Louis Juneau - Chief Legal Officer and Corporate Secretary Henry Buckley - President and Chief Executive Officer Eric Bussières - Chief Financial Officer Brent Windom - President and Chief Operating Officer, Canadian Automotive Group Steve Arndt - President and Chief Operating Officer, FinishMaster Inc. Peter Sephton - President and Chief Executive Officer, European Automotive Group

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

Michael Glen - Macquarie Securities Group

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

Presenting this morning are Henry Buckley, President and Chief Executive Officer; and Eric Bussières, 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.

Henry?

Great. Thank you, Louis.

Good morning, everyone, and thank you for joining us today. Overall, our second quarter results were relatively in line with our expectations.

On a consolidated basis, sales reached $462 million, up 36% over last year, primarily driven by the acquisition of The Parts Alliance. Adjusted EBITDA was up 10% to $36 million or a margin of 7.7%.

During the quarter, we integrated 3 stores and opened up 4 greenfields. We are pleased by our progress at FinishMaster as organic growth resumed and with Parts Alliance as they exceeded our growth expectations, however, the Canadian business faced some headwinds in the quarter, primarily as a result of soft market conditions.

Given our overall performance for the first half of the year and our outlook for the second half, we are reiterating our annual consolidated guidance for the year, but have adjusted our business unit guidance to take into account a stronger performance of The Parts Alliance and a more conservative view for Canadian operations. Let me go through each business unit segment in more detail.

So please turn to Page 4 for FinishMaster US. Sales increased to $211 million, slightly above last year, while EBITDA margin stood at 10.2%.

We are very pleased with the top-line performance at FinishMaster as there has been a return to positive organic growth. In addition, market conditions have somewhat improved over the last quarter.

The 0.7% increase in sales is entirely due to new customer wins, and reflects more aggressive and concerted sales and marketing efforts. These results clearly demonstrate that the sales recovery plan and sales growth initiatives across all customer segments, that we put in place over the last few months has started to bear fruit.

Furthermore, we recently announced the appointment of Chris Adams, as Senior Vice President, Sales and Marketing at FinishMaster. We are thrilled to have Chris join our team and help us accelerate profitable growth.

Given this new sales momentum and positive organic sales growth in the month of July, we are confident that we can achieve our organic sales growth guidance for the year at between 2% and 4%. During the second quarter, we integrated 1 store in the network and opened 1 new greenfield location in Oregon.

This new store helps us extend our customer coverage initiative in the Pacific Northwest region. At the same time, we continue to focus on driving profitable growth, with specific initiatives to achieve long-term objectives and counterbalance some of our business challenges.

For example, we continue to drive organic sales growth through new customer sales initiatives, improve customer retention and execute our strategy to expand into the industrial coatings business. We also continued to execute our 20/20 initiative in order to reduce our cost to serve model and we are making good tangible progress with our initiative.

Now, let's turn to Canada on Page 5. Our second quarter sales were up 6.7% to $140 million and our EBITDA reached 7.2%.

Organic growth turned negative 3% in the quarter, following a very solid first quarter performance. These results were driven by a tough comparable quarter last year, as well as soft market conditions.

I want to be very clear, we are not losing market share and the market has just been soft in all regions. Given these current market conditions and other considerations, we have a more conservative view of our Canadian business for the remainder of the year and in that thus adjusted our organic sales growth guidance accordingly, which I'll discuss in a few minutes.

This in no way changes our long-term perspective on the Canadian business. In fact, during the second quarter, we continued to accelerate profitable growth, by focusing on building the foundation for the long-term with the execution of our strategy.

We have converted more customers to the BUMPER TO BUMPER flagship program and our loyalty is growing with the BUMPER TO BUMPER customers by 6% year-over-year. We also focused on our company-owned store integration strategy with the rollout of BUMPER TO BUMPER and FINISHMASTER brands, as well as the continued deployment of our point of sales system, PartsWatch.

As we mentioned last quarter, with this implementation well under way, we have started to focus on the harmonization of our product lines and the optimization of our company-owned store network. As such, we integrated 2 stores in the quarter, and have other consolidation and logistics opportunities to improve the network that we will be evaluating.

I want to be clear that when we are consolidating stores, we are not losing volume, but reducing our cost to serve model, providing better service to our customers, and ultimately improving our margins. Finally, we also executed various initiatives as part of our 20/20 undertaking.

Now, turning to The Parts Alliance segment on Page 6, our second quarter sales were $111 million with the robust organic growth of 8.6% on a standalone basis. Of which, 3% was generated by greenfields.

The EBITDA margin was 7.8% despite opening our greenfields. Since the beginning of the third quarter, we opened an additional greenfield, therefore bringing the total count to 9, since we acquired The Parts Alliance last August and for store-count of 176.

We are extremely pleased by the execution and performance of The Parts Alliance segment. The Parts Alliance is exceeding our expectations supported by solid momentum in greenfield openings, sales and operational performance.

In the second quarter, we continued to drive profitable growth by driving organic sales, integrating earlier acquisitions and expanding customer coverage through greenfields. Considering this success in new greenfields and other current market opportunities, we have decided to accelerate our store opening plan for this year.

Note that this decision will require additional CapEx and we'll have a small short-term negative impact on margins. We also continued to focus on our 20/20 initiative in order to improve our efficiency.

Given The Parts Alliance's strong performance in the first 6 months, coupled with their outlook for the balance of the year, and our plan to increase the number of greenfields, we are increasing our organic sales growth guidance for the year, which I'll discuss in just a few minutes. This is an exciting time for The Parts Alliance, with our current market share in the fragmented market this segment provides a significant runway for profitable growth.

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

Thank you, Henry, and good morning, everyone. Let me begin on Page 8.

Before I comment on the results, I would like to remind you about the impact seasonality on Uni-Select's results. At FinishMaster US, the first and fourth quarter tend 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. As a result, margin in the second and third quarter, tends to be approximately 200 basis points higher than the first and fourth quarter.

Similarly, our UK operations typically have softer third and fourth quarter with the month of August and December being the softest. Consequently, margin in the first half of the year tends to be close to 200 basis points higher than the back half of the year.

Let me now turn to our second quarter results on Page 9. Consolidated sales for the second quarter reached $462 million, a 36% increase as compared to $340 million last year.

This increase was primarily driven by acquisition notably The Parts Alliance. Consolidated organic growth was negative 0.7% in the quarter, as FinishMaster organic growth was more than offset by Canadian Automotive Group negative organic growth.

The FinishMaster US segment reported sales of $211 million slightly above last year. The $1.5 million increase was entirely driven by positive organic growth of 0.7% as a result of successful sales and marketing efforts to gain new customers.

Note that the new customers win signs - the new customers win that we signed since the beginning of 2018 are ramping in the second quarter and third quarter, and will be on a full run rate basis by the end of Q3. The Canadian Automotive Group segment reported sales of $140 million, a 6.7% increase versus the $131 million for the same period last year.

This increase was primarily driven by the favorable foreign exchange conversion to U.S. dollar, acquisitions and a number of billing days.

These factors were partly offset by negative organic growth of 3%, which was driven by soft market conditions in all regions and a strong comparable quarter last year. Recall that last year our second quarter was especially strong as there has been a shift in volume from Q1 2017 to Q2 2017.

The Parts Alliance UK segment reported sales of $111 million in the second quarter. These results include 9 greenfield operations since we acquired them in August.

Turning to Page 10. Our second quarter consolidated EBITDA was $35 million as compared to $30 million last year.

Adjusted EBITDA was $36 million or a margin of 7.7% versus $33 million or a margin of 9.5% for the same period last year. FinishMaster margin decreased from 11.5% to 10.2%, driven by an evolving customer mix and more intensified sales and marketing efforts to gain customers.

That said, our initiatives to improve our cost-to-serve model helps to mitigate some of those impact. Our margins were impacted by the evolving sales mix with MSOs, as you know we defined MSOs as any customers with three or more shops.

Nevertheless after six months, margin at FinishMaster are in line to achieve our consolidated guidance range with Corporation between 7.2% and 8.2% for the year. The Canadian Automotive Group margin was 7.2% in the quarter, down from 8.6% last year.

This low margin compared to Q2 primarily because of a tough comparable quarter last year, which was boosted by strong organic growth from a shift of volume from Q1 to Q2 2017. Having said this, our margins remain under pressure for the impact of the ongoing company-owned stores integration.

It was also impacted by soft market conditions, which resulted in lower sales volume than anticipated for the quarter. Note that we are currently almost half-way through the third quarter, and we are still seeing soft market conditions across the board in our Canadian operations.

Nevertheless after six months, margins for the Canadian operations are in line to achieve our consolidated adjusted EBITDA margin guidance for the Corporation for the year. Finally, The Parts Alliance margin reached 7.8%, down from 8.7% in the first quarter, as a result - as expected and in line with one of the strongest quarter for the year.

In fact, The Parts Alliance reached this margin despite several greenfield openings. We estimate that the greenfield negative impacted - negatively impacted the margins by about 20 basis points.

Keeping seasonality in mind, you should expect lower margin for the second half of the year than the first half. However, recall that in Q3 2017, we only had Parts Alliance beginning in August, one of its slowest month of the year whereas this year The Parts Alliance will contribute for the whole quarter.

We still expect to reach the margin of 7.5% for the year, excluding the impact of greenfield. Therefore, while we adjusted - while adjusted EBITD increase on an absolute basis versus last year, the margin decreased by 180 basis points.

This variance is primarily explained by the evolving customer mix at FinishMaster and the ongoing integration of company-owned stores at Canadian Automotive Group, partly offset by The Parts Alliance contribution in the 20/20 initiatives. Let me provide you with quick update on our 20/20 initiatives.

Recall that the initiative is expected to be save $20 million of annualized operating cost by the end of 2020. The focus is on reducing our cost to serve by accelerating the capture of certain synergies linked various acquisitions, improved productivity level and bring more variability in our cost structure.

To date, we have identified approximately 75% of our target number with specific measurable activities. And we expect this number to reach 85% by the end of 2018.

Since the beginning of the program, we realized over 55% of the annualized run rate savings from various initiatives. In effect, this means that our 2018 results will include about to $11 million of realized savings.

Turning to Page 11. Net earnings for the quarter reached $18 million or $0.42 per share versus $14 million or $0.33 per share.

Adjusted earnings for the quarter reached $18 million or $0.44 per share versus $17 million or $0.39 per share last year. This increase was mainly the results of the contribution from The Parts Alliance and 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 second quarter, cash flow from operating activities provided $39 million liquidity versus $21 million last year. This variation was positively impacted by higher net income.

As a result, we generated $28 million of free cash flow for the quarter as compared to $16 million last year. In the second quarter, our cash was primarily use for customer investment and to pay down debt.

It is important to highlight that we have more than doubled our customer investment this quarter to $18 million compared to same period last year. This level investment is not expected to continue.

We essentially took advantage of opportunities that were available in the market. We expect customer investments for the balance of the year to return to more normalized level.

A good rule of thumb to use is about 2.5% of FinishMaster sales. Turning to Page 13.

At quarter end, our outstanding total net debt stood at $450 million as compared to $469 million three months earlier, a decrease of $19 million. As we explained last quarter, we expect our net debt to decrease in the second quarter.

It is extremely strong quarter for the most of our businesses. For the balance of the year, we expect our net debt to further decrease excluding the impact from any potential acquisitions.

As a result, the funded debt to EBITDA ratio stood at 3.6 times at the end of June. Pro forma for The Parts Alliance acquisition, the ratio would be 3.53 times, similarly to the - similar to the end of Q1.

Note that the next quarter this measure will be relevant as Parts Alliance will have contributed for the full year. This completes my financial review.

And I'll turn the call over to Henry for the outlook.

Great. Thank you, Eric.

As I mentioned at the beginning of this call, we have reiterated our consolidated guidance, but have adjusted our business unit guidance to take into account a stronger performance at The Parts Alliance and a more conservative view of the Canadian operations. As a reminder, 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% to 8.2% and a consolidated effective tax rate of between 22% and 24%. In addition, we expect to invest in the upper part of our range of $26 million to $28 million in CapEx for the year, in order to take account of more greenfield openings in The Parts Alliance.

Recall that our CapEx includes investments for a fleet - vehicle fleet, hardware equipment, software and others. Now turning to organic growth by business, at FinishMaster given our sales momentum, we are confident that we can achieve our organic sales growth guidance for the year between 2% and 4%.

For the Canadian Automotive Group given current market conditions, we've adjusted our organic sales growth guidance for the year from between 2.5% and 4% to between 0% and 2%. For The Parts Alliance segment given a strong performance and increased greenfield openings, we've increased the organic sales guidance from 3% to 4%, to 5% to 7%.

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

We are now ready to answer your questions. Jessa, would you open the line for questions, please?

Yeah, good morning, gentlemen. And thank you for taking…

Good morning, Benoit.

Good morning, Benoit.

Yeah, I was wondering if you could provide more color about the soft market conditions, obviously, you're facing a tougher compare, but when we look in the previous quarter. It seems that you gained some momentum in Canada.

And as you're going through the end of a tough winter, I thought maybe we could see kind of a bump up. So could you be provide more details about the soft market conditions you see, and also the margin profile or what we should expect from Canada in the coming quarters or for the year, kind of a range?

Yeah, well, let's just talk about the soft quarter. Quite frankly, it was a bit of a surprise to us as well.

So I'm not going to - we didn't expect to come into second quarter. We have pretty strong sales momentum coming through the first quarter.

If you looked at the months more individually, April seemed to drop off quite significantly. And you could make an argument for maintenance in the first quarter, that our expectation is we would have a stronger second quarter.

But what we found is April was soft. May was a little better, June was slightly better, and then July, softer again.

So we're seeing some very, very mixed results. And we look at this in a very detailed way in the business.

So we look at our customer by customer and for our independent customers we look to make sure that we look at each one of their businesses to make sure we are still selling them, all the product lines we're selling them before. So we're not losing any market share with our independent customers, save one, and I'll talk about that momentarily.

We're still maintaining our market share, but their business conditions are soft. And it's not on a specific region basis like we saw in the last downturn with the softness in oil and gas, it's pretty much across the board.

We are seeing one customer sales deterioration and that is a customer that I have been talking about for two to three years that we expected to lose over time. So we said three potential customers.

We lost one at the beginning of 2017. We haven't lost this customer, but we're seeing a lower level of sales from that customer today, and I wouldn't expect much different moving forward.

So that's very much in line with our expectations. So I think the other component, because this is important - the other component of this is, is kind of what we're seeing in the market.

Maybe, Brent, you could share with us what your thoughts are.

Good morning, Benoit. Every quarter, we sit with our manufacturers and discuss with them the market conditions, how we're performing.

We've seen - we validated the market as soft across all regions with our key suppliers here selling in the market to ourselves as well as the competitors. So we do believe it is a market that we didn't - no one is seeing the pent-up demand that we expected from the long extended winter yet.

So that's one of the reasons we're being a little bit more conservative.

Okay. And…

And Benoit, as it relates to your latter part of the question on margins, we provided already guidance on consolidated level.

Okay, and with respect to that customer where you see some deterioration, Henry, what is the contribution in terms of margin? Is it the kind of the low margin business or this customer typically brings typical margins?

It's what I've been sharing with everyone for the last three years, quite frank. It's a lower margin customer that we expected to see deterioration on from the beginning so.

Okay. And in the release you mentioned that you're quite confident in that momentum in Canada will be back.

So what makes you confident that the momentum will come back? And also, you're working hard on the integration efforts in Canada, so just wondering when should we expect those efforts to pay off in terms of margin improvement.

When are we going to see some more momentum on the margin side?

So first off, we haven't stated that we expect the Canadian business to ramp back up. I mean, we're at the mercy of the economy at this point too.

So it's quite frankly as somewhat of an unknown. I think Eric mentioned in his chat that we're seeing softness in July and into August so far.

So we're certainly hoping for better market conditions. But what we're doing ourselves is what I reiterated.

We're focusing on our strategy. And that is the BUMPER TO BUMPER flagship program that we've initiated.

We're seeing growth with those customers. And what that means is that when we convert a customer to a BUMPER TO BUMPER program, we're seeing a very significantly increased level of loyalty.

And with that, we're seeing 6% sales increases from those customers, because of that product line extension. Now, they're underlying business is still affected by the softer economy, but we're getting a larger share of that particular customer.

So that's a critical initiative that we actually have control over and I think we're doing an excellent job at rolling out that program. And our expectation would be that continues through the balance of the year without any direct control over what the market conditions would be.

Yeah, so I say…

Okay and latest one? Yeah.

We stated in the past, we still expect 2019 to be a transition year for the Canadian business. And so, we haven't changed our view on it.

Okay. Did you say 2018 or 2019?

2019, 2019 that's what we said. With the 24 months outlook before we start seeing margins rebounding and that's still what we expect.

So 2019 will be a transition year.

Yeah, I think our team has did a very good job in the harmonization of the network. So we have a store group there that we have acquired through primarily individual members that we've acquired through the network.

And our job is now as we've got PartsWatch installed, we can go back after our synergies, start harmonizing the network, using the system to be able to harmonize our product lines. And that's critical for us and that work is underway now that we've got far enough along the PartsWatch program.

So it's very much in line with what we've been saying and what our game plan is and our expectation is we're going to continue to execute that through the balance of this year and into next year as we get all of our current locations on our systems.

Okay. And latest one for me, Eric, when we look at our debt to EBITDA, you ended on the pro forma basis at 3.5, could you mention some color about expectation by the end of the year and whether you're still in line to achieve your initial target between 2.25 to 2.5 24 to 36 months after the closing?

Yeah, I mean, we're still tracking on that basis, Benoit, predicated that there is no major acquisitions done by the businesses. And we do expect leverage to down from the current level to - by the end of Q4, again, provided there is no major acquisition done.

Could you quantify the kind of a level by the end of the year, Eric?

No, I'm not going to do that, Benoit. Since we have seasonality in the businesses, it's extremely hard to predict by quarter exactly where you're going to be, so I'll refrain from that.

I think that general guidance that we gave in terms of our expectation of deleveraging remains.

Okay. Thank you very much.

Thank you.

Hey, thanks, Benoit.

Good morning, Leon. Good morning, Leon.

Oh, you're going to speak to me. That's nice.

I thought there was a hesitation there. I mean…

Oh, no, not at all, not at all. So, yeah, just to pick up on Benoit's question on Canada, because - look, I'm just trying to - I'm just really trying to simplify and understand what you mean by soft market.

Is that just mean that the jobbers are getting less volume or is it just mean that they're buying different types of products that are lower prices, so it's pushing organic. I'm just trying to get that, that level just kind of conceptually the idea of what a soft market condition means for you.

So, Leon, it's just as simple as this, we're just seeing less demand throughout the country. It is not a product shift from premium to mid-grade or lower price yet.

We don't see that degradation. Our margins do not reflect that, nor do our sales mix.

It's really just a pure demand cycle being compressed a little bit this moment.

Okay, fair enough. If I can just switch over to FinishMaster, I mean, you did see a 0.7% organic growth.

The first quarter itself was actually down 2.8, and you're still reiterating your 2% to 4% guidance. Basically, just simpler, I think if you want to get to your 2% at the bottom end of that range, I mean, that would imply pretty substantial organic growth in Q3 and in Q4, so what gives you confidence that to be able to achieve those numbers?

Yeah, it's a totally fair question. And you go back to my second quarter commentary; it's no different than what it is today.

We mathematically, we have to have a pathway to get there. So what I said last quarter was that our sales efforts were paying dividends already.

We've onboarded a number of significant new customers throughout the end of the first quarter, through the second. And as Eric mentioned in his commentary, the role out of some of those customers and the onboarding of those customers is happening primarily through Q2 and Q3.

So that the customers that we've already secured - and by the way, we're going after more - but the ones we're secured already, mathematically get us to be within our guidance range. So that's also backed up quite frankly by so far a very good July from a sales standpoint and into August.

So we're seeing that sales momentum continue to role. And we couldn't sit here and provide guidance at 2% to 4% if we didn't have confident have confidence in those numbers.

So I'm very pleased with the way FinishMaster team has really stepped up and got aggressive in the market place and gone at - continuing to grow that business and they're doing a great job.

Okay. We've seen some broadly announced price increases in automotive refinish at the paint manufacturers' level.

Are you seeing any type of impact there in terms of the margin for FinishMaster?

I think that's early days for us yet. There's some price increases that are heading into market here, I think, on went in July 1.

Steve you can - he is remote right now, but he can comment on that. But hopefully, we'll get some tailwinds from price increases as in the back half of the year.

Yeah, this is Steve. We will definitely see some tailwind on that in the second half, and they continue to look at the market and their cost and determine when and how much those price increases will be.

So we're looking for that more fourth quarter.

Okay. On The Parts Alliance side, it was great quarter there.

How many - you mentioned also that you are seeing the good benefits of the greenfield openings. How many more new stores are you planning on opening for the balance of the year?

Yeah. We are not going to put a target on that.

I think, we had an internal game plan to open up some stores. And what we've seen quite frankly is some significant success with our ability to open those greenfields and have them come up to in good acceptable levels of profitability and sales growth fairly quickly.

So we have a lot of belief in that program, we've got some good opportunities in markets to continue the program, and we'll do that. But we're not going to put a number on it.

The number we can look at is in the rearview mirror, which is nine, since we opened - or since we acquired the company August 7t, last year. It's our anniversary, we're celebrating.

One last one for me, maybe for Eric then, we talked last quarter about where the corporate expenses run rate should fall. You mentioned $15 million annually was reasonable.

Is that still the case, are you expecting much lower corporate expenses in the back half of the year?

I guess the only caveat I have as it relates to that, Leon, is the FX loss that we mentioned, it came a bit as a surprise. I do want to precise of that, that FX losses on paper for now.

It's not a crystallize loss. So that has an impact on my overall corporate costs.

But yes, I think, we are still in line with those numbers overall.

Thank you. I'll turn it over.

Thanks, Leon

Hey, Michael, good morning.

Good morning, everybody. So just to go back on FinishMaster.

The business wins that you're talking about, can you elaborate what product lines those - are those predominantly Axalta wins?

No. We are winning business in all of our customer segments.

So it's not one segment or another, and it's not with one manufacturer or another. So we've got a very nice mix, we support all of our paint manufacturers equally quite frankly.

So I mean, any quarter could go up and down with one supplier or another, but that's really a random act rather than anything directional. So we are very happy with the general performance.

Okay. And are you able to indicate like what percentage of the FinishMaster business mix is Axalta at this point?

No. We don't provide guidance to that supplier level.

Okay. And then, just wondering with the new volume coming in, in the back half of the year, do you think - and I know that you don't like to give guidance, but do you think we could see the growth in the EBITDA profile FinishMaster stabilize?

Or it start to move positive again?

Yeah. Well, look I think it's more stabilize manner that you should think about then necessarily your growth.

Yeah, I mean, if you look at what we are doing, we're making sure that we have - we maximize margins, we talked about special buys ad nauseam. So we'll always take those, if they do come up, so that's an opportunity to enhance.

Equally, so we're working our 20/20 initiative to reduce our cost-to-serve. And that's also a margin enhancing initiative over time.

So I think you can count on us doing anything we can to make sure, we continue to enhance that margin so.

Okay. And then just The Parts Alliance same-store sales growth at 8.6% and then you highlight the greenfield contribution.

So is that mean [Technical Difficulty] when you open a greenfield store, you're including that in the same-store sales growth?

Well, we gave a visibility on those numbers, right. So we did gave you the consolidated organic growth for The Parts Alliance, and we did more engine that 3% of that was tied to greenfield.

So if you back it up, you're at around 5% for two - same-store sales.

Yeah, 5.6%. And, yeah, greenfield is organic, so that's straight up organic for us.

So all in its 8.6%, but…

You have the two data points.

8.6% and 5.6% underline.

Yeah, okay. Okay.

So that's all my question, guys. Thanks a lot.

Thank you, Mike.

Thanks, Michael.

Good morning, Jonathan.

Yeah, good morning, Henry. Just a couple of questions about some of the comments earlier.

The - Eric, in your prepared remarks you mentioned that in Q2 comp quarter, Canada has some deferred deliveries that selling. Could you just clarify what you're saying, I didn't quite hear you there?

I was referring to Q1, Q2 last year, where we had some pickup of sales in Q2 last year above our expectation at the time. And it was a more delay of Q1 maintenance to Q2 maintenance then by the consumers.

We have not obviously experience that factor in 2018.

So that delayed maintenance, is that kind of - can you just remind me, was that kind of just the general economy? Was that the weather?

Yeah. In 2017, our view and belief at the time was linked to the fact that the weather was not conducive for people to do their maintenance at the end of the sort of fall period - sorry, spring period, and it was sort of delayed maintenance.

We have not seen this quarter, and although we did expect something happening to that, that did not materialize and we can only see and this is across the country. So it's not just one location or one region, we saw a softness across the board.

Yeah, you think about this way, we expect people that take the cars in late in the first quarter, to get their tires changed, do their maintenance on the vehicles at that point. And we typically see a pop in that somewhere in March typically, as people set up the spring.

With a long winter that sometimes gets rolled over to the second quarter. And last year, it rolled over to the second quarter and that was a very helpful quarter for us.

We quite frankly, Eric, so we expected this year, but we didn't see it.

Because, we - as you know, we had a very cold winter and a lot of people did not do [and so their] [ph] maintenance in March. So we thought, we had a bigger pickup in Q2.

Okay. And on the customer that left, can you quantify what that customer represents in terms of annual sales and possibly how much of the sales are down in Q2?

No. We are not going to get into customer-by-customer details.

At the end of the day, this is something we've been expecting and planning on for three years. I've kind of highlighted for three years, it was two to three customers.

One which left in January 2017. This one is still with us, but diminishing our sales, which impacts our organic growth, and I understand that's harder to calculate.

But again, we've expected and planned on this for well over two years now. So we'll just continue and see where it lands over time.

But I wanted to make sure, we highlighted that to you, because I have talked about these two to three customers over the last couple of years.

Okay. And if I could just follow-on that though.

Henry, I believe you indicated at the four, the one that left in 2017 was the largest of the four. Where does the next one sort of rank out of the four remaining?

This is middle of the pack. They're going to go one, two, three.

So yeah, it's in the middle one. But again, we don't - we've been planning on it, and the impact to our margins is - is there, but it's not going to be big, and we've got game plans around it.

So we are not unhappy, something we planned and expected, but I just want to make sure, we're transparent with everybody as these things go down.

Okay. And moving on to FinishMaster, one thing I noticed was there was no mention in the MD&A this quarter of fewer discounts year-over-year.

And I think, the discount environment was still pretty good in Q2 of last year. Are you starting to seeing any improvements on the special buy outlook?

No, I won't say that we envision - as Henry said, if there are special buys available to us and it makes sense, we'll do that. But you're correct in your analysis that there were certainly more special buy in Q2 2017 and Q2 2018.

Yeah. Again, be very clear, we'll take them, when they're around, whether it make sense for our inventory and burn down all that kind of stuff.

We're buying good inventory, we're not buying slow, but we're just not in that environment, right now. So we're not getting that additional lift.

If we start to see it again, we'll highlight it to you guys. But right now, we are not seeing it, so it's not a material for us.

Okay. And I wasn't quite clear.

How are the July sales holding up for FinishMaster?

Yeah, yeah, we are happy. We are very much, as I said, tracking A on our plan.

So we expect it to be on this plan, when I talked about in first quarter, because mathematically we have to have a path to 2% to 4%, otherwise we can't reiterate guidance. And our July sales and early August sales support exactly that plan.

Okay. I'll pass the line.

Thanks.

Great. Thanks, Jonathan.

Good morning, Elizabeth.

Good morning. Just going to go back to FinishMaster, and then in your comments you mentioned, work of the sales team more aggressive sales kind of tactics.

Maybe you can elaborate a bit on what you're doing differently in the U.S. to help drive sales there?

Yeah, I almost hate to go back to it, because it's just - it sounds like a repeating. But it's not more complicated than what we said in the first quarter.

We've spent the last prior year-and-a-half are focusing on the product line conversion, a big distraction for the business, and we came into this year had a softer first quarter. And we just double down on our sales initiatives got refocused and put some strong sales recovery and sales initiative plans in place earlier in the year.

And that's it, we're back to business, it's normal for us. This is just how we operate.

And if you think about this company in much longer term, we've always operate that way, we've always generated strong organic growth. And we're just getting back to that profile again after having gone through that product line transition.

So for us, this is business as usual, it is - we're highlighting it, because it's important. We've got when I call them mojo.

Our mojo in that business is very strong. The team is highly engaged.

I spent time with Steve. Steve and I have been travelling in the regions in the U.S., and I can tell you right down to the regions and branch level.

They're highly engaged and very driven to deliver exceptional service to customers. And we're capturing new customers at a very solid rate.

And that's just getting back to what we do quite frankly.

So it's more of a refocus on your core sales tactics rather than - did you increase the sales team or behaving more aggressive in terms of pricing or something like that, that's contributing as well?

We are not increasing the sales team. We are making sure - we're always making sure we have a high performing sales team.

So we're always making the adjustments as needed. We're going to be competitive in the market, no matter what.

So whatever the competition levels are in any particular market that could vary all the way across the country. We're going to stand up and compete in the marketplace and make sure we continue to grow share.

Okay, great. And just going back to Canada very briefly.

In terms of how the economy has done in Canada, it seems to me going on a reasonable clip. So is it fair to expect that some of the sales that didn't pick up in Q2 could potentially be seen in Q3 now?

Are they continuing to be pushed out? Or do you have any insight into the kinds of sales that are being deferred and if that maybe won't be picked up in further quarters?

I'll defer this to Brent. He is very close to our customers.

He is spending significant amount of time with all of our customers in Canada.

Good morning, Elizabeth. I would just tell you our categories of under-car have really been challenged.

We really expected the brake categories, the chassis categories, the categories that we typically see when we hit the tires of the cars in the second quarter. But we really haven't seen those categories.

We were robust with those, but we haven't seen those at the same growth clip that we saw last year. We are very hopeful.

And we're planning to drive those categories in the balance of the year and hopefully for the winter season. So we certainly have not given up on the year nor any initiatives that we have.

BUMPER TO BUMPER flagship.

And we do continue to grow our BUMPER TO BUMPER store count. We'll add a number of those in the second half.

And that we'll also continue to drive our loyalty as well as our overall growth.

Okay, great. And when you say adding in the second half, that would be through M&A, I assume?

No. That would be organically from our existing customers today who are joining our BUMPER TO BUMPER program.

You've got to remember, Elizabeth. BUMPER TO BUMPER program, we have - all of our company-owned stores are BUMPER TO BUMPER obviously.

But our big initiative in Canada is to get significant independent customers we have today converted over to the BUMPER TO BUMPER flagship program. That flagship program drive significant loyalty for us as a company, and benefits to them as an independent jobber customer.

So for us, Brent and the team are highly focused at securing some significant wins in terms of converting some big BUMPER TO BUMPER customers across Canada. So I think we are very, very pleased with that initiative.

As I mentioned in my statements, those customers that are converted to BUMPER TO BUMPER, we're seeing 6% lift on those customers. So our plan is to continue this program, continue the execution of it, no matter what the economy is doing.

We are here in the good times and bad times. So this is a much longer term play for us.

All right, thanks. And just finally from me on The Parts Alliance.

You mentioned there were nine greenfield openings, I believe, since you made the acquisition last year. Is that right?

Yeah.

And how many of those were made in the first half? If you can just remind us of that.

I think, we've done seven right since…

Seven, since January.

Seven this - January this year, yeah.

Okay. So when it comes to thinking about a more active openings as usual for 2018, would it be reasonable to think that you're going to exceed openings from - in terms of the net count from the first half?

Yeah, we are not going to give specific guidance on that. What we are doing this, we are looking at specific opportunities in markets, and we have those opportunities, and Peter's here with us today, we know which markets we want to open up in.

But we're also very, very conscious in terms of our ability to open up, make sure we pace them with our ability to execute, right. What we don't want to do is get over skis in terms of trying to do too many too quickly and then stumble.

And so far, we haven't done that, and our game plan is not to do that, so we'll pay some throughout the course of the balance of the year, hopefully, into next year as the opportunities continue to arise. So we've just mean, I think, very prudent, Peter would you agree?

Yeah, prudent and also conscious what our customers want from us as well. Look at those areas that have real opportunity, what we call them white spots, but also working with our major accounts and speaking to them and asking them what they would like to see as well.

So we've got some readymade business when we open up.

Okay. So the limiting factor - or if you want to call that is internally/demand from customers as opposed to availability of sites?

I wouldn't say, we have a short list right now. We have a nice list of areas that we could move into to close the spaces.

But, yeah, we're going to be pacing it ourselves, in a way we can execute effectively.

Yeah.

Okay. Those are my questions.

Thank you.

Thanks, Elizabeth.

Yeah, just to come back on the Canadian Automotive, I just want to make that we understand correctly. Obviously, you revised your organic growth outlook for the year.

But when we look at Q3 2007, you posted an organic growth of 7.7%. So I'm just wondering again, was there anything specific or could it - will it make a tough comparable, meaning that the kind of the organic growth we might see might be comparable to Q2.

I mean, I think it's a fair comment. We had a very strong Q2 and Q3 last year.

So, I mean, we'll take it every time we can get it. I don't know, Brent, do you have any more thoughts on that?

Well, we had a number of our existing members who open up new locations last year. They expanded their product offerings substantially in Q2, Q3 as part of their business plan.

So those are comps that we won't have in our - against, we won't have in our 2018 results. So we knew those headwinds, so that's one of the reasons we're sort of adjusting quarterly.

Okay, perfect. And, Henry, you mentioned you mentioned some color about the customer that is actually the number two.

But were you able to quantify little bit the impact if you would strip that out, would there be kind of a change in terms of organic growth. Is it material or maybe not that much?

No, we're not going to get into specifics on the customers. It's not our second biggest customer.

It's the second customer of the three. It was the middle size customer.

So I can't get into specific customer size and then impact on organic. I just wanted to make sure we're transparent with you to highlight it's there.

I've also tried to help you understand that it's less impactful on the EBITDA line.

Okay. And for Canadian Automotive, when we look at the margins, obviously, 2019 is still a transition year.

But does it mean that sales will - sorry, margin will decelerate there further, will remain stable or probably just bounce back slightly but still not at the proper level you would expect longer term?

Well, so we haven't give 2019 guidance yet. But, I mean, obviously, you've seen levels and if you look back in the rearview mirror, you've seen margin levels that have been fairly stable since we've launched this program.

And I don't think plan is much different. Our expectation is once we get through the implementation here, get everything stood up, the harmonization and optimization done of our network.

We'll see the margins gradually rise. I think that expectation which we shared with you is exactly the same as it was, and the timing of that starts to sort of happen later on in 2019.

But there is so - we haven't provided specific business unit guidance for that.

Okay. And when you say stable, obviously, probably not Q2, because the margin were down year-over-year, but it's probably going forward from the current levels from where you are right now.

Yeah.

Okay.

The wildcard here is what the economy does to us. I mean, we can control lot of things, but what I can't control is the demand at the shop level.

So the installers - that installer demand is the wildcard for us right now.

Okay, perfect. And just for loyalty, I mean, loyalty was up 6% year-over-year.

So you mentioned some color on that side. Could you maybe talk about the base, the comparison, where do you start in terms of loyalty if we could see further improvement on the loyalty side and how important is loyalty?

Yeah, so, Benoit, just to clarify, right, what we said was it's an increase of our BUMPER TO BUMPER of 6% from Q2 2017 to Q2 2018, and goes with that an increased level of fidelity. I don't know Brent if you want to comment further, but that's when we have members moving to BUMPER TO BUMPER as we've explained in the past.

There are certain requirements and a certain level of fidelity that goes with that.

It's just as simple as that, Benoit, is that when we execute a BUMPER TO BUMPER agreement, we see a share of wallet coming from that customer greater than it was before. There are benefits for them to do that.

There are benefits in turn for us.

Yeah, and we don't have one number. So it's not like I can give you one number that fits all.

So we have some members that give us 50% of their volume. We have other members that give us 75% of the volume.

So if we have a member that's 50% and we've taken to a BUMPER TO BUMPER program, is north of 90%, we see a big gain. If we have a member that's 75% loyal and we go to 90%, that's a different number.

So there isn't kind of one number I can share with you. And we're not necessarily focused on that.

We're just focused on making sure we get that high level of loyalty with those flagship BUMPER TO BUMPER stores we're looking for.

Okay. So it's really in the percentage - that the improvement is on the percentage of the parts that were ordered exclusively at Uni-Select in terms of overall mix of business.

Correct.

Okay, perfect. That's clear.

And maybe latest one for me, obviously there is a nice plan, the initiatives to increase margins in Canada. This will happen mostly 2020, you mentioned some color.

Just wondering, if let's say the plan is more challenging than expected, is there a plan B on what you could do with the operations in Canada?

Listen, we've got a very solid plan for Canada. Thus the wildcard for this quarter is really just been the softer market conditions.

But we've been very happy with the progress of the plan. So it's a lot of work, and you remember, the ultimate state here is we have a balance of independent customers with flagship BUMPER TO BUMPER stores and also AUTO PARTS PLUSs, not everyone of our independent members will be BUMPER TO BUMPER, but we're going to have far more of those across Canada.

But we'll still have lots of good solid independent customers. We're going to have a design network of company-owned BUMPER TO BUMPER stores.

And then we're going to have a network of FINISHMASTER stores across Canada. So we have a multipronged strategy we're executing here.

And the underlying part of the foundational work we talk about is things like putting the PartsWatch system underneath it. And that allows us to do what I described as harmonizing our product lines, because we're all in the same system.

And it allows us to optimize the network. So as I said, when we consolidate a couple of stores, we're looking to deliver better service to those customers as we bring them onboard.

In some cases, they're larger, more robust stock packs, all on the same operating system. This is the integration of a store network.

And if you put this in context of FinishMaster, that's what we have there. So when we buy a company in the U.S., we're able to layer it on to our existing platform and integrate it in a reasonably quick period of time.

What we described in Canada as we have taken on some independence, we didn't have that foundation of platform. We had to build it.

So we have stranded synergies that hang out for a while. But once we have our platform established in Canada, when we make an acquisition, we can then bring it on to our platform in a reasonable amount of time and then bring in the capture of the synergies a lot quicker.

And I think that's just a period of time we're in and I think aside from the softer market conditions we found in Q2 and today, I think we're well on track to execute on those over the balance of the year. There is no real new game plan.

I think as a matter of course, we have 20/20 initiatives that we execute in all of our business to making sure we have the right cost base and we operate efficiently in all of our businesses.

Okay. Thank you very much for the time, gentlemen.

Thank you, Benoit.

Thank you.

Thanks, Benoit.

I apologize if I…

Hey, Jonathan.

Hi. I apologize if I missed this.

Do you have the number of BUMPER TO BUMPER stores today?

We don't publish the BUMPER TO BUMPER store count per se. We publish our company-owned store count, but we don't publish the number of independent BUMPER TO BUMPER stores.

Okay. Sorry, and what's the customer, the corporate store count now?

I'd just double-check, because we integrated three. So I think the BUMPER TO BUMPERs were about 54 if I remember.

So we're probably circa 51 today with 10 FinishMaster stores.

Okay. And, Eric, just on the tax rate, there is another low tax rate for the quarter.

I think we just previously discussed 22% to 24% effective rate for 2018.

Yeah, and that is still what we're seeing.

Okay, okay. Thank you.

Hey, just a follow-on. Henry, I'm just wondering if you can just speak to what you view as the right valuation for the FinishMaster business now that we've gone through sort of this challenging period for that side of the business.

I don't think we comment on valuation. But my view in our business is no more complicated that we have a very strong leading market share of business is FinishMaster.

We have resumed organic growth, 2% to 4%. And for us, it's business as usual.

So this business is a very strong business. We have upside in terms of extending our geography in the U.S.

So I think I mentioned that in my comments, we just opened up a branch in Oregon. I think we have opportunity to close some white-space in the U.S.

today. And our game-plan has been sort of all along the same since the last three or four years.

We have acquired to build density in key markets. And we're still looking at building that density in key markets and we're extending our geographic coverage to make sure we're set up to service those MSO customers and independent customers alike in individual markets.

So I think that game-plan is exactly the same. The resumption of our organic growth and getting that change over behind us, that was the only, quite frankly, distraction we've had to our game-plan.

And now we're back sort of rolling in all four wheels in our vehicle now and accelerating. So we don't think about it in terms of evaluation.

We think about it in terms of head down and driving our plan.

And it's been a little while since you've done some M&A in FinishMaster in the U.S. Could we anticipate that, well, we could see some more deals happen in that business?

Yeah, I think it's fair. And I have shared with all of you - we needed to get back organic growth.

And so, like any prudent business, to start to acquire companies, layer it on to a company that is not growing, it's probably not the smartest thing to do. And the reality is we were focused on the product line conversion, because that's a one-time opportunity that you have to get the highest conversion rate possible.

That's not something you can postpone to later. And what we could not afford is to go out and acquire a bunch of organizations and integrate them into the business in parallel with driving that product line conversion.

So I think we sort of head back into more normal state now, which means we're driving organic growth. And as we continue, I'm not going to rule out the opportunity to continue to acquire in the U.S.

And I would say that's relative to all of our business, and also relative to where our cash flow resides.

Okay. Thanks.

Yeah, just one follow-up for me would be on the FinishMaster side, just to kind of pick up on a bunch of different answers here. We're obviously seeing - your organic growth has resumed, okay.

You start to see a bit of margin expansion, particularly quarter-over-quarter, so obviously, going to be still weaker from a year-over-year perspective. And you are heading into your strongest quarter seasonally as well in Q3.

I'm just trying to think about how we should look at the margin profile of FinishMaster, particularly as we go into the strongest quarter, with now what you're seeing with your organic growth uptick as well. So what's the best way to kind of look at that for us?

Look, Leon, we've given guidance at the consolidated level and you have a specific guidance on Parts Alliance. And as we said in the prior quarters, we're not going to go in more by businesses than what we've done there so far.

So if I think if you can reverse the math and conclude by yourself.

Okay. Thank you.

Thank you.

Thanks, Leon.

Okay. Thanks, Jessa.

Thank you, everyone, for your time and attention today. Great questions again.

Looking forward to connecting in the near future. We do have an Investor Day coming up in September, which will be highlighting the Canadian business and giving a lot more detail on what the Canadian business looks like.

So, again, thank you for listening. Looking forward to updating you on our next call, and have a great day.

Thank you.