Uni-Select Inc. reported its financial results for the second quarter ended June 30, 2022, reflecting year-over-year improvement, but with headwinds projected for the second half of the year.

“We are pleased with our performance in the second quarter and the significant year over year improvements in sales and adjusted EBITDA,” said Brian McManus, Executive Chair and Chief Executive Officer of Uni-Select..

“These results reflect a higher level of vendor rebates and sustained operational improvements across our three business units. We also generated strong cash flow, which we continue to direct toward debt reduction. One year into my tenure as CEO, I am pleased by the improvements we have made to our operations, financial results and our balance sheet.”

“While we will face certain headwinds in the second half of the year, namely from currency translation effects and the impact of labor and operating cost inflation, we expect to have stronger financial results in the second half of 2022 as compared to 2021, albeit to a lesser extent than those seen in the first and second quarters, as we begin to lap certain operational improvements and the timing of vendor rebates earned in the back half of last year. We continue to focus on driving operational excellence and look forward to further leveraging our improved balance sheet and operating results, to re-invest in our business and explore additional acquisition opportunities to further expand and consolidate our market position,” concluded Mr. McManus.

SECOND QUARTER HIGHLIGHTS
(Compared to the Second Quarter of 2021):
• Consolidated sales of $444.3 million, up $27.9 million or 6.7%; Up 10.8% excluding the impact of unfavourable fluctuation of the British pound and the Canadian dollar against the US dollar; Organic growth (1) of 10.8% with all three segments reporting positive organic growth(1);
• EBITDA(1) increased to $48.6 million or 10.9% of sales from $0.5 million or 0.1% of sales; Adjusted EBITDA(1) increased 38.5% to $51.3 million or 11.5% of sales, compared to $37.0 million or 8.9% of sales; ‘• Net earnings of $22.8 million or $0.46 per diluted common share, an increase of $43.1 million or $0.94 per diluted common share; Adjusted net earnings(1) of $25.6 million or $0.51 per diluted common share, an increase of $14.7 million or $0.27 per diluted common share; and
• Total net debt(1) reduction of $56.9 million; Total net debt to adjusted EBITDA(1) ratio down to 1.65x driven by strong operating results and sound working capital management.

SIX-MONTH HIGHLIGHTS (Compared to the Six-Month Period of 2021):
• Consolidated sales of $853.9 million, up $67.4 million or 8.6%; Up 11.2% excluding the impact of unfavourable fluctuation of the British pound and the Canadian dollar against the US dollar; Organic growth(1) of 11.2% with all three segments reporting positive organic growth(1);
• EBITDA(1) increased 204.3% to $76.8 million or 9.0% of sales from $25.2 million or 3.2% of sales; Adjusted EBITDA(1) increased 44.1% to $96.5 million or 11.3% of sales; and
• Net earnings of $30.5 million or $0.63 per diluted common share, an increase of $50.5 million or $1.10 per diluted common share; Adjusted net earnings(1) of $46.9 million or $0.94 per diluted common share, an increase of $30.9 million or $0.56 per diluted common share.

SECOND QUARTER RESULTS
Compared to the Second Quarter of 2021:
Consolidated sales increased by $27.9 million or 6.7% to $444.3 million. Excluding the impact of unfavourable fluctuation of the
British pound and the Canadian dollar against the US dollar of $17.0 million or 4.1%, consolidated sales increased by $44.9 million or 10.8%, compared to the same quarter in 2021, essentially driven by organic growth, with all three segments reporting positive organic growth, ranging between 8.9% and 13.8% for the quarter. Consolidated organic growth of 10.8% was driven primarily by the impact of price increases.

The Corporation generated EBITDA of $48.6 million for the quarter. 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 $14.3 million and 2.6% respectively to $51.3 million million and 11.5% of sales, from $37.0 million and 8.9% of sales in 2021.

The increase is the result of sustained strong gross margins, which includes higher rebates in all three business segments, 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 a small acquisition in Canada. Net earnings for the quarter increased by $43.0 million to $22.8 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 increased by $14.7 million to $25.6 million from $10.9 million in 2021. This performance is primarily attributable to higher sales and rebates as well as improved overall operational performance, including reduced net financing costs, net of income tax expense.

Segmented Second Quarter Results

The Canadian Automotive Group segment reported sales of $161.0 million, an increase of 10.9% largely driven by organic growth of 13.8% and, to a lesser extent, acquisitions over the last twelve months, partially offset by an unfavourable fluctuation of the Canadian dollar against the US dollar.

The increase in organic sales was mainly driven by price increases. This segment reported EBITDA and EBITDA margin of $25.6 million and 15.9% respectively for the quarter compared to $17.2 million and 11.8% in 2021. Excluding impacts of stock-based compensation and special items expenses, adjusted EBITDA and adjusted EBITDA margin improved by $8.1 million and 3.8% respectively to $26.0 million or 16.1% of sales, from $17.9 million or 12.3% of sales in 2021. This increase is mainly attributable to additional vendor rebates, price increases and higher sales, driving scaling benefits, as well as a reversal of bad debt expenses incurred in prior periods.

The FinishMaster U.S. segment reported sales of $186.5 million, with organic growth of 8.9%, driven by price increases. EBITDA was $18.8 million for the quarter compared to negative $7.7 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 $6.1 million and 2.6% respectively to $19.8 million and 10.6% of sales, from $13.7 million and 8.0% 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 GSF Car Parts U.K. segment reported sales of $96.8 million. Excluding the impact of unfavourable fluctuation of the British pound against the US dollar of $10.8 million or 10.8% during the second quarter of 2022, sales increased by $7.8 million or 7.7%, mainly driven by organic growth of 9.7%, offsetting an unfavourable variance in the number of billing days. Organic growth continued to improve in the quarter from price increases as well as from the contribution of recently opened greenfield stores, which represents about half of the organic growth. This segment reported EBITDA and EBITDA margin of $7.5 million and 7.8% respectively for the quarter compared to $5.6 million and 5.6% in 2021. Excluding impacts of stock-based compensation and special items expenses, adjusted EBITDA decreased by $0.4 million and adjusted EBITDA margin decreased by 0.1%, respectively, to $8.0 million and 8.3% of sales, from $8.4 million and 8.4% 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 second quarter of 2022, driving scaling benefits. The second quarter of 2021 benefited from governmental occupancy subsidies of $0.4 million.

SIX-MONTH PERIOD RESULTS

Compared to the Six-Month Period of 2021:

Consolidated sales of $853.9 million for the six-month period increased by $67.4 million or 8.6%. Excluding the impact of unfavourable fluctuation of the British pound and the Canadian dollar against the US dollar of $20.2 million or 2.6%, consolidated sales increased by $87.6 million or 11.2%, driven by organic growth with all three segments reporting positive organic growth, ranging between 9.0% and 13.1% for the six-month period. Consolidated organic growth of 11.2% was driven primarily by the impact of price increases.

The Corporation reported EBITDA of $76.8 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 $29.5 million and 2.8% respectively to $96.5 million and 11.3% of sales, from $67.0 million and 8.5% of sales in 2021. This performance is the result of sustained strong gross margins, which includes higher rebates from all three business segments, 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 small acquisitions in Canada.

Net earnings for the six-month period increased by $50.5 million to $30.5 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 $30.9 million to $46.9 million from $16.0 million in 2021. This performance is primarily attributable to higher sales and rebates as well as improved overall operational performance, including reduced net financing costs, net of income tax expense.

Segmented Six-Month Period Results

The Canadian Automotive Group segment reported sales of $290.8 million, an increase of 11.7%, driven by organic growth of 13.1% and, to a lesser extent, acquisitions over the last twelve months, partially offset by an unfavourable fluctuation of the Canadian dollar against the US dollar. The increase in organic growth was mainly driven by price increases. This segment reported EBITDA and EBITDA margin of $31.0 million and 10.7% respectively for the period compared to $28.9 million and 11.1% 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 $13.2 million and 3.3% respectively to $43.1 million and 14.8% of sales, from $29.9 million and 11.5% of sales in 2021. This increase is mainly attributable to additional vendor rebates, price increases and higher sales, driving scaling benefits.

The FinishMaster U.S. segment reported sales of $359.2 million, with organic growth of 9.0%, or $29.8 million, driven by price increases. EBITDA was $37.4 million for the period, compared to $1.9 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 $15.6 million and 3.8% respectively to $39.4 million and 11.0% of sales, from $23.8 million and 7.2% 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 GSF Car Parts U.K. segment reported sales of $203.9 million, an increase of $7.3 million or 3.7%. Excluding the impact of the
unfavourable fluctuation of the British pound against the US dollar during the six-month period of 2022, sales increased by
$21.2 million or 10.8%, mainly driven by organic growth of 12.2%, offsetting an unfavourable variance in the number of billing days.
The increase in organic sales was mainly driven by price increases and the contribution of recently opened greenfield stores. This
segment reported EBITDA and EBITDA margin of $17.2 million and 8.4% respectively for the period compared to $15.5 million and
7.9% in 2021. Excluding impacts of stock-based compensation and special items expenses, adjusted EBITDA increased by $0.6 million and adjusted EBITDA margin decreased by 0.1%, respectively to $19.0 million and 9.3% of sales, from $18.4 million and 9.4% 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 six-month period of 2021 benefited from governmental occupancy subsidies of $0.8 million.

SUBSEQUENT EVENT
On July 25, 2022, the Corporation entered into a definitive agreement to acquire all the shares of Maslack Supply Limited and related real estate properties. The acquisition closed on August 2, 2022 for a total purchase price of CAD$52.25 million.

CONFERENCE CALL
Uni-Select will host a conference call to discuss its results for the second quarter of 2022 on August 5, 2022, at 8:00 AM Eastern Time. To join the conference, dial 1 888 390-0549 (or 1 416 764-8682 for international calls).

A recording of the conference call will be available from 11:30 AM Eastern Time on August 5, 2022, until 11:59 PM Eastern Time on September 5, 2022. To access the replay, dial 1 888 390-0541 followed by 752647#. A webcast of the quarterly results conference call will also be accessible through the “Investors” section of our website at uniselect.com where a replay will also be archived. Listeners should allow ample time to access the webcast and supporting slides.

ABOUT UNI-SELECT
With over 5,000 employees in Canada, the U.S. and the U.K., Uni-Select is a leader in the distribution of automotive refinish and
industrial coatings and related products in North America, as well as a leader in the automotive aftermarket parts business in Canada and in the U.K. Uni-Select is headquartered in Boucherville, Québec, Canada, and its shares are traded on the Toronto Stock Exchange under the symbol UNS.
In Canada, Uni-Select supports over 16,000 automotive repair and collision repair shops and more than 4,000 shops through its
automotive repair/installer shop banners and automotive refinish banners. Its national network includes over 1,000 independent
customer locations and more than 80 company-operated stores, many of which operate under the Uni-Select BUMPER TO BUMPER®, AUTO PARTS PLUS® and FINISHMASTER® store banner programs.
In the United States, Uni-Select, through its wholly-owned subsidiary FinishMaster, Inc., operates a national network of over 145 automotive refinish company-operated stores under the FINISHMASTER® banner, which supports over 30,000 customers annually.
In the U.K., Uni-Select, through GSF Car Parts, is a major distributor of automotive parts supporting over 20,000 customer accounts
with a network of over 180 company-operated stores.

www.uniselect.com