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Good morning, ladies and gentlemen, and welcome to the Colabor Group First Quarter 2022 Results Conference Call. [Operator Instructions] 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 and Investors section under Events and Presentations 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 First Quarter 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 '19. 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, we'll 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 temporarily dining restriction in the full month of January. Consolidated revenues are up 13.2% compared to the first quarter of last year. Gross margins are up 2.4% to 17.1% of revenues, demonstrating the resiliency of our business model in the context of significant food input inflation. And 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 and 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 $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 2 accretive acquisitions aimed at accelerating our growth in the Quebec foods distribution market. On April 4, 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 $4 million of additional revenues and strengthen our competitive position with independent restaurants in our current and future prospective markets. This service will help us gain new customers across the products.
Also, on April 11, we further announced the acquisition of certain assets of Ben Deshaies, a long-time partner in our wholesale business. This acquisition broadened our distribution reach in Western Quebec and brings approximately $13 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 2 acquisitions represent $17 million in additional revenues.
During the first quarter, 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 face 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 first quarter of 2022. First quarter consolidated sales from continuing operations were up 13.2% to $97.2 million. Sales in the Distribution segment increased by 17.4% to $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 $38.3 million. Again, this results primarily from the easing of operating restrictions 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 operation reached $2.3 million or 2.4% of sales compared to $3.8 million or 4.5% in the first quarter of last year. The effect of growing revenue was mitigated by a reduction of $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 $1.7 million and higher when compared to last year's first quarter loss of $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 $12.4 million in the first quarter of 2022 compared to 5.4% in the equivalent quarter of last year. Lower working capital requirements, combined with the collection of a 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 $3.8 million, with $49 million of available borrowing capacity on our credit facility.
As of March 19, 2022, our net debt amounted to $39 million, down from $48.4 million at the end of fiscal 2021 resulting from the reimbursement of $7.8 million of our credit facility in the quarter. Our financial leverage ratio stands at 1.6x versus 1.9x at the end of fiscal 2021. We expect that the pandemic and the associated labor shortage and supply chain disruptions 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 restrictions, restaurants are allowed to operate at full capacity.
As we have demonstrated these last 2 years, we remain dedicated to maintaining our 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.
[Operator Instructions] Your first question comes from Kyle McPhee with Cormark Securities.
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 a meaningful change and something we should expect to repeat? Or is there anything onetime about the wholesale segment performance we should know about this quarter?
Kyle, thanks for the question. It's Pierre. Well, we don't -- we don't measure or we don't have the same point of view, our wholesale revenue is in line with our expectation and the previous quarters as well. They're up 4.3% year-over-year. So 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 -- in Q1 of 2021 of a volume, but we don't have any major onetime, so you can expect that same type of growth in the final quarters.
Okay. So nothing one time in my numbers are just too low. So moving on, still focused on the top line here. So after the mandated restaurants in January through 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. Kyle, it's Louis. Yes, 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%. But demand is there. The problem is mainly because of the restaurants are not yet able to open at full capacity because of labor issues. So because we're lucky to be well diversified geographically, primarily operating outside of the larger centers. So would be more effect in Montreal, as an example.
Got it. Okay. That's good to hear. And 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 the price inflation.
Got it. And would that be similar across your 2 segments?
Yes. Yes, same type of goods are sold to both segment.
Got it. Okay. And then are you seeing any demand destruction at all into these higher prices in foodservice channels or any of the channels that you sell to? So for example, our consumers -- are you seeing that consumers are eating out less as the prices keep going high?
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 an restricted restaurant capacity because of labor situation. So some restaurants open -- closed Monday and Tuesdays and to catch up their volume and the rest of the week at full capacity. So there are also a kind of that they are also adapting their menus in the face of higher price. There are substituting more expensive items to remain attractive for their customers. So we don't see demand destruction. We don't see a slowdown.
Got it. Okay. And then can you provide any commentary on your payoff from the new sales hires? And it sounds like you hired even more people during Q1. I guess specifically, 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. And we said that the breakeven would be in 2022, and it will happen. So 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. And also we are last year, last year, we hired new people in marketing to develop our private label brand is going well as well. So we started to hire the sales rep also in of last year and it's going according to plan. So very satisfied and in conclusion, we're hiring more reps.
Got it. Okay. Just moving on to one gross margin question here. So you posted strong gross margin percentage in Q1. It was higher versus your recent quarters despite all the food inflation. So is this just purely the resiliency of your business model during times of inflation? Or is there something I should note kind of a onetime 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 starting Feb 1, it helped us with the margins because when we sell to independent restaurants. Our margins are better than 2 institutions, as you can understand. And so our customer mix is better. And the mix of our products also because we sell more menu brand or private label products. So that helps for the gross margin.
There are no further questions at this time.
I'm still here. I do have one more. So 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 kind of on pause for a bit post your two first deal you did?
Kyle, it's Pierre. We are -- thank you for the smart acquisitions. We are not on pause. But again, as we did in the last couple of years, we're going to be very strategic and opportunistic with the M&A side. So if we feel that there's something that is accretive and as to use your word smart, we will pull the trigger again. But that's -- we don't have a specific target for the number of 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.
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 and [indiscernible] environment.
I'm grateful to all our employees who continue to impress and 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 customers account in the Laurentians and Outaouais region. We now have more resources and growing in to help us accelerate growth. I am excited about our future and welcome the opportunity to work with our new colleagues. Thanks for you for joining us. This concludes our call for the first quarter of 2022, stay safe and healthy. Thank you.