Louis Juneau - Chief Legal Officer and Corporate Secretary Henry Buckley - President and CEO Eric Bussieres - CFO Steve Arndt - President and COO, FinishMaster USA Brent Windom - President and COO, Automotive Canada Peter Sephton - CEO and President of The Parts Alliance

Leon Aghazarian - National Bank Financial Jonathan Lamers - BMO Capital Markets Michael Glen - Macquarie Benoit Poirier - Desjardins Elizabeth Johnston - Laurentian Bank Securities Jonathan Lamers - BMO Capital Markets

Thank you, Jessa. Good morning, everyone, and thank you for joining us for the Uni-Select first quarter conference call.

Presenting this morning are Henry Buckley, President and Chief Executive Officer, and Eric Bussieres, Chief Financial Officer. Following their comments, we will open the call for questions.

Joining us today for your questions are Steve Arndt, President and COO of FinishMaster USA; Brent Windom, President and COO of Automotive Canada; and Peter Sephton, CEO and President of The Parts Alliance. Please note that all documents referred to in today's conference call, including this webcast presentation, can be found on our website at uniselect.com in the Investors section.

As noted on Slide 2, I would like to remind you about the caution regarding forward-looking statements, which is applied to our presentation and comments. All amounts are expressed in U.S.

dollars, except as otherwise specified. With that, let me turn the call over to Henry.

Great. Thank you, Louis.

Good morning, everyone. Thank you for joining us today.

Please turn to Page 3. Overall, our first quarter results were in line with our expectations when considering the seasonality of our business.

On a consolidated basis, sales reached $422 million, up 42% over last year, primarily driven by acquisitions. Adjusted EBITDA was up 19.2% to $28 million or a margin of 6.5%.

During the quarter, we integrated 6 stores and opened up 4 greenfields. Once again, the Canadian and U.K.

operations performed well. In fact, it was actually a breakout quarter for The Parts Alliance, which reached an EBITDA margin of 8.7%.

However, in the U.S. segment, we continued to work through some challenges.

Having said this, considering our first quarter results, our business outlook in the U.K. and in Canada, and the progressive improvement expected at FinishMaster throughout 2018, we are confident to achieve our consolidated guidance for the year.

Let me go through each business segment in more detail. Please turn to Page 4 for details on FinishMaster U.S.

Our first quarter results were soft, but largely in line with our expectations. Sales were flat year-over-year, reaching $201 million, supported by business acquisitions, while our organic growth was negative 2.8%.

The EBITDA margin stood at 9.9%. In terms of our top line performance, recall that last year, we were distracted by the product line changeover.

In the quarter, it is worth mentioning that we also experienced general market softness. As a result, we have put a sales recovery plan in place, and have been doubling down our sales growth initiatives.

We had early signs of success and we have won significant new business volume, including a very large customer that we'll start to phase in during the second quarter, with the full run rate expected in the fourth quarter. Having said this, we are confident we are progressively returning to positive organic growth as we move throughout the year.

Notwithstanding this, we integrated 3 stores, opened up a new distribution center in Texas, the fifth one in the U.S. At the same time, we continued to focus on driving profitable growth with specific initiatives to achieve long-term objectives and counterbalance some of the business challenges.

For example, we continue to drive new business in all segments of our Refinish business, and execute our strategy to expand into the Industrial Coatings business. We continue to focus on our 20/20 initiatives in order to drive cost efficiencies going forward.

Now let's turn to Canada on page 5. Our Canadian operations performed well considering it's their seasonally softest quarter of the year.

Our first quarter sales were up 13.5% to $111 million, driven primarily by robust organic growth of 5.9%. Our EBITDA margin reached 2.9% in line with last year.

In the quarter, we continued to focus on building the foundation for the long term, with the execution of our strategy. Our company-owned store conversion strategy is progressing well, with the rollout of Bumper to Bumper and the FinishMaster brands, as well as the continued deployment of our point-of-sale system, PartsWatch.

We integrated 1 store in the quarter and continued to focus on improving our productivity and efficiency through the launch of various initiatives as part of our 20/20 initiative. One point I'd like to highlight is that we'll be moving into new phases of our company-owned store integration in the coming months.

Since we started this journey into owning stores, we've primarily focused on systems integration with the point-of-sale system PartsWatch. With this implementation well underway, we will focus on the harmonization of our product lines and the optimization of our network.

For the after-market part side, the strategy will be to optimize our network to improve profitability. In terms of FinishMaster Canada, we continue to expand customer coverage to further accelerate growth.

We continue to pursue our long-term strategy to build our Canadian company-owned store network in conjunction with a strong network of independent Bumper to Bumper stores. Now let's turn to our Parts Alliance UK segment on page 6.

Our Parts Alliance segment really came through this quarter as anticipated. Our first quarter sales were $110 million with a robust organic growth of 4% on a standalone basis.

Our EBITDA margin was 8.7% despite opening 4 Greenfields in the quarter. Since the beginning of the second quarter, we have already opened 2 more Greenfields, 1 of which was opened this past Monday, therefore, bringing the total count to 8 since we acquired The Parts Alliance in August of last year.

We are very pleased with The Parts Alliance acquisition. The integration with Uni-Select is progressing very well.

In the quarter, we continued to focus on our 20/20 initiatives in order to improve our efficiency. More specifically, we continued to look for further supplier synergies, integrate recent acquisitions, made progress on the rollout of our Performance Management systems, and continued to evaluate various locations to add new Greenfields.

This is an exciting time for The Parts Alliance. With a 7% market share in a fragmented market, this segment provides a significant runway for profitable growth.

Now I'd like to turn the call over to Eric for our financial review.

Thank you, Henry. Good morning, everyone.

Let me begin on Page 8. Before I comment on the results, I would like to take a few minutes to discuss the impact of seasonality on Uni-Select's results by business segment.

At FinishMaster, the first and fourth quarter tends to be softer and the third, the strongest. For our Canadian operations, the first and fourth quarter are typically soft, with the first quarter being the softest.

It is important to highlight that since our company-owned store strategy has added more fixed cost to our business model, our highs are higher and our lows are lower. As a result, margin in the second and third quarter tend to be at least 200 basis points higher than the first and fourth quarter.

Similarly, our U.K. operations typically have softer third and fourth quarters, with the month of August and December being the softest.

Consequently, margins in the first half of the year tend to be close to 200 basis points higher than the back half of the year. In addition, to be clear, Parts Alliance margin in the second quarter will be slightly lower than in the first quarter.

Hopefully, this clear -- this is clear and will help for modeling purposes. Let me now turn to our first quarter results on Page 9.

Consolidated sales for the first quarter reached $422 million, a 42% increase as compared to the $297 million last year. This increase was primarily driven by acquisition, notably The Parts Alliance, and the favorable foreign exchange conversion impact.

Consolidated organic growth was flat in the quarter, as the Canadian Automotive Group organic growth was offset by the FinishMaster negative organic growth. The FinishMaster U.S.

segment reported sales of $201 million in line with last year. While acquisition completed last year increased sales by $7 million, organic growth decreased sales by $5.6 million or 2.8%.

As Henry mentioned earlier, we are on track to ramp up sales aggressively as the year unfolds. The Canadian Automotive Group segment reported sales of $111 million, a 13.5% increase versus the $97 million for the same period last year.

This increase was primarily driven by robust organic growth of 5.9% from an independent customer, as well as company-owned stores. The favorable foreign exchange conversion to the U.S.

and business acquisition completed last year provided additional sales growth. The Parts Alliance U.K.

segment robust reported sales of $110 million in the first quarter. These results included 6 greenfield openings since we acquired them in August.

Turning to Page 10. Our first quarter consolidated EBITDA was $27 million as compared to $23 million last year.

Adjusted EBITDA was $28 million or a margin of 6.5% versus $23 million or a margin of 7.8% for the same period last year. FinishMaster margin decreased from 11.7% to 9.9%, driven by lower special buy and an evolving customer base.

As indicated by Henry, we also experienced some softness during the quarter. The Canadian Automotive Group margin was in line with last year at 2.9% and represents our slowest quarter of the year.

The store margin reflects our transition to a company-owned store model, which further accentuates highs and lows as a result of higher fixed-cost models, as explained earlier. Having said this, it is important to note that the margin was somewhat impacted by activities related to the 2020 initiatives, as well as the effect from the ongoing company-owned store integration work for approximately 30 basis points.

Finally, The Parts Alliance margin reached 8.7% as expected, up from 4% in the fourth quarter in line with one of the strongest quarters of the year. In fact, The Parts Alliance reached this margin despite several greenfield openings.

We estimate that the greenfield negative be impacted the margins by about 20 basis points. Therefore, while the adjusted EBITDA increased on a robust basis versus last year, the margin decreased by 130 basis points.

This variation is primarily explained by FinishMaster, partly offset by The Parts Alliance contribution and the 2020 initiatives. Turning to Page 11.

Net earnings for the quarter reached $10 million or $0.25 per share versus $11 million or $0.26 per share last year. Adjusted earnings for the quarter reached $12 million or $0.29 per share versus $11 million or $0.26 per share last year.

This increase was mainly the result of the contribution from The Parts Alliance and the reduction in the income tax rate following the U.S. tax reform.

Now let's turn to our quarterly cash flow on Page 12. In the first quarter, we used $30 million of cash from operating activities versus an inflow of $2 million last year.

This variation was driven by higher disbursement for inventory [indiscernible] and interest expense in relation to the financing of recent business acquisitions. As a result, we generated lower free cash flow for the quarter at $7 million as opposed to $21 million last year.

Turning to page 13. At quarter-end, our outstanding total net debt stood at $468 million as compared to $418 million 3 months earlier, an increase of $50 million.

As we explained last quarter, we expected our net debt to increase due to seasonality. The [indiscernible] cash flow, outflow, should I say, higher cash tax and the repurchase of certain capital leases in the UK that were refinanced at lower all-in interest rates.

We anticipate this to partly reverse in the second and third quarter, as they are seasonally stronger quarters for most of our businesses. As a result, the funded debt to adjusted EBITDA ratio stood at 3.84x at the end of March.

Pro forma for The Parts Alliance acquisition, the ratio would be 3.55x compared to 3.04x at the end of fourth quarter. Moreover, at the end of the quarter, we had about $145 million available under our credit facility.

This completes my financial review. I now turn the call over to Henry for the outlook.

Great. Thank you, Eric.

Our guidance for 2018 has not changed from last quarter. For the year on a consolidated basis, we anticipate a positive organic sales growth of between 2.25% to 4%.

We anticipate a consolidated adjusted EBITDA margin of between 7.2% and 8.2%; investments to be between $26 million and $29 million for vehicle fleet, hardware equipment, software and other. Turning to organic growth by businesses, at FinishMaster, although we've had a challenging start, we continue to expect organic sales to grow progressively throughout the year, and average between 2% and 4% for the year.

As mentioned earlier, we have secured new business and, which will kick in during the second quarter. For the Canadian Automotive Group, we expect organic sales growth to be between 2.5% and 4%.

For The Parts Alliance UK segment, we expect organic sales to be between 3% and 4%. Finally, we expect our effective tax rate to be approximately 22% to 24%.

To conclude, we have a great foundation for growth in all our businesses and we remain focused on doing what is required to enhance results. This concludes our presentation.

We are now ready to answer your questions. Jessica, could you open the line, please?

I'm not entirely sure if it's me having problems, but the slides aren't necessarily available on your website, so I had a pretty difficult time following what you guys were going through. So I don't know if it was relayed elsewhere, but it's not on your website.

But having said that, let me jump into some of the, so maybe you guys can send that over, I'm not sure. Having said that, so a couple of questions for me.

Number one on the FinishMaster side, I mean, you mentioned that you want new business volume. Can you comment a little bit about that?

You said it's going to kick in Q2. Is it a meaningful one?

And then what gives you confidence that you can kind of reverse this negative 2.8 organic growth to basically average out for the balance of the year at a much higher clip than that?

Yes, thanks, Leon. It's a great question.

At the end of the day, as I said, we have won significant new volume we've put in place. Last year, as we talked about, we were distracted by the product line changeover; that's behind us.

So that is just parking that. That is an effective last year; in this year, we've been doubling down on our sales growth initiatives in all regions.

And in specific terms, we were able to secure a significant amount of new business, some of those, some very large accounts in our world, and we're not going to get any details in terms of who they are or what they are, but if we're -- obviously, if we're going to extend our guidance in that 2% to 4% range, I think clearly, we're comfortable with that.

Okay. And then what are you seeing in terms of pricing?

We're seeing from all the -- some of the paint suppliers that reported their own results, there's a lot of inflationary pressure that they're seeing. Are we seeing the pass-through there?

Any impact, potential impact, on the margins on FinishMaster for the year?

Hey, Leon, this is Steve. The price increases that they are passing forward are similar to the years in the past.

So don't see any significant impact on our margins; may come a little bit earlier, but that's really not at our doing. So right now, we see them the same as they have been over the past few years.

Okay. That's helpful.

On the Canadian side, we didn't see obviously very strong organic growth, but margins on a year-over-year basis, I appreciate the seasonality. But on a year-over-year basis, it was still a little bit lower.

Can you walk us through a little bit as to why that is the case?

Yes, Brent, do you want to take this?

Sure. Hey, Leon.

As we say, Q1 is typically a softer quarter for us. With the higher sales, we certainly had a seasonal mix in our products.

And we continue to work on our margin initiatives with our PartsWatch implementation through the corporate stores. So we see that rebounding the next quarters.

Okay, fair enough. And then one on the U.K.

I suppose here, you did mention the 4 greenfields. I believe I heard a 20-basis point impact.

Is that correct, Eric, from the 4 greenfields, the margins would have been higher by about 20 bps?

Yes, it's for the 6 greenfields, Leon. So if you recall, we did open also 2 greenfields in Q4, so it's a combination impact of those 6 greenfields that affected the quarter, the first quarter, results by about 20 basis points.

So I guess my follow-up to that would be how many greenfields are you planning on opening this year overall? And what is the cost, I suppose, for doing each one of those?

Yes, so we're not going to get into details of how much it cost us to open up a greenfield. But just like we talked about in the last calls, and when you guys were at the investor conference, we have an opportunity to extend our coverage in the U.K.

by opening up greenfields. And with that, a great experience, have been able to bring those greenfield locations up to profitability in a reasonable amount of time.

So the business view right now is that we're looking at locations throughout the U.K., and we will ramp them up as it is appropriate in terms of our internal capacity and the opportunities that present themselves in those particular markets. So we're not going to put a number out there in terms of how many we're going to open, but we are likely going to open up more.

Okay. I'll get back in queue.

Thanks.

Hey thanks, Leon.

Good morning, Jonahan.

I apologize if I missed this in the package, but what was Parts Alliance's organic growth in the quarter?

4%.

Okay. On FinishMaster, my understanding is that many of the stores going into the year still had 1 product line, and you were looking to introduce a second line at those stores.

Has that process been completed yet?

Yes, so what we said is that we have PPG; we have Axalta; and we have Akzo Nobel in some locations. And in some cases, we have 2 lines; in some areas, we have 1 line; and there's some areas where we have 1 line where it's appropriate for us to add a second line.

So we're adding a second line into those locations are as we fit, but that process is ongoing, so it's not kind of an event. It's something that's actually ongoing for us as a company and we'll make those evaluations and determinations in terms of adding a second line based on the individual market circumstances.

Okay. But my understanding was that was a real driver for the organic comps improving to your 2% to 4% range for 2018, so I just wanted to understand.

I think it's a component. I wouldn't say it's certainly the only thing.

I think we have opportunities to replace BSF business with all of our lines. And as we look at each individual market, if that is with one of the lines we carry in that business already, then we'll do that.

If that's not possible and it's appropriate for us to have a second line, then we're absolutely going to do that. So it is absolutely a contributor, but it's not the only one.

I think if we can reiterate again, we have doubled down on our sales initiatives internally. We've got a very strong push on recapturing some business, whether it be from BSF or others, and we are aggressively going after market share growth.

So that is our focus.

Okay. And I know you said you won't go into any new details on the new business win, but can you provide us with any sense of how many customers that represents and relative to how many customers you had last year?

And was this a particularly large customer, group of customers?

Well, I think, Jonathan, it's more than just one customer. I think we have a larger customer we're on-boarding that's obviously important for us, but we have a whole host of customers that have, that we're recapturing through the business and we're acquiring new business.

So for us, we look at it in all facets. We're growing a new industrial business; we're growing business with new customers; and we're growing business with current customers in terms of making sure our retention rates for customers are higher.

So it's an all-encompassing initiative for us. So it isn't just one thing that's contributing.

Again, industrial, new customers, clearly getting some of our, retaining our current customer business. And then we've been fortunate enough to capture some large business.

Okay. And just kind of a high-level question, like looking at some other players in the industry, it seems like industry demand growth has slowed a bit.

My understanding is that the insurance customers, the insurance companies are reimbursing less for paint blending than they formerly did. Are you receiving any feedback along those lines from the body shops?

Hi, Jonathan, this is Steve. We have not heard that, that there's a reduction in reimbursements from the insurance companies.

There's always an ongoing technical approach to estimates and the repair process, but our customers have not said that to us at this point.

Okay. And one last one on FinishMaster.

Just on the lower special buys, have you talked to your suppliers as to their strategy around the special buys that they're offering? Like it seems like this may be part of an effort to smooth out your order patterns a bit, so there's less sort of lumpiness; and the orders, your orders and the sales changes are more in line with the underlying body shop demand.

Is that, can you provide us any color on that?

Jonathan, this has kind of been a journey for us over the last few years, and quarter-after-quarter, we indicated that we were getting special buys. And then the last few quarters, we've had significantly less.

So I think for us, what you have to understand is that we have no control over this whatsoever. It's a really at the avail of our suppliers.

And for whatever reasons they choose, they may offer it or they may not offer it. So I wouldn't want to comment in terms of their strategy, but our supply chain is driven by the demand of our customers.

So our buying patterns are very, very consistent with the demand. So anything that is incremental to that in terms of special buys is clearly driven by opportunities we would have based on the suppliers.

So their strategies, I don't really want to comment on them.

Fair enough. And one question on the U.K.

greenfields. Can you provide us with any guidance as to what level of sales you expect the new greenfields to contribute in 2018?

And then at a normal run rate, would the sort of sales per store be comparable to your overall sales per store?

We're not going to break out that level of detail in terms of our organic growth. Obviously, these stores don't start off large, but they do contribute on an organic basis.

So we've got underlying organic growth in our business overall, and then we have contributory organic growth from the greenfield opening.

Okay. But just directionally, how many months does it take for green store to sort of cover it, cost to serve, and then to reach the targeted run rate sales?

Yes, so, so far, as we've said before, The Parts Alliance have been very successful in their greenfield by being breakeven at the EBITDA level within a span of 3 to 6 months. Now, that doesn't mean that it will be the case for all the greenfields we're opening.

So in my mind, if we're breakeven, going in a period of 6 to 12 months, we've done a pretty good job. I would say full maturity, full valuation of that store probably takes 18 to 24 months, which is a stellar performance when you open a store, to be breakeven within 3 to 6 months, as experienced by Parts Alliance.

It's a kudo to the business and the organization.

Yes, historically, it would've been 18 to 20, a way through some methodology just -- I mean, where we open, accelerate that.

Without a doubt. That's why we're going to make sure we take the best opportunities first and we're not just opening up randomly.

We've got very specific geo-marketing for the entire UK, so we know the market dynamics wherever we open. So it is a very planful approach and so far, it's been paying off for us, and we'll continue to do that same level of due diligence as we expand our openings.

Okay. Thanks for your comments.

Thanks Jonathan.

And just before we go to the next question, I just want to confirm that the conference call presentation is available on the website in the Investors section under the folder Events and Presentation.

Good morning, Michael. Good morning Michael.

Maybe on mute.

Can you guys hear me okay?

There you are.

Yes, we can. There you are.

Okay. Sorry about that.

Just to go in on FinishMaster a bit more, so you had the product line changeover there. BASF has now seemingly gone out and secured new distribution.

What's the competitive situation like in the market right now? Are they trying to be overly disruptive and steal share to get back involved in that market?

Hey, Michael, this is Steve. The landscape hasn't really changed; it's always dynamic.

All the manufacturers are looking at distribution. It's competitive; it will remain competitive for share out there.

I wouldn't say that they are anymore or any less competitive than they were before. But like everybody, they are trying to make sure that they get what they feel is their fair share.

Okay. And then maybe just to go back on the new customer win that you indicated, so seemingly, this is with an MSO.

How should we think about then the margin profile on this business versus other parts of your business?

I'll take that, Henry. We have a very strong and robust pipeline.

And as Henry said, we are getting new business from every segment, not just the MSO, but the traditional segment, the regional segment, the industrial segment. So there's going to be a blend of margin in there from all those different segments.

And as we've said before is, the MSOs provide less margin than the traditional. So you should see, or we should see, a blend of our margins throughout all the wins we're getting.

Okay. And I think the margin for FinishMaster was 9.9%.

It's sub-10%. Is that the right level for FinishMaster for a margin?

Yes, we're not going to declare margin by segment or, but one think to keep in mind it is one of our seasonally softer segments. And obviously, we have a fairly significant fixed cost base, and as we ramp up sales, we're obviously looking to improve profitability.

So that's our primary goal.

Okay. And the Corporate segment, the cost was about $5 million in the period.

That was a tick higher than where it had been previously. What's, is there something in there or is, what should we think about that number coming in on a full year basis, the Corporate segment?

Michael, it's Eric. So one of the elements of cost in our corporate costs is linked to the hedging program we have for the shares, for the DSUs-BSUs.

As we've indicated in the past, we have hedged that program, so obviously, if it's out of money, or if the share price moved, I've sort of frozen that expense so some of the benefits flows to the business units. But the cost of the hedge remains at the corporate level and that's part of the explanation.

We also have slightly higher legal cost, but overall, the rest is pretty much in line.

And that like $5 million a quarter, is that the right number for that segment?

No, I think that's on the high side linked to the share price decrease from December to now, that there's a view that the share price will go further down or, and if the share price goes up, there should be some benefit associated with that.

Okay. And the working capital in the quarter, you talked about it in your remarks, but it was quite negative.

So that should then reverse through the balance of the year?

Yes, that is my expectation that throughout the following quarters, that will reverse. As you know, [indiscernible] business and even Parts Alliance, quite candidly, because Parts Alliance had a very strong quarter.

And they've ordered more to meet the demand and the same thing for Canada getting ready for spring sales. So and as you know, Q1 is a tougher quarter for cash perspective because it will also be our members' rebates are made in Q1, so there's more cash-out than with any other quarters from that perspective.

Okay. That's all my questions.

Thanks, guys.

If we could come back on FinishMaster and the new business win in the quarter, is it more related to MSOs or traditional?

So we have multiple wins in the quarter, so to be very clear, we highlighted we've got one larger win, which is obviously going to be a multi-shop by definition because it's larger, but we have a myriad of wins again from industrial wins. That business initiative is aggressively growing, so we're happy with the progress there.

We've got all of our day-to-day wins in our traditional segments in all 4 of our regions. So when I say we've doubled down, Steve and the team, myself, we've been there in detail.

In fact, we've been in and indeed pretty much every month this year. And I could tell you, there is a very robust pipeline; there is a very high commitment to achieving sales growth.

And we are seeing that progressively -- results progressively being delivered in terms of new account wins already. So we're very, very happy with the progress, right?

Again any segment details, but it isn't just one customer; it's a broad selection of customers.

Okay. And could you talk -- maybe could you break down your exposure to MSO, how it has changed over the previous quarter?

And also, whether industrial is -- there's some dilution brought by industrial on the margin side?

Yes, so Benoit, it's Eric. On the industrial, as we said, the way we categorize MSOs -- and I think it's important in terms of definitions.

We've always said that it's collision repair centers and operated by same party for 3 or more. And under that definition, it represents about 40% of FinishMaster business.

If you think about the very large MSOs, it's in the low teens as a combined revenue by profile.

Okay.

And the way we look at the industrial as well, the gross margins are a little lower in industrial, to be fair. That's the nature of the business, but remember though, we also have a very fixed cost facility network across the U.S.

with 212 locations. And we're not opening new locations; we're adding new volume to the existing locations.

So on a gross margin basis, it's slightly lower than the average. However, it is actually contributing nicely to the bottom line EBITDA margin.

Okay. Okay.

That's perfect. And just in terms of corporate cost, the $5 million, going forward, what should we expect for quarter, let's say, a good run rate going forward for corporate cost?

Benoit, the corporate cost would be around $3.5 million on a normal run rate basis.

Okay, perfect. And for FinishMaster, when would you expect to resume organic growth?

Would it be Q2 or more back half kind of or.

Well, as we said, right, it will grow progressively, so obviously, our expectation is Q2 will be better than Q1, and Q3 will be stronger than Q2, and Q4 will be probably the highest. It's progressive and we are importing new customers as we speak and we have secured a lot of new businesses.

And that's why it gives us comfort that we are reversing that trend.

Okay, perfect. And Parts Alliance obviously, nice improvement from a seasonal piece point.

Just wondering about the run rate for the full year, whether it has changed. And do you still expect the second half margins of Parts Alliance to be lower by about 200 bps like you disclosed before?

Yes, that is still our view and thoughts, Benoit. So the first half (technical difficulty) obviously, and the second half will be something like close to 200 basis points lower from an EBITDA margin in the second half for Parts Alliance.

And in

And as we clarified, the strongest quarter is Q1; Q2 will be strong, but slightly lower than Q1.

And the overall year, as we've talked about many times now, we expect the 2018 calendar year to be 7.5%, diluted by the impact of our greenfield openings. That's the same thing we expect -- we talked about earlier is the same thing we expect today.

Okay. And for dilution, would it be fair to, let's say 50 bps overall on the, is it a fair assumption in terms of what could be the impact for the full year?

Yes, look, it all depends on the number of Greenfield we'll open, but I think that's a high number if you ask me.

Okay. Okay.

Okay. That's pretty good.

And now could you talk, Eric, a little bit about your balance sheet? Where do you see the debt EBITDA on a pro forma basis evolving throughout the year and finish the year?

Yes, look, Benoit, there's no question that my expectation is that we will deliver from where we are at the end of Q1. In the next 3 quarters, I think it will be a progressive deleveraging.

As we pointed out, Q2 and Q3 tends to be the strongest quarters for the combined businesses. And we tend to generate a lot of cash from those quarters, so that should be helpful.

And my expectation will be significantly cash positive in Q4, so that leverage will go down.

And do you have a certain target in mind, Eric?

Well, as we've always said, after The Parts Alliance acquisition, our objective is to deliver over a period of 24 to 36 months to be in the range of 2 1/4x to 2 1/2x to EBITDA, and that remains our goal over that period of time.

Okay. Okay, perfect.

And could you talk on this same topic about the M&A prospects right now, and if you have any upcoming debt renewal to make?

So we do not have any upcoming debt maturing at this current point in time. And as you can see on the SEDAR, we do have a pretty revolving place that we can extend.

And more likely than not, we'll do that in the foreseeable future. In terms of M&A activity, look, there's a pipeline.

We're very disciplined. We will selectively decide if it makes sense to transact or not.

I think that's one thing that the businesses have been very, very smart about pursuing or not pursuing a transaction. And there's a pipeline and we'll decide if we execute on those opportunities as we see fit.

Exactly.

Okay. Okay.

Thank you very much for your time.

Just going back to a previous comment you made about The Parts Alliance, and just to be clear, the EBITDA margin is 7 1/2%. Is that including or excluding Greenfield dilution?

That is excluding Greenfield dilution.

Okay, thanks. And just turning over to Canada then, in terms of the organic growth forecast for the year, given the number you put up in Q1, it implies a meaningfully lower organic growth level through the balance of the year.

Can you just walk us through why you think that's going to be the case, or are you just being particularly conservative here?

Well, look, I think all quarters are not equal, and we had, definitely had a very strong Q1 from an organic growth perspective. If we would think that would be sustainable throughout the remainder of the quarters, we would probably have indicated so.

But I think it would be, I think we were pleasantly surprised by that organic growth very strong performance, and I'm sure that we'll continue to have positive organic growth in Canada. But to say that we've got to be above 4 over the next 3 quarters would be quite aggressive.

And maybe Brent can add some color to that.

I think the weather has certainly contributed to our first quarter. We had a strong seasonality mix across Canada, something that we didn't anticipate.

And certainly, we expect the rest of the year to be strong, but certainly, we're not indicating…

Yes.

…it'll be that strong.

More normalized. I think we could say it's been slightly slower in April with the -- the weather impact we've had in Canada has been a bit more challenging.

So there's a little bit of delayed maintenance there for the month, but we're -- listen, if we could do the 5.9 all year long, sign us up. We're all over that.

So don't think for a second -- we think we're gaining market share in Canada from speaking to the competition and looking at our customers, so I think we're doing a pretty good -- a darn good job up there. It's just a matter of keeping the pedal down throughout the balance of the year and looking for more growth.

Okay, great. And then in terms of margin, it was -- I know the question was asked earlier in terms of margin in the Canadian segment, the EBITDA margin, that is.

And given the organic growth levels, I really would've expected higher, maybe not meaningfully higher, given some of the headwinds you highlighted; but certainly higher EBITDA margin year-over-year. Can you walk us through again just some of the key items?

I know that you called out 30 basis points of headwind, but is there anything else to that, that we're not including in our estimates here?

Yes, well, Elizabeth, I'll start and Brent will complement. But I think it's important to understand that as we've added corporate stores, the fixed-cost base of the business has evolved.

And therefore, that's why we expect more seasonality in the results of Canada going forward. And that's certainly what we saw in Q1 when the sales volume is lower than we normally we experience in Q2, Q3.

So the highs will -- should be higher and the lows should be lower. And Brent, any other factors that you want in the revenue mix?

Maybe you can expand a little bit on that?

No, as I stated earlier, I think the product mix of the type of products that we sell during the first quarter due to the weather conditions has had an impact on our rates. And then, quite frankly, as we integrate, we're about halfway through The Parts Alliance implementations.

And we have a number of initiatives around our margins. We'll stabilize that and roll it over the months.

Okay. Then so on a full year basis, do you expect that 2018 will look more like 2017 or more like 2016?

Elizabeth, as you know, we haven't given, with the exception of Parts Alliance, specific margin, the guidance for businesses. So we have provided guidance on a consolidated basis and we have provided guidance as it relates to Parts Alliance.

I think I don't know any companies that start splitting the expected EBITDA by divisions, and we're not going to do that.

Okay.

I think we've given a lot of help in terms of what we expect for the year and that's where we're going to -- that's what we're going to say.

And just going over to FinishMaster then, again on the organic growth, you mentioned seeing signs of a trend reversing. But sequentially from Q4 to Q1, organic growth actually declined.

And maybe you can just talk about some of the impacts on that negative 2.8%. How much of that was market softness?

And what gives you confidence that that softness is going away as you go through the balance of 2018?

Yes, so we're not going to get -- break out the specific details, but if you look at the entire market -- and you've heard it from others reporting -- it's a softer quarter for sure. So it was softer than the fourth quarter overall.

And then you look at small things like the weather-related impact on the business. We had a number of stores close for multiple days because of the weather in the U.S.

And I never like to use weather as an excuse. It goes for you and gain share times but -- and certainly in the U.S., the weather itself wasn't terribly helpful in terms of having stores closed and shutting sales down.

And that impact, quite frankly, not is just -- it's not just with us. Our collision repair center customers also have to close those stores during those times as well.

So I think those are backdrop dynamics. We're not going to talk about the conversion.

That is behind us, but I think those are the two primary things. Steve, do you want to -- any other color there?

Yes, the product line changeover is behind us and we think that the worst is behind us. And we really feel that we remain very positive on the guidance that we have given, where we're going to end up.

Okay then. And just, that's it for me, actually.

Maybe just one final question on FinishMaster just in terms of the special buys, lower special buys. Does that imply that you still have some that you are able to get, or they're all gone altogether?

I just wanted clarity on the wording there.

Hi, Elizabeth, this is Steve again. As Henry said earlier special buys are really directed and dictated by our suppliers.

And so we can't tell you what, if they're going to be available or not. We will always take a look when they're available and see if they make sense for us, and proceed from there.

Yes, and listen, we've said this for years. We'll take them anytime we can get them, right?

It's just that's the reality on our side. So please don't think for a second we don't want them.

We'd love them, but we're not going to bank or design our business around them. We're designing our business on the day-to-day and we manage our inventory based on the requirements of our customers.

It's really for us to more complicate in that, but if we have something like that that makes sense, we're happy to do it.

Okay. That's it for me, thanks.

On the Canadian business, could you just provide us with an update on the PartsWatch implementation, kind of when you expect that to end, and like the early results that you're seeing? And just how that feeds into your 20/20 initiatives?

So Jonathan, this is Brent. We certainly are active.

We'll be going live again next week with another implementation. That'll bring us close to the high 30s of our store count that'll be completed this far.

We're certainly looking to try to be done by the end of the year, at the latest first quarter of next year. We're doing it at a very methodical pace.

And I'd say where we're really gaining now, that is the ability to manage the business across the country in a more stabilized manner, and understand how we implement controls and margins, as well as operational excellence. So we're pretty happy with where we are right now and we see a great opportunity to improve.

Yes, if I could add onto this one, this is really, really important. And I mentioned in my remarks, when you start a store group, from the outset, we're building from the foundation up.

And we've always said all the way along, we're going to walk before we run on this initiative. So you don't see us acquiring stacks and stacks of stores.

We don't want a huge backlog. We want to make sure we get our processes and systems correct.

We want to make sure we have the right team members in place to help drive that business. I think Brent and the team are doing a great job getting that foundation set.

As we move into the next phase of this integration process, we're going to continue to harmonize our product lines, harmonize and optimize our branch locations to make sure we have the right network as a foundation and then you'll see us layering on locations. We'll have the system in place; we'll have it more optimized.

The processes will be in place. And then you'll see us layering on new store locations at that point, in conjunction with our independent customers.

And Brent and the team have done a very good job with the Bumper to Bumper program in Canada and we're seeing significant upside in terms of the future for that program. So for us, it's really putting together the two key elements and you'll throw in FinishMaster Canada is doing extraordinarily well in their accelerated growth program as well.

But again, we want to make sure we walk before we run on this and we get the processes and the foundation really set rock-solid. So if it takes us a little more time, we're okay with that.

Okay. And I'm sorry, I didn't quite hear you, Brent.

Did you say it would be completed by Q1 next year?

Yes, it will be -- the majority of the stores will be done by the end of the year or at the latest, Q1 next year.

Thank you.

Great. Thank you very much, Jessa.

Thank you for listening, everyone, and looking forward to updating you on our progress during our next quarterly call. Thank you, and have a great day.