Good morning, ladies and gentlemen, welcome to Colabor's First Quarter 2023 Results Conference Call. At this time, all lines are in a 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. Note that this call is being recorded on Thursday, May 4th, 2023. 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 is 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 the investors 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 like to turn the conference over to Louis Frenette, President and CEO of Colabor Group. Please go ahead, sir.
Thank you. Good morning, everyone, welcome to Colabor Group first quarter fiscal 2023 results conference call. This is Louis Frenette, President and Chief Executive Officer. Last evening, we released our earnings results for the 12-week period ended March 25th, 2023. The press release and disclosure documents can be found on the website, on SEDAR.com. An accompanying presentation can also be accessed online on the investors section under colabor.com. 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. I am extremely pleased by our first quarter results. After more than two years of efforts dedicated to improving our business and profitability, I can once again reaffirm that we are on the right track. Our first quarter results mark an eighth consecutive quarter of revenue growth and improving profitability.
They also demonstrate that we are gaining momentum in our current market and are winning market share in our coveted markets. I refer you to slide number four for a highlight of our performance in the quarter. During the first quarter, our consolidated revenues were up 38% due in part to our organic and non-organic growth, push in Western Quebec, new major accounts wins as announced in Q4, and from existing customer growth. Our effort dedicated to improving our product and customer mix, as well as the effect of our April 2022 acquisition, have led to sustained gross margin expansion of 160 basis points. Growing revenues means that we are increasingly able to generate operational leverage. As a result, Adjusted EBITDA grew by 141% in the first quarter.
Growing profitability also means that we maintain our leverage ratio at 2.3x , even as we invested to support growth. Pierre will provide more disclosure on the updated formula we are now using to calculate our leverage ratio. These results demonstrate that our past investments in organic and non-organic growth are paying off and that there is strong demand for our offering in western Quebec. I would like to refer to Slide five of the presentation to review the evolution of our four strategic pillars during the first quarter. As we stand today, we are halfway through our five-year strategic plan. First, we generate profitable growth. Since we introduced our new strategic plan, we prioritized improving our customer mix and product offering. We work on optimizing our category management and procurement activities and invested in our private label brand.
In addition to our April 2022 acquisition, these initiatives have been fundamental drivers of growth margin expansion in the first quarter of 2023. Our second pillar is grow our reach from 30% to a potential of 90% of the HRI market. Our objective is to penetrate the Western market where the majority of food service customers are located. Since the start of our transformation and into the first quarter, we invested in our sales and marketing capabilities to gain market share in the region and continue to evaluate non-organic growth opportunities. The upcoming move to our new strategic facility in Saint Bruno is a key piece of our continued growth. The state-of-the-art hybrid facility will allow us to conduct both our existing wholesale operations and greenfield our new distribution activities to better serve the growing opportunity that we see in western Quebec.
The third pillar, improving our employer's brand. Attracting and retaining the best talent is a key success factor for Colabor. Our HR team is highly focused on this objective. As a result of various HR initiatives, I'm happy to report that we are in a very good position labor-wise ahead of the upcoming busy summer season. In the longer term, we believe that the new facility will also help our attractiveness as an employer of choice in the region by providing a stimulating working environment with easy access to public transit. Our fourth and last pillar, renew and refreshing our brand. Raising the quality and local component of our offering is becoming an increasingly important differentiation factor for Colabor, and one that our customers are starting to really appreciate.
I'm proud to say that during the first quarter, our fish and seafood specialty distribution business obtained the Fourchette Bleue certification, or literally the Blue Fork certification, attesting to the quality and local sourcing of our offering. Before turning the call over to Pierre, I would like to thank once again our dedicated and hardworking employees at all levels of our organization for their contribution to our success. We are entering 2023 with a lot of growth runway and improving offering and a resilient business model. Because of our of our dedicated client-focused team, Colabor is now on its way to becoming the local ingredient for the success of our catering artisans in the province. Pierre, with this, I will turn the call over to you.
Thank you, Louis. Good morning, everyone. I'm pleased to be here today to discuss our key financial results for the first quarter of 2023. Please refer to Slide six, seven and eight of the presentation available on our website for a snapshot of our financial performance in the quarter. First quarter consolidated sales were up 37.8% to CAD 133.9 million. Sales in the distribution segment increased by 43.9% to CAD 96.7 million. This results from higher volume normalizing in the restaurant channel, new chain and street customers, price increases reflecting food inflation passthrough of approximately 7.5%, and our acquisitions of April 2022. Sales in the wholesale segment increased by 23.9% to CAD 47.4 million. This results primarily from normalizing volume from the restaurant sector and food inflation passthrough.
Consolidated Adjusted EBITDA from continuing operation reached CAD 5.6 million or 4.2% of sales, compared to CAD 2.3 million or 2.4% in the first quarter of last year. Growing sales volume, improving gross margins from improving product and customer mix, and contribution from our April 2022 acquisition helps mitigate our higher input costs and continued investment in our private label brand and sales and marketing initiatives. Net loss improved to CAD 0.2 million or nil per share, compared to a net loss of CAD 1.7 million or CAD 0.02 per share in the first quarter of 2022. Let me remind you, because of the seasonality, sales and profitability in the first quarter are typically lower.
It is noteworthy to highlight that our revenue run rate is improving to the point that we are now in a better position to absorb our fixed costs in what is typically a much quieter quarter. Cash flows from operating activities were CAD 0.8 million in the first quarter, primarily resulting from a higher working capital requirements of CAD 4.5 million to support inventory build, given our new chain customers, growing sales, and busy upcoming season. This compares to CAD 12 million of cash flow from operations generated in the first quarter of 2022. I would like to remind you that last year's first quarter was unusual, given that the restaurant channel was still partially operating under COVID restriction, we had the effect of the receipt of a non-recurring gain of CAD 4 million.
In Q1, our strategic investment amounted to CAD 0.8 million out of CAD 1.5 million of CapEx. Strategic investment mainly went towards deposits of our first equipment orders for the new Saint-Bruno facility. We still expect our strategic CapEx to be in the high teens, low 20s, and disperse mainly towards the second half of 2023. We ended the first quarter with higher net debt of CAD 52.4 million, up from CAD 47.8 million at the end of Q4 2022. Our financial leverage ratio stands unchanged from the end of fiscal 2022 at 2.3 x.
This ratio is obtained by dividing our total net debt by our Adjusted EBITDA, to which we remove our last 12 months of lease liability payments. We now have CAD 38 million of available borrowing capacity on our credit facility. I would now like to turn the call over to the operator for the Q&A period.
Thank you. Ladies and gentlemen, if you would like to ask a question, please press star followed by one on your touch-tone phone. You will then hear a three-tone prompt acknowledging your request. If you would like to withdraw from the question queue, please press star followed by two. If you're using a speakerphone, please lift the handset before pressing any keys. Please go ahead and press star one now. Your first question will be from Kyle McPhee at Cormark Securities.
Hi, everyone. Congrats on the great result. Just first regarding the revenue, regarding the huge organic volume growth implied by your results, can you quantify how much came from the two new clients that you announced with Q4 results, and confirm whether or not you got a full quarter contribution from those new clients in Q1?
Hi, Kyle. It's Louis. Thank you for your question and your comment. No, we cannot divulge the size of our two new accounts. To the second part of your question, one of them started February 1st, was not on was not in effect in January. Almost we sold to it during the whole quarter.
Got it. Is the client that started February 1st, is that the 38 stores or the 200 stores that you announced with Q4?
Yeah, that was the 38 stores. Yes. Yes.
Got it. Thanks. Okay. Then were there any new wins worth noting during Q1 beyond the two new clients that you announced with Q4?
No, we don't have new clients in the pipeline other than gaining street accounts one by one as we do very well in western Quebec. The idea is to manage our capacity. The good news is that we'll have a good summer with the workforce to support it. We secured it's gonna be an easier summer, we're happy with that. The idea is to serve very well those two new chain accounts. We're kind of practicing until we have more capacity in the new facility in Saint-Liboire.
Got it. Okay. Regarding capacity, do you have capacity to add more material volume then this year, or is Colabor now bottlenecked until the new facility comes online later this year?
No. We're not bottlenecked. We can escort the growth. Growth's gonna be, is gonna be solid for the summer period. We can escort it, and the idea is to have perfect, well, close to perfect service level. That's how we're able to gain more customers. We will go through that. We'll continue to have growth, but we will not run after a major chain as we speak. We're focusing on executing very well and capture opportunities here and there, but moderately. The summer period is definitely the highest season for us. If you look at Q1 is usually the lowest period, and we did well, we'll do even better this summer.
Understood. Okay. Thanks for that. Moving on to the new facility build out. Is the facility still tracking to come online later this year? Have you actually taken possession from the landlord to outfit the inside of the new building yet?
Hi, Kyle. Good morning. It's Pierre. Thank you for your question. No, we have not taken possession yet, but it's on track. It's on track for time. It's on track for budget.
Okay. That's good enough for now.
Yes. Yes. Just wanna add that all hands are on deck on this one to make the move a success.
Got it. Perfect. Okay. And then moving on to gross margins. It moved higher again. Can you maybe explain the main moving parts that allowed for that, you know, yet again another strong gross margin performance? What are the main moving parts driving that?
You're on mute. Sorry, it's Louis here again. I was on mute. Primarily the improving mix of customer and products. Higher volume from the street business, and especially from the remaining effects of the COVID recovery of January was not a good month last year. The fact that we sell more to the restaurants is helping improve the margin. Coming back to our product mix, you know, we're pushing hard to sell more of our private label, this is helping the margin. In the long term, we'll try to balance new chain accounts with the street business to generate a good and fair gross margin.
Got it. Okay, that helps expand some of the moving parts. Just on regarding the new volume win from a few new customers, these bigger chain type clients, is that coming through at kinda average or above or below at the Colabor average gross margin?
Well, the usual lead chains are coming below, okay? I can confirm that they are below average. The ch- that's what I was trying to explain a bit before, like in the future, we'll have more and more chains below average. We're developing in parallel, growth in the smaller independent restaurants. The balance should help keep it. The more chains we add, it can affect the gross margin, we're trying, our job is trying to protect it.
Got it. Looks like you were successful in Q1. Okay. That's all for my questions. Congrats again on the results.
Thank you, Kyle.
Thank you. At this time, I would like to turn the meeting back over to Monsieur Frenette for closing remarks.
Thank you again, thanks, Kyle, for your questions. We are extremely pleased with our first quarter results. Growth accelerated in the first quarter, and profitability continued to improve. These consistent and solid results demonstrate that we have successfully completed the first phase of our turnaround. As we enter the second phase of our transformation, we are gaining market share, new chain customers, and growing our existing customer share of wallet. Profitability is also significantly improving, providing us with the necessary resources to invest in the future growth. I'm very enthusiastic about Colabor future and particularly in the potential that lies in restaurant Quebec. This concludes our call for the first quarter of fiscal 2023. Thank you for joining us. Stay safe and healthy.
Thank you, sir. Ladies and gentlemen, this does indeed conclude the conference call for today. Once again, thank you for attending. At this time, we ask that you please disconnect your lines.