Premium Brands Holdings Corp T.PBH

TD

[retiredcf]

Have a $150.00 target. GLTA

Premium Brands Holding Corp.

(PBH-T) C$101.32

Q2/22 First Look: Pricing Helps Deliver Strong Top Line Beat Event

• PBH reported Q2/22 adj. EBITDA of $130.8mm vs. $112.2mm last year (+17%), above TD/consensus of $129mm/$128mm (range: $115-139mm).

• CC Details: 1:30 p.m. ET today. Dial-in # [phone]. ID: 94465746

  Impact: MIXED

  Some initial key Q2/22 takeaways include:

• Revenues (4% consensus beat): Price inflation and M&A accounted for 11% and 15% of y/y growth, respectively. For each segment specifically:

  • Specialty Foods (SF): As expected, pricing came through meaningfully in

    Q2, driving a 6% beat on the top line. That said, the company did report a very modest 0.5% contraction (+2.2% excluding higher order short shipments) in organic revenue growth, which could be the first evidence that inflation is beginning to bite (i.e., demand destruction in certain categories, primarily beef jerky).

  • Premium Food Distribution (PFD): Organic volume increased 4.4%, primarily benefiting from consumer spending shifting from retail to foodservice (which was a headwind for SF) and the recovery in foodservice cruise line sales after pandemic restrictions were lifted.

• Adjusted EBITDA (2% consensus beat) was driven by the stronger top line.

• Announced two acquisitions in typically higher margin growth categories of

  cooked protein and dry cured meats.

• Raised revenue guidance range to $5,750-6,000mm (up from $5,600-5,850mm) mostly to reflect the two new acquisitions. However, they now expect EBITDA to come in closer to the lower end of their previous $510-530mm guidance range on the back of temporarily lower high margin sales, persistent inflation on some input costs, and freight inflation. That said, it is looking increasingly likely that PBH will now exceed its longer term 2023 guidance of $6,000mm/ $600mm of sales/EBITDA.

  We believe PBH is doing a good job at managing through the numerous operating pressures supported by another quarter of double-digit revenue and EBITDA growth. While we expect the operating environment to remain challenging at least through the end of the year, with the shares trading well below its historical valuation range, we continue to view this as an attractive opportunity to buy a solid Canadian company highlighted by, in our view, one of the best long-term organic revenue growth and M&A profiles among its North American CPG peers.