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Good morning, ladies and gentlemen, and welcome to Colabor's First Quarter 2023 Results Conference Call. Following the presentation, we will conduct a question-and-answer session open to analysts only. [Operator Instructions] Also note that this call is being recorded on Thursday, May 4, 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 statements 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. And 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, and 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 25, 2023. The press release and disclosure documents can be found on the website on sedar.com, and an accompanying presentation can also be accessed online on the Investors section of colabor.com.
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. I am extremely pleased by our first quarter results. After more than 2 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 marked 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 COVID hit markets.
I refer you to Slide #4 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 nonorganic growth push in Western Quebec, new major accounts wins as announced in Q4 and from existing customer work. Our efforts dedicated to improving our product and customer mix as well as the effect of our April 2022 acquisition has 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 -- 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 nonorganic growth are paying off and that there is strong demand for our offering in Western Quebec.
I would like to refer to Slide 5 of the presentation to review the evolution of our 4 strategic pillars during the first quarter. As we stand today, we are halfway through our 5-year strategic plan. First, we generate profitable growth. Since we introduced our new strategic plan, we prioritize improving our customer mix and product offerings. 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 gross margin expansion in the first quarter of 2023.
Our second pillar is grow our reach from 30% to a potential 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 continuing to evaluate nonorganic growth opportunity. The upcoming move to our new strategic facility in St. 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 employers brand attracting and retaining the best filing is the key success factor for Colabor and our HR team is highly focused on this objective. As a result of various HR initiatives, I'm happy to report that we have -- we are in a very good position labor-wise and 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 steady leading 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 see that during the first quarter, our fish and seafood specialty distribution business obtained the Fourchette Bleue certification or literally the blue for 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 dedicated client focus team, Colabor is now on its way to becoming the local ingredient for the success of our catering artisan in the product. 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 2023. Please refer to Slides 6, 7 and 8 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 $133.9 million. Sales in the Distribution segment increased by 43.9% to $96.7 million.
This results from higher volume normalizing in the restaurant channel, new chain and street customers, price increases reflecting food inflation pass-through of approximately 7.5% and our acquisitions of April 2022. Sales in the wholesale segment increased by 23.9% to $47.4 million. This results primarily from normalizing volume from the restaurant sector and food inflation pass-through. Consolidated adjusted EBITDA from continuing operation reached $5.6 million or 4.2% of sales compared to $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 $0.2 million or million per share compared to a net loss of $1.7 million or $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 quiet third quarter. Cash flows from operating activities were $0.8 million in the first quarter, primarily resulting from a higher working capital requirements of $4.5 million to support inventory build, given our new chain customers, growing sales and busy upcoming season.
This compares to $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 on the COVID restriction and that the effect of -- and that we have the effect of the receipt of a nonrecurring gain of $4 million. In Q1, our strategic investment amounted to $0.8 million out of $1.5 million of CapEx. Strategic investment mainly went towards deposits of our first equipment orders for the new St Bruno facility.
We still expect our strategic CapEx to be in the high teens, low 20s and diverse mainly towards the second half of 2022. We ended the first quarter with higher net debt of $52.4 million, up from $47.8 million at the end of Q4 2022. Our financial leverage ratio stands unchanged from the end of fiscal 2022 at 2.3x. This ratio is obtained by dividing our total net debt by our adjusted EBITDA to which we removed our last 12 months of these liability payments. We now have $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. [Operator Instructions]. And your first question will be from Kyle McPhee at Cormark Securities.
Congrats on a great result. Just first regarding the revenue, regarding the huge organic volume growth implied by your results. Can you quantify how much change from the 2 new clients that you announced with Q4 results and confirm whether or not you've got a full quarter contribution from those new clients in Q1?
Kyle, thank you for your question and your comment. No, we cannot divulge the size of our 2 new accounts. And to the second part of your question, one of them started February 1. So I was not on it was that an effect in January. So almost the other accounts we sold during the whole quarter.
Got it. Is the client that started February 1, is that the 38 stores or the 200 stores that you announced for Q4.
Yes. That was the 38 stores yes.
Got it. Okay. And then were there any new wins worth noting during Q1 beyond the 2 new clients that you announced with Q4?
No, no. No, we don't have new clients in the pipeline are to then gaining street accounts one by one as we do very well in Western Quebec. So the idea is to manage our capacity. The good news is that we have a good summer with the workforce to support it if the cure. So it's going to be an easier summer, and we're happy with that. So the idea is to serve very well those 2 chain accounts. So we're kind of practicing until we have more capacity in the new facility in tangible.
Got it. Okay. And then regarding capacity, do you have capacity to add more material volume than this year? Or is Colabor now bottleneck into the new facility comes online later this year?
In a bottleneck, we can score the growth is going to be solid for the summer period. We can have core it. And the idea is to have perfect well, close to perfect service level that we are able to gain more customers. So we will go through that. We'll continue to have growth, but we will not run after a major chain as we speak.
So we're focusing on executing very well and capture opportunities here and there, but moderately. And the summer period is definitely the highest season for us. And if you look to Q1 is usually the lowest period when we did well. So we'll be even better the summer.
Understood. Okay. 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?
It's Pierre. Thank you for your question. It's -- no, we have not taken the session yet, but it's on track. It's on track for time, and it's on track for budget.
Okay. That's good enough for now...
Just want to add that we all have all ends of our deck on this one to make the move success.
Got it. Perfect. Okay. And then moving on to gross margins. It moved higher again. But can you maybe explain the main moving parts that allowed for that yet again another strong gross margin performance? What are the main moving parts driving that...
Sorry, we hear can an improving mix of customers and products, overall higher volume from the street business and especially from the remaining effects of the case recovery of January was not a good month last year. So the fact that we sell more to the restaurant is helping into the margin. And coming back to our product mix, we're questioning how to sell more of our private label -- so this is helping the margin. So in the long term, we'll try to balance new chain accounts with the stream business to generate a good and fair gross margin.
Okay. So that helps expansion on the moving parts. Just on -- regarding the new volume win from 2 new customers, these bigger chain type clients. Is that coming through at kind of average or above or below at the Colabor average gross margin?
Well, we usually chains are in below, okay? And I can confirm that they are below average, but the -- that's what I was trying to explain a bit before, like in the future, we'll have more and more change below average, but we're developing in parallel growth in smaller Western [ independent ] restaurants. So the balance should help keep it. But the more change we have, we can affect the gross margin are trying our job trying to protect it.
And it looks like you were successful in Q1. Okay. That's all for my questions. So congrats on the results.
Thank you.
Thank you, Kyle.
Thank you. And at this time, I would like to turn the meeting back over to Mr. Frenette for closing remarks.
Thank you again, and thanks, Kyle for your questions. Again, we are extremely pleased with our first quarter results, growth accelerated in the first quarter and profitability continued to improve with consistent and solid results demonstrate that we have successfully completed the first thing 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 world. I'm very enthusiastic about Colabor future and particularly in the potential net line in Western Quebec. This concludes our accounts for the first quarter of fiscal 2023. Thank you for your -- for joining us. Stay safe and healthy.
Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we ask that you please disconnect your lines.