High Liner Foods (TSX:HLF) reported first-quarter financial results on Thursday. The transcript from the company’s first-quarter earnings call has been provided below.
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The full earnings call is available at https://app.webinar.net/revD7gJl42k
Summary
Herbalife Ltd reported strong top-line growth driven by promotional activities and product innovation, although operational pressures and supply chain constraints impacted profitability.
Key strategic initiatives include addressing pricing strategies post-Lent, focusing on targeted promotions to optimize margins, and improving supply chain efficiency.
Despite challenges, the company remains optimistic about improving bottom-line performance with pricing adjustments, cost management, and strategic investments in innovation.
Financially, the company saw a 24.8% increase in sales to $334.9 million, but gross profit as a percentage of sales decreased due to higher raw material costs and promotional activities.
Management emphasized a disciplined approach to capital expenditures and capital allocation to ensure optimal returns, while also addressing challenges related to rising fuel costs and supply constraints.
Full Transcript
OPERATOR
Good morning ladies and gentlemen. Thank you for standing by. Welcome to the Highliner Foods Incorporated Conference call for results of the first quarter of 2026. At this time, all participant lines are in the listen only mode. Following Management’s prepared remarks, we will conduct a question and answer session. Instructions will be provided at that time for you to queue up for questions. If anyone has any difficulties hearing the conference, please press star key followed by zero for operator assistance at any time. This conference call is being recorded today, Thursday, May 14, 2026 at 10:00am Eastern Time for replay purposes and I would like to turn the call over to Matt McDonald, Vice President of Finance and Investor Relations for Highliner Foods. Please go ahead
Matt McDonald (Vice President of Finance and Investor Relations)
Good morning everyone. Thank you for joining the Highliner Foods Conference call today to discuss our financial results for the first quarter of 2026. On the call from Highliner Foods are Paul Jewer, Chief Executive Officer, Kimberly Stevens, Chief Financial Officer and Anthony Rosetta, Chief Commercial Officer. I would like to remind listeners that we use certain non IFRS measures and ratios when discussing our financial results as we believe these are useful in assessing the Company’s financial performance. These measures are fully described and reconciled to IFRS measures in our MD and A. Listeners are reminded that certain statements made on today’s call may be forward looking statements under applicable securities law. Management may use forward looking statements when discussing the Company’s investments and acquisitions strategy, business and markets in which the Company operates, as well as the operating and financial performance in the future. These statements are based on assumptions that are believed to be reasonable at the time they were made and currently available information. Forward looking statements are subject to risks and uncertainties. Actual results or events, including operating or financial results, could differ materially from those anticipated in these forward looking statements. Highliner Foods includes a thorough discussion of the risks and other factors that could cause its anticipated outcomes to differ from actual outcome in its publicly available disclosure documents, including its most recent annual MDA and Annual Information Form. Please note that Highliner Foods is under no obligation to update any forward looking statements discussed today at the close of markets yesterday May 13, Highliner Foods reported its financial results for the first quarter ended April 4, 2026. That news release, along with the Company’s MDA and unaudited condensed interim consolidated statements for the first quarter of 2026 have been filed on SEDAR plus and can also be found in the Investors section of the Highliner Foods website. If you would like to receive our news release in the future, please visit the Company’s website to register. Lastly, please note that Company reports its financial results in US Dollars and therefore the results to be discussed today are also stated in US Dollars unless otherwise noted. Highliner Foods common shares trade on the Toronto Stock Exchange and are quoted in Canadian dollars. I will now turn the call over to Paul for his opening remarks.
Paul Jewer (Chief Executive Officer)
Thanks Matt and thank you everyone for joining us on today’s call. Before I share my perspective on the quarter, I’d like to begin by welcoming Matt to Highliner Foods as our new Vice President of Finance and Investor Relations. Matt brings extensive public market experience both domestically and internationally in oil and gas, real estate and financial services. We are thrilled to have him on board. Now turning to the first quarter. When I last spoke to you in February, we were encouraged by the strong start to the year, both in terms of demand for our products and the progress we were making on driving enhanced profitability. As we reported today, despite a volatile and inflationary macro environment, the strong demand we saw at the start of the year persisted through the quarter, supported by an earlier lent promotional activity and product innovation. Demand on the top line surpassed our expectations. However, as the first quarter progressed, that outperformance created operational pressure impacting profitability and delaying the timing of our margin improvement initiatives. Challenges included larger than expected constraints on global supply, particularly in key whitefish species which impacted fill rates and operational efficiency across the supply chain. Against this backdrop, our plants were operating in catch up mode to respond to higher than planned demand which coupled with higher inflation and rising input costs negatively impacted our Q1 margins. I recognize that the strength of the top line has not translated to bottom line profitability over the past three quarters and this is being actively addressed across the business. Our focus is on the factors we can control and it comes down to strengthening execution across the organization in three primary areas, pricing, promotions and supply chain. First, on pricing. With Lent behind us, we’ve been able to address pricing with our customers and now have necessary pricing in place across the majority of our portfolio for Q2. However, these are unprecedented times and as raw material costs continue to rise, we are prepared to have more frequent pricing discussions with our customers, particularly as it relates to certain whitefish products and along with all suppliers, we will be seeking to pass on higher fuel costs. Second, promotions. We are taking a more targeted approach to promotional activity to ensure investments support the bottom line as well as the top line. In today’s environment, strategic investment in trade is essential to attract a value conscious consumer to our brands and to the category in general. However, as we consider future investments, we will put greater emphasis on the importance of optimizing margins and an overall return on investment. Third Supply Chain Given the global supply shortages in some of our key species and the resulting higher raw material costs, the work we are undertaking here focuses on strengthening planning around raw material availability and driving greater efficiency across our operations. While this is still in progress, I’m pleased to report that post lent raw material availability is and production are improving. We are taking steps to improve capacity utilization by reducing lower return SKUs and focusing our teams on productivity and operational discipline in parallel to action on price promotions and supply chain. We will continue to manage costs across the organization and remain extremely disciplined in our capital expenditures and capital allocation to ensure optimal return on investment. Our recently announced organizational changes have helped to right size our costs to this current reality. To sum up, we have a clear roadmap for stronger bottom line performance and to restore margins to the level this business is capable of delivering. With that, I will pass the call over to Kimberly to discuss our financial results. Kimberly, over to you.
Kimberly Stevens (Chief Financial Officer)
Thanks Paul and hello everyone. As Paul mentioned, we saw strong top line growth during the first quarter supported by our targeted promotional activity, the earlier led in period and the underlying strength of our branded and value added product portfolio.
Kimberly Stevens (Chief Financial Officer)
While margins remain pressured due to the ongoing internal and external factors previously discussed, we are applying insights from the first quarter to strengthen our execution across pricing, promotion and plant operations while simultaneously we’re continuing to identify cost saving opportunities to support our value proposition in an inflationary and competitive environment. Despite continuing to operate in a volatile and inflationary macroeconomic environment, we continue to see and experience top line growth in both volume and net sales over the prior year.
Kimberly Stevens (Chief Financial Officer)
In both retail and food service sales volume increased in the first quarter by 7 million pounds or 10.6% to 73 million pounds compared to 66 million pounds in the first quarter of 2025 due to the timing of the Lenten period, the additional contract manufacturing business and the volume growth associated with the United States Department of Agriculture USDA contract retail volume was also higher due to the incremental volume associated with the newly acquired brands from conagra Brands as well as the company’s targeted approach to value driven promotions and innovations and strong demand in the Highliner Foods diversified product portfolio. Sales increased the first quarter by 66.5 million or 24.8% to 334.9 million compared to 268.4 million in the same period last year driven by the increased volume as well as the increased pricing reflecting inflationary markets, gross profit increased for the first quarter by 3.1 million or 4.9% to 66.6 million and gross profit as a percentage of sales decreased by 380 basis points to 19.9% as compared to 23.7 in the first quarter of 2025.
Kimberly Stevens (Chief Financial Officer)
The increase in gross profit is driven by the increase of sales volume previously mentioned. This is offset though by higher raw material costs including tariffs on select species, elevated promotional activity, unfavorable product mix and supply chain challenges due to the limited availability of supply, particularly in the company’s key whitefish species, which is reflected in the decline in the gross profit as a percentage of sales.
Kimberly Stevens (Chief Financial Officer)
Distribution expenses consisted of freight and storage increased in the first quarter by 4.2 million or 33.6% to 16.7 million compared to 12.5 million in the same period in the prior year. This increase in distribution expense was mainly due to the increased freight costs incurred on the sales associated with the newly acquired brands from Conagle brands and incremental retail distribution.
Kimberly Stevens (Chief Financial Officer)
Increased storage costs from higher levels of inventory due to the newly acquired brands and to support strategic purchasing at the beginning of the quarter also contributed to the overall increase. As a percentage of sales, distribution expenses increased to 5% in the first quarter compared to 4.7% in the same period in the prior year.
Kimberly Stevens (Chief Financial Officer)
Although the distribution cost rose due to the addition of the newly acquired brands, we are pleased to report that these brands generated incremental positive adjusted EBITDA during the quarter. As anticipated, adjusted EBITDA decreased in the first quarter by 2.8 million or 8.7% to 29.3 million compared to 32.1 million in the same period in the prior year, and adjusted EBITDA as a percentage of sales decreased to 8.7% compared to 12%. The decrease in adjusted EBITDA reflects the increase of gross profit previously mentioned, offset by increased distribution and SGA expenses. Reported net income decreased in the first quarter by 7.3 million or 47.7% to 8 million, while diluted earnings per share decreased to $0.27 compared to $0.51 in the prior year.
Kimberly Stevens (Chief Financial Officer)
The decrease in net income reflects the expenses related to the recent restructuring efforts that the Company undertook to align its cost structure with the current market conditions as well as the decrease in the adjusted EBITDA previously mentioned. Excluding the impact of certain non routine or non cash expenses that are explained in our MDA, adjusted net income for the first quarter of 2026 decreased by $5.2 million, or 31.3% to $11.4 million. Adjusted diluted earnings per share decreased to $0.39 from $0.55 in the same period in 2025. With regards to cash flows from operations and the balance sheet, net cash flows from operating activities for the first quarter 2026 increased by $35.6 million to an inflow of $25 million compared to an outflow of 10.6 million in the same period of 2025.
Kimberly Stevens (Chief Financial Officer)
The increase is primarily driven by favorable changes in non cash working capital balances, specifically in the collection of our accounts receivables and lower inventory balances in relation to the earlier timing of the lenten period in 2026 compared to 2025, partially offset with the repayments of our account payable balances.
Kimberly Stevens (Chief Financial Officer)
Net debt at the end of the first quarter of 2026 decreased by 4.4 million to 318 million compared to 300 million at the end of fiscal 2025, reflecting our higher cash balances partially offset with an increased bank loans and lease liabilities, Net debt to adjusted EBITDA was 3.6 times at April 4, 2026 compared to 3.5 times at the end of fiscal 2025. We expect the ratio to improve throughout the year and be slightly above the company’s long term target of three times by the end of fiscal 2026. We are in the process of applying for US tariff refunds, however, this is not currently reflected in our financial statements. Due to the high level of uncertainty around the process and the timing of collecting these funds, we are continuing to pursue this and we will share further updates when appropriate.
Kimberly Stevens (Chief Financial Officer)
I’ll now hand the call over to Anthony to discuss our operational performance.
Anthony Rosetta (Chief Commercial Officer)
Thanks Kimberly. As you’ve heard, we delivered a strong quarter on the top …
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