Uni-Select results shows across-the-board improvement

by | Nov 14, 2022 | 0 comments

Uni-Select acquires Ontario Bay Auto. To become Bumper to Bumper stores

Uni-Select Inc.’s latest financial results, for the third quarter, showed “impactful operational improvements to drive our business forward,” said Brian McManus, Executive Chair and Chief Executive Officer of Uni-Select.

Results for the third quarter ended September 30, 2022 showed:

THIRD QUARTER HIGHLIGHTS
• Consolidated sales of $452.7 million, up $26.6 million or 6.2%; Up 11.6% excluding the impact of unfavourable fluctuation of the British pound and the Canadian dollar against the US dollar; Organic growth(1) of 9.8% with all three segments reporting positive organic growth(1);
• EBITDA(1) increased to $47.6 million or 10.5% of sales from $35.3 million or 8.3% of sales; Adjusted EBITDA(1) increased 16.5% to $49.3 million or 10.9% of sales, compared to $42.3 million or 9.9% of sales;
• Net earnings of $22.4 million or $0.45 per diluted common share, an increase of $10.5 million or $0.20 per diluted common share; Adjusted net earnings(1) of $24.3 million or $0.48 per diluted common share, an increase of $7.1 million or $0.12 per diluted common share; and
• Total net debt(1) reduction of $50.5 million; Total net debt to adjusted EBITDA ratio(1) down to 1.44x driven by strong operating results and sound working capital management offsetting capital deployed on acquisitions.

NINE-MONTH HIGHLIGHTS :
• Consolidated sales of $1,306.6 million, up $94.0 million or 7.8%; Up 11.4% excluding the impact of unfavourable fluctuation of the British pound and the Canadian dollar against the US dollar; Organic growth(1) of 10.7% with all three segments reporting positive organic growth(1);
• EBITDA(1) increased 105.4% to $124.4 million or 9.5% of sales from $60.6 million or 5.0% of sales; Adjusted EBITDA(1) increased 33.4% to $145.8 million or 11.2% of sales, compared to $109.3 million or 9.0% of sales; and
• Net earnings of $52.9 million or $1.07 per diluted common share, an increase of $61.0 million or $1.26 per diluted common share; Adjusted net earnings(1) of $71.1 million or $1.42 per diluted common share, an increase of $37.9 million or $0.64 per diluted common share.
(All comparisons above to same period 2021 unless otherwise stated.)

“We are pleased by our third quarter results which reflect the ongoing efforts of our teams to deliver impactful operational improvements to drive our business forward. During the quarter, we realized organic growth(1) across all of our business, generated meaningful cash flow, and achieved higher EBITDA(1) compared to Q3 2021 despite unfavourable currency translation effects. During the quarter, we also completed the acquisition of Maslack, the most significant acquisition for Uni-Select since we began our turnaround in Q2 2021,” said Brian McManus, Executive Chair and Chief Executive Officer of Uni-Select.

“Notwithstanding the persisting currency translation impact and labor and inflation challenges, our focus on operational excellence and cost discipline should still yield modest year-over-year improvement in the fourth quarter of 2022. In the near term, we aim to drive organic growth(1) through volume gains and deliver synergies from recent acquisitions.

“Our solid financial position and ongoing capital discipline also enables us to capitalize on further acquisition opportunities to strengthen our market position. As we look out to 2023, we anticipate these factors to produce higher adjusted EBITDA(1) and adjusted EPS(1) compared to 2022,” concluded McManus.

THIRD QUARTER RESULTS
Compared to the Third Quarter of 2021:
Consolidated sales increased by $26.6 million or 6.2% to $452.7 million. Excluding the impact of unfavourable fluctuation of the British pound and the Canadian dollar against the US dollar of $23.0 million or 5.4%, consolidated sales increased by $49.6 million or 11.6%, compared to the same quarter in 2021, essentially driven by organic growth, with all three segments reporting positive organic growth, ranging between 7.8% and 15.3% for the quarter. Consolidated organic growth of 9.8% was driven primarily by price increases.

The Corporation generated EBITDA of $47.6 million for the quarter. Excluding impacts of stock-based compensation and special items expenses, adjusted EBITDA and adjusted EBITDA margin increased by $7.0 million and 1.0% respectively to $49.3 million and 10.9% of sales, from $42.3 million and 9.9% of sales in 2021. The increase is the result of price increases, rebates, improved operational performance, and scaling of payroll and operating expenses, offset by certain inflationary costs, including fuel and wages, as well as the timing of certain expenses incurred with respect to new store openings in the U.K. and acquisitions in Canada. Net earnings for the quarter increased by $10.5 million to $22.4 million.

Excluding impacts of change in estimate related to inventory obsolescence, stock-based compensation, special items expenses and amortization of intangibles assets related to the acquisition of GSF Car Parts, adjusted net earnings increased by $7.1 million to $24.3 million from $17.2 million in 2021. This performance is primarily attributable to price increases, as well as improved overall operational performance, including reduced net financing costs, net of income tax expense.

Segmented Third Quarter Results
The FinishMaster U.S. segment reported sales of $189.1 million, with organic growth of 8.1%, driven by price increases. EBITDA was $19.5 million for the quarter compared to $14.0 million in 2021. Excluding impacts of stock-based compensation and special items expenses, adjusted EBITDA and adjusted EBITDA margin improved by $4.2 million and 1.5% respectively to $20.1 million and 10.6% of sales, from $15.9 million and 9.1% of sales in 2021. This performance was driven by additional vendor rebates, price increases and higher sales, driving scaling benefits, offsetting higher delivery cost .

The Canadian Automotive Group segment reported sales of $160.2 million. Excluding the impact of unfavourable fluctuation of the Canadian dollar against the US dollar of $5.4 million or 3.7% during the third quarter of 2022, sales increased by $21.1 million or 14.5%, compared to the same quarter last year, driven by organic growth of 7.8% and acquisitions over the last twelve months representing 6.7%. The increase in organic growth was mainly driven by price increases.

This segment reported EBITDA and EBITDA margin of $21.0 million and 13.1% respectively for the quarter compared to $16.2 million and 11.2% in 2021. Excluding impacts of stock-based compensation and special items expenses, adjusted EBITDA and adjusted EBITDA margin improved by $4.3 million and 1.6% respectively to $21.1 million or 13.2% of sales, from $16.8 million or 11.6% of sales in 2021. This increase is mainly attributable to price increases and product mix, and higher sales, driving scaling benefits, offset by transactions costs related to recent acquisitions and foreign currency losses due to the depreciation of the Canadian dollar during the quarter.

The GSF Car Parts U.K. segment reported sales of $103.5 million. Excluding the impact of unfavourable fluctuation of the British pound against the US dollar of $17.6 million or 16.5% during the third quarter of 2022, sales increased by $14.4 million or 13.4%, mainly driven by organic growth of 15.3%, offsetting an unfavourable variance in the number of billing days. The increase in organic growth was mainly driven by price increases, the contribution of recently opened greenfield stores, which represents about half of the organic growth, as well as click and collect orders. This segment reported EBITDA and EBITDA margin of $9.3 million and 9.0% respectively for the quarter compared to $10.8 million and 10.1% in 2021. Excluding impacts of stock-based compensation and special items expenses, adjusted EBITDA and adjusted EBITDA margin decreased by $1.5 million and 1.1% respectively to $9.5 million and 9.2% of sales, from $11.0 million and 10.3% of sales in 2021. This variance is mainly attributable to inflationary fuel and utility costs, higher repair costs due to new fleet replacement delays, as well as higher payroll costs. This was partially offset by higher sales and rebates in the third quarter of 2022, driving scaling benefits.

NINE-MONTH PERIOD RESULTS
Compared to the Nine-Month Period of 2021:
Consolidated sales of $1,306.6 million for the nine-month period increased by $94.0 million or 7.8%. Excluding the impact of unfavourable fluctuation of the British pound and the Canadian dollar against the US dollar of $43.4 million or 3.6%, consolidated sales increased by $137.4 million or 11.4%, driven by organic growth with all three segments reporting positive organic growth, ranging between 8.7% and 13.3% for the nine-month period. Consolidated organic growth of 10.7% was driven primarily by price increases.

The Corporation reported EBITDA of $124.4 million for the period. Excluding impacts of change in estimate related to inventory obsolescence, stock-based compensation and special items expenses, adjusted EBITDA and adjusted EBITDA margin increased by $36.5 million and 2.2% respectively to $145.8 million and 11.2% of sales, from $109.3 million and 9.0% of sales in 2021. This performance is the result of price increases, rebates, improved operational performance, scaling of payroll and operating expenses, offset by certain inflationary costs, including fuel and wages, as well as the timing of certain expenses incurred with respect to new store openings in the U.K. and acquisitions in Canada.

Net earnings for the nine-month period increased by $61.0 million to $52.9 million. Excluding impacts of change in estimate related to inventory obsolescence, stock-based compensation, special items expenses, amortization of intangibles assets related to the acquisition of GSF Car Parts and the net tax impact of change in rates and reversal of a contingency provision, adjusted net earnings for the current period increased by $37.9 million to $71.1 million from $33.2 million in 2021. This performance is primarily attributable to price increases as well as improved overall operational performance, including reduced net financing costs, net of income tax expense.

Segmented Nine-Month Period Results
The FinishMaster U.S. segment reported sales of $548.3 million, with organic growth of 8.7%, or $44.0 million, driven by price increases. EBITDA was $56.9 million for the period, compared to $15.9 million in 2021. Excluding impacts of change in estimate related to inventory obsolescence, stock-based compensation and special items expenses, adjusted EBITDA and adjusted EBITDA margin improved by $19.7 million and 2.9% respectively to $59.5 million and 10.8% of sales, from $39.8 million and 7.9% of sales iN 2021,

This performance was driven by additional vendor rebates, price increases and higher sales, driving scaling benefits, offsetting higher delivery cost and bad debt expenses.

The Canadian Automotive Group segment reported sales of $451.0 million, an increase of 11.4%. Excluding the impact of unfavourable fluctuation of the Canadian dollar against the US dollar of $11.8 million or 2.9% during the nine-month period of 2022, sales increased by $57.8 million or 14.3%, compared to the same period last year, largely driven by organic growth of 11.2% and, to a lesser extent, acquisitions over the last twelve months representing 3.1%. The increase in organic growth was mainly driven by price increases.

This segment reported EBITDA and EBITDA margin of $52.0 million and 11.5% respectively for the period compared to $45.2 million and 11.2% in 2021. Excluding impacts of change in estimate related to inventory obsolescence, stock-based compensation and special items expenses, adjusted EBITDA and adjusted EBITDA margin improved by $17.5 million and 2.7% respectively to $64.2 million and 14.2% of sales, from $46.7 million and 11.5% of sales in 2021. This increase is mainly attributable to price increases and product mix, and higher sales, driving scaling benefits, offset by transactions costs related to recent acquisitions and foreign currency losses due to the depreciation of the Canadian dollar.

The GSF Car Parts U.K. segment reported sales of $307.4 million, an increase of 1.3%. Excluding the impact of the unfavourable fluctuation of the British pound against the US dollar of $31.6 million or 10.4% during the nine-month period of 2022, sales increased by $35.5 million or 11.7%, mainly driven by organic growth of 13.3%, offsetting an unfavourable variance in the number of billing days.

The increase in organic growth was mainly driven by price increases and the contribution of recently opened greenfield stores.

This segment reported EBITDA and EBITDA margin of $26.5 million and 8.6% respectively for the period compared to $26.3 million and 8.7% in 2021. Excluding impacts of stock-based compensation and special items expenses, adjusted EBITDA and adjusted EBITDA margin decreased by $1.0 million and 0.4% respectively to $28.5 million and 9.3% of sales, from $29.5 million and 9.7% of sales in 2021.

This variance in adjusted EBITDA margin is mainly attributable to inflationary fuel and utility costs, higher repair costs due to new fleet replacement delays, as well as higher payroll costs.

This was partially offset by higher sales and rebates in the period of 2022, driving scaling benefits. The nine-month period of 2021 benefited from governmental occupancy subsidies of $0.8 million.

CONFERENCE CALL
Uni-Select held a conference call to discuss its results for the third quarter of 2022 on November 4, 2022, at 8:00 AM Eastern Time.
A recording of the conference call is be available from 11:30 AM Eastern Time on November 4, 2022, until 11:59 PM Eastern Time on December 4, 2022. To access the replay, dial 1 888 390-0541 followed by 837559#.
A webcast of the quarterly results conference call will also be accessible through the “Investors” section at uniselect.com where a replay will also be archived. Listeners should allow ample time to access the webcast and supporting slides.

(1) This information represents a non-GAAP or other financial measure. Non-GAAP and other financial measures do not have any
standardized meaning prescribed by GAAP and are therefore unlikely to be comparable to similar measures presented by other
entities. Refer to “Non-GAAP and other financial measures” section for reconciliation and further details.

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