10 leading growth categories in all of retail are protein and meat related, 9 out of the 10 right? So basically, the trends that we've been talking about are continuing.

And Derek, I would add, it's interesting because where we're seeing the most in our business and that comment is on the food service side of things, we are seeing a much more price-sensitive consumer. Our food service customers are looking for solutions, price-based solutions and that's historically what we have seen in economically challenged times. And then correspondingly, we generally see some pickup or benefit on the retail side as people eat out less. The interesting part and what's driving all our growth, all our capital investment has been around the U.S. And at this point, it's primarily a retail strategy. So we're not exposed to that food service sensitivity in the U.S.

Okay. It's top for maybe products like at the [indiscernible] stores, right, the [indiscernible] priced?

Yes, yes. Although our biggest exposure there is jerky. And you're not seeing that category too well as we called out in our MD&A. And I guess -- and where we are exposed in the foodservice side on the sandwich business and QSR, again, that unique part of the channel seems to be pretty economically solid and sort of that small luxury concept, and it tends to do fairly well or find through these more economic times. And that's what we're seeing play out today.

Okay. And then maybe one final one for me before I requeue. Good progress on the free cash flow. It feels like it all back still a little bit by the working capital. It looks like as you build up your as you build up your programs mostly on inventory. Can we be expecting a release of that cash in the coming quarters and when?

Yes. It's the first quarter in a long time. I can say I'm I'm a little bit happy at the progress we made on inventory because when you dig into it, we build about $70 million of inventory for 3 key protein programs. Our [indiscernible] program, our sticks program and our Kebab program. And it was purposely built to support us through the busy summer seasons. We're building inventory going into those seasons because we can't meet demand with our production capacity if we don't build in the offseason. And so it's a big -- it's a very positive story, the inventory build. You strip that $70 million out, our days purchase in inventory is about 57. And that's starting to get pretty good. A return probably targeting closer to 55, but we're getting very close to targets. So in answer to your question, yes, we should see that free cash flow starting in Q2 as we start to liquidate that inventory.

Next question will be from Michael Glen of Raymond James.

Maybe just to start, Will, can you just give some -- you made the comment on the earlier question regarding the beef price inflation, but are you comfortable like I'm just trying to assess if you look at the USDA data recently, it looks like beef has been moving higher. Like what level of beef price have you embedded into the guidance? And are you comfortable with that level? We're just trying to get an idea of all of that.

Yes. So yes, we definitely expect beef to be inflationary this year. That demand continues to be very strong win corresponding to George's earlier comments on consumer trends. and at the same time, supply continues to be very tight in North America. So we are expecting it to be inflationary, that is built into our guidance. But the issue in the back half of last year and what shocked us so much was what happened with the tariff situation in the U.S. with Brazil. that really created a tremendous amount of volatility that wasn't factored into. Taking out those types of black swan events, we feel very comfortable with the pricing strategies we put in place at this point for 2026.

Okay. And in the third quarter, you provided a figure with specialty gross margin, excluding the higher beef price. Do you have a similar figure for Q4?

Well, it's interesting because that figure, what we did in that figure is we looked at our selling price increases in our protein group of businesses, and we compared that to the increase in beef prices. And we took that nominal difference and that's what we used in the MD&A. What that does not reflect is the fact that that's just a cost recovery. You're still not recovering your margins. And so in Q4, we actually made great progress on our pricing. So when you do that math, it's actually slightly positive. It's about $2 million positive, i.e., our selling price increases, net of commodity and wage inflation was a positive $2 million. But the issue now is our percentage margins still haven't come back because the price increases weren't fully implemented. So it becomes a little more difficult to come up with that number when you're now going from just a cost recovery basis to what the margin should be. So that's why we didn't disclose it this quarter.

And then just on the Shaw divestment, does Shaw get netted out of the reported results at the time of sale, so in 60 days? Or does it get netted out as a discontinued op from the beginning of the year?

Yes. We'll probably -- because it's not material, we're going to argue it's not a discontinued ops. So it will just be netted out from the day we sold and there seems to be a little bit of confusion around the Shaw transaction. So yes, we've excluded Shaw for the 3 quarters of the year. That's about $170 million in sales that we've pulled out of the guidance, if you want to compare it sort of pre Shaw to post Shaw transaction. And on the EBITDA side, for '26, we're budgeting before restructuring costs, about $21 million, most of that being in the last 3 quarters, about $20 million of it being in the last 3 quarters. So we pulled out that $20 million from our guidance. So if you want to normalize the guidance for the Shaw numbers, it's $170 million in sales and about $20 million in EBITDA.

And all the numbers that Will has mentioned, Michael, are in Canadian dollars. There seems to be some confusion in terms of what's U.S. or Canadian in some of the commentary I saw all the numbers you mentioned are in Canadian dollars.

Next question will be from Chris Li at Desjardins.

Sorry, my [indiscernible] might have been a big source of the confusion, I apologize for that. Well, maybe 1 -- I start with the question on the Stampede acquisition. When the deal was first announced, I think you provided some EBITDA guidance for 2026 of around USD 90 million. Just wanted to check in to see if that's still a reasonable outlook. I just asked in the context of your earlier comments around the foodservice channel being a bit more sensitive. I think Stampede is a bit more leverage to foodservice. I know there's some unique advantages, obviously, to that business that may make it more resilient. So I just want to check in to just see the outlook for Stampede is still valid.

Yes. So the actual number -- total number, Stampede was $90 million, and then we had $8 million of synergies built into that number. So a total contribution of $98 million. And we still feel very good about that. The food service exposure, you're absolutely right that, that is a different characteristic of Stampede. That was one of the reasons that attracted to us because it further diversified our cash flows. But it's very interesting because whereas they are seeing. Their customers are seeing some softness in their sales, which is no surprise. But what has been happening is their customers have been coming them to more product solutions, more LTO-type transactions, which they do incredibly well on in terms of their ability to meet what the customer is trying to do. And so yes, that -- if you just looked at 1 SKU within the Stampede business, you might see some softness but they're more than making it up in these other opportunities around LTOs and new product development.

Yes. The other comment I have, Chris, is that they're not just food service. They do a lot of business with club and retail. This is the part of the business, the business that's growing and will continue to grow in the future. And again, based on some of the macro trends that I talked about earlier.

Okay. That's very helpful. And my second question is just again on your revenue outlook. If I look at your Specialty Foods, excluding Stampede, just last year, [indiscernible] organic volume growth rate of almost 10%. When you think about your outlook for this year, are you expecting the [indiscernible] to be similar, like almost 9% to 10%? Or do you expect it to accelerate given you have on the immune program still coming through the year?

For the year, Chris, our organic volume growth rate in the Specialty Foods, I believe, is about little over 8.5% for the year. And it had accelerated through the year. So by the end of the year, we're around the 10%, I believe, for Q4. For 2026, we're expecting an annual rate closer to the Q4 rate. So going from 8.5% to about 10% for the year.

Next question will be from Luke Hannan at Canaccord Genuity.

I appreciate the added disclosure when it comes to ROIC in the MD&A as well. I just wanted to follow up on -- it's mentioned in there, the ramp-up costs that were associated with Shaw. But overall, do you expect that divestiture to be dilutive at all to ROIC in the near term, just given the contribution of margins in bakery and how much higher [indiscernible] development.

Well, it's interesting, Luke. If you separate out show from -- we look at the ROIC on the different groups within the platform, the Specialty Foods platform. So for our bakery platform, you look at ROIC on that business, and it was about 7% this year. But if you strip Shaw out, it's actually 17.5%. Our artisans brand business, which they built -- they were the first plant built in our most recent CapEx cycle. They finish their plant in 2022. And that plant is now coming to close to capacity or at capacity. And so they're hitting out of the part of ROIC. Shaw is still in the early days of the ramp-up, last start-up costs, a lot of things to work out in the new San Leandro plant. So their ROIC has been suffering because of that.

Okay. Got it. And then just for my follow-up here on the thought behind the keeping that minority stake. I mean it would seem like the intention would probably be at some point in time down the road for you guys to divest that as well? Is that...

No, no, let's be clear, that's a great question, Luke. We only own 74% of Shaw. Our partner down in San Francisco owns the other 26%. So we will have fully exited our investment in Sharwood's transaction. So that USD 114 million in proceeds we received. That's for 74% of the business. So you need to divide that by 74% to get sort of a full value of the business concept.

Sure. And then so following on that logic, then so a rough math, I'd say you guys got about 10x for that stake?

Yes. Yes, if you take the $21 million in projected EBITDA for 2026, convert that to U.S. dollars, that's about USD 15 million in EBITDA. You take out -- there's still going to be some ongoing restructuring costs with the business. Yes, we're a little over 10x the multiple.

Not only that, Luke. But again, as you know, we're not a financial investor here. We're a strategic investor. And we found an excellent buyer for the business. And again, there's tangibles and intangibles to this type of transaction. And we're going to work together with the buyer for for me to benefit in the future. So we will be partners with them in the future in our core business.

Next question will be from Ty Collin at CIBC.

For my first one, I'm just wondering if you could provide a little more color around the gross margin decline in the quarter. I know you guys called out a few factors in the MD&A, but I just want to understand what the biggest drivers were there since it sounds like commodity headwinds were actually quite a bit lower sequentially. And just how we should think about that into 2026.

Now Ty, are you looking at consolidated or in the individual segments?

I was referring to consolidated, but yes.

Okay. Yes, yes, because if you're looking at a consolidated basis, the biggest single factor was in our lobster group. Going back to my earlier comment of taking selling prices, less commodity impacts and looking at what that number is, the fourth quarter, you take our selling price increases on our lobster products and take the commodity cost impact, commodity cost inflation on the lobster procurement, that's about -- that was about a $6.5 million hit in the quarter. That was the single largest impact on our gross margins. And then if you look at the Specialty Foods Group, it was my comment earlier. Our protein margins, protein group's margins are still below where they should be. because we're still in the process of realizing on our beef price increases. So that was a contributing factor. But the single biggest one was the lobster issue.

Okay. So it's still more of a -- within specialty because it's still more of a commodity issue rather than plant start-up or any other sort of...

Sorry, sir, that's a great point. Yes, we had about $10 million of incremental overhead costs associated with our Tennessee facility, our various protein lines that have come on and with one other new plant that came on that -- I'm not recalling right now. So yes, you're absolutely right. but partially offsetting that was we had incredibly strong organic volume growth in the quarter, right? Our U.S. growth initiatives hit 18% organic volume growth. So that's helping to cover some of that plant overhead.

Okay. Got it. And then just for my follow-up on the M&A pipeline. So I mean, just based on the debt you put out this quarter, it looks like that's emptied out pretty significantly compared to what it was in Q3. Is that because you're seeing fewer quality opportunities out there? Or does that reflect more of a deliberate decision to kind of take a breath and focus on some other priorities in the near term?

Yes. We are in a number of discussions, Ty, with some excellent companies. I think we're cautious. Obviously, there is a war going on, and we have some concerns around the impact of high gas prices and consumers and those type of things. But certainly, we're very busy. We're always in discussions with companies that we think will complement our our portfolio of food companies. And with regards to that schedule in the deck, we're always very careful because we're a big player now. And a lot of times when we disclose discussions as advanced people speculate us to do. what companies they are. So we're trying to be a little more cautious. But again, we're obviously very acquisitive, and we still -- we're still looking at a number of wonderful opportunities.

Next question will be from Nevin Yochem at BMO Capital Markets.

You've got [indiscernible] on for Steve today. Just a couple of questions from our team. I guess the first is, are you able to provide an update on the major meat stick launch you guys had ramping up how did that progress? Are you fully ramped up now? And then if you're able to discuss initial margins relative to your expectations?

Yes. So in terms of the launch, it's gone extremely well. It's exceeded expectations, our expectations and our customer expectations. So very successful. It's using up a lot of capacity, which is which is a good problem to have, I guess, because we're unable to, in some cases, launch other programs that are in the pipeline. I won't comment about margins because we don't like to do that in terms of specific margins, about specific SKUs for competitive reasons. But again, yes, I think everybody is extremely pleased with the launch.

Yes. And the only thing I'd add, Nevin, is it is a cost-plus structure. So we are on that basis achieving our margins, obviously, because it's cost plus that we expected. The challenge in the quarter with the program though, it's such a big program, and it's impacting several different plants, including our new [indiscernible] expansion. So you probably noticed in the deck, it was by far a significant impact on the restructuring costs in the quarter. So that was one of the challenges of the program because we made it very clear. Every product that went into a store had to be 100% the best in quality. And so that resulted as we're ramping up the program and working through equipment issues and so it resulted in a lot of waste, taking such a strict adherence to our quality standards. The good news is we are now through that. So you're going to see that cost, that restructuring cost for that program drop off dramatically in Q1.

Great. That's good to hear. And a follow-up just on the investment income. It looks like you benefited from a onetime $5 million valuation gain in Q4. Excluding this, it looks like investment income has been consistently in the $15 million to $16 million range per quarter. Is that a fair run rate going into '26?

Yes. Yes, absolutely. And you're absolutely right. That was sort of again that we're not expecting that on a regular basis by any means. And that $15 million or so is a good run rate.

Next question will be from John Zamparo at Scotiabank.

I'd like to get a sense of what level of pricing you've taken on beef products that we'll start to notice in Q1. Without sharing the numbers, I wonder, does it reflect the peak inflation that we saw in the middle of last year or the lower level of year-over-year inflation we saw in Q4. Just wondering what the baseline is that you've based your pricing off?

Yes. It's not the peak, John. We all knew that -- sorry, we didn't know the peak was the peak, but there was a lot of hesitation to price off the peak because it was just so high, and we weren't sure could be sustainable. And in fact, it wasn't. So we priced off below it for most of our business. Now some of our businesses did price off that. They priced -- and they set prices in that chaos. But the reality is our customers now see what's happened, and we'll probably, to the extent that the pricing was so high, give some of that back. But overall, we're priced at a nice point between sort of where we are today in that peak, leaving us some flexibility for, like I say, the expected cost inflation we see for 2026 in the beef category.

The interesting thing, John, as I said earlier, is that despite high beef prices, and these are historically high beef prices particularly with certain cuts. Demand for beef not dollar-wise, but volume-wise, is still going way up. right? This is something that we haven't seen before. Normally, the price of values up substantially the impact the demand for vacant, those type of things. But even if beef prices are historically high, demand in terms of volume continues to increase.

Okay. And then thinking about inflation more holistically, the last time we saw a spike in oil at the start of the Ukraine war, beef costs surged shortly afterwards, I think inflation on some other commodities for PVH increased as well. I'm mindful of the comment in the press release of [indiscernible] beef inflation so far. But what's your expectation on commodity inflation for this year? And what are the implications to BBH if we do see a prolonged period of higher natural gas costs leading to higher fertilizer costs leading to higher feed costs?

Yes. Well, it's an interesting question, John, because the supply/demand dynamics that drive the cost of the raw materials we buy. They're indirectly but not directly impacted by the freight. That more impacts the packers and the farmers' margins, so we're far enough down the channel that it takes a long time until you see any of that kind of impact us. First, what has to happen is there's going to be a cutback in production cut back in process. So our expectations, at least for the near to midterm is other supply/demand and supply/demand dynamics are going to be more important than fuel at this point. Generally, where we see most of the cost and fuel is at least in the short to midterm is more in freight. Freight, if you go back to 2022, '23, we were talking a lot about freight costs as part of the inflation equation that hasn't been a story for the last couple of years. So that's where we do see sort of the more short-term impacts. And it's just not as material to overall margins.

The other thing, John, and you're making a little bit of a circular argument there because ultimately, the best thing about high prices is high prices, right? So there's a point where demand for beef will come down. It hasn't happened yet. But ultimately, if prices for beef continue to go up, there will be a point where demand will go down, and that will bring prices down. right? That's what I kind of wanted to explain earlier, right? The other part is that demand remains high, but beef comes from either domestic sources or from imports, right? And imports tend to be cheaper and the U.S. now has opened up to more imports, right? So the more supply that should keep prices lower rather than higher. So there's a number of dynamics there that will impact price.

Okay. And if I could squeeze one more in. I know you just sold 1 business, but I wonder if we can get an update on your plans to divest of other noncore assets. This is something that's been discussed in the past. But I don't know if there is anything you can say, but is there anything you can share about those plans or expected time line for completion?

Yes. We have a number of -- we're in a number of discussions, John, with regards to exiting investments and businesses that we deem non-core, we expect to close some in some more transactions in '26. We don't know exactly when, but we're definitely in a number of advanced discussions in that regard.

Next question will be from Vishal Shreedhar at National Bank.

Related to the specialty foods and the organic volume growth that we quoted, my assumption based on discussions through the year was the anticipated acceleration through the year, culminating in Q4 is a new stick program launch, but we saw the growth kind of sequentially slow, albeit, still strong. And within the process in particular, I was hoping if you could comment on that or if there was something that happened probably through the quarter that may changes trajectory?

No. If you look year-over-year for quarters, sequentially, it did get stronger every quarter, the organic volume growth rate for the group. On a quarter-over-quarter basis, the only thing without drilling into a little bit more would be seasonality, Vishal, be the only kind of factor maybe to consider.

Yes. The other factor, we shall see absolute timing of launches, right? These are big, big launches. And the timing makes a difference in terms of what we move forward.

I see. Okay. So regarding from Q3 to Q4, the seasonality would have been the impact that we should consider in terms of the change in trajectory?

Yes, Yes. It's really the acceleration is sort of on a year-over-year quarter comparison.

Right. But Q3 would not attack the large new [indiscernible] launch, it started in Q4 partly through, is that correct?

Yes. correct.

Yes, correct, Vishal. It was delayed to the fourth quarter. And it was partway through the fourth quarter that it launched. It wasn't the full quarter.

And was launched in Canada in Q1. So it did not launch in Canada until Q1 '26.

Okay. And with respect to, Will, the comments that you provided earlier on in this call and you said you anticipate an acceleration of trends through the year recognizing seasonality in Q2 and Q3, is the suggestion then that we should anticipate Q1 organic volume growth to slow before we constitute through Q1, Q2 and Q3. Q1 slow sequentially, albeit store growth.

Yes. Again, on a year-over-year basis, Vishal, it will accelerate on a quarter-over-quarter basis, I'd have to go back. I'm not sure what the answer to that would be. I would suspect so because they're both seasonally slow quarters. And like I said, the -- 1 of the biggest drivers of our growth has been the stick launch and that was partway through Q4. So we'll get a full quarter in Q1.

Right. Okay. And you commented on the restructuring costs, the $25 million. And how should we think about the restructuring costs we're building through the year and they are larger than they usually happen with PVH and those are adjusted out, I understand. But in 2026, how should we think about the restructuring costs are going to be incurred. Do you have a sense in your plan?

Yes. Yes. Q4 came in higher than our original plan. We had 2 major issues that caused the variance. So we've got a slide in the deck that outlines sort of the individual initiatives. Just the labor transition issues at our Shaw facilities in San Francisco, the degree of challenges around that wasn't anticipated. So that was about a $5.7 million variance in the quarter. As you know, Shaw bakers has been sold. So we're not going to see -- we'll see some in Q1, but we won't see any more after that. And then the other one was the product launch, the stick product launch, which again, to keep our product quality standards at the level we wanted resulted in a tremendous amount of waste. That waste was higher than expected. So those 2 issues are essentially gone now. So those are the big variances, the big numbers in the quarter. We are expecting for 2026 a much lower number.

You got a little bit of carryover on the sticks. The Tennessee project is now complete. Our pillars project is making some good progress now. So we expect that's the only one to go to in Q2 and then after that, it's sort of some miscellaneous projects. So it will certainly be a much, much lower number in '26 than it was in '25.

Next question will be from Chris Li at Desjardins.

Maybe just a question on leverage. I think pro forma Stampede, your leverage is around 3.9x, and you're still targeting that to get to the low 3s, I think, by end of this year, early 2027. Can you just walk us through kind of what are the key drivers that will get you there? And how much visibility do you have to achieve that target?

Yes. So yes, in terms of getting to our targeted total debt to EBITDA ratio of 3 or that are absolutely still targeting end of '26, early '27. That has not changed. Again, the key drivers are, first off, leveraging the capacity we've invested in. So growth in our EBITDA. That's going to be the biggest single driver. There will be some debt paydown because you're going to see a nice improvement or a significant improvement in our free cash flow. The saw transaction takes our turns down about 0.2 to 0.3 turns. So that's an immediate benefit when we close that transaction. Those are probably the big immediate factors driving it.

And some of the other noncore...

It does happen. That's -- if there's another transaction that would only accelerate it. But just based on our modeling and our assumptions and status quo, with the transactions that have happened so far, that's the plan, Chris.

Okay. Yes, that was my other question was is predicated on more divestiture, but it doesn't sound like...

No, absolutely not. That would only accelerate it.

Okay. And then George, thanks for the update on sort of your thoughts around non-core assets. That was helpful. I know another group of businesses that you look at as you kind of call it, strategic assets. Any sort of update on that in terms of monetizing some of those assets this year?

Again, Chris, I would say that, as you could see, we are growing substantially in the U.S. We still think that we're in the early innings in the U.S. where in some areas now, we've added a lot of capacity, and we are looking for more capacity or examples in sticks as we speak. And so we're always trying to sharpen our focus. We like the opportunities we see in certain parts of the business. And we're looking at our overall business a little differently. But I can't say more than that. Again, really excited by some of the growth opportunities we're seeing organically and by acquisition in the U.S. market.

Okay. So I was not clear. I was thinking more just in terms of you guys maybe partnering up with someone. Is it like a supply chain partner where you can allow you to take some of the [indiscernible] out of your -- some of your assets?

As I said earlier, Chris, that is part of what we view as some monetization of potentially non-core assets, right? So that's one of the ways that we're looking at to basically take some capital from a part of the business where maybe the returns are not as high as the potential returns we could make by employing it in the U.S. in our core businesses there, right? That's part of that process. And as I said earlier, we're in a lot of those type of discussions. I don't know at this point in timing, but certainly, there's a lot on the go in that regard. There's a lot of very good companies that are interested in partnering with us in some of our segments.

Okay. And then my last question, just going back to your comment about the free cash flow improving. Can you just remind us or share with us what is your CapEx projection for this year? And also maybe from a working capital perspective, I know last year, there was a usage of about $300 million. What is your expectation for 2026?

So on the CapEx, we really talk about 3 buckets. One is our maintenance CapEx, which we're projecting $70 million to $75 million for the year. The second is our approved major CapEx projects, and we've got a slide that outlines those in the presentation. there's about $67 million left to spend on those projects over the next 3 quarters, Q1 through 3, up '26. And then we have smaller CapEx projects. And generally, we spend about $70 million plus on those projects is our expectations going forward with Stampede joining the group. So as of today, that's what's committed to or that's the plan. But I mentioned earlier, our sandwich group is running into capacity issues. So we may look at other projects in the future.

But at this point, that's all that's in the pipeline. In terms of working capital, like I say, we've made good progress on our core inventories. The issue at the end of the year was the buildup for -- to support our growth. So going forward, really, the driver is just going to be our growth and buying opportunities there'll be volatility around that. So I can't give you a number around on net working capital. I'll -- other than to say it will increase with the growth of our business.

[Operator Instructions]

Next we will hear from Ryland Conrad at RBC Capital Markets.

Just on the revenue guidance for 2026, could you impact your assumptions there for growth in Canada?

We don't give specific guidance on Canada, Ryland. But in general terms, it's not a big piece of our expectations for the year. At best, it's probably 2% to 3% volume growth would be our general expectation on the specialty foods side, a little bit higher on the premium food distribution group, which is primarily on the distribution side of Canadian business. But again, the excitement in our business, the big growth driver of our volume growth is going to be or is our U.S. initiatives. And it will be interesting to see 2026 because 2025, it was our protein sandwich of bakery groups. We've got a lot of exciting stuff happening in our culinary group right now. We built a new facility in Maine. We've made some investments here on the West Coast in our culinary capacity. And it's an exciting category with a lot of opportunities, and we expect them actually to be a nice driver of growth, start registering on our organic growth in 2026. But again, all of that centered around the U.S. and the investments we're making in the U.S.

Great. And then just on the truck sales within Specialty Foods, could you just remind us when that headwind began to emerge in 2025? And how have sales or the year-over-year kind of sales decline trended sequentially? Like are you seeing incremental pressure there? Or is it generally stable?

It kind of -- it's a little volatile. It seems to go up and down a bit. It was a tougher quarter this in Q4 because for the last number of quarters, you've been seeing contraction in our jerky sales, and that reflects what's happening in the market. It's a very high-cost product that has historically targeted at a young male consumer and so a much more price-sensitive consumer in the C-store channel. And correspondingly, you've seen that whole category come under pressure given the high beef prices. So the other factor though that accelerated or made it a bit bigger in Q4 versus where it had been trending is we also have some very successful Turkey tender programs, so like a Turkey jerky almost. And Turkey prices have just gotten so incredibly high that there -- we've started exiting categories because the price point has just gotten too high. So it was a little higher this quarter because of that. But outside of that, if you look at the category in general, that's kind of where our jerky sales have been trending as well.

Again, if you go back a few years when we partnered with Oberto. Oberto was a jerky company effectively a national jerky company with very little business in sticks. At the time, we said that the opportunity for Oberto and for us is to leverage the Oberto's platform to grow the premium sticks today, effectively, it's a much larger company, but it's predominantly one of the leading state companies in the U.S. today.

As Will said, we just haven't been focusing on jerky, jerky's a legacy type of item. But really, the big focus in terms of marketing promotions, capacity expansions has all been in sticks, we were right. The Stig industry has particularly the premium stick industry has exploded in the U.S.

Okay. I appreciate that color. And then just last for me. modeling question on corporate costs. I guess is it safe to assume this kind of $30 million annual run rate is good going forward. I know it's consistently been in -- it's kind of $8 million to $10 million range through the first 3 quarters and then drops quite a bit in Q4. So just how should we be thinking about that?

Yes. So the big -- the volatile factor there is discretionary employee discretionary costs, so bonuses. And clearly, with the challenges in the protein group, and the ban the Shaw Bakery Group and the Lobster Group, discretionary compensation was down significantly. So that's one of the factors you see driving the decrease in the corporate costs and SG&A in general. So you kind of have to normalize that for that. And so going forward '26, assuming we hit our numbers as we expect, you should expect a higher corporate cost because of higher discretionary compensation.

Next question will be from Derek Lessard at TD Cowen.

And by the way, I did see $20-plus U.S. turkey prices at Logan Airport. I got that point.

No surprise there, Derek.

Yes. I just -- Will, I just want to clarify the sales guidance, the [ 9.25 to 9.55 ]. To be clear, if it was included in the Shaw Bakery, it would -- those numbers would have been $170 million higher?

Yes, $170 million to $180 million to reflect sort of the range concept Canadian.

Okay. And the same thing on the EBITDA, correct?

Correct.

At this time, we have no other questions registered. I would like to turn the call back over to George Paleologou.

Yes, I'd like to thank everyone for attending today. Thank you very much.

Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines.

Welcome, everyone, to our 2025 year-end conference call. Thank you for joining us today. With me here is our CFO, Will Kalutycz. Our presentation will follow the deck that was posted on our website this morning. Later this morning, we will hold a separate live Q&A session at 10:30 a.m. PST. Details of the call can be found on our press release as posted on our website. We're now on Slide 3, which outlines some of the key highlights for the year and the fourth quarter. We finished 2025 strongly, strategically, operationally and financially. Despite significant commodity inflation headwinds throughout the year and, more specifically, record-high beef costs for most of the year and substantial chicken cost increases in the first half of the year.

As we have often stated, we manage our business for the long-term and are confident these headwinds are transitory and that our pricing actions, combined with normalization of commodity markets, will bring our margins back to historical levels. Overall, 2025 was another transformational year for Premium Brands as we commissioned, expanded or acquired substantial new plant capacity across North America to support our continued industry-leading growth. Correspondingly, we're well positioned to meet or exceed our 2027 sales and Adjusted EBITDA targets of $10 billion and $1 billion, respectively.

Sales for the year increased by just over $1 billion, or 15.6% to $7.5 billion, while our Adjusted EBITDA margin came in at 9%, a 20 basis point decrease as compared to 2024, mainly due to beef and, to a lesser extent, chicken commodity-cost inflation. Subsequent to 2025, we completed the largest acquisition in our history with Stampede Culinary Partners joining our ecosystem of great food companies. Stampede's extensive plant network and accomplished management team will play a pivotal role in supporting the growth of our Value-Added Protein Group, the largest of 6 platforms.

From a personal perspective, I'm delighted to do a call out to our entire Protein Platform, which when combined with Stampede, is one of the most exciting food platforms in North America. This is at a time when protein and more specifically premium meat protein is increasingly being recognized as the leading nutrient source for optimum human health. Everyone I know is increasing their protein intake, and we're uniquely positioned to offer consumers and customers best-in-class, protein-based products for all eating occasions for both home and out-of-home consumption. I can assure you that the favorable positioning of our Protein Platform did not happen by accident and that we have been preparing for this moment for a long time.

As we have stated in the past, the food medicine movement is taking over in North America, and consumers are shifting from ultra-processed foods, high-added sugars, unhealthy fats, artificial colors and flavors and preservatives to clean, nutrient-rich, protein-centric foods that improve their overall health and well-being. And as I stated in my 2024 CEO Letter to Shareholders, an increasing number of consumers are no longer being swayed by the usual confusing and misleading messages of the past and instead are basing their decisions on their own personal health markers measured in real time on their wearable devices.

They say that knowledge and data is power, and the power today definitely belongs to consumers who are looking for foods that improve their health markers and contribute to their journeys towards better health. Stampede complements our other Protein Business in many ways, including extensive sous-vide cooking capabilities that position us to offer all cooking technologies to our retail, club and foodservice customers across North America. As I said earlier, this comes at a time when demand for protein is not only growing but accelerating, as consumers and foodservice operators are looking for convenience and ease of execution without sacrificing flavor, texture, nutritional value or aesthetic attributes.

Stampede operates a national network of best-in-class facilities across the U.S. and offers customers customized product and service solutions at both the regional and national levels. The onboarding of Stampede to Premium Brands and to our Protein Platform has gone very well, and we look forward to reporting Stampede's progress in the future as it begins to leverage PB product solutions, resources and services to expand its offerings to new and existing customers, channels and geographies.

This week, we entered into a definitive agreement to sell our 74% interest in Shaw Bakers. Occasionally, we will make investments in start-ups or early-stage companies if we believe in the management team and are aligned with the vision. Since its inception, Shaw's management team has executed a very successful growth strategy and has positioned its business as the leading USDA premium laminated dough company in North America, with its sales growing from very little to USD 100 million.

As part of our recently announced Non-core Asset Monetization Strategy, we're pleased to be selling Shaw Bakers to a well-established and very reputable bakery company that will help take Shaw's business to the next level. Our CFO, Will Kalutycz, will give you more color on our results for the quarter and the year later on in the presentation. We're now on Slide 4. You can see here that our acquisition pipeline continues to be very active and that we're in several discussions and conversations.

As we have demonstrated in the past, including the Stampede acquisition, any new acquisitions will be done in the context of us achieving our stated long-term financial objectives. Slide 5 showcases Stampede's portfolio of ready-to-eat and ready-to-cook products while demonstrating the diversity and versatility of their extensive offerings and capabilities. We're now on Slide 6 to 8. Slide 6 shows you the location of our facilities in Canada and the U.S. with the dots in red showing the facilities that we have added to our plant network during the past couple of years.

You can see that the number of facilities in the U.S. has expanded substantially and that we're now much better able to support our U.S. growth from state-of-the-art and modern U.S.-domiciled capacity as shown on Slides 7 and 8. U.S. sales made up 68% of our Specialty Foods segment sales in the fourth quarter and 67% for the year. With the purchase of Stampede, we expect this number to be in the 70% to 80% range in 2026. I will now pass it to Will.

Thanks, George. Before I begin, I would like to remind you that some of the statements made on today's call may constitute forward-looking information, and our future results may differ materially from what we discuss. Please refer to our MD&A for the 13 and 52 weeks ended December 27, 2025, as well as other information on our website for a broader description of the risk factors that could affect our performance. Turning to Slide 11. Our sales for the quarter were a record $1.9 billion, up $258 million or 15.7%, as compared to the fourth quarter of 2024. This increase was driven by 3 factors: -- the first and most significant was organic volume growth, which accounted for $151 million of the increase.

Acquisitions made up another $76 million of our growth and selling price increases, primarily related to beef-based products, contributed $39 million. These increases were partially offset by a currency translation impact of $8 million, resulting from year-over-year strength in the Canadian dollar. The main driver of our organic volume growth in the quarter was the continued success of our Specialty Foods segment's U.S. market-focused initiatives in Premium Protein, Sandwich and Artisan Bakery products, which generated $117 million in organic volume growth, representing an organic volume growth rate of over 18% -- the balance of our organic volume growth came primarily from the sale of processed lobster inventory built up over the course of 2025. Slide 12 shows a breakdown of our core U.S.-growth sales initiatives by group.

As you can see, our Protein, Sandwich and Bakery groups all generated very solid results for the quarter with organic volume growth rates of 20.1%, 12.5% and 62.2%, respectively. For the year, our core U.S.-growth initiatives generated organic volume growth of $370 million, representing an organic volume growth rate of 14.8%. Looking forward, we expect our U.S.-sales initiatives to continue to be the major driver of our overall organic volume growth. Turning to Slide 13. Our Adjusted EBITDA for the quarter was $179.5 million, representing an increase of $30.8 million, or 20.7%, as compared to the fourth quarter of 2024.

The major drivers of this improvement were our organic volume growth -- sales growth and lower discretionary compensation. These were partially offset by higher operating overheads associated with our new production capacity brought online by our Protein, Sandwich and Bakery groups. In terms of cost inflation impacts, while the difference between the selling price increases our Specialty Foods segment realized in the quarter and the impacts of commodity-beef and wage-cost inflation improved significantly as compared to the last quarter, Specialty Foods margins were still below targeted levels.

This was due to a combination of price increases being phased in over the course of the quarter and some increases being delayed to the first quarter of 2026. Despite this challenge, as well as below-average margins on our lobster product sales, we were still able to improve our Adjusted EBITDA margin for the quarter by 40 basis points, resulting in a 9.5% EBITDA margin for the quarter.

Slide 14 shows in U.S. dollars an index comprised of some of the main beef commodities used by our Specialty Foods segment's businesses. You can see that the costs in the third and fourth quarters of 2025, which are represented by the green line, were at all-time record highs. Slide 15 provides a breakdown of our start-up and restructuring costs by initiative, by quarter for the last 6 quarters. In the fourth quarter of 2025, costs for our Shaw Bakers and our major new-product launch initiatives ended up being higher than planned due to a range of challenges, which resulted in an increase in total start-up and restructuring costs as compared to the previous quarter.

The good news is that all but one of our major projects are now finished or will be shortly, with the remaining project expected to be completed in the second quarter of 2026. As George mentioned earlier, 2025 was a very key year in commissioning new capacity and launching new sales initiatives that will accelerate growth in our top and bottom lines for the next couple of years. Turning to Slide 16. Our Adjusted Earnings and Earnings Per Share for the quarter were $57.6 million and $1.29 per share, respectively, with these metrics increasing by 24.4% and 22.9%, respectively, as compared to the fourth quarter of 2024.

The improvement in our profitability is due primarily to the growth in our Adjusted EBITDA and, to a much lesser extent, lower interest rates. These factors were partially offset by higher depreciation, lease and interest costs associated with the major investments we have been making in new production capacity. Slide 17 shows our annual sales for the last 8 years, which have grown at a compounded annual growth rate of almost 14%, as well as our 2026 Sales Guidance of $9.25 billion to $9.55 billion. Note that our 2026 guidance reflects the sale of Shaw Bakers.

As George mentioned earlier, our 2025 sales as compared to 2024 increased by $1 billion, or 15.7%, to $7.48 billion. This was at the top end of our 2025 guidance range of $7.4 billion to $7.5 billion. Slide 18 shows our annual Adjusted EBITDA for the last 8 years, which has grown at a compounded annual growth rate of over 13%, as well as our 2026 Adjusted EBITDA Guidance of $870 million to $910 million. Our 2025 Adjusted EBITDA as compared to 2024 increased by $79 million, or 13.2%, to $672 million. This was within our 2025 Guidance Range of $670 million to $680 million. Slide 19 shows our annual Adjusted Earnings and EPS for the last 8 years, which have grown at compounded annual growth rates of 8.2% and 3.4%, respectively.

These lower growth rates relative to our sales and Adjusted EBITDA growth rates are due to the CapEx-related investment costs I mentioned earlier that have resulted in higher depreciation, lease and interest costs. Our 2025 annual Adjusted Earnings and EPS as compared to 2024 increased by 15.8% and 14.8%, respectively. Looking forward, we expect the improvement in these metrics to accelerate significantly as we leverage our investment in production capacity to grow our business.

Turning to Slide 20. We spent $54.4 million in capital expenditures in the quarter, consisting of $21.3 million in major project CapEx, $15.4 million in smaller project CapEx, and $17.7 million on maintenance CapEx. We define project CapEx as investments that are expected to generate an unlevered after-tax internal rate of return of 15% or greater. All other capital expenditures are classified as maintenance CapEx. Primarily, all of our major project CapEx in the quarter were on investments to increase the production capacities and, in many cases, operating efficiencies of our Protein, Sandwich and Bakery groups.

For the year, we spent $159.5 million in project CapEx and $59.5 million on maintenance CapEx. Slide 21 shows our project CapEx for each of the last 12 quarters. You can see the significant downturn in expenditures in recent quarters, as we near the end of our most recent major CapEx investment cycle. Looking forward, we expect to spend over the next 3 quarters another $67 million in major project CapEx, after which we will have invested in approximately $2 billion of incremental sales capacity relative to our 2024 sales of $6.5 billion.

Slide 22 shows some of the key metrics we use to assess our financial position. Our Senior Debt to EBITDA leverage level improved by 0.2 turns as compared to last quarter, due to a $172.5 million convertible debenture issuance that we completed in anticipation of the Stampede acquisition. Our total debt-to-EBITDA leverage was flat as compared to last quarter, as an approximate 0.2 turns improvement resulting from growth in our Adjusted EBITDA was offset by the impact of higher inventory levels associated with finished-inventory builds to support our 2026 meat-stick, cooked protein and CBA sales initiatives.

While our debt ratio levels remain above our mid-term targets, they are well within our shorter-term operating parameters. Looking forward, in the coming quarters, we expect to make significant progress towards our goal of total debt leverage of 3:1 or better, driven by a variety of factors, including growth in our Adjusted EBITDA and the sale of Shaw Bakers. The next and final slide shows a variety of our Free Cash Flow and dividend metrics over the last 8 years. For the quarter, we generated a record $82.9 million in Free Cash Flow, up $18.6 million, or 28.9%, as compared to the fourth quarter of 2024.

Similarly, our Free Cash Flow Per Share for the quarter increased to a record $1.86 per share, representing a 28.3% increase as compared to the fourth quarter of 2024. These increases reflect the early stages of us generating returns on the investments we've been making in new production capacity. In terms of dividends, subsequent to the quarter, we declared a dividend of $0.85 per share for the first quarter of 2026. That concludes our presentation. Please join us on our Q&A conference call later today at 10:30 a.m. Vancouver time, 1:30 p.m. Toronto time. Thank you.

Good morning, and welcome, everyone, to our 2025 Third Quarter Conference Call. With me here today is our CFO, Will Kalutycz. Hopefully, you've had a chance to listen to our prerecorded remarks posted on our website this morning. We will now take your questions. Ludy.

[Operator Instructions] With that, our first question comes from the line of Chris Li with Desjardins.

I want to just start asking, I guess, George, in your prerecorded comments, you did make some comment about you guys have begun the process of monetizing some assets with an announcement hopefully soon. I want to just ask, is it fair to say, I guess, you guys wouldn't make that comment unless there is a decent likelihood of something happening? And then if there's anything beyond what you said that you can share, I think, would be very helpful.

Yes, Chris, again, I don't think we have very much to add at this point, Chris, but we do expect to make some announcements in the near future.

Okay. Okay. And then just maybe hypothetically speaking, if something were to transpire, would the proceeds from sale likely be used for debt reduction? Is that fair to assume?

Yes, absolutely, Chris.

Got it. Okay. Okay. No, that's good. I'll leave it at that. And maybe another question, maybe, I guess, maybe for you, Will, is just in terms of the Specialty Foods segment, I think in the press release, you noted that if you normalize for the high beef cost impact, gross margin would have been about 70 basis points higher than the reported number.

So that would imply EBITDA margin compared to last year would be roughly stable. So if I'm reading that correctly, can you sort of talk about maybe other areas that might be pressuring your margin a little bit beyond just the input cost pressure? Because I would have expected the margin rate would have been a bit stronger in light of the very, very nice strong top line growth that you guys are achieving.

Yes. Actually, the answer is quite simple, Chris. It was plant overhead. It was a combination of both the Tennessee facility coming online and a number of plants adding second shifts. So we were hit with a lot of incremental overhead in the quarter. That was almost as much of an impact on the quarter's margins as the beef prices that you mentioned earlier. Again, it's that capacity coming on that's going to help us achieve the growth expectations we have in Q4 and going into 2026.

The only other thing I would add, Chris, is that, as you know, as we've announced, we've built inventory for the big launch, the biggest launch in our history, which obviously is taking place as we speak. And so had that launch happened sooner during the third quarter, then our margins would have been higher.

And Chris, also, just while we're sort of talking on this, the other area that all that ramp-up impacted us was that was a big driver of the large restructuring charge in the quarter. As we brought on those second shifts, as we're ramping up the Tennessee facility, there's all sorts of inefficiencies and throughput, yield issues. And so those same factors were the driver of the restructuring charge as well.

Okay. So maybe I'll just take advantage of your answer. Just maybe one last question for me is still on the margin. So if I take your updated full year guidance, it seems like your implied Q4 EBITDA margin, you're implying that the margin rate should be up year-over-year in Q4. Am I reading that correctly? And if...

Yes. We should see some very modest improvement in Q4. Again, we're going to have some of the beef headwinds continue into Q4 as well as that overhead impact. But the offsetting factor is going to be the growth.

And the next question comes from the line of Martin Landry with Stifel.

I would like to just touch a little bit on the commodity price -- the commodity cost increases and your offset with prices. What was your ability to increase prices in recent weeks? And what kind of impact do you expect to see from that disconnect in Q4?

So in terms of the pricing, Martin, again, it's sort of a range of factors. Our businesses have been watching beef prices. It was quite a spike, and it is, as George alluded to in his prerecorded comments, specific to some key drivers that we are expecting to reverse. So the business has held back a little bit.

But alternatively, we do what will become a tailwind is on the chicken side, where we did put a number of price increases through in Q2 and beginning Q3. So those are going to be kicking in. So it's kind of Q4 is -- and that's why we're being conservative in our guidance. It's going to be a little mucky. But certainly, by Q1, we expect things to be back to normal levels.

Okay. And just shifting gears, when you do price these new contracts, when you go bid for new businesses, what kind of margin is embedded in your new contracts? Is this margin accretive to your overall revenue? Just trying to understand a little bit when you go and try to get these large contracts, do you have to take a little bit of a margin hit? Or is it margin accretive?

It's absolutely margin accretive. In terms of -- we've referenced the historical one of the largest launches in our history, which is happening in Q4. The contribution margins on that are in line with our protein group's overall strategy of high 20s, low 30% contribution margins. And so it's within that range. It is at the bottom of that range, but it is still within that targeted range.

Again, we talk about across our 3 big growth platforms, protein sandwich and bakery. Our sandwich group targets roughly 30% contribution margins, plus or minus. Our -- sorry, that's our protein group. Our sandwich group is 20% to 25% contribution margins. And then our bakery group, which is our highest are 40% plus.

So all of them are -- that growth you're seeing in the U.S. is incredibly accretive. We just need to now start leveraging all that capacity, all that overhead we've added. And that's when you're going to see that accretiveness to the overall margins of the company.

Yes. My other comment, Martin, is that in our culture, we don't bid for new business, right? Bidding assumes that we're bidding against somebody else. We develop very best-in-class innovative products, and we show them to our customers, right? That's the nature of business for Premium Brands.

Yes. Okay. Understood. And then maybe just a last question. You reiterated your fiscal -- or your 2027 revenue goals of $10 billion. That's going to be, I think, a 33% increase versus what -- where you're going to get to this year. So I'm just trying to see a little bit how it's going to play out in the next 2 years. Is this split evenly into '26 to '27 in terms of the growth rate? Or is there going to be 1 year that's going to have a little bit more faster growth?

No. We expect '26 to be a very strong year. Again, I think if you look at the cadence of our growth through '25, it's really accelerating as we get towards the end of the year, right? So Q3 was much stronger than Q2. And likewise, Q4 is going to be very strong relative to Q3. So we're going into '26 with that tailwind as well as continued new product launches through '26. So '26 will be the strongest.

And then we'll start filling some of the capacity we've developed towards the end of '26. And so you'll see a slightly modest growth rate in '27. But we feel very bullish that between '26 and '27, we're going to get to that $9 billion, $9.5 billion in sales organically and then the balance will be filled out with acquisitions to get to our $10 billion target.

The next question comes from Kyle McPhee with Cormark Securities.

Great organic volume growth in Q3, 10% for the total company and your commentary -- your outlook commentary is suggesting it accelerates even more than what we're already seeing into Q4 here. I'm hoping you can give some color on some of the moving pieces driving that. Is it even more of an acceleration for U.S. Specialty Foods versus the huge number we already saw in Q3? Or is it because you expect Canada to start posting wider organic volume growth versus the levels prevailing now? Any color on that moving...

Yes, -- it's the U.S., Kyle. And again, you're going to see the continuation of a lot of the initiatives from Q3. The one normalization, the one -- our sandwich group had an unusually strong third quarter. Some of that was an image strategy with one of our larger customers. They were putting more inventory in their system. So sandwich group, you're actually going to see come down -- come off a little bit in Q4 relative to Q3, but you're going to see protein accelerate.

Again, the big thing being this major meat stick launch we're in the progress of executing right now. And so you're going to see really strong numbers in the protein group. That, combined with some of the things we're doing in cooked protein, and European deli meats will be the big drivers.

Yes. And the only thing I would add, Kyle, is that really, as we've talked to you in the past, it's really leveraging the capacity that we've built and also purchased, right? That's really what's driving our growth. In many cases, we're rolling out very successful products in different regions across the country, right? That's given us a lot of traction.

Okay. And correct me if I'm wrong, but this major record sized program launch in Q4 that is in the -- it's a beef-based product. It doesn't sound like you have any changes to your contribution margin expectations. But is that kind of a mid- long-term comment or right out of the gate type of comment? I'm not sure if pricing for these types of contracts was set quarters ago or if it's set current to the current beef inflation environment.

Yes. No, it's right out of the gate. And it's very clear. It's -- a lot of that inventory sitting on our books at the end of the third quarter was both a combination of raw materials to take us through a couple of quarters as well as finished goods. So we're very comfortable on the standard contribution margins expected from that product. Now there are some start-up costs associated with them that we put in restructuring, as I mentioned earlier, attached to some yield. We're still refining the equipment, the processes, the throughputs, training the people. And so there are some still efficiencies to gain in both throughput and yields on that program.

We're very excited by that launch, Kyle, 2 to 3 years in the making. It's an exceptional product. Again, it will do extremely well, we feel.

Got it. Okay. And just one more thing on the beef category here. From what I can see in the market data, quarter-over-quarter sequential inflation is finally inflected to down so far in Q4. Are you seeing this with your own business, meaning beef specific margin drag starts to fade, prices can finally start to catch up?

Yes. We'll see, Kyle, because what we're not seeing that we would historically see at this time of the year is buying opportunities, some significant supply opportunities in the market. And we're not yet seeing those given some of the changes in trade and some of the other issues around beef. But that could quickly change given a change in the political environment.

Although we are seeing them in chicken, Kyle.

Yes, chicken, absolutely. Yes.

Okay. And I'll squeeze in one last one here. Your cash flow statement has $43 million coming in from investments. What is that from? Is that Clearwater catching up on accrued payments? And if so, do you expect that to continue?

Yes. The vast majority of that is Clearwater catching up on payments. Lots of good things happening in Clearwater's business. As we talked about last quarter, they did sell the Macduff operation. That was actually a positive impact on our EBITDA in the third quarter. They put in a new financing structure, a very competitive structure that has really improved their liquidity. And they're looking at a few other opportunities in their business. So we're -- along with all that, they saw some return to normalcy in the clam turbot and shrimp fisheries. So the ship seems to be turning, and we are starting to see good things there and setting up for a much better 2026.

The next question comes from the line of Derek Lessard with TD Cowen.

Congratulations to you and your clients on the launch.

Thanks, Derek.

Thanks you, Derek.

The one question I do have is, so we all know about this big national customer. I was curious if you guys can maybe add some color to some of the upcoming launches in 2026. You said you're expecting an acceleration through the period. Just curious on what's happening.

We're very -- as Will said, Derek, we're very bullish with regards to the top line for '26. Some of the challenges this quarter were basically ramp-up related, right? We're ramping up a lot of facilities, a lot of new capacity. But again, we did well. We've executed well, all the controllables for the quarter.

But as I've said before, we're comfortable that the demand is there. It's coming from all channels. We're doing really well in the coffee channel, for example. We're picking up new customers all the time, leveraging our new capacity in the sandwich group.

Protein, meat snacks and cooked protein are -- again, they're growing immensely for us, lots of demand, new demand for our products. Again, some -- we will have some challenges around ramp-up again as we ramp up brand-new capacity and brand-new technology. But overall, we're very bullish for '26 from a top line perspective.

Yes. It's interesting, Derek. Our sales pipeline, which we've talked about in the past, we pulled off of that pipeline about $250 million this quarter of successful launches. But despite that, the pipeline continues to grow. And it's just -- it's a range of initiatives across many customers across those 3 platforms. So it's very diversified and it's not as dependent as, say, this major launch we just completed in Q4.

And it's really, again, Derek, driven by the fact that we can offer to our customers innovative in-demand products, leveraging best-in-class efficient food safe capacity.

Okay. And just curious if you guys have experienced sort of increased demand from one of the -- one of your bigger clients that had struggled earlier in the year and last year.

Yes. Yes, it's interesting. The -- that's a client I referenced earlier, who has sort of changed their inventory strategy to try to improve fill rates in their stores. And so we saw some growth from that. But we did see some growth in the core business. It was great. There's a couple of new products that we launched earlier this year that are doing really well. So yes, very positive signs there.

The next question comes from the line of Luke Hannan with Canaccord Genuity.

I just wanted to circle back to -- so the 70 basis points of beef price beef cost inflation, it sounds like that's going to be resolved, not necessarily in Q4, but maybe in Q1. But I wanted to come back to the ramp-up or the second shift. It was also -- it sounded like a 70 basis point headwind. When should that -- when should we expect that to be resolved?

Well, that overhead is there, right? It's permanent, Luke. And what will resolve it now is as we continue to leverage that capacity, and we talked earlier about the accretive margins of the new business. So that -- it's really one of -- that's fixed overhead. That's there now. That capacity is in place. And then as we grow the top line, that's what's going to grow the margin.

And that growth in the margin, Luke, will come from using up the capacity, of course, and then optimization of mix as well once that happens, right?

Right. And so that's -- just to be clear, though, that's probably a 2026 event, early 2026 event?

That's correct.

Well, it will contribute in Q4 as well, Luke, because we are expecting some very solid growth in Q4. So that overhead is relatively fixed. There's a little bit of variability to it, but that should -- you should start seeing a little bit of that benefit in Q4.

Got it. Okay. And then sticking with beef for a second here. So I realize price increases are coming and that will help alleviate margin as well. But it was mentioned in the press release that you guys are exploring, I think, new procurement strategies as well. Just curious to know what exactly levers to pull -- what levers you guys have to pull on that front, new procurement, maybe the cost savings you can get there.

Yes. Luke, so there's different assumptions we could make. I think that the market knows that there's been some trade issues with Brazil. And hopefully, those will be resolved. We're hearing rumors that they may be resolved sooner rather than later. Obviously, that will be a positive for us and our input costs.

There appears to be traction with with issues around this screwworm epidemic in Mexico and the ability for Mexico to ship animals into the U.S. for processing. That should improve the situation as well as we go forward.

The other one is really about us ramping up plants and making sure that we run them at capacity or at full capacity or close to full capacity, while at the same time, allowing us the time to optimize the mix as well, right? So those will effect improve margins ultimately.

Got it. Last one for me again on beef, and then I'll pass the line here. I'm just trying to get a sense of what the consumer response has been to price increases of late. And I realize there's more to come, and it seems like everybody is taking price as well. But really, I guess what I'm getting at is, are you getting the sense that the consumer is reaching the point where they are completely stretched and they won't respond maybe according to your expectations as far as the volumetric response to whatever price increases you may need to take?

It's a very good question, Luke. And again, we're talking about beef right now, right? As we mentioned earlier, chicken prices have come off. Our input costs with regards to chicken have come off quite substantially during the quarter.

The amazing thing is that although prices for beef are very, very high from a historical level, demand remains very strong. And it relates to my prepared remarks about the changes in consumer preferences, changes in the buying patterns for consumers.

I think I've mentioned it before, but last year, for example, there was some inflation in beef prices as well, not as much as we saw this quarter, but the #1 growth SKU in all of grocery was ground beef. So there's something happening there with regards to demand. It is a super food. It is considered to be a super food. It's very satiating. And consumers are choosing it, particularly beef with the different claims like Grass-Fed and other claims, right? So consumer is holding. The consumer demand is holding.

The next question comes from the line of Michael Glen with Raymond James.

Just on M&A, perhaps, Will and George, you can provide an update for us in terms of what you see as your financing and capital structure options with regard to some of the M&A you've outlined in Slide #4 of the deck.

Yes. So as you see, there's lots going on there, a lot of discussions. Really, all we can say is what we've been saying in the past, Michael, is we are committed to deleveraging our balance sheet. And anything we do on the M&A front will be done within that context. Again, last year, we did 3 transactions at the end of the year, one at the beginning of this year. And through the combination of how we structured that with debt, equity and contingent consideration, all of those transactions were less than 3x debt-to-EBITDA cash flow in them. So again, we are committed to that deleveraging and getting our total debt-to-EBITDA ratio, not just our senior, but our total over time down to that 3: 1 or better range.

The other thing I would add, Michael, is as we've stated before, we're involved in both acquisitions and monetization as well.

Okay. So that was kind of the follow-up I had for you there. Would any of the perhaps larger transactions that you've outlined in that slide be contingent on successful completion of the monetization?

Yes. I'm not sure about the timing, but as long as we have good visibility in regards to the outcomes of our monetization, probably.

Probably not. Probably not.

Okay. And then just circling back to Clearwater. Will, can you just provide -- do you expect any incremental or additional returns of capital from Clearwater over the course of '26?

Yes. No, absolutely. They're an incredibly asset-rich business, and they do have some redundant assets that they're looking to monetize. So between that and the improvement in the core operations, absolutely.

And are you able to just remind us the amount of subordinated debt there is outstanding with Clearwater you have?

Yes, it's about a little over $0.5 billion, $500 million -- a little over $500 million.

And the next question comes from the line of MacLeod Stephen with BMO Capital Markets.

Just wanted to circle around on a couple of things. Just with respect to the large launch that you have in the market for Q4 that you're going through now. I was just curious if you can just -- if you're able to give any color on the dynamic of the launch in Q3 and how it's evolved into Q4?

Well, I'll start and then maybe hand over to George. In terms of Q3, there was virtually no impact in Q3. I think we had -- we were just doing some test stores at that point, and I think it was about less than $1 million of sales in Q3. It really ramped up in Q4.

Yes. Again, as you've seen from our balance sheet, Stephen, we've built a lot of inventory for the launch. It was a big bang type of a launch, a national launch in the U.S. first. And so the product now can be found all across the U.S.

And then we are shipping to the customer in December for the Canadian launch. And so it will probably be in the stores in January '26 in Canada.

But the product itself, Steve, is performing very well, and it's exceeding original expectations by both us and the customer.

Okay. That's great. That's great to hear. And then maybe just -- I just want to clarify on the sales capacity when you talk about it being at $1.6 billion today, you mentioned in response to one of the other questions that you were -- I think you executed on $250 million this quarter. Is the $1.6 billion, is that to be thought of as unfulfilled sales capacity opportunity rather than $1.6 billion is what you have and you've already filled [ ex ] of it?

Yes. So the $1.6 billion is relative to our 2024 sales, and it's the capacity that has been brought online. Once we're finished with the balance of the projects in our major CapEx cycle, which we referred to in the comments, it's about $92 million left to spend on that. There's 4 major projects in there. It will bring us to about $2 billion of potential sales capacity relative to 2024. So that's what's going to -- that's supporting our growth in '25 and then what it's going to support through '26, '27.

Incremental to that, Steve, is just the general capacity we still had in the system. Not every plant was running at full capacity by any means. So our capacity is more than that $2 million. And again, it's leveraging all that, that gets us to that $9 billion -- $9 billion to $9.5 billion in sales by end of 2027.

Right. Okay. Okay. That's helpful. And then just as you think about like the bridge between $1.6 billion to $2 billion, is that incremental $400 million focused on one of your 3 core U.S. sales initiatives and a higher proportion than others?

It is more weighted towards -- let me think about that for a second, Steve. It's across all 3 platforms, but it's more weighted towards protein slightly. But sandwich and bakery both have unique initiatives in them as well still.

Okay. Okay. That's great. And then maybe just finally, I don't want to get too hung up on the Q4 outlook. But if I'm reading between the lines, it sounds like you're kind of -- the setup is strong and accelerating top line, improved gross margin as you get some of those price increases, but maybe a little bit of gross margin headwind from the overhead. Is that the way to think about it?

Yes. Beef is still expected to be a bit of a headwind in Q4, Steve. We'll see what happens. That's the potential upside. If something does get -- something positive does happen with beef prices, then certainly, that's going to put us at the top end or higher in our targeted EBITDA guidance for the year. But if it continues as it is today, then yes, that will still be a bit of a headwind in Q4 as well.

Okay. Okay. That's great. And congrats on the strong -- very strong sales performance in the U.S.

And the next question comes from Ty Collin with CIBC.

So just a quick question to start on the leverage that ticked up a little bit this quarter. I think on some FX movement and some elevated inventory levels, which you mentioned are related to that large program launch. Where are you expecting leverage to be at exiting this year? And what are your expectations in terms of working capital specifically?

Yes. Good question, Ty. In terms of Q3, just -- we did expect to make a little bit of progress in Q3 on our debt to leverage ratios. But as we talked about between FX and inventory, that was a bit of a headwind.

Going into Q4, definitely, we expect to make progress, a lot of it driven by improving inventory. A lot of the inventory is not only this major program we've been talking about, but there's a variety of things launching that we had built inventory up for. So as those launch, obviously, that inventory will fall through. So that should help. We should continue to see solid year-over-year growth in our EBITDA. So that's going to help.

The FX is an unknown. It's an anomaly. It's just arithmetic. It's not anything fundamental in the business. So that could go against or for us in the Q4. But overall, we will show solid progress in our debt-to-EBITDA ratio in Q4. We don't have a specific target, though we're giving the market.

Okay. That's really helpful color. And then just for my follow-up, it seems like you've been finding more opportunities within the U.S. foodservice channel. George, you mentioned some more opportunities within coffee specifically. Has that become more of a focus for premium brands? And what do you like about the opportunities that you're seeing in that foodservice channel specifically?

It's always been a focus, Ty. I would say that should accelerate because we have available capacity, right? A lot of the products that are conducive to that channel, we -- obviously, we were lacking capacity, and we had to prioritize our legacy customers.

But now with the build-out of the Tennessee facility, obviously, we have more capacity to focus in that channel. We've got 6 lines operating as we speak in that facility, and we have room to get up to 10 lines potentially. So anyway, yes, we will do more business in that channel, and we're leveraging our capacity to do that.

And the next question comes from the line of Vishal Shreedhar with National Bank.

Just wanted to get your perspective on the organic volume growth. So the total SF organic volume growth was $142 million and the U.S. core organic volume growth was $146 million. And given that Canada had OVGR of 1%, I was just hoping to understand the delta and what that business constitutes and how we should think about that delta going forward?

Yes, sure. So in terms of -- Canada was up about 1%. It translated to dollars, that was about $4 million of growth. So you add the U.S. growth, the Canada growth. The offsetting factor was the jerky category. It was down about $7 million to $8 million in the quarter. So that should work -- make your math work, Vishal.

And the jerky category was 2 factors. One is, and generally, we've seen that product category struggling. It's a young male consumer is the typical buyer of that product. And you've got a situation with very high beef prices driving very high shelf prices. So you've got that headwind in the category.

Then on top of it, we actually had a major product launch in the third quarter of 2024. So it was a very tough comparative. So that's what led to the bigger-than-normal contraction in jerky sales on a year-over-year basis.

I see. And is it correct to say that jerky category, you consider that to be a noncore business internally?

Yes. It's certainly not what we're investing in, Vishal. It's sort of legacy business. Business largely that came with our Oberto's acquisition. Our focus is on the stick category. That's where we've been investing in all the capacity. That's where we've been seeing all the growth.

Okay. So if I were to reflect -- that noncore jerky category in your specialty business and the organic volume growth would be closer -- would be around 21%. Is that correct in terms of math?

I'd have to do the math, Vishal. But again, all the investment we've made, all that's driving the accretion in our margins and our cash flow in the protein group has been in categories outside of jerky, sticks, cooked protein, kebabs, things like that.

Okay. And with respect to the growth delta between Canada and the U.S., given that the products are the same, is it really the capacity that you've added in the U.S. and that's the delta? Just hoping you can reconcile that.

Yes. No, the product category -- the sales mixes aren't the same just because in Canada, we are in the European deli meats, the largest player in Canada. It's a major category. We are not a major player in that category in the U.S. And that category in recent years has been growing at a slower rate than these other ones that we're in, such as sticks and cooked protein. So you have that factor. And then we have seen a little bit softer of an economy in Canada relative to the U.S.

The only other difference, Vishal, between Canada and the U.S. is that in the U.S., we have a very limited amount of large SKUs where in Canada, our legacy business involves a lot of SKUs, a much bigger number of SKUs that do a lot less volume, right? It's a very different business overall.

Well, and also, Vishal, we're very mature in Canada. We are in all the markets. We have solid market share positions in all the markets. In the U.S., we are at such early stages and such a small portion of the market. And so you've got -- a lot of the growth is being driven by new customers, new geographies, things like that as well as new product innovation.

I guess we've proven out, Vishal, and we've talked about it before. You have one SKU in the U.S., and it's a very large dollar number if we launch it across the U.S. In the U.S., we talk about launching SKUs for $50 million to $100 million of potential sales, and that's unheard of in Canada.

And the next question comes from John Zamparo with Scotiabank.

I wanted to ask about the trade comments on beef. Maybe the right way to frame the question is, can you say what percent of your beef is imported currently? It would be helpful to get a sense of a potential tailwind to margins if you saw some relief on the trade front.

Yes. Again, we don't disclose that, John, but it's a large number. Basically, historically, the balance between supply and demand is filled with imports. Imports from Australia and New Zealand or South America, especially Brazil and Mexico. I think they're talking about Argentina as well as we speak, right? So we're a large buyer of North American beef, but we also buy imported beef as well. So at times, the percentage varies, but we're talking large numbers.

Yes. And John, we've tried tracking in the past. The thing is our buying groups are so dynamic and it's constantly shifting. So it's really not a meaningful metric other than like George says, import is a major component of our buy.

And I would say it's a significant component of the inputs for all value-added processors in Canada and the U.S.

Right. Okay. Okay. That's good. On the product launches over the next couple of years, we've talked lots about the meat sticks starting now and into Q1. I wonder if perhaps without signaling what product is coming when, can you share -- are there any quarters in '26 or even '27 that you expect will be more impactful for your business?

Yes. As Will said earlier, John, we're working on a number of initiatives that will involve large launches across all of our groups, specialty bakery. I can think of a few as we speak, cook protein, protein in general, sticks. Again, yes, I would say nothing specific. All of the groups are leveraging the new capacity to be working with customers to -- for growth. Again, lots in the pipeline, as Will said earlier.

Right. Okay. On the Tennessee facility, I appreciate the color on the product lines. Can you give a sense of what capacity that facility is operating at right now? And ultimately, when -- can you remind us when do you need those additional 4 lines, do you think?

Yes. So again, we don't talk in terms of the plant just because it's not like the plant was started up and all new business that all business it produces is new business. There was a reshuffling of capacity around our sandwich group's networks to optimize freight and customer demands. So it's not really a good metric for measuring how much new incremental capacity is in there. So it has taken on business and freed up capacity at our Phoenix facility, our Reno facility and our Columbus facility. In terms of the additional lines, I would suspect early 2026, they'll come on.

Okay. That's helpful. And then 2 others. One is kind of broad, maybe I'll start with that one. I wonder why you think there are such significant challenges in jerky and it's a much healthier or more favorable environment in other beef products. Is it primarily related to the channel more than anything else? I would love to get your thoughts on that.

Yes. Just again, John, as Will said earlier, a lot of jerky is sold in the C-store channel, which is frequented by 14- to 26-year-old males, right, and that are price sensitive. And given the price of beef, we've seen a decline in demand.

Secondly, this is a legacy type of product. And it's a very competitive space. There's a lot of competition in that space. So if you go back to the announcement of our investment in Oberto and our partnership with Oberto, we said at the time that our focus was going to be sticks, and it has been.

When we invested in Oberto, they had a very limited amount of stick business. And today, it far exceeds their jerky business based on us identifying this area for growth in demand, right? So it's really a much more price-sensitive category only because of the market that it serves.

Right. Okay. I appreciate that insight. And then lastly, on the balance sheet, is there other real estate that you own that you could potentially look at for sale leasebacks in the future? Or do you figure you've exercised those opportunities already?

Yes. Well, we have one more definitive piece of property in our plan, and that will be in 2026 is our GTA facility project, which is the consolidation of 3 facilities into a single modern facility with increased capacity. So that's due to be completed Q2 next year, and we'll do a sale leaseback around that. That's the only definitive one in our plan today. We have other facilities that are potential, but nothing definitive planned for.

[Operator Instructions]. The next question comes from Ryland Conrad with RBC Capital Markets.

Could you just talk a bit to what channels or segments of your business would be under cost-plus arrangements? I'm just trying to get a better sense of the overall commodity exposure.

Yes. Again, in general terms, a big differentiator between our specialty food businesses and our Premium Food Distribution group businesses is largely pricing models.

In our distribution group, a lot of the pricing is either cost plus or very dynamic pricing, i.e., as some businesses are setting their pricing weekly. So that's why you tend to see pretty stable gross margin dollars in distribution. Sometimes you see erosion in the percent margins because of -- if you have accelerated inflation, they're just really covering gross profit dollars in the interim. Longer term, they'll get their margins back to percentage-wise. But very, very stable gross profit dollars there because of the pricing models.

If you switch over to the Specialty Foods side, and I'll go through the 3 major groups in that. So bakery is pretty well all your traditional retail pricing, where when they have cost inflation, then they have to sit down with the customer and negotiate a price, there's a waiting period, et cetera. That's the bakery group. The protein group is a mix. The vast majority of it is that traditional retail pricing model. But they are, over time, more and more developing cost-plus structures as they develop strategic relationships with customers. For instance, this major stick initiative we're on now is a cost-plus structure. So it's a blend, but it's certainly weighted towards retail -- traditional retail pricing model.

And then the sandwich group, they're more weighted to a cost-plus structure. It works much better in the strategic relationships they've developed with their customers over the year, but they do have a little bit of retail pricing in their model as well, but more cost plus.

I appreciate that. That's really good color. And I guess on the retail model, what's the traditional kind of timing lag...

Yes. So the way it works, Ryland, is this is typical. You'll have a situation where a business is experiencing some cost inflation. And it needs to make a decision, is this something temporarily, i.e., weeks or maybe a month? Or is this something longer term? So that's the first delay. So they need to come to a conclusion that they need to put a price increase through. They try to avoid having to put price increases through because it's always a tough negotiation with the customer. Customers don't like price increases.

And so if they have some things going down and some things going up, then they'll take a little expanded margin on one product, give it up on another. But after a while, they come to the conclusion they need to put a price increase through just to keep -- because the balance of the portfolio is undergoing cost inflation. And it does seem to be more than just temporary. So then the next step is to sit down with the customer, explain what the dynamics are, why they need the price increase. We're very transparent with our customers.

We show exactly why we need the price increase. And there's a negotiation and 99% of the time, we get our price increase through.

And then the third step, the third delay is then most retailers have a wait period until the price increase takes effect. That can be anywhere from 60 to 90 days. So that's why in inflationary periods, we do see some margin erosion as we go through these processes. But as we've shown time and time again, we ultimately always get our margins back to those normal standard levels. And we just need some stability in commodity pricing to do that. We don't need low prices. We just need stability.

The other end of the equation is just how inelastic demand has shown itself to be for our products. We've gone through some incredibly inflationary times. And despite that, have rarely seen any demand destruction or minimal demand destruction in consumer demand.

The only thing I would add here, guys, is that it's not as if our customers, if, let's say, the retailers don't buy beef commodities or pork commodities or chicken commodities. They're very well aware of what's going on with regards to their commodities. Obviously, if it affects them, it affects us. So these conversations tend to be very constructive.

Okay. That's great. And then I appreciate the prepared comments around cost reduction initiatives. Just curious, are there any formal cost-saving programs underway? Or is that just more of a general statement?

Yes. It's continuous improvement, Ryland. We -- a focus of all our businesses, and we're constantly challenging them is continuous improvement. Investment in automation, investment in better processes. We have corporate resources that help with automation, help with sharing best practices. So it's really that. We don't come out with these grand deal statements that we're going to save X amount of dollars through this initiative. No, it's a very grassroots cultural-based initiative.

And the way we view these is basically on a business-by-business basis or a plant-by-plant basis. I think that we purchased a certain facility in Oklahoma this year. It was losing money when we purchased it. We've invested in new lines in there, in new equipment, in efficiencies. We've moved some production into that facility, leveraging the new capacity we created. It's running a lot better, and it's generating positive cash flow as we speak. Again, better mix, more efficiencies, more focus and bigger volumes, right? And you can apply that to all of our facilities in the system.

Okay. Understood. And then just the last one for me on the distribution from Clearwater in the quarter, is $15 million to $16 million per quarter still a reasonable run rate for investment income? Or should we expect to see that come down in Q4 and into next year?

Yes. For the next several quarters, it's going to remain at that level until we see some liquidity come through that will help pay that down meaningfully.

And I'm showing no further questions at this time. I would like to turn it back to George for some closing remarks.

I'd like to thank everybody for attending. Thank you very much.

Thank you, presenters. And ladies and gentlemen, this concludes today's conference call. Thank you all for joining. You may now disconnect.

Welcome, everyone, to our 2025 Third Quarter Conference call. Thank you for joining us today. With me here is our CFO, Will Kalutycz.

Our presentation will follow the deck that was posted on our website this morning. We're now on Slide 3, which outlines key highlights for the quarter. We delivered industry-leading growth this quarter, driven by the momentum of our core growth initiatives in the U.S., which on a combined basis delivered organic volume growth of over 24%. Our growth is especially not worthy in the context of the slowing revenue trends for most of our peers.

As mentioned in my most recent letter to shareholders, titled, “the future of food is in the past," consumer tastes and lifestyles are changing fast, resulting in shifting purchasing patterns and changing consumer preferences. Investments we have been making in state-of-the-art capacity to produce the products consumers are demanding position us well to capitalize on this changing landscape.

Since our founding in early 2000, we have been investing in three major consumer trends, increased protein consumption, premiumization and convenience. As a result, we're uniquely positioned to offer customers the healthy and nutritious protein-centric product solutions they're looking for, made in state-of-the-art facilities, featuring industry-leading automation, technology and food safety. We're very excited by what we see in terms of future demand for products driven by these major trends, and we believe that this elevated demand will continue to accelerate and gain even more momentum in the future.

The third quarter was not without its challenges, and while very high chicken raw material costs subsided as expected, beef raw inputs reached record highs. In addition to the North American cattle herd being at near historic lows, imports from Mexico and Brazil that normally help balance supply and demand were disrupted due to several issues, including cattle disease issues in Mexico, and trade-related challenges with Brazil. While we're taking the necessary targeted pricing actions needed to restore margins, but also focused on various cost reduction initiatives through continuous improvement, automation and capacity expansion and optimization.

Overall, we're very pleased with our progress during the third quarter as our various financial performance metrics speak for themselves. We're very well positioned to continue to deliver record top and bottom line results despite the "black swan events" that occasionally come our way, and we remain steadfast in our conviction on the value we will be creating by leveraging our recent capacity investments to capitalize on the major food trends that are driving demand for our best-in-class products.

We will continue to go where the puck is going to be and not where it's been and correspondingly expect to see a growth in the value we're creating continue to accelerate. This gives us conviction that we will reach or even exceed our 5-year targets of $10 billion in revenue and 10% to 12% EBITDA margins by 2027. We look forward to discussing our plan for 2026 early in the new year, and presenting you with our next 5-year plan in early 2027.

We're now on Slide 4. Although we did not close any acquisitions during the quarter, our acquisition pipeline remains full, and we're involved in many active discussions with talented food entrepreneurs and legacy owners that are looking to join our unique ecosystem of best-in-class specialty food companies. This is because they know that we will respect their legacies and company cultures and that we would take a long-term view in investing and in managing our business. I would also like to announce that we have now begun the strategic process of monetizing certain assets and investments. We hope to have some announcements soon in this regard, but we will make no further comments at this time.

We're now on Slide 5 and 6, which include pictures of two plants, one located in Ontario, Canada and the other in Washington State. These plants have been significantly expanded in recent years and are both involved in executing the biggest prior launch in our history. Both plants use state-of-the-art technology and feature advanced automation and the high standards of food safety. The launch is in full swing as we speak, and you can now buy these products all across the U.S. Canada will be shipping in December and will be available in stores in January '26.

I will now pass it to Will.

Thanks, George. Before I begin, I would like to remind you that some of the statements made on today's call may constitute forward-looking information, and our future results may differ materially from what we discuss. Please refer to our MD&A for the 13 and 52 weeks ended December 28, 2024, as well as other information on our website for a broader description of the risk factors that could affect our performance.

Turning to Slide 8. Our sales for the quarter were a record $2 billion, up $319 million or 19.1% as compared to the third quarter of 2024. This increase was driven by four factors. The first and largest was our organic volume growth, which accounted for $172 million of the increase. Acquisitions made up another $73 million of our growth, selling price increases, primarily relating to beef and to a lesser extent, chicken-based products contributed $62 million to our growth. And finally, a currency translation benefit of $12 million, resulting from year-over-year weakness in the Canadian dollar made up the balance of the increase.

Our organic volume growth in the quarter was driven mainly by the continued success of our U.S. market-focused initiatives in premium protein, sandwich and artists and bakery products, which generated $146 million in organic volume growth, representing an organic volume growth rate of over 24%. The balance of organic volume growth was driven by our Canadian protein and seafood distribution businesses, which continued to benefit from the stabilization of consumer behavior in the retail and foodservice channels. An increase in lobster product revenue resulting from certain sales normally occurring in the second quarter being pushed to the third quarter also contributed to our organic volume growth.

Slide 9 shows the breakdown of our core U.S. growth initiatives by group. As you can see, our protein sandwich and bakery groups all generated very solid results for the quarter, with organic volume growth rates of 21%, 24% and 57%, respectively. On a year-to-date basis, our core U.S. growth initiatives have generated organic volume growth of $252 million, representing an organic volume growth rate of 13.7%. Looking forward, given the strong and increasing momentum of our U.S. sales initiatives, we expect to see continued improvement in our overall organic volume growth in the coming quarters.

Turning to Slide 10. Our adjusted EBITDA for the quarter was $179.1 million, representing an increase of $19.7 million or 12.4% as compared to the third quarter of 2024. The major drivers of this improvement were our organic volume sales growth and improved operating efficiencies. These were partially offset by the impact on our protein group of rising raw material costs, namely beef, and higher operating overheads associated with new production capacity brought on by our protein sandwich and bakery groups. Normalizing for the impact of raw material cost inflation on our Protein Group, our adjusted EBITDA for the quarter is $188.1 million, representing an adjusted EBITDA margin of 9.5%.

As George discussed earlier, we expect the impact of raw material cost inflation to be temporary, but in the meantime, are pursuing a variety of initiatives, including targeted price -- selling price increases to get the contribution margins on our protein products back to normal levels.

Slide 11 shows our start-up and restructuring costs for the three most recent quarters. Third quarter costs reached $19 million, driven by: one, the ramp-up issues associated with the major product launch George referred to earlier, two, the start-up of our new 352,000 square foot sandwich production facility in Cleveland, Tennessee, three, the reconfiguration of the deli meats plant in Waterloo, Ontario, and four, a variety of smaller initiatives implemented to bring on incremental capacity to support our continued growth. Looking forward, we expect the third quarter to be the peak in these costs and should see them steadily decrease over the coming quarters.

Turning to Slide 12. Our adjusted earnings and earnings per share for the quarter were $56.8 million and $1.27 per share, respectively, with both metrics increasing by 14.4% as compared to the third quarter of 2024. The improvement in our profitability is due primarily to the growth in our adjusted EBITDA and to a much lesser extent, lower interest rates.

These factors were partially offset by higher depreciation, interest and lease costs associated with the major investments we have been making in new production capacity to support our U.S. growth initiatives, which we estimate were approximately $0.30 per share for the quarter.

Turning to Slide 13. We spent $46 million in capital expenditures in the quarter, consisting of $15 million on major project CapEx, $18 million in smaller project CapEx, and $13 million of maintenance CapEx. We define project CapEx as investments that are expected to generate an unlevered after-tax internal rate of return of 15% or greater. All other capital expenditures are classified as maintenance CapEx.

Primarily all our major project CapEx expenditures in the quarter were on investments to increase the production capabilities and capacities and in many case, offering efficiencies of our protein sandwich and bakery groups.

Slide 14 shows our project CapEx for each of the last 11 quarters. You can see the dramatic downturn in expenditures in recent quarters as we near the end of our most recent major CapEx investment cycle. Looking forward, we expect to spend over the next four quarters another $92 million on major projects, after which these will provide us approximately $2 billion of incremental sales capacity relative to our 2024 sales of $6.5 billion.

Slide 15 shows some of the key metrics we use to assess our financial position. Our debt leverage levels increased slightly as compared to last quarter, with our senior debt to EBITDA ratio going from 3.3:1 to 3.4:1, and our total debt-to-EBITDA ratio, which includes our subordinated convertible debentures, increasing from 4:2:1 to 4:3:1. These increases were due to two factors: the first was a rapid weakening of the Canadian dollar relative to the U.S. dollar towards the end of the quarter.

This resulted in our U.S. dollar-denominated debt being valued much differently than the U.S. dollar-denominated cash flows being used to service it. Normalizing for this anomaly, our senior debt to EBITDA and our total debt-to-EBITDA ratios for the quarter are 3.3:1 and 4.2:1, respectively.

The second challenge was excess inventory levels, largely resulting from delayed product launches. This, too, increase our ratios by 0.1 turns. Partially offsetting these factors was growth in our EBITDA, which reduced our debt ratios by 0.1 turns. While our debt ratio levels remain above our midterm targets, they are well within our shorter-term operating parameters.

Looking forward, we expect to delever our balance sheet in the coming quarters, driven by growth in our adjusted EBITDA and a variety of other initiatives, including efforts to reduce the amount of inventory held by our businesses as major project launches are completed. In terms of liquidity, we finished the quarter in a strong position with $528 million of unused credit capacity.

The next and final slide shows a variety of our free cash flow and dividend metrics over the last 11-plus years. For the quarter, we generated a record, $85 million in free cash flow up $13 million or 18.2% as compared to the third quarter of 2024. Similarly, our free cash flow per share for the quarter increased to a record $1.90 per share, representing a 17.3% increase as compared to the third quarter of 2024. These increases reflect the early stages of us generating returns on the investments we have been making in new production capacity in recent years. In terms of dividends, subsequent to the quarter, we declared a dividend of $0.85 per share for the fourth quarter of 2024 -- 2025.

That concludes our presentation. Please join us on our Q&A conference call later today at 10:30 a.m. Vancouver time, 1:30 p.m. Toronto time. Thank you.

Good morning and afternoon, ladies and gentlemen, and welcome to the Premium Brands Holdings Corporation Second Quarter 2025 Earnings Conference Call Question-and-answer Session. [Operator Instructions] Also note that this call is being recorded on Wednesday, August 6, 2025.

Our speakers will be George Paleologou, CEO and President of Premium Brands; and Will Kalutycz, CFO of Premium Brands.

And I would like to turn the conference over to George Paleologou. Please go ahead, sir.

Thank you, Sylvie. Good morning, and welcome, everyone, to our 2025 second quarter conference call. With me here today is our CFO, Will Kalutycz. Hopefully, you've had a chance to listen to our prerecorded call posted on our website this morning.

We will now take your questions. Sylvie?

[Operator Instructions] And your first question will be from Derek Lessard at TD Cowen.

Congrats on a great quarter.

Good morning, Derek.

Thanks, Derek.

I guess my first question is, how should we be thinking about the cadence over your next 2 quarters, I guess, just in terms of your revenue and EBITDA guide, is it -- do you think it's an equal split? Or does the momentum build and Q4 should be a stronger quarter?

Yes. It does build, but there's an offsetting cycle with cyclicality. So it should be pretty -- our expectation is pretty consistent over the next 2 quarters, maybe a little bit stronger in Q4 because of the momentum.

Okay. And maybe just -- I was wondering if you guys could maybe just update us on the timing of some of the new contracts or launches that are coming through on that U.S. sales pipeline, I guess, other than meat. What are the bigger programs that are coming through?

Yes, Derek, our business development pipeline is full. It's very robust. We've onboarded and launched a number of new programs in the first 2 quarters of the year, which has obviously driven our organic growth. We are in the process of ramping up a number of brand-new facilities. Obviously, we want to execute well. We want to execute the launches well. It's not an issue for us in terms of business opportunities. It's an issue of obviously making sure that the plants are running well.

And again, as I mentioned earlier, a lot of the launches are going to be large and very lumpy. We don't have the best visibility today in terms of the exact timing, but I can tell you that we're very excited at the pipeline, the business development pipeline.

Okay. And maybe one final one for me before I requeue. Just maybe talk about the decision for you guys to introduce ROIC and make it part of the compensation program. And is there a time frame for you guys getting to that 15% target?

Yes. So we've been using the concept of RONA, which is a pretax calculation, and that dates back to when we were an income trust. And we probably should have made the change sooner, but we've moved to RONA our ROIC to better reflect our after-tax status. It ties closely with our internal metric or target of a 15% unlevered after-tax IRR for all capital allocation decisions. And in terms of meeting that target, it's going to take a couple of years, but '28, '29 is when we expect to be at or exceeding that 15%.

Next question will be from Martin Landry at Stifel.

I would like to follow up on Derek's question to just to get a bit of more visibility and color on your adjusted EBITDA guidance of $680 million to $700 million for the full year. It does imply a very strong back half. it looks like by my calculation, your EBITDA will need to increase by at least 18% to meet the low end of your guidance. So can you talk a little bit about some of the drivers of EBITDA growth for the back half that we can expect and that could give us a bit more visibility as to how you're going to achieve that pretty strong pace of growth?

Yes. It's really growth, Martin. And particularly, Q3, we expect to see some continued growth with the initiatives being launched. They are over the course of Q3 and the largest single launch in our -- our pipeline, which will actually be one of our largest launch -- new product launches in our history is in now early September. So it is sort of loaded to the back half of the quarter. But that's really going to drive a much stronger year-over-year Q4 because Q4 has historically been one of, if not our weakest quarters for seasonality reasons. But a lot of these launches, a lot of this growth is in the U.S. market. It's less seasonal business. And really, that's going to be the biggest year-over-year factor driving that growth into our targeted EBITDA range.

The other part, Martin, that you need to remember is that even though we've reported in line EBITDA for the quarter, we absorbed about $15 million to $20 million in margin contraction because of hyperinflation in chicken and beef. Plus there were some tariffs there as well, not that material, but there were some tariffs as well. So that shows you that the earning capacity of the company on a normalized basis is much higher than what we've reported, right? So you have to account for that in terms of any projections you make.

Okay. So understood. So maybe just to follow up on that last point on your price increases that you've put in place to absorb commodity increases. Are you -- is Q3 also impacted a little bit by that? Or were you able to mitigate fully the commodity cost increases in Q3?

We are -- we put through price increases, but our expectations of our margins normalizing to where they should be over the long term, Martin, is a combination of those price increases, and we do see easing of certain commodities, particularly chicken. So -- and then the third factor is we do expect to see some efficiency gains, which has been consistently part of our EBITDA growth over the last couple of years. But it's sort of a combination of those factors that get our margins back to that normalized number.

Having said that, Martin, there's a lot of moving parts now given the tariff noise in the U.S., not necessarily with Canada, but with obviously trade with Brazil and Australia and New Zealand and Europe and others, right? So again, you have to incorporate some element of risk there as well.

Okay. And then just lastly, George, you talked about in the previous question -- in the previous -- with the question with Derek that some of the launches would be large and lumpy. Are you referring to launches of products this year or this was more a 2026 comment?

No, no. This year, of course, and next year as well. But I was talking generally about the business development pipeline over the next couple of years.

Next question will be from Stephen MacLeod at BMO Capital Markets.

Just wanted to follow up on a couple of things. Just with respect to just the Q3 commentary, I just want to make sure I fully understand the commodity impact. It sounds like you do expect to see margins normalizing, but would you expect to see gross margins in the Specialty Foods business actually improving year-over-year in Q3? Or are you still under pressure just a little bit because of the time it takes to make -- to pass through those price increases?

Yes. Steve, I don't know off the top of my head, the actual percentage margin Q3 over Q3 projected versus next year. But the reality is we do expect to see improvement from Q2.

Okay. No, that's helpful. Okay. Great. Maybe just thinking about the sales capacity that you have. You've talked about the $1.7 billion for -- with the new capacity you have in place. Can you talk a little bit about whether you've previously talked about like $700 million being highly likely for 2025. Can you just let us know if that's still the case? And then how much do you think you've realized by the end of Q2 of that full capacity amount?

As much as we continue to recognize amounts from that pipeline and off the top of my head, I think of that original pipeline, we talked about $1.2 billion. I think it's about $200 million of that has been realized. The reality is the pipeline hasn't changed. As we realize new things, a few projects have dropped off, new projects have come on. We look at our pipeline and today, it's still around that $1.2 billion. In terms of where it falls in terms of likely, highly likely and the quarters, that's always moving around, Steve, as you've seen, this launch I mentioned earlier coming up in September, there's always little delays. There's always things that happen. Originally, it was beginning of August. We had a piece of equipment that was delayed. It's tough to put it that refined of a bucket. But the key note is the pipeline continues to be very strong and lots of exciting stuff going on.

And a lot of that, Stephen, is driven by the 3 megatrends that I mentioned in my prepared remarks, which have driven the growth of Premium Brands since inception and are still driving the growth of Premium Brands, subject obviously to capacity, which we're bringing on stream as we speak with the capital investment that we've made over the last 2 or 3 years, right? We are invested in the right products, in the right plants, obviously catering to the channels that are recognizing that these megatrends [indiscernible] and are investing in them.

Right. Okay. That's helpful. Just to clarify on the sales capacity, I thought in the prepared remarks, you talked about $1.7 billion. But Will, you just said $1.2 billion. So I'm just wondering, is there a difference between those 2 numbers that I'm not aware of?

No, no. The $1.2 billion is the -- those are actual initiatives, Steve, that target initiatives, X product with Y customer. The $1.7 billion is something we'll grow into over the next year or two and as we develop other new opportunities.

That's the available total capacity.

Okay. Okay. That's great. And then maybe just finally, just on the investment income representing the Clearwater investment. It's been a bit higher, sort of the last 2 quarters have been higher than what we saw through the quarters in fiscal 2024. And I'm just curious, is that kind of a new run rate? Or is there anything else that's happening with that line item to cause it to move higher?

If you saw the equity earnings number, Clearwater has been -- had a very tough first half of the year. Now the positive that we are expecting a much better half -- second half of the year for Clearwater. But as a result of that, we've been accruing our interest and the interest compounds. So that's been a driver.

And then as we talked about last quarter, we did have to advance them $40 million at the beginning of the year to help with their liquidity as they put a new financing structure in place. And so the combination of that has led to that growth in the interest rate. Lots of good things happening in the business, though, Steve. They're very close to closing on a new financing, which will greatly address their liquidity needs through this sort of tough part of the cycle.

As I mentioned, the core business itself is starting to show solid improvement for a much better back half. And strategically, there's a lot of good things happening that we'll probably talk about next quarter.

Next question will be from Ty Collin at CIBC World Markets.

So maybe my first one, just to follow up on a previous point. You mentioned that you're expecting one of your biggest programs or contracts of all time to turn on. I think you said around September and that the EBITDA guide is kind of levered to that. I'm just wondering what your level of visibility is on that timing specifically and whether there's any risk that, that gets pushed further into Q3 or into Q4.

Again, the business will be executed by a brand-new facility, Ty, which we're currently ramping up. And we feel comfortable at this point that we'll be able to execute it. If we don't execute it in terms of a big bang type of opportunity, we will basically gradually launch it and ramp up the capacity. But we're hoping that we'll ramp it up all at once, but plan B is to basically launch it gradually.

Okay. Got it. And then I'm wondering if you could kind of provide your updated thoughts on whether there are any parts of your business that you'd consider noncore and might look at divesting at the right price. There's obviously been some consolidation going on in the food distribution space down south. And I'm curious if that's kind of jump-started any conversations around premium brands recently.

Yes. I think, as Will said in his prepared remarks, Ty, we're always looking for ways to improve our liquidity, unlock value, obviously, pay down debt. We're committed to getting back to 3:1 debt to EBITDA. Obviously, growing the EBITDA will be one where you're getting there as well. So all I could say is that we're looking at a number of value unlocking transactions that we will able to use to bring down the debt as we promised we would.

Next question will be from Luke Hannan of Canaccord Genuity.

I wanted to ask about CapEx. I know it's consistent with what you said in the past, CapEx -- project CapEx gradually has been coming down. I think you mentioned $108 million is what you expect over the course of the next 4 quarters. I'm curious so if we look beyond that, let's just say, 2 or 3 years out, should we expecting either on an absolute dollars or a CapEx intensity basis, should we expect relative consistency over the next few years? Or what can you share on that front?

Yes. So we look at CapEx in 3 buckets. Our maintenance CapEx, which tends to be fairly steady, around $60 million to $65 million a year. And then we -- there's generally across our plant network, smaller CapEx projects, adding a line, adding some automation, things like that. And that's generally about $60 million to $65 million a year as well. So that's kind of our baseline CapEx. And then we have these other larger projects that tend to accelerate or increase our organic volume growth rate. And that's what that $108 million we referred to in the presentation, we're left to spend on those major projects.

And so your question is really, are there going to be future major projects. In terms of hitting our target of $10 billion in sales by 2027, and the organic growth number in that is about $9.2 billion to $9.4 billion of sales and then a little bit of acquisitions to get us to the $10 billion. We'll have completed the CapEx cycle of the major projects to get there. Now I can't say there won't be more projects because it will depend on the growth profiles of our business. If they exceed the expectations of their growth profile, they run out of capacity, well, then it will be a very positive story, but we will then be needing to invest more money in their businesses. But based on today and hitting our 5-year targets for 2027, we are essentially at the end of that CapEx cycle.

Okay. I appreciate it. And then on that $9.2 billion to $9.4 billion, if there's a scenario that presents itself where there happens to be more attractive acquisition opportunities out there where perhaps maybe you'd be comfortable giving up some organic growth to go after and chase those acquisitions. Is that a plausible scenario? I guess the question is, are you comfortable potentially acquiring more than what it is that's -- what's being implied.

Absolutely. And just to correct you on something, we wouldn't give up the organic growth, right? Those are niches in place. Our businesses are executing on them. We put what we feel is a very conservative acquisitions number into our 5-year plan. The reality is we expect to exceed that. And so the answer is absolutely yes. If opportunities arise, -- and in George's prepared remarks, our pipeline right now is incredibly robust. There's lots of increasing or interesting transactions we're looking at. And I think we increased our active pipeline to, I think it's about $2 billion in sales opportunities today. So yes, there's significant opportunities there.

Now the one thing I will caveat that will is with is we are committed to maintaining or getting to within our midterm leverage targets, the 2.5 to 3:1 senior debt to EBITDA and the 3.5:1 -- sorry, 4.5:1 total debt to EBITDA. So we're not going to do anything that prevents us from getting within those targets. And I should say and make this very clear is our long-term target is to get our total debt-to-EBITDA ratio down to 3 or less. So those are -- whatever we do, we're working within those trajectories as well.

Yes. Just to talk about history a little bit, Luke, as we've started in Canada many years ago and started to do good things in the food space, many, many food entrepreneurs came to us to join us. And of course, we grew organically by acquisition in Canada. The same thing is happening in the U.S. We're doing a lot of amazing things in the U.S. market. We're launching some of the best-selling products in that market in different channels, and we're well known. We're getting to be well known these days. And because of that, we are having a lot of discussions with many, many food entrepreneurs that would like to join Premium Brands, right? So yes, absolutely, Will is right. We will be doing a lot of acquisitions in the U.S. in the future as we grow our different platforms.

That's great. Last one here, and then I'll pass the line. Just on the Cleveland, Tennessee sandwich facility, roughly speaking, I mean, are the sales that are expected to come out of Phase 1 and potentially future phases? Is that concentrated to any one customer? Or is that relatively well diversified amongst your existing or potentially new customers?

Well diversified, Luke. Again, we have a robust pipeline of large opportunities. And again, we're very, very certain, I would say that we will fill that capacity sooner than what we even budgeted ourselves.

And that's for future phases as well?

Absolutely.

Next question will be from John Zamparo at Scotiabank.

I wanted to ask about the $1.7 billion in capacity, just to follow up on that. Is the right way to think about that, that's the capacity you have in place for facilities today? Or does that include the remaining $108 million in remaining project CapEx over the next 12 months?

Yes. No, let me clarify a couple of things there, John. So the $1.7 billion is, yes, after we complete that $100 million of projects. And in particular, the big project in there is a consolidation of our Concords businesses, plants in the Greater Toronto area. That's about $100 million of sales capacity. So that's the $1.7 billion. But I want to be clear, that $1.7 billion is just the incremental capacity from the new projects. So there's still other capacities in the system. Not every plant was running at full capacity before we started on this CapEx plan. So there is some slack in the system in addition to that as well as I mentioned on an earlier question, the 3 buckets of CapEx. Well, that small project CapEx budget, a bucket of about $60 million to $65 million a year, that also provides us with an additional growth capacity. So it's not limited to the $1.7 billion. There are other elements to it.

Okay. That's good color. The margins on incremental volumes on your organic volume growth this quarter, are those still hitting the, call it, the high 20s percent rate? Is it fair to say this quarter you saw that or above that level?

Yes. Yes. In fact, if you look at our U.S. initiatives, it's much better because -- we've talked about this in the past. Our sandwich group has -- of the 3 big growth platforms in the U.S. Our sandwich group has the lowest contribution margins there, sort of that 20% to 25% range.

Our sandwich are 25%, 30%, even over 30% contribution margins depending on the product mix. And then our bakery is 40% plus. So absolutely relative to 20%, 25%, we're far exceeding that.

Okay. Understood. On tariffs, George, I think you mentioned that was not a meaningful drag on margins in the quarter, but I wonder what you might expect moving forward now the tariffs are a bit more clear and are elevated for many countries, what you might expect over the back half of this year.

Yes. So it's interesting when we -- tariffs became part of the topic that the conversation was -- and the focus was on exports from Canada into the U.S., which we feel we've got $400 million to $500 million of product that crosses the border, but we've got good strategies around that and ways to mitigate any conflicts between the U.S. and Canada.

Really, what's emerging is the impact on supply chains into the U.S. for our U.S. businesses. And so we bring products in from Brazil. We bring products from Europe. We bring products from New Zealand. And so we're watching that very closely. We have flexibility to the extent that these are -- we're procuring products so we can move things around and address it. But certainly, that's what we're viewing today as the biggest challenge and our management teams are focused on managing that.

Ultimately, to the extent that there are unique products that we have to procure from these other markets just because we can't procure them from the U.S. In those situations, we'll have to deal with the tariffs through price increases.

It's an interesting scenario, John, because as we try to game it, let's say, we know that other companies in the food segment are way more exposed than we are, right? Very -- like for us, again, there'll be some impact, but it won't be material, and we have ways to basically deal with it, but there is companies out there that maybe don't have the same option. So anyway, it will be interesting how it unfolds.

Yes. And just to sort of further clarify George's point, John, our imports into the U.S. are raw materials. We import very few, if any, finished goods. It's any manufacturers that have outsourced their manufacturing offshore, those food companies are the ones that are going to have serious issues.

But this is pure speculation because we don't know where we're going to end up at, John, right? Let's remember that.

Yes. Okay. Understood. And then one last one, and then I'll pass it on. There was a comment in your prepared remarks this morning about Premium Brands growing with customers that are less sensitive to downturns or trying to do so. I wonder if you could share some more color here. Is that referring to a certain channel or is that an income cohort you're referring to? Just a bit more color there, please.

Yes. Again, John, overall, as you know, we manufacture premium products with clean ingredients. And we sell them to customers whose consumers basically are looking for them and are not buying them on price, right? So basically, we've done well with customers in North America that have the right type of consumer who is looking for those type of products, differentiated products that are not ultra processed and they're willing to pay a premium ultimately.

So in our view, that consumer doesn't suffer as much in a mild recession, and they don't change their eating habits in a mild recession. So that's what we were trying to convey. And we've seen that in the past in Canada.

Next question will be from Michael Glen of Raymond James.

I'd like to maybe try and pin you guys down a bit more on the Specialty Foods EBITDA margins in the back half of the year. Like your EBITDA margins in the front half were down about 60 basis points year-over-year. Like how much -- do you feel you have enough in place to grow EBITDA margins or keep them flat in Q3 on a year-over-year basis?

Yes, we don't provide quarter-to-quarter guidance on EBITDA margins, Michael. We're confident in our guidance for the year. And I think we've given the cadence of that guidance over the next 2 quarters.

Okay. And in terms of some of the pricing inflation that you're up against, like the chicken pricing, you feel it's largely behind you now? And can you comment on beef prices at all?

Yes. So chicken prices have come off, which is great to see, and that's sort of in line with our expectations. So as the quarter is unfolding, that's sort of looking according to plan. Beef is a greater uncertainty. We just -- we scratch our heads with how high it can go. It just continues to be inflationary. We've seen a few signs here and there, but that's probably going to be the biggest challenge in the back half of the year.

Plus, Michael, there's the uncertainty around tariffs because a lot of beef goes into the U.S. from places like Brazil and Australia, New Zealand and Canada, of course, and others, right? So there's some uncertainty with regards to beef inputs. What I'll say, again, just to add to Will's comment is that we've been very dynamic and very proactive in terms of passing prices through to our customers.

Okay. And a few items. So the inventory ramp that you saw during this quarter, what would be your -- can you provide some idea of how we should think about inventories through back half of the year?

Yes. It was probably about $60 million of inventory we carried over in the quarter that we -- most of that was excess relating to these product initiatives. Again, assuming things go according to plan, you should see a much more positive message at the end of Q3 going into Q4 around working capital.

The only other thing I would add, Michael, in defense of our operating companies is that, as we mentioned earlier with regards to the tariff noise, it's a very uncertain environment. So when you have an uncertain environment, the bias is always on to be sure, right? The bias is always to be conservative. So there's a little bit of that in our working capital numbers.

Okay. And then last one for me. On the Clearwater advance from 1Q, is there -- did you provide a timing for when we might see that come back?

We didn't give specific timings, Michael, but we do expect with the new financing going in place and some of the other strategic initiatives are working, we do expect to receive that in 2025.

Next question will be from Vishal Shreedhar at National Bank.

Can you comment on the new capacity not identified in the $1.7 billion? You talked about excess capacity in existing facilities. It's a large number that seemingly gets us to the $9.2 billion to $9.4 billion. So where are the major capacity -- incremental capacity coming from? What facilities will drive that delta from that $6.5 billion plus the $1.7 billion plus that residual number?

Yes. We have in our Specialty Foods network 60 to 70 facilities, Vishal. It's really spread across them. There's no one single facility I can call out and say there's $150 million of excess capacity. It is really widely dispersed. And it's -- the reality is, George mentioned earlier the tailwinds driving many of our businesses. And the reality is we've got -- all of our businesses are benefiting from that on the Specialty Foods side. And there's -- in addition to these large pipelines of opportunities, these are specific initiatives. There's just general market growth in the categories we're in, and it's really supporting that general growth.

Okay. So with respect to that number, do we know where we are in that continuum of capturing it? I guess the $1.7 billion started in 2024. So I presume some of those capacity initiatives to take up the slack in capacity or add new lines, some of that's been done and then some of that will be done through the course of the remaining years. Is there a sense or is it also very difficult given the number of facilities to gauge that?

Yes, Definitely.

It's a combination of the two, Vishal. And again, that's how we are going to get to that $9.2 billion to $9.4 billion in sales through organic growth. It's that large pipeline that we built -- or that large new capacity we built, the $1.7 billion, plus it's then general expansion and existing capacity throughout the network. So that's your delta. That's your difference in the $1.7 billion from -- our sales in '24 were $6.4 billion. You add the $1.7 billion to that and then that difference from that number to the $9.2 billion, $9.4 billion is that general capacity through the system, plus the incremental benefit of that $60 million to $65 million a year of spend.

Yes. And Vishal, just in terms of the capacity thinking aloud here. I think over the last 3 years, we've built about 6 plants, 6 brand-new plants in the network. We've expanded a few substantially, and then we've added new production lines to existing ones. So those are the 3 different types of capital investments we've made to increase our capacity. And I'll talk to Will and maybe on the future calls, we'll give you a little more color on that, where we're at in terms of that.

That would be helpful. With respect to the timing of the large program that will start in September, George, I think you mentioned that if you're ramping up a new facility and if it doesn't ramp according to the plan, maybe you'll take it a bit slower. At what point will you know -- first, did I characterize that correctly? And second, what point will you know what speed you can go and the cadence of the ramp up? And what outcome is reflected in your guidance? Is it the slower ramp-up outcome that's reflected in guidance?

Yes. No, it is a more rapid ramp-up, Vishal. And really, what will happen is if it's a slower ramp-up, all you're going to see is -- I don't think it's going to change our outlook for the year by much because the initial channel fill as you ramp up is the big portion of the initial sales. And we're fully confident that if it's not fully ramped up by Q3, it will be in Q4. So it's really one -- some of those sales might get pushed into Q4, but it would not change our outlook for 2025.

I see. So it's a month timing issue that you're referring to?

Exactly, exactly.

Next question will be from Chris Li at Desjardins.

Just maybe one follow-up question for me. Just going back to the U.S. sandwich organic growth rate in the quarter. You noted that it was up slightly if you exclude the tough year ago comp. I'm just wondering, to the extent you can, can you provide some color of how do you think that organic volume growth rate will evolve in the back half of the year as some of the new programs start to come in?

And then maybe in the context, if you're able to share what you're seeing from your large QSR customer, how are some of the initiatives going on right now? And then what does that mean for the back half of the year for you guys?

Yes. So the sandwich group, we do expect to see a much better growth in the back half of the year. Part of that is with our -- one of our biggest customers, we continue to see steady improvement in their business and our sales to them. And then just a lot of stuff in the pipeline that's starting to come to fruition, particularly with the Cleveland plant starting up. So yes, yes, no, no, you should see a nice cadence in the sandwich group over Q3, Q4.

Yes. And again, just a couple of more things, Chris. We're making excellent progress in terms of lining up more business in the overall coffee channel in the U.S., which is growing in the high single digits. Again, we're probably the best well positioned -- the best positioned company in the food space to take advantage of the growth of that channel. And secondly, we're making very good progress in terms of doing business in the retail and club channels as well. So again, there's a lot going on. I also want to mention that the co-packing channel for us is a great opportunity as we leverage the state-of-the-art facility in Cleveland, Tennessee.

Okay. That's very helpful. And then maybe another quick one for me. Just, George, in your letter to shareholders, there were a few interesting comments. I think the one I think you noted was that, and I'm just paraphrasing that if you don't see any significant improvement in the valuation of your business, you'll likely shift from focus on dividends to share buybacks. Can you elaborate on what you meant by that and just the timing of it and just any parameters we can look for would be helpful.

Yes. I think as Will said, Chris, our first priority is to basically improve the balance sheet. As I mentioned earlier, we're focusing on a number of initiatives to do that. We hope to have more to announce in the coming months. We're making really good progress on that front. And I think you saw some of the improvement in our balance sheet after the second quarter. Ultimately, we think that at certain levels, our shares are very undervalued relative to their intrinsic value. And obviously, we're going to be looking at buying back shares. It's a more tax-efficient way to create value for our shareholders.

Next question will be from Ryland Conrad at RBC Capital Markets.

Just on Premium Food Distribution, a nice kind of positive inflection in organic volume growth there. Can you just unpack the drivers of that performance? In the release, I think it mentioned that opportunistic inventory purchases were a contributor. So just trying to get a sense whether that kind of mid-single-digit volume growth is sustainable going forward.

Yes. Thanks for asking that question. Again, we were pleasantly surprised, of course, by the performance of our distribution group, given some of the challenges with the economies in Canada and the U.S., the well-known challenges. Having said that, I can't emphasize enough the demand we're seeing for protein, particularly premium protein.

And again, we've talked about this for a long time. We think that there is an inflection point here with regards to consumer demand and consumer taste. Obviously, consumers are favoring premium protein, and we're seeing the benefit of that in our distribution business, which, as you know, mainly distributes protein across Canada and some parts of the U.S.

Great. And then just could you remind us on the timing of the sale leaseback for the GTA facility? And are there any kind of preliminary estimates on the proceeds from that?

Yes. So it won't be until we complete that project, and the completion now is for Q2 2026. So it's a ways off.

Okay. Got it. And then just on Clearwater, I think you kind of alluded to it in some of your responses, but I noticed in the release that Clearwater exited the Macduff kind of land-based operation a few weeks ago. And correct me if I'm wrong, but I believe that was a bit of a drag on the business. So could you maybe just provide some color on that sale and any implications for Clearwater?

Yes. So they've entered actually a number of transactions in the last few months that unlock value, reduce losses, of course, or eliminate losses in some cases. and also free up working capital as well. So maybe Will can give you some numbers in terms of the improvement in the capital efficiency of the business model, which has really been our priority.

Yes. So certainly, that transaction, which happened after the quarter, we view it very positively. The benefits from a cash flow perspective, really the majority of them will flow through future consideration and like George says, working capital benefit. So certainly, that's contributing to our expectations to see improved cash flows coming out of Clearwater to Premium Brands.

[Operator Instructions] Next, we have a follow-up from Derek Lessard at TD Cowen.

Just one follow-up for me, guys. In terms of the buyback versus the dividend, could you just maybe clarify, do you mean you'd be doing the buyback rather than growing the dividend?

It depends how our liquidity unlocking initiatives go, Derek. I don't think the 2 are mutually exclusive, right? It just depends how it goes. But ultimately, it just depends on the -- where our shares are trading, our view of the intrinsic -- relative to intrinsic value. And what we've said is that ultimately, if the balance sheet allows it, it would be more tax efficient to buy back the shares.

Okay. And I guess to that point, George, like when do you think you'd be in a position to be buying back shares or anticipate.

If everything goes well, hopefully sometime in '26.

And at this time, we have no other questions registered. I would like to pass it back to George for closing remarks.

I'd like to thank everybody for attending today. See you all in October.

Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines.

Welcome, everyone, to our 2025 second quarter conference call. Thank you for joining us today. With me here is our CFO, Will Kalutycz. Our presentation will follow the deck that was posted on our website this morning.

We're now on Slide 3, which outlines key highlights for the quarter. Overall, our results for the second quarter were on plan as our premium protein and artisan baked goods strategies in the U.S. continue to generate very strong organic growth rates, and our Canadian business has benefited from strong demand for protein products in both the retail and foodservice channels.

While the consumer backdrops in both Canada and the U.S. have their challenges, we continue to generate solid organic growth as a result of the 3 main macro trends we have been investing in over the past 20 years, namely value-added protein, premiumization and convenience. Indeed, consumer preferences in North America and even globally are shifting rapidly with demand for premium protein growing substantially, while many ultra-processed foods are being scrutinized, questioned or even avoided by consumers like never before.

At the same time, busy lifestyles are driving demand for healthy, nutrient-rich minimally processed ready-to-eat and ready-to-cook snacks and meals. For more color on our various strategies and the consumer trends driving them, please see my most recent CEO letter to shareholders, which is titled The Future of Food is in the Past and can be found on our website.

Our strong performance during the quarter was not without headwinds as higher-than-expected inflation in certain key commodities, namely beef and chicken, pressured margins and our overall profitability. We're taking the necessary actions needed to restore our margins, including targeted pricing as well as cost reduction initiatives through continuous improvement, automation and capacity optimization.

Our ability to continue to deliver record top and bottom line results despite the many challenges that come our way is a testament to the resilience of our unique business model, our commitment to running best-in-class operations, our premium and on-trend product portfolio mix and the passionate men and women entrepreneurs that we're privileged to work with.

Furthermore, the base of consumers driving the megatrends we're investing in is growing in size and is less sensitive to mild economic downturns. As we near the end of our most recent $1 billion capital investment cycle, which began 3 years ago, we're well positioned to execute our 5-year plan, which will take us to $10 billion in revenue and to 10% to 12% EBITDA margin by the end of 2027.

We're now on Slide 4. Although we did not close any acquisitions during the quarter, our acquisition pipeline remains full, and we're involved in many advanced stage discussions with talented food entrepreneurs that are looking to join our unique ecosystem of best-in-class specialty food companies. This is because they know that we're investors and not traders of food businesses and that we take a very long-term view in managing our business while always staying true to our vision and our values.

We're now on Slides 5 and 6, which includes some pictures of new capacity recently added to our U.S. plant network. Our new state-of-the-art sandwich assembly plant in Cleveland, Tennessee, which is shown on Slide 5, is now operational with 4 lines in production and a fifth being installed. Slide 6 shows a picture of our recently acquired cooked protein production facility in Owasso, Oklahoma.

Over the last 6 months, we have made significant improvements to this plant, which is now producing our highly successful marinated chicken skewer and cooked chicken bite lines that are also shown on the slide.

I will now pass it to Will.

Thanks, George. Before I begin, I would like to remind you that some of the statements made on today's call may constitute forward-looking information, and our future results may differ materially from what we discuss. Please refer to our MD&A for the 13 and 52 weeks ended December 28, 2024, as well as other information on our website for a broader description of the risk factors that could affect our performance.

Turning to Slide 8. Our sales for the quarter were a record $1.9 billion, up $212 million or 12.5% as compared to the second quarter of 2024. This increase was driven by 4 factors. The first and largest was organic volume growth, which accounted for $82 million of the increase. Acquisitions made up another $74 million of our growth. The third factor was selling price increases, primarily relating to chicken and beef-based products, which contributed $50 million to our sales increase. And the final factor was a currency translation benefit of $6 million, resulting from year-over-year weakness in the Canadian dollar.

Our organic volume growth in the quarter was driven mainly by the continued success of our U.S. market-focused initiatives in premium protein and artisan bakery products, which generated $58 million in organic volume growth, representing a combined organic volume growth rate of 21%. On an individual basis, these initiatives generated organic volume growth rates of 15% and 98%, respectively.

The balance of our organic volume growth was driven by our Canadian businesses, which, as George mentioned earlier, are benefiting from some stabilization of consumer behavior in the foodservice and retail channels as well as several macro consumer trends. These positives were partially offset by a 2.3% contraction in our U.S. market-focused sandwich initiatives, which was solely due to a tough year-over-year comparative resulting from channel fill sales associated with a major new product launch in the second quarter of 2024.

Adjusting for the impact of this, our U.S. sandwich initiatives generated a positive organic volume growth rate of 2.3%. Looking forward, we expect this rate to accelerate over the coming quarters as our sandwich group leverages the incremental capacity of the new Tennessee plant George referred to earlier.

Slide 9 shows a breakdown of our core U.S. growth initiatives. As you can see, our protein and bakery groups generated very solid results for the quarter, while our sandwich group struggled for the reasons I mentioned earlier. On a year-to-date basis, our core U.S. growth initiatives have generated an organic volume growth rate of 8.6%, representing a sales increase of $107 million.

Turning to Slide 10. Our adjusted EBITDA for the quarter was $177.1 million, representing an increase of $12.5 million or 7.6% as compared to the second quarter of 2024. The major drivers of this improvement were our organic volume sales growth and improved operating efficiencies. These were partially offset by the impact on our protein group of rising raw material costs, particularly for certain chicken and beef commodities and higher operating overheads associated with new production capacity brought online by our protein and sandwich groups.

Normalizing for the impact of raw material cost inflation, which we expect to address through a combination of targeted selling price increases, easing of certain raw material costs and improved operating efficiencies, our adjusted EBITDA for the quarter is $192.5 million. Our adjusted EBITDA margin for the quarter as compared to the second quarter of 2024 fell by 50 basis points to 9.2%. However, after adjusting for the temporary impact of raw material cost inflation, it is 10.1%, representing a positive 50 basis points year-over-year increase.

Turning to Slide 11. Our adjusted earnings and earnings per share for the quarter were $59.4 million and $1.33 per share, respectively, representing increases of 4.4% and 4.0%, respectively, as compared to the second quarter of 2024. The improvement in our profitability is due primarily to the growth in our adjusted EBITDA and to a much lesser extent, lower interest rates, partially offset by higher depreciation, interest and lease costs associated with the major investments we have been making in new production capacity to support our U.S. growth initiatives.

Turning to Slide 12. For the quarter, we spent $52.4 million on capital expenditures, consisting of $25.3 million on major project CapEx, $12.6 million on smaller project CapEx and $14.5 million on maintenance CapEx. We define project CapEx as investments that are expected to generate an unlevered after-tax internal rate of return of 15% or greater. All other capital expenditures are classified as maintenance CapEx.

Primarily all our major project capital expenditures in the quarter were on investments to increase the production capacities and in many cases, operating efficiencies of our protein and sandwich group's businesses.

Slide 13 shows our project CapEx for each of the last 10 quarters. You can see the dramatic downturn in expenditures in recent quarters as we near the end of our most recent major CapEx investment cycle. Looking forward, we expect to spend over the next 4 quarters, another $108 million on major projects, after which these will, relative to our 2024 sales, provide us with approximately $1.7 billion of incremental sales capacity.

Slide 14 shows some of the key metrics we use to assess our financial position. We made significant progress in the quarter in reducing our debt leverage with our total debt-to-EBITDA ratio decreasing to 4.2:1, representing 0.4 turns of improvement as compared to the first quarter of 2025, and which is now nearing our midterm target of 4.0:1 or better.

This improvement was driven by 2 factors, namely the completion of the sale and leaseback of the real estate associated with our new sandwich plant in Tennessee and the growth in our adjusted EBITDA. These were partially offset by increases in our net working capital associated with the ramp-up of inventory for product launches planned for the third quarter of 2025 as well as our general growth.

Our senior debt-to-EBITDA ratio also improved from the first quarter of 2025 but only by 0.1 turns to 3.3:1 due to the use of our senior credit facility to repay a $172.5 million subordinate debenture that came due in April.

Looking forward, over the back half of 2025, we expect to continue to deleverage our balance sheet driven by the expected growth in our adjusted EBITDA and a variety of other initiatives, including efforts to reduce the amount of inventory held by our businesses. In terms of liquidity, we finished the quarter in a strong position with $583 million of unused credit capacity.

The next and final slide shows a variety of our free cash flow and dividend metrics over the last 11-plus years. For the quarter, we generated $80.2 million in free cash flow, up 6.6% as compared to the second quarter of 2024. Similarly, our free cash flow per share for the quarter increased by 6% as compared to the second quarter of 2024. These increases reflect the early stages of us generating returns on the investments we have been making in new production capacity in recent years. In terms of dividends, subsequent to the quarter, we declared a dividend of $0.85 per share for the third quarter of 2025.

That concludes our presentation. Please join us on our Q&A conference call later today at 10:30 a.m. Vancouver Time, 1:30 p.m. Toronto time. Thank you.