Uni-Select Inc. reported its financial results for the fourth quarter and full year results ended December 31, 2021, showing a strong finishing quarter and year over year growth
“We ended the year on a very strong note with 2021 sales up almost 10% year-over-year, adjusted EBITDA of $147 million and net earnings back in positive territory. 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,” stated Brian McManus, Executive Chair and Chief Executive Officer of Uni-Select.
“In 2021, we generated cash flow from operating activities of $114 million, which we used to make strategic investments to grow our business as well as reduce our total net debt(1) to $309 million, its lowest level since 2017, ending the period with a leverage ratio of 2.11.
“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 and lower financing costs as we continue to reinvest in the business and drive operational improvements in our three business units. Looking to the future, and making use of our improved balance sheet, we are beginning to consider strategic acquisition opportunities,” concluded McManus.
FOURTH QUARTER HIGHLIGHTS (Compared to the Fourth Quarter of 2020):
- Consolidated sales of $400.2 million, up 9.3%, driven by organic growth(1) of 7.5% primarily resulting from increased demand and prices as global markets continue to recover from the COVID-19 pandemic;
- EBITDA(1) increased 45.9% to $31.3 million or 7.8% of sales from $21.5 million or 5.9% of sales in 2020, as a result of improvements in gross margin due to volume and enhanced scaling of payroll and operating expenses; Adjusted EBITDA(1) increased 47.2% to $37.4 million or 9.4% of sales;
- Basic EPS of $0.21, up $0.33; Basic adjusted EPS(1) of $0.36, up $0.37 due to increased sales, enhanced scaling of operating costs as a result of disciplined operational performance and lower interest costs as a result of the credit facility amendments completed during 2021; and
- Total net debt to adjusted EBITDA(1) ratio of 2.11, driven by strong operating results, continued focus on working capital management and capital discipline.
TWELVE-MONTHS HIGHLIGHTS (Compared to the Twelve-Month Period of 2020):
- Consolidated sales of $1,612.8 million, up 9.6%, driven by organic growth(1) of 6.0% primarily a result of increased demand and price increases as global markets continue to recover from the COVID-19 pandemic, offsetting fewer billing days;
- EBITDA(1) increased 42.1% to $91.9 million or 5.7% of sales from $64.6 million or 4.4% of sales in 2020, as a result of an improvement in gross margin and scaling of operating costs; Adjusted EBITDA(1) increased 58.1% to $146.7 million or 9.1% of sales; and
- Basic EPS of $0.02, up $0.76; Basic adjusted EPS(1) of $1.14, up $1.26 due to increased sales, enhanced scaling of operating costs as a result of disciplined operational performance and lower interest costs as a result of the credit facility amendments completed during 2021 and lower debt levels.
CONSOLIDATED FINANCIAL RESULTS
During the year, the Corporation updated its definition of adjusted EBITDA, adjusted EBT, adjusted earnings and basic adjusted earnings (loss), and is now excluding stock-based compensation. Management believes this new definition better reflects its core operational performance. Accordingly, comparative figures were adjusted to reflect this change, including certain ratios such as total net debt to adjusted EBITDA. (Refer to the “Non-GAAP Financial Measures” section for further details.)
The following table presents selected consolidated information:
| Fourth Quarters Ended December 31, | Twelve-Month Periods Ended Dec. 31, | |||||
| (in thousands of US dollars, except per share amounts, | 2021 | 2020 | 2021 | 2020 | ||
| percentages and otherwise specified) | $ | $ | % | $ | $ | % |
| OPERATING RESULTS | ||||||
| Sales | 400,175 | 366,246 | 9.3 | 1,612,800 | 1,471,816 | 9.6 |
| EBITDA(1) | 31,312 | 21,457 | 45.9 | 91,882 | 64,643 | 42.1 |
| EBITDA margin(1) | 7.8 % | 5.9 % | 5.7 % | 4.4 % | ||
| Adjusted EBITDA(1) | 37,433 | 25,425 | 47.2 | 146,695 | 92,791 | 58.1 |
| Adjusted EBITDA margin(1) | 9.4 % | 6.9 % | 9.1 % | 6.3 % | ||
| EBT(1) | 10,311 | (2,521) | 509.0 | 1,803 | (35,304) | 105.1 |
| EBT margin(1) | 2.6 % | (0.7) % | 0.1 % | (2.4) % | ||
| Adjusted EBT(1) | 19,209 | 2,512 | 664.7 | 62,748 | (3,010) | 2,184.7 |
| Adjusted EBT margin (1) | 4.8 % | 0.7 % | 3.9 % | (0.2) % | ||
| Change in estimate related to inventory obsolescence | 1,019 | — | 21,619 | — | ||
| Stock-based compensation | 5,177 | 1,525 | 11,380 | 3,980 | ||
| Special items | (75) | 2,443 | 21,814 | 24,168 | ||
| Net earnings (loss) | 9,008 | (5,075) | 277.5 | 895 | (31,531) | 102.8 |
| Adjusted earnings (loss)(1) | 15,678 | (292) | 5,469.2 | 48,885 | (4,901) | 1,097.4 |
| Free cash flows(1) | 19,624 | 46,061 | (57.4) | 91,452 | 122,276 | (25.2) |
| COMMON SHARE DATA | ||||||
| Basic earnings (loss) per share | 0.21 | (0.12) | 271.8 | 0.02 | (0.74) | 102.8 |
| Diluted earnings (loss) per share | 0.20 | (0.12) | 267.0 | 0.02 | (0.74) | 102.7 |
| Basic adjusted earnings (loss) per share (1) | 0.36 | (0.01) | 3,756.5 | 1.14 | (0.12) | 1,021.0 |
| Number of shares outstanding (in thousands) (3) | 43,582 | 42,387 | 43,582 | 42,387 | ||
| Weighted average number of outstanding shares | ||||||
| Basic (in thousands) | 43,781 | 42,387 | 42,904 | 42,387 | ||
| Diluted (in thousands) | 52,302 | 42,387 | 43,064 | 42,387 |
| As at December 31, | ||
| 2021 | 2020 | |
| $ | $ | |
| FINANCIAL POSITION | ||
| Total net debt(1) | 309,230 | 370,252 |
| Credit facilities (including revolving and term loans) at nominal value | 235,384 | 318,379 |
| Convertible debentures | 78,327 | 87,728 |
| (1) | This is a non-GAAP financial measure. Refer to the “Non-GAAP Financial Measures” section for further details. |
| (2) | On April 20, 2020, the Board decided to suspend dividend payments. |
| (3) | The outstanding number of shares corresponds to the issued common shares less the shares in the Share Trust. |
FOURTH QUARTER RESULTS
Compared to the Fourth Quarter of 2020:
Consolidated sales of $400.2 million for the quarter increased by 9.3%, mainly driven by organic growth of 7.5% and favorable Canadian and British currency fluctuations, offsetting the adverse effect of fewer billing days. Consolidated organic growth continued to improve in the quarter reflecting the global market recovery.
The Corporation generated EBITDA of $31.3 million for the quarter, which was mainly impacted by stock-based compensation of $5.2 million primarily due to the Corporation’s share price appreciation, as well as by a change in estimate related to inventory obsolescence of $1.0 million. Adjusted EBITDA and adjusted EBITDA margin increased by $12.0 million and 2.5% respectively to $37.4 million and 9.4% of sales, from $25.4 million and 6.9% of sales in 2020. This performance was largely driven by additional vendor rebates in all segments. Furthermore, the quarter benefited from scaling benefits linked to organic growth and a streamlined cost structure. These elements were, in part, offset by a higher level of expenses during the current quarter of 2021, as the fourth quarter of 2020 benefited from government assistance programs, lower labor costs due to temporary employee furloughs and temporary closure of company-operated stores in response to the reduced demand effects of the pandemic. The current quarter of 2021 also had higher short-term incentive expenses, due to operational performance.
Net earnings for the quarter increased by $14.1 million to $9.0 million and adjusted earnings increased by $16.0 million to $15.7 million from an adjusted loss of $(0.3) million in 2020. This performance is primarily attributable to increased sales, better scaling on operating costs as a result of disciplined operational performance, lower interest costs as a result of the credit facility amendments completed during both the second and the fourth quarters of 2021 and lower debt levels.
Segmented Fourth Quarter Results
The FinishMaster U.S. segment reported sales of $167.8 million, organically increasing by 8.5%. This segment reported organic growth for a third consecutive quarter, stimulated by the market recovery across its operations. EBITDA was $15.4 million for the quarter, compared to $8.2 million in 2020. Adjusted EBITDA and adjusted EBITDA margin improved by $7.2 million and 3.9% respectively to $15.6 million and 9.3% of sales, from $8.4 million and 5.4% of sales in 2020. This performance was driven by higher sales volume and rebates, increasing gross margin and improving fixed cost absorption. During the same quarter in 2020, this segment was affected by lower rebates in relation to the optimization of the inventory levels. Starting in the third quarter of 2020, this segment has reported improved adjusted EBITDA in each quarter over the comparable quarter in the prior year, both in dollar and as a percentage of sales, as a result of measures put in place and a broader market recovery.
The Canadian Automotive Group segment reported sales of $136.0 million, an increase of 8.8% supported by organic growth of 5.5%, from higher demand and price increases during the current quarter as well as the appreciation of the Canadian dollar, offset by the adverse effect of a fewer number of billing days. This segment reported EBITDA of $14.7 million for the quarter, compared to $12.7 million in 2020. Adjusted EBITDA and adjusted EBITDA margin increased by $3.3 million and 1.6% respectively to $16.8 million or 12.4% of sales, from $13.5 million or 10.8% of sales in 2020. The variance is mainly explained by additional vendor rebates, product mix and price increases, which were partially offset by foreign exchange losses while the fourth quarter of 2020 benefited from foreign exchange gains, as well as by higher short-term payroll incentive expenses, in line with the operating performance of the segment.
The GSF Car Parts U.K. segment reported sales of $96.4 million, an increase of 11.2%, mainly driven by organic growth of 8.6% and a strong British pound against the US dollar during the current quarter of 2021. Organic growth of the U.K. segment continued to improve during the quarter and sales were in line with 2019. This segment reported EBITDA of $6.5 million for the quarter, compared to $6.7 million in 2020. Adjusted EBITDA and adjusted EBITDA margin increased by $0.7 million and decreased by 0.1%, respectively, to $7.4 million and 7.6% of sales, from $6.7 million and 7.7% of sales in 2020. This improvement is attributable to additional sales volume, increasing gross margin due to higher vendor rebates and improved fixed cost absorption. Furthermore, the fourth quarter of 2020 benefited from government occupancy subsidies of $1.0 million or 1.2% of sales. Starting in the third quarter of 2020, this segment has reported improved adjusted EBITDA in each quarter over the comparable quarter in the prior year in dollar terms.
TWELVE-MONTH PERIOD RESULTS
Compared to the Twelve-Month Period of 2020:
Consolidated sales increased by $141.0 million or 9.6% to $1,612.8 million for the period, mainly driven by organic growth of 6.0% as the markets in which the Corporation operates, continue to recover from the COVID-19 pandemic and the favorable fluctuations of the British and the Canadian currencies. This performance offsets the adverse impact of fewer billing days and the expected sales loss from the consolidation of company-operated stores.
The Corporation reported EBITDA of $91.9 million for the period, which was impacted by a change in estimates of $21.6 million related to inventory obsolescence primarily in the FinishMaster U.S. segment, special items of $21.8 million, mainly for severance related to changes to executive leadership, as well as stock-based compensation of $11.4 million primarily as a result of the strong appreciation of the Corporation’s share price. Adjusted EBITDA and adjusted EBITDA margin increased by $53.9 million and 2.8% respectively to $146.7 million and 9.1% of sales, from $92.8 million and 6.3% of sales in 2020. This performance resulted from improved gross margins due to additional volume rebates and price increases, a streamlined cost structure, as well as an improved fixed cost absorption related to organic growth. Furthermore, the results of the twelve-month period benefited from improved collection of receivables while additional bad debt expense was recorded during 2020. These elements were partially offset by a higher overall level of expenses related to the sales recovery and by higher short-term payroll incentives due to operational performance, while the same period of 2020 benefited from temporary employee furloughs and closure of company operated-stores in response to the reduced demand effects of the pandemic. In 2020, the Corporation also benefited from governmental assistance programs that were offset by additional obsolescence.
The Corporation reported net earnings of $0.9 million for the current period compared to a net loss of $(31.5) million in 2020. Adjusted earnings for the current period increased by $53.8 million to $48.9 million from an adjusted loss of $(4.9) million in 2020. This improvement in adjusted earnings was driven by higher volume of sales and improved overall operational performance, including reduced net financing costs as a result of the amendments to the credit facility completed during the year 2021 and lower debt levels.
Segmented Twelve-Month Period Results
The FinishMaster U.S. segment reported sales of $672.1 million, an increase of 2.8%, driven by organic growth of 3.6%, or $23.6 million, in part offset by a lower number of billing days. This segment reported EBITDA of $31.3 million for the period, which was impacted by a change in estimates related to inventory obsolescence, special items and stock-based compensation, totaling $24.1 million. Adjusted EBITDA and adjusted EBITDA margin increased by $22.4 million and 3.2% respectively to $55.4 million and 8.2% of sales, from $32.9 million and 5.0% of sales in 2020. This performance is attributable to additional vendor incentives and price increases, cost reduction initiatives, including workforce optimization, company-operated store consolidation, diligent control of overall discretionary expenses and a partial reversal of bad debt provision due to improved collection. During the twelve-month period last year, this segment was affected by additional inventory obsolescence and bad debt expenses.
The Canadian Automotive Group segment reported sales of $540.9 million, an increase of 11.4%, driven by the appreciation of the Canadian dollar and organic growth of 4.2%. The organic increase in sales was the result of a higher demand and price increases. This segment reported EBITDA of $59.9 million for the period, which was impacted by stock-based compensation, special items and a change in estimate related to inventory obsolescence. Adjusted EBITDA and adjusted EBITDA margin increased by $15.3 million and 1.8% respectively to $63.5 million and 11.7% of sales, from $48.2 million and 9.9% of sales in 2020. This performance is mainly attributable to additional vendor rebates, product mix and price increases. These elements were partially offset by higher short-term incentive expenses, due to the operating performance of the segment. Furthermore, the twelve-month period of 2020 benefited from government payroll subsidies of $3.3 million.
The GSF Car Parts U.K. segment reported sales of $399.8 million, an increase of 20.2%, mainly from organic growth of 13.1% and a strong British pound against the US dollar during the year 2021, exceeding the unfavorable variance in the number of billing days and the expected sales loss resulting from the consolidation of company-operated stores. This segment reported EBITDA of $32.8 million for the period, which was mainly impacted by special items and stock-based compensation. Adjusted EBITDA and adjusted EBITDA margin increased by $16.3 million and 3.0% respectively to $36.8 million and 9.2% of sales, from $20.5 million and 6.2% of sales in 2020. This improvement was driven by additional sales volume, as well as improved gross margin from higher vendor rebates and price increases. During the twelve-month period of 2020, results were affected by additional reserves for inventory obsolescence and bad debt, which were specific to the economic slowdown in the U.K.
AMENDMENT CREDIT FACILITY
In December 2021, the Corporation entered into a second amended and restated credit agreement. Under this agreement, the aggregate amount available under the credit facility was reduced to $400,000 (plus an accordion feature of $200,000) through the conversion into one single secured long-term revolving credit facility, and immediate cancellation, of the outstanding secured term facilities.
CONFERENCE CALL
Uni-Select hosed a conference call to discuss its fourth-quarter and annual results for 2021 on February 18, 2022, at 8:00 AM Eastern.
A recording of the conference call will be available from 11:30 AM Eastern on February 18, 2022, until 11:59 PM Eastern on March 18, 2022. To access the replay, dial 1 888 390-0541 followed by 630730#.
A webcast of the quarterly results conference call will also be accessible through the “Investors” section of Uni-Select’s website at uniselect.com where a replay will also be archived. Listeners should allow ample time to access the webcast and supporting slides.
The following is a reconciliation of organic growth.
| Fourth Quarters Ended December 31, | Twelve-Month Periods Ended Dec. 31, | |||
| 2021 | 2020 | 2021 | 2020 | |
| $ | $ | $ | $ | |
| FinishMaster U.S. | 167,788 | 154,657 | 672,124 | 653,720 |
| Canadian Automotive Group | 135,961 | 124,908 | 540,879 | 485,388 |
| GSF Car Parts U.K. | 96,426 | 86,681 | 399,797 | 332,708 |
| Sales | 400,175 | 366,246 | 1,612,800 | 1,471,816 |
| % | % | |||
| Sales variance | 33,929 | 9.3 | 140,984 | 9.6 |
| Translation effect of the Canadian dollar and the British pound | (6,981) | (1.9) | (60,911) | (4.1) |
| Impact of number of billing days | 1,089 | 0.3 | 9,023 | 0.6 |
| Loss of sales from the consolidation of company-operated stores | — | — | 1,185 | 0.1 |
| Acquisitions | (520) | (0.2) | (2,659) | (0.2) |
| Consolidated organic growth | 27,517 | 7.5 | 87,622 | 6.0 |
The following is a reconciliation of EBITDA and adjusted EBITDA.
| Fourth Quarters Ended December 31, | Twelve-Month Periods Ended Dec. 31, | |||||
| 2021 | 2020 | 2021 | 2020 | |||
| $ | $ | % | $ | $ | % | |
| Net earnings (loss) | 9,008 | (5,075) | 895 | (31,531) | ||
| Income tax expense (recovery) | 1,303 | 2,554 | 908 | (3,773) | ||
| Net financing costs | 6,595 | 9,087 | 30,224 | 37,350 | ||
| Depreciation and amortization | 14,406 | 14,891 | 59,855 | 62,597 | ||
| EBITDA | 31,312 | 21,457 | 45.9 % | 91,882 | 64,643 | 42.1 % |
| EBITDA margin | 7.8 % | 5.9 % | 5.7 % | 4.4 % | ||
| Change in estimate related to inventory obsolescence | 1,019 | — | 21,619 | — | ||
| Stock-based compensation | 5,177 | 1,525 | 11,380 | 3,980 | ||
| Special items | (75) | 2,443 | 21,814 | 24,168 | ||
| Adjusted EBITDA | 37,433 | 25,425 | 47.2 % | 146,695 | 92,791 | 58.1 % |
| Adjusted EBITDA margin | 9.4 % | 6.9 % | 9.1 % | 6.3 % |
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