Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the High Liner Foods Incorporated conference call for the results of the fourth quarter of 2025. At this time, all participants are in a 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 difficulties hearing the conference, please press the star key followed by zero for operator assistance at any time. This conference call is being recorded today, Thursday, February 26th, 2026, at 10:00 A.M. Eastern Time for replay purposes. I would now like to turn the call over to Jennifer Bell, Vice President of Communications for High Liner Foods.
Good morning, everyone. Thank you for joining the High Liner Foods conference call today to discuss our financial results for the fourth quarter of 2025. On the call from High Liner Foods are Paul Jewer, Chief Executive Officer, Kimberly Stephens, Chief Financial Officer, and Anthony Rasetta, 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 just fully described and reconciled to IFRS measures in our MD&A. Listeners are also 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 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 risk and uncertainties. Actual results or events, including operating or financial results, could differ materially from those anticipated in these forward-looking statements. High Liner Foods includes a thorough discussion of the risks and other factors that could cause its anticipated outcomes to differ from actual outcomes in its publicly available disclosure documents, including its most recent annual MD&A and annual information form. Please note that High Liner Foods is under no obligation to update any forward-looking statements discussed today. At the close of markets yesterday, February 25th, High Liner Foods reported its financial results for the fourth quarter, ended January 3rd, 2026.
That news release, along with the company's MD&A and audited consolidated financial statements for the fourth quarter of 2025, have been filed on SEDAR+ and can also be found in the investors section of the High Liner Foods website. If you'd like to receive our news releases in the future, please visit the company's website to register. Lastly, please note that the 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. High Liner 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.
Thanks, Jen, welcome everyone to our 4th quarter and full year 2025 conference call. I'm joined today by our Chief Financial Officer, Kimberly Stephens, and our Chief Commercial Officer, Anthony Rasetta. Before I pass the call over to my colleagues, I would like to begin by sharing my perspective on our performance and outlook. During the 4th quarter, we made progress across our business, delivering top-line growth. While external pressures continued to weigh on margins during the quarter, the actions we've taken to support the bottom line are working, and we ended the quarter in a better position than where we started. Importantly, that improvement has carried into the 1st quarter on both the top and bottom line. Rising raw material costs and tariffs require us to make deliberate trade-offs as we balance volume, pricing, and profitability while continuing to deliver value to our customers.
We are addressing these priorities in a disciplined and coordinated way across the business, recognizing that some actions translate quickly, while others take more time to be fully reflected in our results. We're balancing cost-saving actions, continuous improvement, and automation efforts with constructive pricing conversations with customers and suppliers to help offset rising costs. As we've discussed before, particularly in retail, pricing actions take time to fully flow through given longer lead times. At the same time, we're continuing to invest in the opportunity ahead. We expect the consumer to remain focused on value in 2026, and we see potential to grow the seafood category as consumers look for healthy, high-protein options both at home and when dining out. Our innovation pipeline, including our recently launched fully cooked whitefish products, is focused on value-added offerings that make seafood easier and more convenient to choose.
We're encouraged by the traction we're seeing across our core portfolio and new innovations. Building on that momentum, we will continue to execute against our branded and value-added strategy while balancing price, promotion, and innovation across our business to drive profitable sales growth. As demonstrated by our recently completed oversubscribed incremental addition to our term loan and the extension of our ABL, we have the financial flexibility and balance sheet strength to generate long-term shareholder value. Our disciplined cost management and prudent approach to capital allocation supports my confidence in our outlook and in our ability to deliver sustainable margin improvement in the near term. With that, I will hand over the call to Kimberly to discuss our financial performance.
Thank you, Paul. Hello, everyone. As Paul outlined, our fourth quarter results reflect both the challenges of our operating environment and the progress that we've been making to generate improved performance across our business and to return to profitable growth.
Consistent with the previous quarter, we recorded the remaining temporary purchase price accounting adjustment related to the acquisition of the U.S. retail brands, Mrs. Paul's and Van de Kamp's, from Conagra Brands. This adjustment, combined with the continued raw material and tariff pressures that materialized more significantly in the fourth quarter as we moved through higher tariff inventory faster than anticipated, limited margin recovery. We sold through the remainder of the acquired Conagra Brands inventory in the fourth quarter, which resulted in the temporary accounting non-cash impact of approximately $1 million on our gross margin. In addition, we also saw a shift in some Lent-related volume for these brands into Q1, as we are now shipping these products directly to the consumer.
As Anthony will discuss shortly, we have a solid strategy in place to enhance the positioning of these brands heading into the important Lent period. We have seen the margins normalize now that the acquired inventory is fully sold through. In terms of plant efficiencies, we are making progress on our previously discussed automation upgrades, while planned downtime continued to impact our utilization during the quarter, we are realizing the benefits of these initiatives through labor savings and plant performance, which will support enhanced profitability. Sales volume increased in the fourth quarter by 900,000 pounds, or 1.5%, to 61.3 million, compared to 60.4 million pounds in the fourth quarter of 2024, due to targeted promotional activity as well as the additional week in the fourth quarter of fiscal 2025.
Sales increased in the fourth quarter by $35.2 million, or 15%, to $270.2 million, compared to $235 million in the same period last year, driven by the increased volume as well as the increased pricing, reflecting inflationary markets and favorable product mix, supporting the company's brand of value-added strategy. Gross profit decreased in the fourth quarter by $1.3 million, or 2.5%, to $49.7 million, and gross profit as a percentage of sales decreased by 330 basis points to 18.4% as compared to 21.7% in the fourth quarter of 2024.
The decrease in gross profit is driven by the increased expenses related to the tariffs on the seafood imported into the U.S. and the higher raw material pricing on selective species, as well as targeted promotional activity. The gross profit was also impacted by the increased cost of the inventory related to the Conagra Brands acquisition, which I've mentioned earlier, resulting in that temporary margin contraction of approximately $1 million. Adjusted EBITDA decreased in the fourth quarter by $4.5 million or 18.9%, to $19.3 million, compared to $23.8 million in 2024, and Adjusted EBITDA as a percentage of sales decreased by 7.1% compared to 10.1%. The decrease in Adjusted EBITDA reflects the decrease in the gross profit previously mentioned, as well as increased distribution and SG&A expenses.
Reported net income increased in the fourth quarter by $2.1 million, or 35.6%, to $8 million, while diluted earnings per share increased to $0.27 compared to $0.20 in the prior year. The increase in net income reflects the debt modification gain that we recorded in the finance income for the 14 weeks ended January 3, 2026, as a result of the long-term debt amendment and the lower income tax expense, offset by the decrease in Adjusted EBITDA. Excluding the impact of certain non-routine or non-cash expenses that are explained in our MD&A, adjusted net income in the fourth quarter of 2025 decreased by $9.8 million, or 78.4%, to $2.7 million. Adjusted diluted earnings per share decreased $0.09 from $0.41 in 2024.
With regard to cash flows from operations and the balance sheet, net cash flows from operating activities in the fourth quarter of 2025 increased by $9.4 million to an inflow of $30 million, compared to an inflow of $20.6 million in the same period in 2024. The increase is primarily driven by favorable changes in non-working capital balances, specifically due to lower accounts payable and accrued liabilities in comparison to the same period in 2024, offset by higher inventory balances, both related to the Conagra Brands acquisition as well as the opportunistic buying ahead of some of the raw material prices.
Net debt in the end of the fourth quarter of 2025 increased by $89.2 million to $322.4 million, compared to $233.2 million in the end of fiscal 2024, reflecting higher bank loans and higher term loans due to the Conagra Brands acquisition and investments in inventory. Net debt to Adjusted EBITDA was 3.5x at January 3rd, 2026, compared to 2.3x at the end of fiscal 2024. We expect the ratio to be slightly above the company's long-term target of 3x at the end of fiscal 2026.
As Paul mentioned, we also completed the $60 million incremental addition to our senior secured Term Loan B, which was oversubscribed, and a five-year extension of our asset base revolving credit facility during the fourth quarter. This transaction signals the strong confidence that we have in our long-term strategy and further strengthens our financial flexibility and liquidity. I'll now pass the call over to Anthony to discuss our operational highlights.
Thanks, Kimberly. Hello, everyone. As you've heard today, tariff headwinds and inflation continued to put pressure on seafood pricing and volume during the quarter. However, what we are seeing in the category is that consumers are still willing to spend on value-oriented products that offer a premium dining experience at home at the right price. Against this backdrop, we continue to lean into key channels, innovation, and targeted promotional activity in partnership with our customers to drive growth across our branded and value-added portfolio and support category recovery. Importantly, our targeted promotional activity is supporting the long-term positioning of our brands, helping us to stay top of mind for our customers and consumers beyond the scope of the promotion, putting us into a strong position heading into Lent. Looking specifically at our retail performance.
In the U.S., strong momentum in our branded value-added products and successful promotional activations led to market share gains for the quarter and the full year. Despite accelerated inflation, consumers in the U.S. continued to prioritize premium frozen seafood options that deliver restaurant quality experiences at home. This was apparent in the strength of our premium Sea Cuisine product line, which continued to lead both High Liner and the category in growth. Gains in this brand were driven by strength in the club channel, which is winning in the current value-led environment. Our tortilla-crusted tilapia SKU performed particularly well in this channel during the quarter, we were thrilled to close the year with this product ranking as the number three item in the entire value-added seafood category. We also saw success in the traditional grocery channel, driven largely by our value-added salmon products.
We are excited by the opportunities ahead for Sea Cuisine in 2026 as we continue to grow the brand through innovation, as demonstrated by the recently announced launch of our battered fish strip and shrimp products in partnership with Guinness. These two new offerings, now available in grocery and club channels, provide delicious restaurant quality pub favorites direct to consumers' homes. Our value-oriented product line, Fisher Boy, also performed well during the quarter as we expanded distribution, particularly in our smaller pack sizes, to reach more price-sensitive consumers that respond well to value-priced offerings. We continue to advance the integration efforts with Mrs. Paul's and Van de Kamp's during the quarter, and we have a strong plan in place to grow these brands in 2026. We're optimizing price and promotional activities with key retailers ahead of Lent to drive incremental distribution, leveraging full-scale shopper marketing programs and realizing synergies.
In Canadian retail, the market remains highly competitive and inflationary driven. Amid this environment, we saw demand increase for our private label products during the quarter as these offerings appeal to more cost-sensitive consumers. Though these options are critical to the category, the continued importance of the premium segment and strength of our pan-sear products, which maintain category leadership during the quarter, signals consumers are still looking for quality meals at home. While we expect headwinds to persist in 2026, I'm confident in our ability to continue to navigate market dynamics through optimized pricing, strategic promotions, and successful innovation. Turning to food service. Traffic during the quarter was stable despite elevated inflation, driven largely by menu deals as operators leaned into innovations, increased promotions, loyalty programs, and marketing to enhance the guest experience and support sales.
In this environment, we continued to leverage the diversity of our portfolio to grow our offering in value-oriented species. This includes pollock and haddock-based products, as well as alternative species like hake and southern blue whiting, that provide operators with compelling, consistent seafood solutions at a competitive price. This approach, combined with our balanced pricing ahead of Lent, supported our ability to grow top line, and we're proud to be the top value-added seafood manufacturer in food service in North America. Quick service restaurants was our fastest growing channel by volume during the quarter, and this remains an area of focus for our business heading into 2026. As Paul mentioned, we're also excited about the significant opportunity in our new fully cooked whitefish product line, which we launched in convenience and non-commercial channels last month.
These products present operators with easy-to-execute, affordable offerings that support back-of-house efficiencies and drive seafood category recovery. We're off to a great start with strong customer engagement around these products, and we're excited to expand distribution in QSR in the future. Outside of these channels, the casual dining segment remained a bright spot during the quarter as our partnerships with key customers continued to generate growth. We're also leveraging our strategic partnerships with customers to introduce Norcod's Snow Cod, a premium offering in the North American market, with commitments secured for Q1. Customer engagement for these products in the fourth quarter showed strong results with great pull-through, and we look forward to expanding distribution of this product in 2026. Overall, I'm confident with the work we've put in to link strategic promotional activations to high-impact channels, supported by balanced pricing and cost-saving initiatives.
Positions us well to drive sustainable top and bottom line growth heading into Lent. With that, I'll hand the call back to Paul for his concluding remarks before opening the call for Q&A.
Thank you, Anthony. As we have outlined today, we are taking the necessary actions, including meaningful investments in our business strategy, brands, and plants, to support margins and expand the seafood category. Looking ahead, we continue to be excited by the significant opportunity that exists for growth in North American seafood consumption, particularly as demand for healthy and sustainable protein is rising. The recently updated U.S. Dietary Guidelines and the prominence of GLP-1s further supports this environment. We're thrilled to see seafood becoming more prominent as more consumers start to prioritize protein at every meal. As a leader in the frozen seafood category, we are actively working to capitalize on this long-term growth potential through continuous innovation that delivers choice and value to customers and consumers.
This includes our fully cooked products as well as our newly launched Sea Cuisine Guinness beer-battered fish strips and shrimp products, which are helping to draw even more consumers to our brands and the category. In the near term, our focus remains on executing against our continuous improvement initiatives, prudently managing costs, and implementing strategic pricing initiatives to support performance improvement on the top and bottom line. That said, we are in a fortunate position to have a strong balance sheet, and we will continue to explore strategic growth opportunities as appropriate and in line with our long-term value creation objectives. In closing, I'm proud of our team and our ability to finish the year with renewed underlying momentum across our business.
Our disciplined approach to cost management and margin improvement initiatives is taking shape in our financial results, and we expect to return to EBITDA growth starting with this first quarter of 2026. With that, operator, please open the line for questions.
Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press the star followed by the one on your touch tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star followed by the two. If you're using a speakerphone, please lift the handset first before pressing any keys. I see we have our first question from Luke Hannan with Canaccord Genuity. Please go ahead.
Thanks. Good morning, everyone. I want to first start with the volume performance in both Q4 and then Q1 thus far. It'll be a two or maybe even a three-part question. First, I just want to get a sense of what the cadence looked like from the beginning of the quarter to the end. I'm wondering, if possible, if we can strip out, we can just think about it on an apples-to-apples basis. If we strip out the impact of the USDA volumes and then also any incremental volumes that you may have realized thus far from integrating the Conagra Brands, what did that volume growth look like year-over-year? How different is that from the reported number? Again, both for Q4 and then as we think about, the performance thus far in Q1.
You're right. A couple parts to that question, Luke Hannan. I think first of all, on the USDA front, there was some small positive benefit to volume, but it was pretty small in the quarter still, because we still had the contract from a year ago that was rolling over. There's a small impact there, but really pretty insignificant. The Conagra Brands volume actually, as Kimberly Stephens highlighted in her prepared remarks, was actually a slight negative for us in the quarter, almost 2 million pounds. The primary reason for that is, while a year ago we were shipping the product to Conagra Brands in advance of Lent, now we're shipping the product directly to the customers during Lent.
Some of that volume shifted into the first quarter. In terms of the volume performance, when you kind of exclude those things, we certainly saw it improve as we moved through the fourth quarter, and we've seen, certainly seen that continue for the start of the first quarter. Some of that's to be expected in the first quarter because Lent is earlier, certainly we were off to a strong start in January. We're even when adjusting for what we think the impact of the Lent shift is, we're still pleased with the volume momentum.
Okay, great. Thanks for that. My follow-up here is going to be on margins as well, and then tying it into the commentary on your expectations for Adjusted EBITDA growth, year-over-year growth in 2026. Keeping in mind that my expectation, I imagine most investors or street's expectation, is that the margin headwinds that you're witnessing from tariffs right now, that's likely to continue for most, if not all of H1. There should be some benefits, though, that you realize in the second half of the year from a margin perspective.
As far as just the cadence, I guess, of year-over-year EBITDA growth in light of that, is it fair to say then, that even though you expect growth in Q1, it should be relatively more muted in the first half and then more significant in the second half? How should we think about that?
Yeah, I think that's fair. You have to factor in some seasonality into that though, as well. As you pointed out, in Q1, we do have the benefit of, you know, a typically strong quarter for us because of Lent. You know, we're in a much better position in Q1 than we were in the back half of 2025 because of the action we've taken on pricing. That's certainly helped with our margin performance. We all are, though, continuing to promote, to support volume in the category, so there is some promotional impact, and that's likely to be heavier in the first part of the year, to your point, than it will be in the back half of the year.
The other piece that will certainly continue to help margins in the back half of the year, more than perhaps what we see in the first quarter, will be our continuous improvement initiatives and the actions we're taking on taking costs out of the business. Because, you know, that's to support margin improvement through the year, as you point out, but it's also so that we can continue to find ways to deliver value to the customer and consumer in what, you know, is an inflationary category. The tariff piece, you know, we'll see some impact as, you know, it shifts from what was previously IEEPA tariffs to the new 10% or 15% tariff that's imposed. Country by country, that will have some impact.
We don't expect to see much more in the way of increases in price on key raw material species like cod and haddock, because a lot of that has already been both costed in and priced into the business.
Got it. Appreciate it. Thanks.
Thank you. As a reminder, if you would like to ask a question, please press star then one. We have our next question from Michael Glen with Raymond James.
Hey, good morning. Just following on your comments on inflation, Paul, like, would you say, like, when you look across your species, maybe aggregate basis, would you say inflation has cooled? This is absent tariffs, but general inflation across input has moderated somewhat right now, or has it continued to move higher?
It's still high inflation, and you'll see that in terms of the gap between volume and sales performance. A lot of that is just the lag time in our supply chain, right? We're really still seeing the inflation from higher costs in 2025 showing up in the business today. I would expect, as I mentioned in my answer to the previous question, that we'll start to see that inflation start to get better as we get towards the back part of the year, because so much of it has already, you know, been reflected in the market. We would expect, particularly on those really higher priced species, we may see some impact on demand.
What we have been pleased with is how we're starting to see even more interest in some of the alternative species, that we've been bringing to market as a result of that inflation. Also, good performance on species that haven't seen the same amount of inflation, species like pollock, as an example.
How far can you give an indication about how far you are right now in terms of putting through the price you need to put through to offset the inflation?
Hey, Michael, it's Anthony. I think from a food service perspective, given the pricing cycles, we're actually able to do that quite regularly, and so are able to manage that, you know, on a monthly basis, and that helps us with passing it on. From a retail perspective, that's where, as we noted, as I think Paul noted in the script, that takes a little bit longer. From a retail perspective, we were in a blackout period in the fourth quarter before Christmas time and then, you know, have pricing announced to customers, and so would expect that to start getting reflected after Lent into the second quarter and beyond. The first quarter will continue to see not the full pricing reflected because of the Lent timing.
We're still being intentionally, promotionally focused, as the key window to be competitive, to drive trial of our innovation, and to support category recovery.
The, when, during the comments, Kimberly, you referenced normalized, maybe it was normalized gross margins. Can you like, for Q1, what, if we're looking at about 18.5% gross margin through the back half of last year, I know that there's a bit of noise in there, like, what is sort of the front half versus back half gross margin outlook? If you could give some assistance on that.
I think on average, like, on an annualized year, we look around about 21%-22% gross margin. As you pointed out, at the end of 2025, we unfortunately were seeing margin contraction. I think in the beginning of this year, I think you could anticipate seeing a little bit lower than we were last year at around 23.7%. I think this year you should expect anywhere between that 21%-21.5% gross margin.
The only build would be, again, in the first quarter, we'll continue to see promotional activity and shifting because of Lent timing. That puts a little more pressure on margins. When we think about the inflation that's in the market, when we're looking at margins as a % of net sales, that will continue to drive the percentage down, while we're obviously looking to increase absolute gross profit.
To your point, Michael, sequentially, you'll see margin percentage higher in Q1 than it was in the back half of 2025.
Okay. Okay, thank you.
Thank you. We have our next question from Nevan Yochim with BMO.
Yeah, thank you. Good morning. Appreciate the comments so far on quarter to date trends. Just hoping you could talk about your volume outlook, maybe just expectations for 2026.
Yeah, certainly, we are expecting to grow volume in 2026 on a full year basis. We are in good shape to do that in the first quarter, based on our start. You know, we typically would suggest that we would have volume growth in the low single digits. That's kind of the, you know, 2%-3% range. At this stage, the way the first quarter has started, we don't see any reason to have to suggest otherwise.
Great. Thanks, Paul. Maybe just an update on the Conagra Brands acquisition. We're coming up on about eight months here. Can you provide some detail on maybe realized synergies to date and whether you're on track for your $11 million run rate EBITDA by 2027?
Yeah, certainly. We're actually, I would say slightly ahead of schedule. We feel good about synergy realization thus far. On the procurement side, that was one of the areas where we would have synergies, so buying of pollock in particular. You're starting to see that now flow through into the business in the first quarter. We have started to realize some of the benefits on the distribution of product as we now have the products in our warehouses and traveling on the same trucks as our products. You'll start to see that benefit continue to grow through 2026. Finally, we were anticipating some synergy benefit on the manufacturing side.
I'd say that we haven't, yet realized. That will be more later 2026, where that materializes. Beyond synergies, the integration went very well, completed ahead of schedule in November. We're pleased, as Anthony mentioned, in his remarks, with the progress we've made on the brands, on the interactions with customers. We feel good about the plan that we have in place, for those brands for Lent, which is an important selling period for those brands. Really pleased at this stage with how that has gone.
Glad to hear that. Just one more for me on these fully cooked products that you've introduced into food service. Can you talk about maybe your near-term goal for penetration as a percentage of sales, then maybe long-term aspiration to launch additional new products or expand into retail?
In evidence, Anthony. Yeah, so far so good on the whitefish products. We have four items that are out in the market now. We are in market with a national convenience customer in the U.S., and we're starting to ship to non-commercial channels and have listings at major distributors. You know, still a relatively small portion of the business overall, but given the incremental channels and the incrementality of fully cooked in seafood, as you know, penetration relative to chicken and beef that are pretty widely distributed, we're excited by the prospect and what that can represent for us going forward.
In terms of future launches, we're absolutely working on species outside of whitefish and the breaded and battered launches that we have right now, and expect to be in a place to introduce more of that by the end of the year.
Perfect. Thanks for the details.
Thank you. Our next question is from Luke Hannan with Canaccord.
Thanks. Just wanted to follow up on one comment that you made. I can't remember if it was Anthony or Paul, which one of you had mentioned this, but there was talk about the updated USDA Dietary Guidelines, featuring seafood being a little bit more prominent, being featured a little bit more when it comes to every meal, just more consumption in general. Does that Based on your experience, has that ever translated into maybe more seafood being actually featured on the menus of some of more of your contract feeder customers in the past? Like, are they sort of instructed, I guess, to follow along the USDA Dietary Guidelines?
Yes, Luke, absolutely. I think with the not just the dietary guideline changes, which are helpful as protein is playing a more prominent part, also in what Paul talked about on GLP-1, the general consumer sentiment, looking for higher protein, lower calorie items. It's a conversation that we're seeing in terms of macro trends that our customers are more interested in. I was at a couple of industry conferences, both for food service and retail, where that was a prominent part of the conversation and helping us, you know, with interest in further distribution of seafood on menus.
One of the largest segments in our contract feeding business, Luke, is healthcare, hospitals, long-term care homes, and one of the next largest would be schools. They absolutely do consider the USDA guidelines, as they plan for, feeding and meals.
Got it. Appreciate it. Thanks.
Thank you. We have no further questions. At this time, I will now turn the call over to Paul Jewer, President and CEO, for closing remarks.
Thank you, operator. Thank you for joining our call today. We look forward to updating you with our results for the first quarter of 2026 on our next conference call in May.
Thank you, ladies and gentlemen. This concludes our conference call. We thank you for your participation. You may now disconnect.