Supremex Q3 2026 Earnings Call Transcript

Supremex (TSX:SXP) reported third-quarter financial results on Thursday. The transcript from the company’s third-quarter earnings call has been provided below.

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Summary

Supremex reported a revenue increase of 16.1% to $76.2 million, while adjusted EBITDA rose 38.5% to $8.6 million, indicating strong financial performance despite U.S. tariffs.

The company’s strategic focus remains on expanding its packaging business, which grew to 38.9% of total revenue, with plans to approach 50% through acquisitions and organic growth.

The envelope segment continues to generate cash, with a 44% increase in adjusted EBITDA margin despite tariffs. Packaging showed strong 44.4% revenue growth driven by recent acquisitions and 10.5% organic growth.

Supremex is managing tariff impacts through pricing actions, supply chain adjustments and a restructuring plan expected to save $5.7 million annually, offsetting approximately half of the tariff burden.

The company’s future outlook includes continued growth in packaging, tariff mitigation and debt reduction, with a focus on integrating recent acquisitions like Goldrich and iFlex.

Full Transcript

OPERATOR

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Supremex 2026 third quarter earnings conference call. At this time, all participants are in a listen-only mode. Following the presentation, 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 followed by zero for operator assistance at any time.

Before turning the meeting over to management, please be advised that this conference call will contain statements that are forward-looking and subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated. I would like to remind everyone that this conference call is being recorded on Thursday, November 5, 2026. I will now turn the conference over to Martin Goulet of Capital Markets Advisors.

Please go ahead.

Martin Goulet

Thank you, operator. Good morning, everyone, and welcome to Supremex’s conference call for the third quarter ended September 30, 2026. With me today are Stuart Emerson, President and CEO, and Norm McCallie, CFO and Corporate Secretary. Press release, MD&A, and financial statements were issued this morning and are available on SEDAR+ and at www.supremex.com. Today’s presentation is also on our website and we will call out page numbers as we go. Please note that today’s remarks contain forward-looking information and actual results could differ materially. Please refer to the risk factors in our MD&A and Annual Information Form. We will also refer to non-IFRS measures including adjusted EBITDA, adjusted net earnings, and adjusted free cash flow. They are defined and reconciled in our MD&A and summarized on pages 15 and 16 of this presentation. And finally, all amounts are in Canadian dollars unless otherwise stated.

And I will now turn the call over to Stuart.

Stuart Emerson (President and Chief Executive Officer)

Hey, thank you, Martin, and good morning, everyone. So let me start with the headline. This quarter reflects the company we continue to build: revenue of $76.2 million, up 16.1%, adjusted EBITDA of $8.6 million, up 38.5%, with the adjusted EBITDA margin climbing to 11.3%, up from 9.4% last year. This quarter both engines pulled at once: packaging grew and envelope delivered higher margins, and we did it while absorbing about a million dollars of U.S. tariffs.

Norm will take you through the details shortly, but I’ll focus on what’s behind the numbers because this quarter, like last quarter, our strategy is showing up in the results. Please turn to page three of the presentation, which is our plan on one page. Simply, we run two businesses and we ask something different of each. Packaging is the growth engine: folding cartons, e-commerce packaging, and labels sold to premium customers in markets that grow every year. Envelope is our cash engine: number one in Canada, top five in North America. We run Envelope with discipline for margin and cash. What makes the model powerful is how the two engines work together.

Every dollar the cash engine produces has a job: fund the growth of packaging and fund the tuck-in acquisitions that extend the life of the envelope business itself. We try to do both while keeping leverage around our target of 2 times net debt to adjusted EBITDA. You will also see the stamp on page 3: tariffs. Let me tell you up front how we view them, but we won’t get into any details about what we think of them. They are a headwind, period. They slow the pivot, but they do not change it.

We are managing them effectively and Norm will quantify the impact in a moment. We are planning prudently. We have implemented a reorganization plan built on tariffs exactly as they stand today. So we are prepared whether they ease or whether they stay in place. Moving to page four, you can see how the plan is changing our revenue mix. Packaging was 31.3% of our revenue a year ago. In the third quarter it reached 38.9% of consolidated revenue and we are not done. Our short-term destination has packaging approaching 50% of revenue with the timing driven by our acquisition pipeline. Please turn to page five. The shift in revenue split did not happen by accident. We were a pure envelope play less than a decade ago.

Since 2017 we have methodically built our packaging business and this past year that build accelerated: five acquisitions in the last two years, each with a clear purpose in packaging. We buy to grow strategically in product categories with durable growth. Transgraphique strengthened our packaging platform. iFlex gave us a firmer footing in labels and a real platform to grow from. And in June the acquisition of Goldrich Printpak gave us our first folding carton plant in the large Ontario market.

We did not stand still with Envelope either. We were opportunistic with Laurentide Envelope in Montreal and Elite Envelope in Massachusetts, two highly synergistic deals. Within weeks we took on our customers and absorbed the volume through our own plant network on more efficient equipment, which delivers more cash from a well-developed platform that we already own. One playbook, two jobs: growing packaging and stretching the runway on envelope. Let me take each in turn. Starting with Envelope, please turn to page six of the presentation. Over the last 12 months, envelope generated roughly $192 million in revenue and it keeps doing exactly what we ask of it. In the quarter, revenue was $46.5 million, up 3.2% from the third quarter of 2025. Average selling prices rose 4.7%, unit volume declined 1.5%, and Elite Envelope, which we acquired in December of 2025, helped offset that. But the real story here is margin.

Segment adjusted EBITDA was $7.7 million, up 44%, and the margin expanded to 16.5% from 11.8%—470 basis points of improvement—despite the million dollars of tariffs. That margin is earned, not gifted. It comes from how we run the envelope business: pricing discipline, capturing the synergies from Laurentide and Elite, and consolidating capacity. Indianapolis Envelope is a good example of consolidating capacity. In January we closed our envelope plant there and moved the production primarily through our plants in the Greater Toronto Area.

The same customers are now served from fewer, significantly more efficient and now fuller plants, and the resulting improved absorption contributed to the margin improvement this quarter. Please turn to page seven of the presentation. It shows us why the runway is longer than many assume. The U.S. envelope market is approximately US$2 billion, roughly 23 times the size of Canada’s—well beyond the usual 10 to 1 ratio between the two economies—primarily because direct mail remains an important marketing channel in the U.S. That recurring direct mail for marketing and fundraising provides a steadier demand stream. Our share of the U.S. market is still single digits and much of that volume is within reach of plants we already own. Every point of the U.S. share we win offsets the decline in Canada, using equipment and know-how we already have. Tariffs make the opportunity more challenging in the near term, but this is exactly where our footprint pays off. We have plants on both sides of the border and, where we can, we are rebalancing production between the countries to optimize our cost structure and improve absorption.

That flexibility lets us keep serving our U.S. customers competitively while tariffs are in place and maintain our market position for the long term. With the cash envelope provides, packaging is where we put it to work. Please turn to page 8. Packaging delivered a strong quarter. Revenue was $29.7 million, up 44.4% from the third quarter of 2025. Our first full quarter with Goldrich and iFlex contributed about 34 points of that growth. The number I want to underline is organic growth of 10.5% because it tells you the base business is winning a larger share of business with our multinational consumer packaged goods customers and continued growth in e-commerce.

And on the heels of that increase in revenue, profit followed. Segment adjusted EBITDA was $3.5 million, up 61%, with the margin improving to 11.8% from 10.5% last year. And I also want to be straightforward where we need to be better. Commercial print sits in this segment and remains very soft. Revenue was down almost a half a million dollars in the quarter and it weighs on the segment’s margin. Excluding commercial print, the rest of the packaging grew 46.5%, and with commercial print recording a $400,000 loss in the quarter, segment adjusted EBITDA would have been about $400,000 higher without it.

We continue to optimize commercial print, including reducing the footprint of the standalone Saint-Laurent commercial print facility announced in October, while Goldrich, iFlex, and the cross-selling opportunity in Ontario keep building the rest of the segment. Our confidence comes from the reasons why we succeed. We serve premium, quality-sensitive customers—health and beauty, pharma, and larger in-home food manufacturers across Quebec, Ontario, and the Midwest U.S. These customers increasingly want their packaging made closer to their own plants, and our plants are close to theirs. Importantly, we hold the certifications they demand: ISO 9001, ISO 14001, FSC (Forest Stewardship Council), printing certifications like G7 and GMI, we have pharma-standard accreditations, and even a nut-free facility where food manufacturers can have boxes manufactured with confidence—the credentials that take years to earn and provide us with the ability to service a broad cross-section of the packaging market.

We continue to put capital behind this business. In September we announced approximately $4 million in investments to expand our high-end, high-performance folding carton and e-commerce packaging capacity—a new six-color press with inline UV coating and new converting and finishing equipment in Indianapolis—and added e-commerce capacity in a Chicago-area envelope plant. These investments bring work in-house that we used to subcontract, add much-needed capacity, and allow us to respond faster and control quality from start to finish.

Please turn to page nine. Our packaging business stands on three: folding carton, e-commerce packaging, and labels, and all three legs of the stool are growing. U.S. folding carton demand is growing at approximately 2.6% per year toward roughly US$15 billion by 2029. U.S. e-commerce packaging demand is growing at more than 6% a year and global label volumes—a good proxy for growth in the North American markets we serve—are growing at approximately 4.5% per year.

Each leg plays a distinct role for us: folding cartons serves high-value health and beauty, pharma, and in-home food markets where we have critical mass in Quebec and, with Goldrich, a growing presence in Ontario. Our e-commerce is in a premium niche where package is part of the product—innovative right-sized solutions we develop with e-tailers themselves—and labels, which we scaled with iFlex, carry attractive margins and open a meaningful cross-selling opportunity across our packaging customer base.

Large, growing markets with attractive niches and plenty of room to grow in the geographies we already serve. That is a good place to be in. Norm will now take you through the numbers and how we’re managing through the tariffs.

Norm McCallie (Chief Financial Officer and Corporate Secretary)

Thank you, Stuart, and good morning, everyone. Please turn to page 10. Revenue was $76.2 million, up 16.1% from $65.7 million in the third quarter of 2025, driven by our packaging acquisitions, organic packaging growth, and higher envelope pricing. Adjusted EBITDA was $8.6 million, up 38.5% from $6.2 million in the third quarter of 2025, with our adjusted EBITDA margin improving to 11.3%, up from 9.4% last year. And that’s after absorbing approximately $1 million of tariffs in the quarter.

Net earnings were half a million dollars, or $0.02 per share, compared with $9.1 million, or $0.37 per share, in the third quarter of 2025. Note that last year’s results included a $6.1 million gain on the sale and leaseback of two properties and a $3.1 million tax recovery. On an adjusted basis, which excludes the sale and leaseback gain, net earnings were $0.8 million, or $0.03 per share, compared with $0.19 per share last year. Cash generation in the quarter was very strong.

Adjusted free cash flow was $5.2 million, up from $0.1 million in the third quarter of 2025. Now turning to page 11, let’s look at the quarter by segment. Compared with the third quarter of 2025, packaging revenue grew 44.4% to $29.7 million. Goldrich and iFlex added 33.9 points and organic growth added 10.5 points. Envelope revenue grew 3.2% to $46.5 million on a 4.7% increase in average selling price, partly offset by a 1.5% decline in volume. Envelope adjusted EBITDA was up 43.5% to $7.7 million, a 16.5% adjusted EBITDA margin, and packaging adjusted EBITDA was up 61.4% to $3.5 million, an 11.8% adjusted EBITDA margin.

Corporate costs were $2.6 million, up from $1.3 million a year ago, mainly because the $0.7 million foreign exchange gain recorded in the third quarter of 2025 did not repeat itself and salaries and benefits were higher, partly offset by lower share-based compensation expense. On a year-to-date basis, packaging revenue grew 24.1% to $80.1 million, reflecting the acquisitions and continued organic gains, and Envelope revenue grew 3.8% to $142.6 million on both higher pricing and higher volumes.

Adjusted EBITDA was $26.3 million, up 26%, with the adjusted EBITDA margin improving to 11.8%, up from 10.3% last year. Please turn to page 12. Net debt was $38.6 million at September 30, down $1.5 million from June 30, as we made the first installment on the acquisition term loan and net repayments on the revolver. And we did that while continuing to invest approximately $3.5 million of capital expenditures in the quarter, including investments in the packaging business that we believe will fuel further growth. Net debt to adjusted EBITDA was 1.09 times, down from 1.22 times at the end of the second quarter and comfortably within our target of around 2 times.

Net debt to adjusted EBITDA leverage is higher than the 0.26 times of a year ago on account of the acquisitions we have completed over the last 12 months. We ended the quarter with $31.4 million of available liquidity. Please turn to page 13. The main headwind we are managing is tariffs. We estimate the impact at $10 to $12 million a year pre-tax, and that is after the mitigation we already have in place—pricing actions, supply chain adjustments, and our initial rebalancing of production between our Canadian and U.S. plants. The estimate assumes tariffs stay as currently enacted. To be clear, we’re not standing still. The restructuring plan we announced on October 6th eliminates approximately 60 positions, consolidates certain activities across our Canadian and U.S. envelope and folding carton sites, and accelerates technology adoption in the back office.

We expect annualized savings of about $5.7 million, benefits beginning in the fourth quarter, with the full run rate reached during the first quarter of 2027, and a restructuring charge of approximately $1.8 million in the fourth quarter of 2026. Those savings offset roughly half of the tariff impact. As for the remaining gap of $4 to $6 million, we’re committed to continuing to identify ways to reduce it through all of the levers at our disposal.

With that, I’ll turn it back to Stuart.

Stuart Emerson (President and Chief Executive Officer)

Thank you, Norm. Let me bring it together. On page 14 of the presentation, what is working: packaging is scaling up—44% in the quarter—and now stands at 39% of revenue. Envelope margins remained on solid footing given pricing and optimization initiatives, and leverage is down to 1.09x. We are watching the tariffs and paying close attention to the continued softness in commercial print, and we are proactively managing both. Our focus for the coming quarters is clear: deliver the $5.7 million of restructuring savings, integrate Goldrich and iFlex, continue to grow organically, keep working on tariff mitigation, and pay down debt. So let me leave you with this. The cash engine is performing. The growth engine is compounding. Tariffs are a headwind. We are managing. The restructuring plan offsets roughly half of the annualized impact. We are committed to finding further ways to close the remainder.

And the steps we have taken to protect the balance sheet while protecting the pivot continues. Thank you for your time this morning. Norman and I would now be happy to take your questions and turn it over to the operator. Thank you.

OPERATOR

We will now begin the question and answer session. To join the question queue, you may press star then 1 on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then two. We will pause for a moment as callers join the queue. The first question comes from Don Angelo Volpe with Beacon. Please go ahead.

Don Angelo Volpe (Analyst)

Hey, good morning, guys. Just on the tariff mitigation efforts, so I understand that full run-rate savings should come through in Q1. Just wondering how I should be looking at timing for Q4. Are we expecting kind of partial realization of these efforts in December? Like, are we expected weighted towards the end of the period, or do we look at kind of that $1 million impact for, call it, a little over a month and just look at that as pretty much flat through Q4?

Norm McCallie (Chief Financial Officer and Corporate Secretary)

Yeah, there’ll be a little bit of savings on that in the fourth quarter, D’Angelo. You know, much of it, much of the impact being realized in December. So, you know, if you wanted to make an estimate on that, it would be at the lower end. At the lower end of, like, a typical quarter. Right.

Don Angelo Volpe (Analyst)

Okay. Thank you. Yeah, okay, that makes sense. Okay. And then I guess just pivoting over to the packaging side. Excellent organic growth, I would say materially stronger than we’ve seen in recent periods. Just wondering how much of this was driven by new customer wins versus kind of increased wallet share with existing customers and how sustainable we should look at that double-digit growth rate kind of moving forward.

Stuart Emerson (President and Chief Executive Officer)

I don’t have the number precisely, but it’s a combination of the two. And if I had to put a mark on it, it would be 60/40, 40/60—new customer wins versus share-of-wallet gains. So it’s not all new customer wins, it’s not all share-of-wallet gains. There’s a combination thereof. Double-digit organic growth is impressive, but it’s a tough bar. So we expect organic growth every quarter. Can we keep it at 10.5? I’d like to think so, but that’s a tough one.

Don Angelo Volpe (Analyst)

Okay, thank you. And then final one for me and then I’ll hop back in the queue. Just wondering if you can provide more color on Goldrich’s performance, I guess kind of towards revenue growth, utilization and margins, and just kind of how it’s tracking compared to your expectations when you guys originally completed the acquisition.

Stuart Emerson (President and Chief Executive Officer)

It’s still early. There’s been—I don’t want to say a couple of customer defections—but faced a little bit of headwinds with the transition. Not with the transition. We had a little bit of customer overlap where maybe one and one doesn’t equal two. But, you know, it’s performed very well, it operates extremely well. There’s some significant capacity available there, adding to the sales organization as we speak. And, you know, just… it’s still early, but it’s performing well and within expectations.

Don Angelo Volpe (Analyst)

Okay, congratulations on the results, guys. I’ll hop back in the queue.

OPERATOR

Thank you. This concludes the question and answer session. I would like to turn the conference back over to Stuart Emerson for any closing remarks.

Stuart Emerson (President and Chief Executive Officer)

Great. Thanks, operator. Again, thank you to everybody on the call and thank you for your time and your interest in Supremex. And I’d like to take this opportunity to thank the employees of Supremex. None of this happens without their continued commitment and perseverance to making Supremex the company it is today. So thank you to everybody.

OPERATOR

This brings to a close today’s conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company’s SEC filings and official press releases. Corporate participants’ and analysts’ statements reflect their views as of the date of this call and are subject to change without notice.