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

Presenting this morning are Brent Windom, President and CEO of Uni-Select and President and COO of the Canadian Automotive Group; and Eric Bussieres, Executive Vice President and Chief Financial Officer. Following their comments, we will open the call for questions.

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 cautions 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 Brent.

Thank you, Louis. Good morning, everyone, and thank you for joining us.

Our second quarter is the first quarter that we reported full impact of COVID-19. As expected, our results were significantly lower than the same period last year, but better than our initial expectations.

First, I would like to thank our team members for the countless hours and sacrifices made in the past few months. We are proud of how the entire organization successfully came together and implemented the actions required to deal with the impacts of the pandemic.

We are especially thankful to our customers, members and supply partners as we recognize they too have been adjusted into this new norm. We trust the updates we provided have been beneficial to the financial market.

Overall, our actions resulted in a much better financial performance than we had first anticipated and we continue to see encouraging signs of recovery in each of the business units. Today, I will provide a quick overview of the market conditions, and update on our COVID-19 measures, the key takeways for the second quarter, the status [ph] of our continuous improvement plan.

Following my comments, Eric will review our profitability and financial conditions, and we will provide an outlook based on the visibility that we have as of today. Just turn to page four, please.

As you know, the automotive aftermarket is in a central service industry. With that said, it is and has been affected by the pandemic.

In the U.S. CCC reported that repairable automotive insurance claims were down 35% for the second quarter of 2020 compared to the same period last year, however, we have seen a month-over-month improvement from April to June.

While April was down over 50%, May was down 34.5% and June was down 25.7%, half of the impact from the peak. Our performance of FinnishMaster mirrors the industry trends at this point.

Turning to Canada. According to the desk of research of Roland Berger, total miles driven in April were down 35% and 4% in June.

CAG has been the least impacted and has remained strong through this period. We are monitoring the forecasts and miles driven as they are expected to be reduced by upto 14% in 2020, according NRCan.

International Transport Forum. In the U.K., the impact from the pandemic hit hard initially, but has been the quickest to recover.

In fact, according to the U.K. government statistics office, road traffic was down 33% of normal levels in April, 50% in May, and 69% in June, and we have seen our revenues rebound accordingly as well.

While the industry is certainly impacted, we are seeing signs of recovery. As the containment measures have been lifted, the market is recovering and we have adjusted our actions accordingly.

Please turn to page five for COVID-19 update. Recall that on the onset of COVID-19 in March, we quickly and proactively implemented measures to minimize the impact on our operations.

We’ve put in place stringent protocols for social distancing, and hygiene precautions to safeguard our team members, our customers and supply partners. We have also implemented temporary measures for business continuity, we furloughed approximately 50% of our workforce, we reduced work hours by 20% or salary reductions for most team members.

We temporarily closed about one third of our stores across the network, and the stores that remained open were operating at reduced hours. We also implemented a cash preservation plan to ensure maximum liquidity and financial flexibility.

We tightened the management of working capital and non-essential expenses, reduce capital expenditures and customer investments, and the Board of Directors reduced this renumeration and suspended the dividend. As of June 30, we are pleased to report that more than 80% of our company stores were open and operational, while 12% of our stores were operating at reduced hours, and 3% were limited activities for essential services.

In addition, 30% of our team members were temporarily furloughed, and about 10% of our team members were working for a reduced schedule. In addition, the pandemic helped us identify further opportunities to accelerate our transformation.

From those we are driving a number of initiatives and each of the businesses to improve the overall efficiencies. In conjunction to the business with the businesses, we have formed a continuous improvement team that focuses on identifying and implementing these various initiatives.

Please turn to page six. We made great strides in our cash management and access to liquidity in the second quarter.

We successfully refinanced our debt, given us access to additional liquidity and more flexible financial terms and conditions. We also managed our inventory and receivables.

And we have been able to lower our total net debt by 24 million in Q2, despite the revenue headwinds brought on by the pandemic. Eric will provide more details on this in a moment.

What remains uncertain is how long the recovery will last. We will continue to monitor the announcements of the governments and adjust to the dynamic market conditions to ensure we remain in our leadership position in each of the businesses.

The automotive aftermarket, an industry has been resilient in the past and we're convinced that it will be no different this time. Just turn to page seven.

In Q2, given the actions we put in place when the onset of the pandemic and the pace of recovery. Our second quarter results were better than expected as stated.

Consolidated sales for the second quarter were down 34% to $303 million from $456 million last year. The adjusted EBITDA amounted $50 million from $36 million last year.

Despite these results, we generated $35 million of cash flow from the operations. We ended the quarter with 431 stores in our network, as the same level as last quarter.

The overall results were impacted by lower sales due to the COVID-19 which directly impacted our gross margin and absorption of fixed cost. In addition, they were impacted by the expected revenue decrease from the integration of the company stores in the last 12 months.

Additional revenues -- excuse me additional reserves for obsolescence and bad debt, both which totaled about 6 million more than last year, as well as the lower incentives due to optimization of inventory. However, since April, we are showing encouraging signs of recovery with steady growth month-over-month, while sales were down about 50% in April, at the end of June, were 85% over the same level that they were the same month last year.

Throughout the difficult operating environment for all of us, we maintained our market share and we continue to drive continuous long term improvements to all three business models. Please turn to page eight please.

In the second quarter, we accelerated our continuous improvement initiatives. These initiatives are based on long term approach to further improve the productivity and the efficiency of all segments, while ensuring the customer needs will remain our focus.

Our main objectives of the plan are to ensure that our customers are served to the highest standards that operations and service models are positioned to meet the long term demands and expectations of the market in which we operate. We will continue to be a strong market leader while ensuring the safe and healthy environments for all parties.

We expect the newly implemented continuous improvement plan to generate between 28 million to 30 million in annualized savings by the end of 2020. The execution of the plan started in June, and we are well positioned for the recovery in the post COVID-19.

At the end of June, we generated about half or 14 million of the annualized cost savings. It is important to note that the realized annualized savings of the second quarter are based on the first quarter 2020 operating run rate.

Again, we would like to thank our manufactured channel partners for their collaboration and support. And certainly our customer’s success and safety are, and will remain our primary focus.

With that, I'd like to turn the call over to Eric for a financial review. Eric?

Thank you, Brent, and good morning everyone. Please turn to page 17 for consolidated profit.

In the second quarter, we reported a loss of $24.2 million $0.57 per share versus a profit of $6.3 million or $0.15 per share last year. Adjusted earnings for the quarter were a loss of $9.7 million or $0.23 per share versus a profit of $10.4 million or $0.25 per share last year.

The decrease in adjusted earnings was mainly attributable to lower adjusted earnings before tax and a different income tax rate. It should be noted that our Q2 results do not include any benefits from the Canadian CEWB program but is expected to be in Q3.

Now, let me comment on our cash flow on page 18. Recall that our second quarter cash flow from operations is typically neutral to positive.

We were able to maintain this seasonality trend even in the face of COVID-19 where our revenue were impacted by 34% compared to the same period last year. We generated $34.9 million of cash flow from operation in the second quarter versus $97.2 million last year.

This positive cash flow was mainly due to our cash preservation plan. We continued to optimize our inventory at FinnishMaster as well as in the other segments, which improve our working capital by about $73 million year-over-year.

In fact, since the beginning of the year, we reduced our inventory level approximately $140 million, of which a minimum of about $100 million should be considered a permanent reduction going forward. In addition, with emphasis on the collection of receivables, we improve our working capital by another $51 million year-over-year.

However, these cash inflow were more than offset by the timing of payables as we had highlighted last quarter, and lower operating results. As part of our cash conversion plan, we kept our capital deployment to a minimum.

In the second quarter, we continued to invest modestly in CapEx and margin paid dividends and also paid down debt. Note that the dividends paid in April was the last one paid as all future dividends have been suspended in order to provide more financial flexibility.

We generated $12.9 million free cash flow for the quarter compared to $32.1 million last year. This variation is primarily due to the decline in margins, mainly in relation to the lower volume rebates associated with the impact of COVID-19, as well as higher interest payments on long term debt.

Turning to page 19, on May 29, we successfully secured new credit facility providing access to additional liquidity with more flexible financial terms and conditions. The new 565 million secured credit facility, which will mature on June 30, 2023, consists of $350 million revolving credit facility, and $250 million term facility.

These new facilities increase our total available liquidity by an additional $100 million to about $215 million. They also provide a more favorable covenants structure and more latitude to manage our business under the current context.

As at June 30, 2020 our outstanding total net debt stood at $444 million including $94 million of IFRS lease obligation, a decrease of $24 million versus the $468 million and $96 million respectively three months earlier. We are very pleased that even in this difficult operating environment, we were able to reduce our debt level on an absolute basis from the quarter, from last quarter.

Obviously, given the decrease in profitability, the same can be said for leverage ratio. When you exclude IFRS 16 lease obligation, total net debt to adjusted EBITDA stood at 3.6 times versus 3.18 times for the same period last year.

Having said that, we were in compliance with all our bank covenants. Based on our assumption and expectation, we believe that our current liquidity and future cash flow in countries will be sufficient to meet your operating financial and capital needs.

Turning to page 20 for the outlook. We are seeing encouraging signs and are working on the assumption that demand will continue to progressively improve in Q3 and be back to more normalized sometime – at normalized levels sometime in the back half of 2021.

However, there remains significant uncertainty going forward from the implication of the pandemic. And it is difficult to submit or predict at this time the potential impact.

In this context, let me provide you with some color on what we see for the balance of the year with the visibility we have. July consolidated sales continued to hold and improve sequentially overdoing, which is a good sign.

But it is hard to determine at this point if it is tangible or just a question of time. More importantly, we expect to encounter in Q3 some temporary supply chain issues as manufacturers are challenged with a spike of recent demand.

We expect this issue to be – subside itself by the end of third quarter, but it could temporarily impact some of our sales. In general, we expect the aftermarket to recover more rapidly than the refinish market as lower miles driven has a significant impact on claims.

More specifically, we expect FinishMaster sales to recover on a regional basis as opposed to on a national basis as there is an increase in COVID-19 cases in selected state that had returned to lockdown measures and thus are experiencing a decline in collision repairs once more. Furthermore, national and MSO sales are recovering faster than the independent market.

CAG second quarter 2020 sales include pent up demand. However, we expect miles driven to continue to recover in Q3, 20 on the back of normal seasonality.

It is also important to point out that the refinish market in Canada is experiencing similar trend as in the U.S. Finally, recall that the second half of the year is always a softer period for TPA.

However, the market in Q4, 20 is expected to get a boost from the Ministry of Transport required testing, which was postponed to October from April due to the COVID-19. That could offset some of the usual but not completely seasonality.

With regards to continuous improvement plan, we expect the bulk of the remaining announced savings to be realized in Q3 with residual amount left in Q4. As a reminder, these savings are based on our Q1 run rate.

After that, the continuous improvement journey will continue as part of the on-going culture and benefits for the long term. We will continue to focus on our cash management in the spirit of reduced demands.

For the balance of the year, we will manage capital investment and working capital prudently. With increased sales, we now expect our cash outflow in Q3 to be lowered by approximately $25 million to $35 million on our total account payables compared to the second quarter.

As it relates, capital expenditure and customer investments, we are in the process of relaunching certain initiatives as each business recovers. For 2020, we now expect the investment in capital expenditure between $16 million to $18 million and approximately 50% to 60%, of what we invested in 2019 for merchant members and incentives to customers.

Taking into account all these variables, we expect our total net debt level at the end of the year to be similar to last year. We are confident that we have a solid financial plan to address the current price and sufficient liquidity to meet our current operating and capital needs.

This completes the financial review of the second quarter. I will now turn the call over to Brent to conclude.

Thank you, Eric. In conclusion, we are pleased with the Q2 performance in light of the global crisis and our team's ability to execute in the extreme circumstances and look forward to the new opportunities with our continuous improvement plans.

While we are adapting to the new norm, a strong emphasis is being put on the various sales initiatives in each of the businesses. The actions we have and will take will not only benefited us in the second quarter, but will position us positively for the long term.

I would like to thank our team members again for their commitment to adapt and execute for our customers, our suppliers and shareholders for their support. This concludes our presentation.

We're now ready to answer your question. Julie, if you open the line, please?

Yes. Good morning gentlemen and congratulations for a strong quarter.

Thank you, Jean.

So, I appreciate the indication for the sales performance in June. So it was very helpful to see that trend.

But I was wondering if you could help us understand how the sales have progressed in July and maybe on a segment per segment, please?

So, I would -- I'll categorize it in the automotive as a whole. We've continued to see marked improvements in both the automotive segments.

I would see the refinish business, both in Canada and the U.S. are slower to recovery as Eric mentioned.

It's very much in line with what we're hearing and seeing from the industry with both our paint manufacturers as well as the market. But we're certainly in line with the paint.

We don't believe we've lost any market share, but it's just a slower trend than currently with the automotive side.

And then continuing on the comment you just said about the recovering the auto parts market. Would it be fair to say that the Canadian segment will recover maybe faster than in the U.K.

in Q3? And then maybe a switch in Q4 as the boost from the Ministry of Transport required testing?

Well, look, I think for Canadian business, you're right that it's probably the business that will have the strongest sales performance compared to the two other businesses in Q3. I do want to caution everybody that there is seasonality in both businesses and that seasonality will remain with us in Q4 in the CAG business.

And remember that for TPA, there is seasonality in the back half of the year, right? So on the back of that, we do think that the Ministry in Transport in the U.K.

by pushing the mandatory inspection to Q4 from the April delays will have a bit of a bump in our revenue, but not to offset the full amount of the seasonality in the U.K. So it's a bit of a balancing act that you have to think about.

And as we pointed out, we don't expect FinishMaster to recover at the same speed. It's just going to take a little bit longer for that business to recover from our perspective.

Okay, great. Thanks for your color.

And then one last for me. So you mentioned the supply chain issues that are expected to potentially impact sales in Q3.

I was wondering if this situation was more related to auto parts or it's across the board? Thank you very much.

Yes. So a very fair question.

I would say we're seeing it more in the automotive sector on the parts side than the paint. But I would tell you, we are seeing some issues on the paint to be transparent.

We do believe it's really driven by the sheer spike in demand and the recovery of the automotive side of the businesses from our key manufacturers. We're working very much collaboratively with them.

And we do believe it's a short-term issue.

And is there any way to quantify what might be the potential impact in Q3 in -- I don't know, in percentage of sales or it's too early to tell?

Your latter statement is correct. It's just too early.

Quite frankly, we're -- we've experienced it in the last probably two to four weeks. And with Eric and I trying to be very transparent with you guys and give you as much relevant information as we see through the process, we felt it viable to sort of signal that right now, but we don't have any quantitative impacts at all.

Perfect. Thank you very much for the color.

Thank you, Jean-Francois.

Good morning, Jonathan.

Good morning. Just picking up on the supply chain issues.

I mean, the auto parts businesses carry a quite a bit of inventory in the warehouses. Is there any way to sort of size the portion of SKUs that could be affected or is it really across the board?

Well, we see it in segments with specific manufacturers. And when it really happens, it depends.

We carry over -- we catalog over 3 million SKUs and 500 manufacturers. So you're right, it is a very broad base.

But when you look at it, right now, we just -- we're monitoring it. We got teams on it full time to make sure that because through Q2, we had excellent fill rates, our supply chain was very strong and we were able to lower inventories without sacrificing any supply chain compromise.

And so we're just -- we're cautious about the recovery of that in our growth back in Q3, but it's too early to tell, Jonathan, at this point.

Can you comment on the July fill rates or is it too early to say?

Yes. I would tell you that we're down slightly from where we were in Q2.

Not alarming at any moment. But certainly we're just concerned with -- if our acceleration continues, that could be acerbated some bit.

That's all.

Thank you. And how do you see payroll and benefits changing into Q3?

I believe you've applied for government support programs like the CEWB. I'm just curious, do you have any idea of what size of benefits you might be receiving?

Yes. Jonathan, it's Eric.

I think that from the third -- second and third period under the program in Canada, we expect the amount to be roughly in about CAD4 million that would actually be accounted for in Q3. We're in that process as we speak and we've been very diligent to ensure that we're within the boundaries of the programs.

As you know, there has been a lot of guidance and rules issued over time on this program. We want to be prudent to make sure that we file it in context of what the regulator wants.

So that's on its way. And as it relates to the U.S., we don't expect any real tangible benefits.

And in the U.K., there will be some, but it's a bit early also for the U.K.

Okay. Thank you.

And Brent, circling back to your comments on the refinish market, I believe the industry is talking about demand being 80% of prior year levels at the end of June. Is that consistent with what you're seeing in the U.S.?

Well, I would say that everything we've seen is, it's probably in that 25% to 35% range in June. It depends on if you're looking at the manufacturers of the CCC reports.

And we believe we're certainly in line with that with what we indicated by month of FinishMaster's trend is.

Yes. I'm sorry, I wasn't clear.

I was speaking to the exit rate.

Yes, yes. So I mean, I think everybody is expecting it to be in that -- I would say, our guideline is probably 15% to 25%, and 20% is probably a safe number in the middle.

But -- and so we're -- but we're -- it's dynamically, as Eric mentioned, it's happening by region instead of a global. So it depends on the density.

California and the West is really being impacted again with the COVID impacts and we're very -- we're dense in California, as you know. So we're monitoring the sensitivity of this, I mean, dynamically every day.

But clearly, it's not a fundamental flaw of the business. It's just a sheer demand issue right now.

And can you remind us how you see the MOT testing requirement implemented in Q4 boosting demand in the U.K.? And give us an idea of what impact this might have?

Thank you.

Well, I mean, quantifying it is a tougher part. But what I can tell you is the Ministry of Transport suspended mandatory inspection back in April because of COVID and had postponed those inspection basically to Q4.

So we would expect a bit of a pent-up demand linked to that in Q4. Obviously, someone that grow with car and needed a repair in the meantime, got the inspection done at the same time, right?

So that's where the -- it's not -- I'm not willing to say that everybody did not have their car inspected because if you had a repair to be done, probably did the inspection at the same time. But what we believe that, Jonathan, is some of the demand that should have materialized in Q2 has been pushed to Q4 because of the Ministry of Transport mandatory inspection and should help the seasonality in that case.

But I do want to caution everybody that there will still be, in our opinion, some seasonality in the U.K. in the second half.

Thanks. That's clear.

I'll pass the line.

Thank you.

Good morning, Daryl.

So first question, obviously, quite a bit of noise in the quarter. I was wondering if I could get maybe a little bit more detail what the margin profile looks like, not to go month by month, but sort of exiting the quarter because you've taken a lot of cost out and obviously, sales have recovered.

And so just sort of what a run rate margin might look like at current levels.

Yes. Look, I think it's -- you're right that there is noise in the quarter simply because we had a lot of our employees that were unfurloughed during the quarter.

So that's why we're trying to make a distinction between the run rate of Q1 and the cost actions that we've taken and how we foresee those cost actions reflect against the Q1 operating run rate. The $14 million cost out that we took in towards the end of June, those should be looked in the context of their Q1 run rate costs since a lot of those employees were either on furlough or on reduced hours, right?

So I think from a modeling standpoint, you need to look at it from that perspective. And as we said, we expect to crystallize the second portion of our savings, right, that will range between $28 million and $30 million on an annualized run rate to be materialized in the Q3.

And quite frankly, it should all be done by mid-August or most of it will be done by mid-August is our expectations. In terms of what the overall operating run rate, look, if you take that $28 million to $30 million operating cost on annualized basis, knowing that there was $14 million crystallized in July -- in June, sorry, and the balance will be done in Q3, I think that gives you a sense -- a pretty good sense of the operating expenses salary wise.

The key variable, quite frankly, they're always on the top line, right? I think we've done what was doable on the cost side.

I think we've done a pretty good job, an extensive job on all aspects. And now we're well positioned to manage the business with the current revenue level.

And I hope that the revenue will rebound further in the next six months.

Okay, great. And then you made a comment on the MSOs activity levels are coming back faster.

I was just wondering if you can maybe give a little bit of color on some of the market dynamics and how things are playing out with your customer base in terms of the mom and pops versus the MSOs?

So, I'll let Eric answer in just a moment. I would just say from a -- on the traditional side, we saw them to be very consistent throughout the COVID period.

It was the MSOs that actually contracted probably more in the national accounts being larger in scope and more of a production type of business. We have certainly seen them as they reopen to come back to their market share growth and they've done it faster than quite frankly I think we expected.

It's not bad news. It's good news, but it is just a trend within the sector.

So we still remain a dominant supplier to both channels and that was just a flavor in the quarter.

Yes. I think as Brent alluded to, the paint manufacturers have been also signaling very similar things that we've seen.

And the -- sorry, there is -- hang on, Daryl. So the traditional segments, as Brent said, was fairly constant in the quarter, but it's a variation at the national accounts level where we saw a higher decrease at the beginning of the quarter and a higher pickup towards the end of the quarter.

I believe one of the paint manufacturer also indicated that they did not experience or saw a significant bankruptcy at the independent level. And we haven't seen any specific trends at this point.

So we'll see. And obviously, we're monitoring the situation.

Okay. And then at the distributor level, have you seen any competitive shifts or changes?

Or are there any expectations for further consolidation that might change the competitive dynamics as we shift through sort of the back end of COVID?

I think it's a little early to tell that dynamic at this point. I think consolidation is inevitable in all three business segments over time.

It's just a matter, to your question, of when.

Okay. And then just one quick one.

When you say activity levels are back at 85%, was that the kind of the last week of June exiting? Or is that consistent with what you're seeing now?

Well, when we're saying this, I think you have to think more about the month than the week because we don't really report on a week by week basis, quite frankly. We do track this on a week by week basis.

But our comment was more towards the month.

Okay, great. That's it.

Thanks guys and congrats on a good results.

Thank you very much.

Thank you. Morning everyone.

Congrats.

Good morning, Zachary.

Apologies in advance, I was disconnected for a while. So if I, two question, sorry [Indiscernible] my apology.

Are there any stores that you were able to reopen that were subsequently shut down again with what's happening in the States?

No. But what we have seen is having to flex hours with any given source.

And obviously, with the U.S. market, it's certainly not an impossibility that could happen, Zachary, because as the pandemic has the impact and we've seen some markets closing and shutting down.

But right now, so far what we've done rather is to reduce hours, specific stores, if that's warranted. And we will continue to flex if need be.

And do you see further progress in reopening the stores throughout July?

Sorry, the line broke a little bit, Zachary. Did we see…

A further progress in store reopening through July?

Yes. We are reopening certain stores and we continue to reopen certain stores.

We've done that in July and there's a few that will open in August. But obviously, as part of our plan and restructuring plan, there is certain store that will not reopen.

And we'll announce that to the market as those are being permanently shut down.

Understood. Could you be able to walk us through the potential supply chain issues and maybe put a price tag on the impact of that?

It's too early to determine the impact to the supply chain disruption that we may or may not have in the businesses at this point. I would just say that we're proactively managing that with our supply partners and helping them with everything we can from forecasting to alternate suppliers or supply chain alternatives for our customers in the meantime, if it's needed.

So at this point, we don't have any real color. It's just something that we're living through day-to-day as part of the dynamic recovery of the COVID.

And last one from me. Was there any impact from government brands for [Indiscernible]?

Yes. There was about $700,000 of subsidies in our overall results.

As I pointed out, Zachary, the CEWB are not in our Q2 results. Benefits from that is expected in Q3 to the tune of about CAD4 million.

Thank you, Julie. Thank you for joining us today and thank you for your support.

We will continue to update on our progress and we look forward to our next quarterly call with you. Thanks, and be safe.