Thank you. Good morning, everyone, and thank you for joining us for Uni-Select's fourth quarter and year-end conference call.

Presenting this morning are Brian McManus, Executive Chair and CEO of Uni-Select; and Anthony Pagano, our 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 the caution regarding forward-looking statements, which applies 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 Brian.

Thank you, Max. Good morning, everyone, and thank you for joining us for our fourth quarter and year-end results conference call.

The second half of 2021 was very exciting as we worked to set the foundation for future growth. We refreshed the leadership team, aligned the three businesses with our vision and focused on operational excellence.

In parallel, we also identified some interesting growth opportunities and look forward to executing upon them in 2022 and beyond. Let me turn to Slide 4 for the key highlights of the fourth quarter.

We ended the year on a very strong note with profitability surpassing 2020 as well as pre-pandemic levels in 2019. These results reflect the successful implementation of operational improvements, significant savings on borrowing costs and the dedication and relentless efforts of all our team members.

Consolidated sales for the fourth quarter were up just over 9% to $400 million from $366 million last year, primarily attributable to organic growth of 7.5%, reflecting continued recovery in all business segments, coupled with a favorable impact from currency conversion. Organic sales were positive for a third consecutive quarter with all three segments contributing, driven by increased demand and price increases.

In turn, adjusted EBITDA increased 47% to $37 million or a margin of 9.4% compared to $25 million or a margin of 6.9% last year, representing an increase of 250 basis points. Excluding government assistance programs received last year, the margin would have increased by 280 basis points.

This performance was largely driven by additional vendor rebates in all segments and a streamlined cost structure. These factors were partially offset by higher expenses related to a fully operational business, unfavorable variations in foreign exchange and higher short-term incentive expenses.

As a result of higher adjusted EBITDA and significantly lower financing expenses, our adjusted EPS reached $0.36 per share versus an adjusted loss of $0.01 per share last year. Now, turning to Slide 5 for a quick overview of the year.

Consolidated sales for the year were up almost 10% to $1.6 billion, mainly driven by organic growth and currency conversion effects. While sales have not quite recovered to pre-pandemic levels, primarily due to slow recovery at FinishMaster, profitability certainly has.

Adjusted EBITDA and adjusted EPS reached $147 million and $1.14 per share, respectively, in 2021. Given this greatly improved profitability, we generated solid cash flow from operations, which we used to make strategic investments to grow our business and continue to reduce our total net debt, ending the year at $309 million, our lowest level since 2017.

I will now turn the call over to Anthony to complete the financial review. Anthony?

Thank you, Brian. Turning to Page 7 for FinishMaster.

Both sales and organic growth increased 8.5% to $168 million, driven by a general recovery in the market and the effects of price increases. Sales have continued to improve sequentially, generating positive growth for a third consecutive quarter.

Adjusted EBITDA also continued to improve, reaching $15.6 million or a margin of 9.3% compared to $8.4 million or a margin of 5.4% for the same period last year. This significant improvement was driven by additional sales volume and rebates as well as an optimized cost structure.

Note that Q4 2021 represents the best adjusted EBITDA margin for FinishMaster over the last nine quarters. This is a testament to our operational initiatives taking hold.

For the full year, sales reached $672 million, up 2.8% from $654 million in 2020 but remain lower than the 2019 level of $831 million. Adjusted EBITDA reached $55 million or a margin of 8.2%, up from $33 million or a margin of 5% in 2020, but still down from $73 million or a margin of 8.8% reached in 2019.

While the sales recovery in the FM business is taking longer to materialize, our operational improvements are definitely taking hold as our margin is much closer to pre-pandemic levels. For 2022, our focus will be on ramping up sales, optimizing our path to markets and further leveraging technology to develop our operating model.

Turning to Page 8 for the Canadian Automotive Group. Sales reached $136 million, up 9% from $125 million last year.

This growth was attributable to strong organic growth of 5.5%, driven by increased demand, price increases and favorable currency conversion effects. Sales remained strong in Canada and have now surpassed 2019 levels.

Adjusted EBITDA reached $16.8 million or a margin of 12.4%, up from $13.5 million or a margin of 10.8% for the same period last year. This increase is mainly due to additional vendor rebates, product mix, and price increases.

It was partially offset by an unfavorable variation in foreign exchange. For the seventh consecutive quarter, CAG reported double-digit adjusted EBITDA margins.

For the full year, sales reached $541 million, up 11.4% from $485 million in 2020 and surpassed sales of $516 million in 2019. Similarly, adjusted EBITDA reached $64 million for a margin of 11.7%, up from $48 million or a margin of 9.9% in 2020, despite having recorded a $3.3 million government subsidy in 2020.

2021 adjusted EBITDA also surpassed the $47 million or a margin of 9.1% reached in 2019. For 2022, we see further opportunities to improve our overall CAG operations.

Turning to Page 9 for GSF. Sales reached $96 million, an increase of 11.2% from $87 million for the same period last year, mainly driven by organic growth of 8.6% and the positive effects of currency conversion.

This represents the fourth consecutive quarter of sales increases, and sales have now surpassed 2019 levels. Adjusted EBITDA reached $7.4 million or a margin of 7.6%, up from $6.7 million or a margin of 7.7% last year.

This growth in adjusted EBITDA is due to additional sales, higher vendor rebates and an optimized cost structure, partially offset by the government subsidies recorded in 2020. For the sixth consecutive quarter, GSF has reported an improvement in its year-over-year adjusted EBITDA.

For the full year, sales reached $400 million, up 20.2% from $333 million in 2020 and surpassed sales of $393 million in 2019. Similarly, adjusted EBITDA reached $37 million or a margin of 9.2%, up from $21 million or a margin of 6.2% in 2020, and surpassed the $22 million or margin of 5.6% reached in 2019.

In fact, 2021 adjusted EBITDA is the highest on record since Uni-Select acquired the business in 2017. In the quarter, we opened two greenfield branches, and we expect to invest in additional openings in 2022, in line with our growth strategy.

In summary, we are pleased with the operational results across all three of our businesses and are encouraged by the growing list of opportunities for ongoing improvement and sales initiatives that will be executed in the coming year. Turning to Page 11 for comments relating to our cash flow.

We generated $28 million of cash flow from operations in the fourth quarter compared to $48 million last year. This decrease is primarily due to -- is primarily attributable to an unfavorable variation in working cap versus 2020, partially offset by increased profitability.

After accounting for net investments in merchant advances as well as CapEx and intangibles, we generated free cash flow of $20 million in the fourth quarter versus $46 million for the same period last year. This is primarily driven by lower cash flow from operations, combined with higher value-added investments, including the modernization of the vehicle fleet, development related to sales and productivity initiatives and increased customer investments.

Similarly, for the year, we generated $114 million in cash flow from operations and $91 million in free cash flow compared to $133 million and $122 million, respectively, in 2020. Recall that this variation is primarily attributable to a meaningful release of working capital in 2020, driven by the rightsizing of the balance sheet.

During 2021, we began to reinvest in strategic initiatives to grow the business. Therefore, our investments in CapEx, intangibles and customer incentives were higher than in 2020 and have effectively returned to pre-pandemic levels.

In 2022, we will be increasing these investments across the three business units. Key projects include onetime improvements to the CAG distribution network, increased customer investments in FM and additional greenfield branches in GSF.

Turning to our financial position on Page 12. Recall that last quarter, we said that our total net debt would tick up at the end of the year due to our decision to strategically procure inventory.

Given the timing and the arrival of these goods, we now expect the impact of inventory on our cash flow to flow through in the first quarter of 2022. As a result, at the end of Q4, our total net debt stood at $309 million, including $99 million of IFRS 16 lease obligations related to buildings.

This represents a decrease of $6 million versus $315 million at the end of Q3 2021 and represents our lowest debt level since Q2 of 2017. Driven by our higher adjusted EBITDA and lower total net debt, our leverage ratio decreased further to 2.1x at the end of 2021 from 2.3x at the end of Q3 and 4.0x at the end of 2020.

In addition, at the end of the quarter, we had $186 million of available liquidity subject to compliance with financial covenants. Looking to 2022, we continue to be highly focused on driving asset utilization, including working capital in order to drive stronger returns for our shareholders.

I'll direct you to Page 13 for an update on our capital structure. In the fourth quarter, we entered into an amended credit agreement with a syndicate of lenders.

We reduced the credit facility from $453 million to $400 million and converted it into a single revolving facility. The new facility features a reduced pricing grid, revised covenants and covenant calculation as well as increased flexibility.

It now also includes a $200 million accordion feature, in addition to covenant step-ups in the case of certain acquisitions. This decision reflects our increased confidence in the stability of our business and in our cash flows as well as our desire to further reduce standby fees while leaving us with ample headroom to operate and grow.

Finally, we were in compliance with all of our covenants at the end of the quarter and are pleased with our ability to successfully leverage our improved financial position to further reduce financing costs. I will now turn the call over to Brian for concluding remarks.

Brian?

Thank you, Anthony. If you could please turn to Slide 15.

We moved forward on key initiatives in the second half of the year. First, we identified and executed operational improvements across three business units.

At CAG, I had the opportunity to visit our operations in many parts of the country. I'm pleased with the work that Emily and her team have started on the operations front, which effectively helped drive double-digit margins.

Furthermore, the team continued to nurture relationships with our members who form the historic backbone of our company. We also toured the distribution operations and identified opportunities to better utilize our existing distribution center footprint.

At FM, we have substantially improved inventory management through the better use of technology and analytics. We also reviewed our distribution network in detail, consolidated the distribution center and successfully integrated its operations into the four remaining distribution centers.

Furthermore, we leverage the tools at our disposal to better understand unit and customer level profitability and plan to use this information to improve performance over the coming years. At GSF, we expanded our click-and-collect service across the network, which is yielding incremental sales.

We also announced and started to execute our rebranding strategy to GSF, which has begun to generate excitement amongst employees and customers alike. In addition, with our renewed team and by leveraging technology, we are in the process of improving our working capital management.

We also made headway at the corporate level. We streamlined our overhead cost and now have a lean corporate team in place to support the business going forward.

In the past six months, we also made substantial improvements to the company's results and financial position. As mentioned earlier, 2021 was a strong year for Uni-Select in terms of profitability.

Adjusted EBITDA reached $147 million or a margin of 9.1%, and adjusted earnings rose to $49 million or $1.14 per share. Given our active cash management and improved profitability, our total net debt decreased year-over-year to $309 million or a leverage of 2.1x, the lowest level since 2017.

In the second half of the year, we also made material progress with the team and organizational culture. We improved our bench strength with a completely new senior leadership team through a combination of key hires and promotions across the businesses.

This refreshed team has stepped up to the challenges and has rapidly aligned to the strategic direction we are taking. We are focused on empowering our people, making them accountable and having them behave as owners of our company.

While changing a company's mindset takes time and effort, we are already seeing signs that a culture shift is slowly being embraced. With our operational improvements taking hold, our healthy balance sheet and our new leadership team firmly in place, we are well positioned to take advantage of growth opportunities.

Our priorities for 2022 will be to continue to drive operational improvements across each business unit. We will also reinvest in the business and expect to increase spending for CapEx and customer investments.

And finally, we will look for strategic acquisition opportunities to further expand and consolidate our market position in all three businesses. That said, we remain cautiously optimistic about 2022 as we continue to face headwinds with regards to our supply chain and labor.

More specifically, we expect challenges with fill rates, inflationary pressures on labor and labor availability. While our team has done a great job managing through these so far, we expect it will become increasingly challenging going forward.

Recall that CAG and GSF are more likely to be impacted by global supply chain shortages. FM, for its part, is also far from being immune from these challenges.

Based on what we currently see, we expect modest improvement in sales and higher adjusted EBITDA and adjusted EPS in 2022 compared to 2021. This assumes more intense inflationary pressures and supply chain and labor challenges.

These factors are expected to be mitigated by a more optimized cost structure, lower financing costs and a strong focus on driving sales in our three business units. To conclude, we have started to create a solid foundation from which we can successfully build the future.

We have the assets, the financial flexibility and a dedicated and passionate team to make this happen. This concludes our presentation.

We are now ready to answer your questions. Operator?

Thanks. Good morning, gentlemen.

Good morning, David.

In your release and in your prepared remarks, you called out rebates as a driving factor behind part of the margin improvement. But you guys also noted in the release that rebates were low last year, particularly in FinishMaster just from inventory optimization.

So I'm curious, if we stripped out any abnormal rebates, what would the margin profile look like? I'm just trying to get a sense on what's a good run rate going forward.

I think, David, if you -- naturally, you're going to have a little bit of a catch-up in rebates in Q4 as we sort of realize on or have a better idea of what our aggregate purchases will be for the year. So what I would do is I would use the full year margin details that we provide, and I would take those as a good estimate of what to expect going forward.

Okay, that's helpful. And you guys called out labor scarcity and inflation as an ongoing headwind.

Anthony, maybe you could speak a little bit about your ability to pass through price increases and your ability to defend margins. Is it something where we can expect it to be flat?

Or can we still expect some margin improvement going forward?

Naturally, we're going to do our utmost to try to continue to drive margin improvement. What I would say is in some parts of our business, the ability to pass through price is easier than in others.

So far, we've been pleased with what the team has been able to accomplish, though, in this regard.

And was there any benefit in the quarter from moving lower-priced inventory?

There's going to be a little bit, David, but it's not something that I would call out as a material driver.

Okay, that's it for me. I'll hop back in the queue.

Thank you.

Hi, good morning, everyone.

Good morning.

So the first question is on the pricing front. I just noticed in your presentation that for GSF, there hasn't been any price increases or there wasn't any material impact from that.

So is that one of those parts -- one of those segments where we should expect in future some price increasing? And I'm just wondering if you could give us some more color in terms of how your competitors are on the pricing front.

Have you been the leader in that or you're just following the industry in terms of price increases?

It's hard for me to comment directly on my competitors. I can say that we do our utmost to pass through price increases as they come through, and it varies between the business units, kind of the timing of those price increases, both when we receive them and when we're able to pass them on.

Okay, that's fair enough. And just -- you've mentioned that M&A or acquisition opportunities is something that now you'll be looking at.

I'm just wondering what's the comfortable leverage level that you guys are thinking internally.

I'll borrow a line from Brian here. We've just recently done a bunch of work and gotten ourselves out of a situation where we were arguably overlevered.

We're in no rush to return to that level. So we'll be very prudent as we think about the capital structure going forward.

Okay, fair enough. And just last one, again, on the capital allocation one.

Is dividend something that is also under discussion? Or right now, you're more focused on deleveraging and if there is an opportunity, just focus on the M&A part?

Well, you almost answered your own question, but I would say, obviously, dividends are always a Board decision. But I think the Board and management certainly feel that going forward, we have a good potential pipeline to deploy capital that would be best for all shareholders.

So at this point, I would say dividends are not in the near future.

Okay, thanks for the color. I'll get back in the queue.

Thank you.

Thank you.

Good morning, Brian and Anthony. And congrats to the team for the impressive results.

Thank you, Benoit.

Yes. Just looking at 2022, obviously, you finished on a strong note with an adjusted EBITDA margin of 9.1%.

You expect improvement in 2022. Could you provide more color about the magnitude of the change we might see and also the biggest driver that will drive the improvement for each segment?

I think really going forward, Benoit, a key focus for us and the teams and a lot of it is even the way we've set up our structures and where we're looking to push is a lot based on driving it from the top line and then letting it flow through, getting that leverage as it goes through the income statement. As you know, we're not going to provide specific guidance on EBITDA.

I think we've kind of come with a statement that we do expect it to be higher in 2022. And while we have some certain headwinds that we've identified, I think at the same time, a lot of the operational improvements that we're putting in place and as they continue to take hold will help mitigate that and hopefully more than offset it.

Okay. And on the call, Brian, you talked about the sales initiatives that will drive results in 2022.

Could you maybe provide more color about the sales initiatives you put in place?

I think I'd prefer not to get into the specifics on it, Benoit, just for competitive reasons.

Okay. And for 2022, with respect to CapEx, any color you could provide in terms of what we might expect?

And also aside the inventory move in Q1, any color about the free cash flow expectation?

I think it's easier for me, Benoit -- or more comfortable for me to answer the first part of your question. So in terms of the CapEx, I would guide you to something or to expect something closer to 2019 levels of CapEx and customer investments in the business.

Okay. Okay, that's great color.

And last one for me, strategic acquisition opportunities. Any color about which segment we should see more -- there is more -- you feel that there's more opportunities right now?

I wouldn't highlight one in particular, Benoit. I think we do see opportunities across the three business units of various sizes, and we're going to be very disciplined with our capital and use it in what we feel is the most appropriate opportunity.

So yes, really just to say that we're seeing opportunities across all three businesses.

That's great. Thank you very much for the time.

Thank you, Benoit.

Good morning, gentlemen.

Hi, Daryl.

First question is around FinishMaster and just some of the competitive dynamics in the industry. I'm wondering if you've seen any of the retail auto parts players look at shifting into paint at all?

I know there's a pretty concerted push by some of them to move greater into the do-it-for-me segment on the auto parts side, but just curious if they picked up any paint share.

Daryl, we're not seeing that dynamic play out, but it is a competitive environment.

Okay. And then just in terms of negotiations with customers at FinishMaster in the U.S., scale and certainty of supply has certainly been highlighted as important through the pandemic.

Has it made it easier to have those conversations with customers to win new work? Or is there any shifting dynamics in terms of small distributors getting pushed out?

Daryl, we manage our inventory and our fill rates very, very carefully. We're managing that on a daily, weekly, monthly basis.

So we're really focused on what we can control, and that's making sure we have the right product in the right place at the right time for the customers.

Which we do hope translates into finding ourselves being more attractive to the customers out there and increasing our market share.

Okay, great. And then in terms of the auto parts, have you seen any -- last quarter, you mentioned some mix shifts and the ability to get customers on to in-house branded products.

Have you seen any changes in those dynamics? And I guess, following on that, is there any margin mix shift related to maybe a normalization of those buying patterns in the future that you would expect?

Yes. I think it's something that we continue to work towards, Daryl, particularly -- I think that private label part of our business has been particularly helpful as we've thought about maintaining in-stock positions in all of our SKUs.

And one of the drivers of margin in the quarter and throughout the year, quite frankly, has been the mix of private labels.

Okay. And you would expect that to be a sustainable trend?

We think so. We think sort of the tightness or shortages in some of the branded products has allowed our clients or customers to really see the value proposition that these private brands bring.

Okay, great. Thanks.

That's it for me. Thanks, guys.

Thank you.

Good morning.

Hi, Zach.

So without asking you to peg it to a number by discussing your leverage comfort zone, would you be willing to take it higher than normal in the short term for the right acquisition? Or is it more of a hard cap in your mind?

Yes, Zachary. I think we've published or we will be publishing momentarily our amended credit facility on SEDAR, and I'm getting a nod here that it has been published.

So there's -- we have the -- our covenants are kind of clearly indicated in there as well as the step-up provisions that I mentioned. So we would want to make sure that in anything that we do, we're not in a position where we're bumping up too closely to those covenant levels.

Absolutely. And you see opportunities across the segment.

What's your pecking order for M&A among the 3? And are you looking at anything outside of your existing geographies?

I think the second part of that question will be easier to answer. I would say we're not looking outside of our existing geographies.

For the first part, it's really -- I can't say there's one particular preference. I think we're going to just look at each opportunity and judge it on its own merit and how it fits with that particular business unit.

That's helpful. And then last one for me.

Any interest in ever getting back into U.S. auto parts?

I never want to say never, but I would say at the current time, I think we have enough on our plate and enough opportunities ahead of us with the way the three business units are currently running.

Fair enough. Thanks for that, I'll turn it over.

Thank you.

Good morning. On the supply chain -- on the supply chain challenges, which were affecting the distribution center sector globally, could you provide any commentary as to how those trended toward the end of the quarter or into Q1, whether it started to result in lower fill rates or anything like that?

I think as we -- in the prepared remarks, we talked about it that we continue to see challenges. Fill rates really vary regionally and by different business units.

And really, what may be short in one particular time period makes up in another particular time period. And our team is doing a great job of finding other sources and finding ways to mitigate where we are seeing potential shortages.

So it's a constant ongoing challenge. I'm very pleased with how we're trying to manage through it, and we hope that as we progress through the year that some of these will start to disappear.

Okay. And on FinishMaster where volumes are still quite depressed compared to 2019, are you finding that as volumes start to recover, that you're starting to bump up against labor shortages?

Or maybe asked another way, like how much more capacity do you think you have to sort of build FinishMaster before labor shortages or wage inflation starts to become an issue for you?

I think it's less an issue for us as it is when you get down to the actual paint shop level where both a combination of part shortages with labor availability there is more what's probably holding back some of the overall demand. From our perspective, I'm comfortable that we have the capacity and as we continue to work on our network, the ability to handle good growth going forward.

It's really going to be when that demand is able to fully kick back.

Brian, would you be comfortable to provide us with a little more color on the acquisition pipeline that you see, whether you've signed any NDAs or LOIs yet, for example, and maybe the valuations that you see out there?

I would say, thanks for asking, Jonathan, but no, I wouldn't be comfortable on any of those.

Fair enough. Thanks for your comments.

All right. Thank you.

Thank you, operator, and thank you, everyone, for listening. We look forward to updating you on our progress during our next quarterly call.

Have a great day.