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Edited Transcript of CLR.TO earnings conference call or presentation 14-May-19 5:00pm GMT

Q1 2019 Clearwater Seafoods Inc Earnings Call

BEDFORD May 28, 2019 (Thomson StreetEvents) -- Edited Transcript of Clearwater Seafoods Inc earnings conference call or presentation Tuesday, May 14, 2019 at 5:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Christine A. Penney

Clearwater Seafoods Incorporated - VP of Sustainability & Public Affairs

* Ian D. Smith

Clearwater Seafoods Incorporated - CEO

* John Lane

Clearwater Seafoods Incorporated - VP of Finance & IR and Treasurer

* Teresa H. Fortney

Clearwater Seafoods Incorporated - VP of Finance & CFO

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Conference Call Participants

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* Doug Cooper

Beacon Securities Limited, Research Division - MD and Head of Research

* George Doumet

Scotiabank Global Banking and Markets, Research Division - Analyst

* Jonathan Lamers

BMO Capital Markets Equity Research - Analyst

* Justine Ho

Mesirow Financial Inc., Research Division - Senior Analyst

* Kyle McPhee

Cormark Securities Inc., Research Division - Analyst of Institutional Equity Research

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Presentation

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Operator [1]

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Good afternoon, ladies and gentlemen, and welcome to the Clearwater Seafoods Incorporated Q1 2019 Investor Call. (Operator Instructions) This call is being recorded on Tuesday, May 14, 2019. I would now like to turn the conference over to Mr. John Lane. Please go ahead.

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John Lane, Clearwater Seafoods Incorporated - VP of Finance & IR and Treasurer [2]

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Thank you, Leone, and thank you, everyone, for taking the time to participate in today's call. My name is John Lane. I'm Clearwater's Treasurer. And with me are: Ian Smith, CEO; Teresa Fortney, CFO; Christine Penney, VP, Sustainability and Public Affairs; and Donald MacNeil, Assistant Treasurer.

This call is intended to provide information to Clearwater investors. We have also scheduled a media call at 3:30 Atlantic Time and would be delighted to take questions from media at that time.

Earlier today, we issued a news release that provided the full details of our Q1 2019 results. For the purpose of this call, we have assumed that participants have reviewed this information, which is also located on our website at www.clearwater.ca. Therefore, during this call, we will focus on the more significant points from this release.

Please note that during today's call, management may make forward-looking statements. All statements other than statements of historical facts, including, without limitation, statements regarding future plans and objectives of Clearwater, constitute forward-looking information that involves various known and unknown risks, uncertainties and other factors outside of management's control. Forward-looking information is based on a number of factors and assumptions used to develop such information but which may prove to be incorrect.

Forward-looking statements may include, but are not limited to, total allowable catch levels, selling prices, weather, foreign exchange rates, fuel and other input costs. There can be no assurance that such information will prove to be accurate, and actual results and future events could differ materially from those anticipated in such forward-looking statements.

For more information on risk factors applicable to Clearwater, please refer to Clearwater's continuous disclosure materials filed, from time to time, with securities regulators, including, but not limited to, Clearwater's annual reports, quarterly reports and annual information form.

Finally, the forward-looking information included in this call is made as of the date of this call, and Clearwater does not undertake to update publicly or revise forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable securities.

All that said, I will now turn our call over to our Chief Financial Officer, Teresa Fortney.

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Teresa H. Fortney, Clearwater Seafoods Incorporated - VP of Finance & CFO [3]

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Thank you very much, John, and good afternoon, everyone. Thank you very much for joining us.

We're very pleased with our first quarter results for 2019. First quarter sales and adjusted EBITDA were $120.1 million and $20 million versus $121.1 million and $19.1 million prior year. Adjusted EBITDA grew 4.8% versus the prior year, resulting in record EBITDA for the first quarter. Cash from operations and free cash flow were $12.3 million and $4.6 million, respectively, versus $14.8 million and $9.6 million in the prior year.

Clearwater entered into a landmark 50-year partnership effective January 1, 2019, with the first -- with the 14 First Nations communities adjacent to the surf clam resource in support of indigenous reconciliation and expanding First Nation participation in Canadian fisheries.

Leverage decreased to 4.7x net adjusted EBITDA, which is down from 5.0 at the -- in quarter 1 2018 as net debt balances decreased by $24.2 million year-over-year. This morning, the Board of Directors approved and declared a $0.05 dividend per share, and it's payable on June 6, 2019, to shareholders of record as of May 23, 2019.

Sales for the first quarter of $120.1 million reflect higher available supply of scallops, crab and langoustine. We also had favorable prices and mix in clam and lobster, which were partially offset by competitive market conditions across scallop species. Our average foreign exchange rate realized on sales for the first quarter of 2019 had a net positive impact to sales of $1 million as compared to the same period of the prior year.

First quarter EBITDA of $20 million was driven by higher-margin scallop sales, stronger demand for lobster in China and strong langoustine sales volumes as harvest volumes increased. And also, with supply mix, scallop supply and costs were positive following an earlier start to our catch in Q1 of 2019 and stronger catch conditions. And it was as a result of these factors that gross margin increased over 16% to grow from 15.4% in the prior year to 17.9% of sales in quarter 1 of 2019. Adjusted EBITDA margin increased to 16.7% of sales, and that compares to 15.9% in the prior year.

Leverage at the end of the first quarter of 2019 was 4.7x compared to 4.7 at the end of 2018, and this was despite additional investments in inventory and resulted from higher EBITDA in the first quarter of 2019 compared to the prior year. Consistent with the seasonality of the business, we expect leverage to be higher during harvesting peak times before decreasing by the end of the year.

For the balance of 2019, Clearwater will continue deleveraging activities, prioritizing cash generation through cost savings, margin improvement and further inventory reductions as well as normalized capital expenditure levels. The resulting cash generation will be used to reduce debt and leverage through the balance of 2019. Consistent with the seasonality of the business, we expect leverage to be higher before it decreases at the end of the year. Clearwater's long-term goal is leverage ratio of 3.0x.

The positive growth outlook for 2019 with disciplined cost management will have us on track to generate strong free cash flow to reduce debt and leverage and to yield a higher return on assets and generate positive returns for shareholders.

As a reminder, it's important to emphasize that Clearwater's core fisheries are renewable resources and are managed for long-term sustainability. We have taken and we'll continue to pursue timely and carefully considered measures in response to near-term volume changes, including adjustments to harvest plans, pricing and distribution strategies as well as cost savings and working capital initiatives.

At this time, I'd like to now turn the call over to our CEO, Ian Smith. Ian?

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Ian D. Smith, Clearwater Seafoods Incorporated - CEO [4]

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Thank you, Teresa, and good afternoon, everyone.

We're very pleased with our results for the first quarter of 2019. Our record adjusted EBITDA in the first quarter of $20 million represents growth of just under 5% versus the prior year, and we consider that a great start to 2019.

During the first quarter, we were also proud to announce the landmark agreement with our indigenous partners. All of the Mi'kmaq First Nations in Nova Scotia and Miawpukek First Nation in Newfoundland have chosen to work exclusively with Clearwater in the Arctic Surf Clam fishery. Revenue sharing benefits from this landmark 50-year partnership are effective January 1, 2019, and therefore, are incorporated into our first quarter results.

For the remainder of this year, we expect balanced growth across multiple species and regions led by Asia Pac and driven by increased volume and new product offerings, including new products in clam, sea scallop, sea cucumber, whelk as well as a full year offering of our live crab from the U.K.

Continued innovations throughout our global supply chain on land and sea will reduce costs and increase the productivity of our asset base while continuing to enable product diversification in response to changing consumer trends. Clearwater will continue deleveraging activities in 2019, prioritizing cash generation, cost savings, margin improvement, further inventory reductions and normal -- with normalized capital expenditures. The resulting cash generation will be used to further reduce debt and leverage.

Clearwater will also continue to advance our working relationships with our indigenous partners on multiple fronts. We will continue to lead our industry working with our indigenous partners to demonstrate that reconciliation can unite and strengthen communities, build trust, secure existing jobs, create new ones and provide greater prosperity for all.

Turning to Clearwater's long-term outlook. Our investment thesis continues to hold. Global demand for wild-caught seafood is outpacing supply and continues to create favorable market dynamics for vertically integrated producers such as Clearwater with strong access to renewable resources. Demand continues to be driven by growing worldwide population, shifting consumer taste towards healthier diets and the rising purchasing power of middle-class consumers in emerging economies, especially in Asia led by China.

The supply of wild seafood is limited and is expected to continue to lag behind global -- growing global demand. This supply/demand imbalance has created a marketplace in which purchasers of seafood are increasingly willing to pay a premium to suppliers that can provide consistent quality, food safety, a wide diversity of species, reliable delivery of premium wild-caught sustainably harvested seafood.

As a vertically integrated seafood company, Clearwater has great assets, and we are well positioned to take advantage of this opportunity. Our licenses, premium product quality, diversity of species, global sales footprint, year-round harvest and delivery capability are all important competitive advantages of our company.

We remain 100% committed to our core business and our strategies. The powerful seafood industry fundamentals, our value proposition and competitive advantages that form the foundation of Clearwater's vertically integrated business model continue to create conditions -- or ability to generate long-term shareholder value, and we believe that these conditions remain strong.

And we're now ready to take your questions. Thank you.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Your first question is from George Doumet from Scotiabank.

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George Doumet, Scotiabank Global Banking and Markets, Research Division - Analyst [2]

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I just want to talk a little bit about really strong numbers in China. And I know this is a tough question to answer, but maybe give us a sense of how much of that strength was the result of the U.S. China trade war and maybe a little bit about how much of it is just maybe better positioning that we've built over time.

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Ian D. Smith, Clearwater Seafoods Incorporated - CEO [3]

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Yes. So what I would tell you is, is that other than probably our lobster business, I would consider most of the growth in China to be truly organic growth. It's -- and shifting from other markets. So clam, we see shift and growth from other markets in Asia. In crab, we see a shift and growth from traditional markets in Europe, and this is U.K. brown crab, just as 2 examples.

With respect to the lobster business, we have always played at the premium end of the market, and it's the lower volume, higher-value segment. And I would attribute a modest amount of that growth to the ongoing trade dispute between U.S. and China, a very modest part. And most of that growth is pure organic, and it's owing to the fact that our prices have always been at a significant premium to the commodity lobster market.

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George Doumet, Scotiabank Global Banking and Markets, Research Division - Analyst [4]

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I guess the answer is probably no, but I mean I'm going to ask it anyways. So you see any impact at all from the tension between China and Canada as it relates to our business over there?

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Ian D. Smith, Clearwater Seafoods Incorporated - CEO [5]

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So China continues to be an attractive market for Canadian seafood exports. So it's not just us. Nova Scotia alone is almost $1 billion annually and Nova Scotia exports are premier. Was just over there on a trade mission in Guangdong. Both Canadian and Chinese-owned exporters in Canada and many importers, food service distributors, restaurants, caterers, et cetera, et cetera, all continue to benefit directly from trade in Canadian seafood.

We have been operating in China for more than 2 decades. Our growth in China has been broad-based. We have many Chinese employees who are living and working in China in several regions. We have seen no indications of slowing business with China.

We, of course, are doing everything we can to make sure that we remain in full compliance with all of the food-related regulations in China, and our relationships with our Chinese customers have never been better. And we also continue to be confident in our ability to compete based on the quality of the product portfolio, our brand and the brand and breadth of markets that we serve.

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George Doumet, Scotiabank Global Banking and Markets, Research Division - Analyst [6]

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Got it. Looking at the U.S. scallop season that's been underway, can you maybe talk to what you expect the impact would be on volumes, maybe realized prices for us maybe for the remainder of the year?

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Ian D. Smith, Clearwater Seafoods Incorporated - CEO [7]

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Sure. So our understanding is that U.S. scallop landings are expected to modestly increase year-over-year. I think the biggest difference in what we expect this year is the attitude or the posture of the harvesters and processors in the segment. So larger volumes are starting to be landed now.

I think that the learning from last year was that with the significant increase in supply, they expected -- price came down precipitously, and they realized that it didn't need to go down as far as it went down last year in order -- and I'm talking about U.S. scallops -- in order to drive increased demand and consumption.

So what we're seeing this year is that while prices have come down industry-wide since the American landings have started and the auction has started up, the price drops are not as significant. We have not had to take any additional pricing changes from what we had already accomplished last year and are -- we had a strong first quarter.

We had more volume available because we started fishing sooner. We had more volume available to sell. We had strong sales in the first quarter. Order patterns remain strong globally for us, and we think we're competitively positioned in the market, and we're anticipating having a strong year.

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George Doumet, Scotiabank Global Banking and Markets, Research Division - Analyst [8]

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Okay. That's helpful. Just one last one, if I may, maybe to Teresa. Free cash flow was down year-over-year for the quarter. I'm just trying to think -- how should we think of, I guess, working capital and CapEx for '18 versus '19? And I'm just trying to get a sense of essentially if free cash flow is expected to grow this year at all.

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Teresa H. Fortney, Clearwater Seafoods Incorporated - VP of Finance & CFO [9]

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So we're expecting -- you asked a timing question as opposed to the totaled question. So free cash flow is going to be positive this year again as it was last year, George. And it really...

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George Doumet, Scotiabank Global Banking and Markets, Research Division - Analyst [10]

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You mean growth, right? You mean growth and free cash flow, right?

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Teresa H. Fortney, Clearwater Seafoods Incorporated - VP of Finance & CFO [11]

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For it to be positive?

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George Doumet, Scotiabank Global Banking and Markets, Research Division - Analyst [12]

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Yes. Sorry, go ahead.

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Teresa H. Fortney, Clearwater Seafoods Incorporated - VP of Finance & CFO [13]

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Yes. And so off hand, it's going to be roughly in, I would think, the same zone as what it was last year if I'm going from where we did our final landing. And so we've got a little bit more investment in CapEx coming in 2019, but we've got some further reductions in inventory coming. So it's all kind of balancing out, should be in that -- net a little bit more positive.

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Ian D. Smith, Clearwater Seafoods Incorporated - CEO [14]

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And I would just add to that, George. So inventory in the first quarter, we had strong sales. We had -- and we had even better harvesting. And part of the inventory build in the quarter is timing of landings particularly since we started scallop harvesting a month earlier.

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Operator [15]

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Your next question is from Doug Cooper from Beacon Securities.

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Doug Cooper, Beacon Securities Limited, Research Division - MD and Head of Research [16]

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Congratulations on a nice quarter. First, circling back on the China issue and the potential for any issues that may arise between the 2 countries, what do you think is the fundamental difference between seafood and say, canola where China has really put the hammer down on that?

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Ian D. Smith, Clearwater Seafoods Incorporated - CEO [17]

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I don't want to speculate, Doug, on what were the conditions underlying the decision by the Chinese government to suspend importation of Canadian canola. I don't think it would be responsible for me to speculate on it, that all I can do is talk to what we know about our business, which is the comments that I made earlier and -- which is making sure our products are of the highest quality going into the market and making sure that we are fully compliant with China's food safety, laws and regulations.

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Doug Cooper, Beacon Securities Limited, Research Division - MD and Head of Research [18]

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I guess what I'm trying to get at is, is there any substitute -- like a substitution impact or availability -- I'm assuming, internally, there's not a lot of substitution availability from the Chinese themselves.

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Ian D. Smith, Clearwater Seafoods Incorporated - CEO [19]

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Yes. I mean substitute...

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Doug Cooper, Beacon Securities Limited, Research Division - MD and Head of Research [20]

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Like just -- like in terms if they don't have lobster, they don't have salmon and so forth and so on.

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Ian D. Smith, Clearwater Seafoods Incorporated - CEO [21]

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Sure. I mean the diversity of seafood going into China is just so massive that on a macro scale, there's substitute availability for everything. American lobster versus Canadian lobster, and lobster is a growing business for Chinese customers and it's growing in its consumption by Chinese consumers. One would make an argument that there's already high tariffs on American lobster, so shipments of Canadian lobster have gone up. It is a live product going into the market.

Are -- could there be issues in the future? There could be. But I think speaking for our colleagues in the industry, which is -- we're all focused on the same thing, which is trying to do the best job we can to service our customer base in China, providing the highest quality product and being compliant with their food safety laws and regulations. And we believe that there's a very strong demand in the China market for this product, and we know how important seafood is in the Chinese diet.

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Doug Cooper, Beacon Securities Limited, Research Division - MD and Head of Research [22]

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I think China now is a net importer of seafood. Is that -- that's correct, correct?

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Ian D. Smith, Clearwater Seafoods Incorporated - CEO [23]

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That is correct.

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Doug Cooper, Beacon Securities Limited, Research Division - MD and Head of Research [24]

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Okay. Just on China, that's 26% of your revenue, give or take, and Asia is closing in on 50% of your revenue. How much do you feel comfortable with that? What's the word I'm looking for -- focus or -- in that particular market for growth? That's -- because that's essentially the only market that you have growing, and you're focusing a lot of attention on there and it's paying off obviously. But how much would you feel comfortable with being a percentage of your sales?

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Ian D. Smith, Clearwater Seafoods Incorporated - CEO [25]

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Yes. So we have -- we are obviously looking at value growth and volume growth. And so whereas the volume growth -- and we are getting strong value growth out of China, but we're actually getting value growth in other regions and species. And so when you talk about different geographies, it's really a story about attractiveness of a particular species.

So for example, clam is a market where we have had a good access to supply, and we've been able to grow the Asian market. And the sushi consumption, particularly around types of sushi like clam, is much -- indexes much higher in Asia Pacific than it does in either North America, although the U.S. is a strong market for the product. But it certainly doesn't index well within, for example, the European or the Middle East market.

So in some species, you have to grow where you can grow where this is what people eat. And so it's not that we aren't working on expanding distribution of clam and consumption in other markets. It's just -- it's a whole lot easier and faster to do it in Asia Pacific.

We are expanding our exports in Asia Pacific. China just happens to be the largest, but we are experiencing growth in Taiwan, in Hong Kong. Japan is down year-over-year, but we think that, that's cyclical and that we expected that, that -- it will reverse itself. We've introduced our products in a new distribution in Thailand and in Vietnam and in Malaysia, and we're also expanding in Australia and New Zealand.

So absolutely, we want to continue to have balanced growth across all regions. But for sure, China is -- will continue to be a growth driver, growth engine for the company. We expect that.

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Doug Cooper, Beacon Securities Limited, Research Division - MD and Head of Research [26]

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Just before I move on from geography, I just noticed, I guess, the one market that was down -- I mean we're talking not a huge number, but Scandinavia was down 50-odd percent. Is there a particular issue there?

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Ian D. Smith, Clearwater Seafoods Incorporated - CEO [27]

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I think that's more timing than anything else. Yes. We just came back from Brussels and there's no red flags.

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Doug Cooper, Beacon Securities Limited, Research Division - MD and Head of Research [28]

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Okay. On the supply side, is there any, in your view, pending issues, whether it be quotas, tax? Or how do you see the indigenous clam playing out over the rest of the year? Do you think this comes back into play this year? Or given it's an election year, how do you see this playing out?

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Ian D. Smith, Clearwater Seafoods Incorporated - CEO [29]

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So my best answer I can give you, Doug, is the breadth of our portfolio is always our competitive insulation year. Any given year, some quotas are going to be up, some quotas are going to be down. We are on record of saying we expect to see balanced growth across species and geographies this year, and we're sticking with our guidance.

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Doug Cooper, Beacon Securities Limited, Research Division - MD and Head of Research [30]

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Okay. And my final one, just on growth, I guess growth be driven predominantly now through pricing, I would guess. You've made the strategic initiative to delever. When do you foresee sort of getting back on the -- where do you feel comfortable getting back on the acquisition trail to diversify the supply geographically like you did in the U.K. a number of years ago?

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Ian D. Smith, Clearwater Seafoods Incorporated - CEO [31]

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So a couple of points. So first is we expect organic growth to be more about volume growth this year than about pricing growth for top and bottom line. And then second, for bottom line growth, we expect that our continuous improvement cost savings programs are going to continue to bear significant fruit this year to generate. So we do believe that we'll have a good balance of top and bottom line growth this year that's driven organically within our business.

With respect to external development, so there's the big E and the little E in terms of external development. And given our deleveraging focus of this year, the focus is less on the big E and more on the types of programs that we can continue to execute around partnerships, royalty agreements, joint venture opportunities, strategic supply agreements. All of those, we're capable of executing and all contribute to our ability to grow top and bottom line.

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Operator [32]

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Your next question is from Jonathan Lamers from BMO Capital Markets.

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Jonathan Lamers, BMO Capital Markets Equity Research - Analyst [33]

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On the -- the reported gross margin improved notably year-over-year despite revenue dollars being flat and scallop revenue dollars being down. What would you attribute that gross margin percentage improvement to?

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Ian D. Smith, Clearwater Seafoods Incorporated - CEO [34]

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Thanks for the question. Very simple, what you see happening in the first quarter, and we expect this to continue to play out through the year is mix favored higher-value species. And the harvesting -- our harvesting has been very good globally. So Argentina, U.K., Canada, those same higher-value species are also enjoying great catch rates and lower costs, so it's a virtuous circle.

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Jonathan Lamers, BMO Capital Markets Equity Research - Analyst [35]

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Okay. And a follow-up on that. Is this harvesting coming at the expense of the remaining 9 months of the year?

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Ian D. Smith, Clearwater Seafoods Incorporated - CEO [36]

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Well, it -- even though it may mean for our quota-based fisheries that catch rates allow us to catch our quota sooner, there's nothing untoward there. It just means lower cost. So our -- if we're -- if our catch rates are higher, we enjoy -- we'll enjoy a lower cost per kilo.

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Teresa H. Fortney, Clearwater Seafoods Incorporated - VP of Finance & CFO [37]

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And that's also part of what you're seeing is with our higher inventories at the end of the quarter, so the catch rates are stronger.

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Jonathan Lamers, BMO Capital Markets Equity Research - Analyst [38]

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Are you able to comment on how catch rates are trending through Q2 to date?

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Ian D. Smith, Clearwater Seafoods Incorporated - CEO [39]

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Our harvest patterns continue to be favorable. The -- and the weather's been actually pretty good.

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Jonathan Lamers, BMO Capital Markets Equity Research - Analyst [40]

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And Ian, you made a comment about your global order patterns being favorable. Is that -- have price trends to date been sort of similar to what you saw in Q1?

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Ian D. Smith, Clearwater Seafoods Incorporated - CEO [41]

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There's been -- the lobster market took a pause waiting for the season to start. But I think generally speaking, prices -- shore prices are where we expected them to be, which is in the $6.50 to $7 range, so nothing untoward there.

And when I say -- our order patterns, we just came back from Brussels last week, and demand was strong from our established customer base at preestablished prices. So we're -- again, I feel pretty confident.

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Jonathan Lamers, BMO Capital Markets Equity Research - Analyst [42]

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Okay. And if I could drill down into your Canadian shrimp business, I'm curious, how are you managing your shrimp harvesting into the 2019 fishing year in the absence of revised total allowable catch limits for the 2019 fishing year?

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Christine A. Penney, Clearwater Seafoods Incorporated - VP of Sustainability & Public Affairs [43]

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It's Christine. I can respond to that one. So as you're alluding to, the shrimp quotas haven't been announced for the year yet. But what DFO does is it make -- amounts of quota available for the fleet to continue fishing, until they are in a position to announce the TAC.

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Jonathan Lamers, BMO Capital Markets Equity Research - Analyst [44]

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And when do you have to expect to have a better sense for how much your access to shrimp supply will be down for 2019?

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Christine A. Penney, Clearwater Seafoods Incorporated - VP of Sustainability & Public Affairs [45]

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Yes. Well, I'd say, as I've alluded to, the announcements are delayed and so we really can't speculate as to when the minister will make that announcement. We're waiting at a new one.

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Jonathan Lamers, BMO Capital Markets Equity Research - Analyst [46]

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One final question on the Q1 results. Which species were moved to -- toward China in the quarter?

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Ian D. Smith, Clearwater Seafoods Incorporated - CEO [47]

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So the -- in China, the species focus continues to be clams, Coldwater shrimp, lobster and Greenland halibut, otherwise known as turbot.

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Jonathan Lamers, BMO Capital Markets Equity Research - Analyst [48]

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And would you say that the margin improvement in the clam business would be sort of sustainable for the balance of the year?

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Ian D. Smith, Clearwater Seafoods Incorporated - CEO [49]

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We expect to have a good year in clam, absolutely.

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Operator [50]

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(Operator Instructions) Your next question is from Kyle McPhee from Cormark Securities.

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Kyle McPhee, Cormark Securities Inc., Research Division - Analyst of Institutional Equity Research [51]

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Just one last question for me. On pricing, does your price realization tend to increase when you ship product into China? For example, you said you're shifting some clams and crabs into their country. Are they -- all else equal, pay more when the ship happens?

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Ian D. Smith, Clearwater Seafoods Incorporated - CEO [52]

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Yes.

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Operator [53]

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There are no further questions at this time. Please proceed.

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John Lane, Clearwater Seafoods Incorporated - VP of Finance & IR and Treasurer [54]

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Okay. Leone, this is John speaking. If there are no other questions, we can wait a few moments for that. And no one's queued in. Okay. So -- well, that's it. We thank everyone for attending the call today, and we got another -- someone did queue up apparently.

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Operator [55]

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That question is from Justine Ho.

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Justine Ho, Mesirow Financial Inc., Research Division - Senior Analyst [56]

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Sorry, I missed the first few minutes of the call, so sorry if you might be -- if you have already answered this. But can you talk about the quotas for 2019 across species and the expectations there or the announcements there?

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Ian D. Smith, Clearwater Seafoods Incorporated - CEO [57]

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So we don't give particular guidance on any quotas in our fisheries. What we have made -- our comment that we started in quarter 4 of last year and are maintaining in quarter 1 is that we expect balanced growth in volume across our fisheries, both -- well, in the U.K., Argentina and Canada. So we are expecting growth in volume through our quota-held fisheries.

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Justine Ho, Mesirow Financial Inc., Research Division - Senior Analyst [58]

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Okay. And what about prices in general across species besides -- I understand that the scallops are slightly down due to the U.S. -- you mentioned expectations of the U.S. having a little bit more supply year-over-year. But the other species in terms of price trends there?

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Ian D. Smith, Clearwater Seafoods Incorporated - CEO [59]

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So we don't obviously give out specific pricing information, but we can tell you that we're expecting that price -- we're expecting prices overall to be stable. If you looked at average price per kilo, we expect that to be relatively stable and that the lion's share or the growth that we expect to achieve this year is going to come from volume as well as cost improvements.

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Justine Ho, Mesirow Financial Inc., Research Division - Senior Analyst [60]

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Okay. And lastly, are there any updates regarding the 2020 25% clam quota process?

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Teresa H. Fortney, Clearwater Seafoods Incorporated - VP of Finance & CFO [61]

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So we announced our landmark agreement in Q1, and we were very pleased to be able to do that with -- certainly with the positive feedback from our government contacts and appreciation for bringing that information forward. And we're focused right now on building value for all the partners in that arrangement.

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Operator [62]

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Please proceed. There are no more questions in the queue.

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John Lane, Clearwater Seafoods Incorporated - VP of Finance & IR and Treasurer [63]

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Well, we want to thank you for your time and attention this afternoon and we very much appreciate that. And with that, we will conclude our quarter 1 2019 analyst call. Thank you and have a good afternoon.

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Operator [64]

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Ladies and gentlemen, this concludes your conference call today. We thank you for participating and ask that you please disconnect your lines.