Good morning, ladies and gentlemen, and welcome to the Colabor Group Q1 2022 Results Conference Call. At this time, all lines are listen-only mode. Following the presentation, we will conduct a question-and-answer session open to analysts only. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Thursday, April 28, 2022. Before turning the meeting over to management, I would like to remind listeners that this conference call contains forward-looking information within the meaning of applicable Canadian securities laws and subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated. I refer the audience to the forward-looking statement as detailed in the presentation supporting this conference call and available on the company's website in investor section under Events and Presentation at www.colabor.com.
Furthermore, risks are discussed throughout the most recent MD&A under the heading Risks. I would now like to turn the conference over to Mr. Louis Frenette, President and CEO of Colabor Group. Please go ahead, sir.
Thank you, Anas. Good morning, everyone, and welcome to Colabor Group 2022 Q1 results conference call. This is Louis Frenette, President and Chief Executive Officer of Colabor. Last evening, we released our earnings results for the 12-week period ended March 19th. The press release and disclosure documents can be found on our website or on SEDAR. Joining me today on this call is Pierre Blanchette, our Chief Financial Officer, who following my initial remarks will provide an overview of our financial results. Well, we are off to a good start to the year. Our diversification strategy allowed us to pursue our growth trajectory even as restaurants face temporary dine-in restrictions in the full month of January. Consolidated revenues are up 13.2% compared to the Q1 of last year.
Another good news, gross margins are up 2.4% - 17.1% of revenues, demonstrating the resiliency of our business model in the context of significant food input inflation. Adjusting for subsidies received last year, Adjusted EBITDA stands at 2.4% of sales compared with 3% last year. The 60 basis point variance results from anticipated inflation in labor and fuel costs and from more investment in the sales and marketing force, which we initiated in April of last year. Furthermore, our strong cash flow allowed us to reimburse CAD 7.8 million of debt during the quarter, which brings our leverage ratio at a very conservative, 1.6x at the end of Q1.
On the operational side, we recently achieved an important milestone, the conclusion of two accretive acquisitions aimed at accelerating our growth in the Quebec food distribution market. On April 4th, we announced the acquisition of Le Groupe Resto-Achats, a purchasing group primarily focused for restaurants located in eastern Quebec. The group brings a dedicated and exceptional management and operational team with CAD 4 million of additional revenues and strengthen our competitive position with independent restaurant in our current and future prospective markets. This service will help us gain new customers across the province. Also, on April eleventh, we further announced the acquisition of certain assets of Ben Deshaies, a long-time partner in our wholesale business. This acquisition broaden our distribution reach in western Quebec and brings approximately CAD 13 million in annual sales revenues.
It expands our geographical reach in western Quebec, more specifically in the Laurentians and Outaouais region by providing access to small warehousing facility located in Mont-Laurier and a new customer network on which to build. Together, these two acquisitions represent CAD 17 million in additional revenues. During the Q1 , we also continued to execute our strategic plan with additional hires to support our organic growth objective in our distribution segment and continued our investment in our private label. These initiatives are on track with our growth and profitability objectives. We continue to pay special attention to dynamically manage the impact of the pandemic and rising inflation in our business and bottom line. Proactive management of rising input costs remains a priority and brings to the forefront the importance of continuing to improve our operations to generate efficiencies.
Looking ahead, with an improving product mix, wider distribution network, and improving efficiencies, we are well positioned to benefit from the recovery of restaurants and hospitality industry. As always, we remain prudent and focused on managing our cost structure in the face of rising inflation, labor scarcity and supply chain disruptions. Pierre, with this, I will turn the call over to you.
Thank you, Louis, and good morning, everyone. I'm pleased to be here today to discuss our key financial results for the Q1 of 2022. Q1 consolidated sales from continuing operations were up 13.2% to CAD 97.2 million. Sales in the distribution segment increased by 17.4% to CAD 67.2 million. Strong growth results mainly from the less restrictive operating environment in the restaurant channel and from the effect of approximately 7% of price inflation. Sales in the wholesale segment increased by 4.3% to CAD 38.3 million. Again, this results primarily from the easing of operating restriction affecting the restaurant industry from the growth of certain customer accounts and small customer gains, mitigated by the partial loss of volume from a single customer, which we are now lapping.
Consolidated Adjusted EBITDA from continuing operations reached CAD 2.3 million or 2.4% of sales, compared to CAD 3.8 million or 4.5%, in the Q1 of last year. The effect of growing revenue was mitigated by a reduction of CAD 1.3 million in subsidies received, as Louis mentioned in his opening remarks, rising labor and freight costs, and continued investment in sales and marketing to grow our distribution market shares and reposition our private brand. Net loss from continuing operations and net loss were CAD 1.7 million, and higher when compared to last year's Q1 loss of CAD 1 million, resulting primarily from lower EBITDA in Q1 of 2022 and higher costs not related to the current operations, which were mitigated by lower financial expenses and higher tax recovery.
Cash flow from operating activities generated CAD 12.4 million in the Q1 of 2022, compared to CAD 5.4 million in the equivalent quarter of last year. Lower working capital requirements, combined with the collection of the settlement of a tax assessment and higher collection of customer accounts on a year-over-year basis. Cash on hand at the end of the quarter represented CAD 3.8 million, with CAD 49 million of available borrowing capacity on our credit facility. As at March 19, 2022, our net debt amounted to CAD 39 million, down from CAD 48.4 million at the end of fiscal 2021, resulting from the reimbursement of CAD 7.8 million of our credit facility in the quarter. Our financial leverage ratio stands at 1.6x versus 1.9 x at the end of fiscal 2021.
We expect that the pandemic and the associated labor shortage and supply chain disruption will continue to have somewhat of an impact on our results. As we stand today, the government of Quebec has rolled back its dine-in restriction. Restaurants are allowed to operate at full capacity. As we have demonstrated these last two years, we remain dedicated to maintaining a prudent approach to managing our cost structure in line with demand and protecting our financial situation. I would now like to turn the call over to the operator for the Q&A period.
Thank you, sir. Ladies and gentlemen, we will now conduct the question and answer session. If you would like to ask a question, press star, then the number one on your telephone keypad. If you would like to withdraw your question, press star two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment please, for your first question. Your first question comes from Kyle McPhee with Cormark Securities. Please go ahead.
Hi, everyone. Thanks for taking my questions. To start on the revenue line, both segments beat my revenue expectations, but the wholesale segment beat in a big way. Is the new wholesale customer, your filings pointed out a meaningful change and something we should expect to repeat, or is there anything one-time about the wholesale segment performance we should know about this quarter?
Good morning, Kyle. Thanks for the question. It's Pierre. Well, we don't measure or we don't have the same point of view. Our wholesale revenue is in line with our expectation and in the previous quarters as well. They're up 4.3% year-over-year. To answer your question, there's no specific item that spiked the revenue in Q1 from our point of view. We have gained new customers, as we mentioned in our prepared remarks, and there is a partial loss of volume in Q1 of 2021. We don't have any major one-time.
You can expect that same type of growth in the coming quarters.
Got it. Okay. Nothing one time and my numbers are just too low. Moving on, still focused on the top line here. After the mandated restaurant closures in January throughout Quebec, did everything return to normal in the restaurant channel, or is that list of restaurants that have not reopened since COVID started now a larger list of restaurants that are not reopened?
Yes. Hi, Kyle. It's Louis. Yeah, it's back. I should say to new normal. Not necessarily the old normal, but because there are still restaurants that are closed, there's about 17%. Demand is there. The problem is mainly because the restaurants are not yet able to open at full capacity because of labor issues. Because we're lucky to be well-diversified geographically, primarily operating outside of the larger centers, would be more affected in Montreal as an example.
Got it. Okay. That's good to hear. Then on pricing gains, can you quantify how much of that 13% revenue growth you posted in Q1 was just from pure pricing?
No. As I mentioned, Kyle, it's Pierre, in my prepared remarks, about 7% of the gain comes from food price inflation.
Got it. Would that be similar across your two segments?
Yes. The same type of goods are sold to both segments.
Got it. Okay. Are you seeing any demand destruction at all into these higher prices in food service channels or any of the channels that you sell into? For example, are you seeing that consumers are eating out less as the prices keep going higher?
No, we don't see that. Demand is still there for dining out. There's still a lot of pent-up demand for eating out. As I said, the problem is not demand, the problem is the restricted restaurant capacity because of labor situation. Some restaurants close Monday and Tuesdays, and they catch up their volume in the rest of the week at full capacity. I should add, Kyle, that they're also adapting their menus in the face of higher price. They're substituting more expensive items to remain attractive for their customers. We don't see demand destruction. We don't see a slowdown.
Got it. Okay. Then can you provide any commentary on your payoff from the new sales hires? It sounds like you hired even more people during Q1. I guess, specifically, you know, is the payoff from these new sales hires, is it a noticeable impact within that 17% revenue growth for your distribution segment?
Well, what I can tell you is that it's going well. It's on target. We said that the break even would be in 2022, and it will happen. We continue to hire more sales rep even in Q1, so it's going well. It's not material at this point in time, but it's going according to plan. Also, last year, we hired the new people in marketing to develop our private label brand is going well as well. We started to hire the sales rep also in Q2 of last year, and it's going according to plan. Very satisfied. In conclusion, we were hiring more reps.
Got it. Okay. Just moving on to one gross margin question here. You posted strong gross margin percentage in Q1. It was, you know, higher versus your recent quarters despite all the food inflation. Is this just purely the resiliency of your business model during times of inflation, or is there something I should note kind of a one-time benefit in Q1, or was it kind of just a normal quarter?
Well, the resiliency is a good word, but with the reopening of the restaurants and starting full service February 1, it helped us with the margins because when we sell to independent restaurants, our margins are better than to institutions, as you can understand. Our customer mix is better and the mix of our products also because we sell more MENU brand, our private label products. That helps for the gross margin. Are we still online?
There are no further questions at this time.
Sorry. Yeah. I'm still here. I do have some one more. It's great to see that you started to pull the trigger on what seems like smart acquisition deals. Is there more to do near term or medium term, or are you kinda on pause for a bit post your two first deals you did?
Kyle, it's Pierre. Thank you for noticing these smart acquisitions. We are not on pause. Again, as we did in the last couple of years, we're going to be very strategic and opportunistic on the M&A side. If we feel that there's something that is accretive and to use your word, smart, we will pull the trigger again. That's. We don't have a specific target for the number per year or any specific target. It's more as soon as we see something opportunistic that is again smart and accretive, we will certainly be looking at it very seriously.
Got it. Okay. Well, thanks for all the commentary, and that's it from me.
Thank you. There are no further questions at this time. Mr. Frenette, you may proceed.
Thanks, Anas, and thanks Kyle for your questions. As I said, we're off to a good start. I'm very proud of what our team has been able to accomplish over the last few years. Together, we have successfully transformed our business, navigated the pandemic, and are now in a good position to manage the current inflationary environment. I'm grateful to all our employees who continue to impress and who are contributing to the improvement of our operations and customer experience. Because of these improvements, we have been able to generate strong cash flow that have allowed us to deleverage our balance sheet and most recently invest in future growth. Earlier in April, we have taken an important step forward with our first acquisition since 2014.
With the addition of Le Groupe Resto-Achats and of new customer accounts in the Laurentians and the Outaouais region, we now have more resources and growing team to help us accelerate the growth. I am excited about our future and welcome the opportunity to work with our new colleagues. Thank you for joining us. This concludes our call for the Q1 of 2022. Stay safe and healthy. Thank you.