Colabor Group Inc.

Good morning, ladies and gentlemen, and welcome to the Color Board Group first quarter 2022 results conference call. At this time, all lines are less than only mode. Following the presentation, we will conduct a question and answer session open to analysts only. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Thursday, April 28, 2022. Before turning the meeting over to management, I would like to remind listeners that this conference call contains forward-looking information within the meaning of applicable Canadian securities laws and subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated. I refer the audience to the forward-looking statement as detailed in the presentation supporting this conference call and available on the company's website in the investor section under events and presentation at www.callboard.com. Furthermore, risks are discussed throughout the most recent MD&A under the heading risks. I would now like to turn conference over to Mr. Louis Frenette, President and CEO of Colabor Group. Please go ahead, sir.

Thank you, Anas. Good morning, everyone, and welcome to Colabor Group 2022 First Quarter Results Conference Call. This is Louis Frenette, President and Chief Executive Officer Last evening, we released our earnings results for the 12-week period ended March 19. The press release and disclosure documents can be found on our website or on CEDAR. Joining me today on this call is Pierre Blanchet, our Chief Financial Officer, who, following my initial remarks, will provide an overview of our financial results. Well, we are off to a good start to the year. Our diversification strategy allowed us to pursue our growth trajectory, even as restaurants face temporary dining restrictions in the full month of January. Consolidated revenues are up 13.2% compared to the first quarter of last year. Another good news, gross margins are up 2.4% to 17.1% Revenues demonstrating the resiliency of our business model in the context of significant food input inflation. And adjusting for subsidies received last year, adjusted EBITDA stands at 2.4% of sales compared with 3% last year. The 60 basis point variance results from anticipated inflation in labor and fuel costs and from more investment in the sales and marketing force which we initiated in April of last year. Furthermore, our strong cash flow allowed us to reimburse $7.8 million of debt during the quarter, which brings our leverage ratio at a very conservative 1.6 times at the end of Q1. On the operational side, we recently achieved an important milestone, the conclusion of two accretive acquisitions aimed at accelerating our growth in the Quebec food distribution market. On April 4th, we announced the acquisition of Le Groupe Resto Achat, a purchasing group primarily focused for restaurants located in Eastern Quebec. The group brings a dedicated and exceptional management and operational team With $4 million of additional revenues and strengthen our competitive position with independent restaurants in our current and future prospective markets, this service will help us gain new customers across the province. Also, on April 11, we further announced the acquisition of certain assets of Bendehé, a long-time partner in our wholesale business. This acquisition broadened our distribution reach in Western Quebec and brings approximately $13 million in annual sales revenues. It expands our geographical reach in Western Quebec, more specifically in the Laurentians and Outaouais region, by providing access to small warehousing facilities located in Mont-Laurier and a new customer network on which to build. Together, these two acquisitions represent $17 million in additional revenues. During the first quarter, we also continued to execute our strategic plan with additional hires to support our organic growth objective in our distribution segment and continued our investment in our private label. These initiatives are on track with our growth and profitability objectives. We continue to pay special attention to dynamically manage the impact of the pandemic and rising inflation in our business and bottom line. Proactive management of rising input costs remains a priority and brings to the forefront the importance of continuing to improve our operations to generate efficiencies. Looking ahead with an improving product mix, wider distribution network and improving efficiencies, we are well positioned to benefit from the recovery of restaurants and hospitality industry as always we remain prudent and focused on managing our cost structure in the face of rising inflation labor scarcity and supply chain sorry supply chain disruptions yeah with this i will turn the call over to you

Thank you, Louis, and good morning, everyone. I'm pleased to be here today to discuss our key financial results for the first quarter of 2022. First quarter consolidated sales from continuing operations were up 13.2% to 97.2 million. Sales in the distribution segment increased by 17.4% to 67.2 million. Strong growth results mainly from a less restrictive operating environment in the restaurant channel and from the effect of approximately 7% of price inflation. Sales in the wholesale segment increased by 4.3% to $38.3 million. Again, this results primarily from the easing of operating restrictions affecting the restaurant industry, from the growth of certain customer accounts and small customer gains, mitigated by the partial loss of volume from a single customer, which we are now lapping. Consolidated adjusted EBITDA from continuing operation reached 2.3 million or 2.4% of sales compared to 3.8 million or 4.5% in the first quarter of last year. The effect of growing revenue was mitigated by a reduction of $1.3 million in subsidies received, as we mentioned in his opening remarks, rising labor and freight costs, and continued investment in sales and marketing to grow our distribution market shares and reposition our private brand. Net loss from continuing operations and net loss were $1.7 million, and higher when compared to last year's first quarter loss of $1 million, resulting primarily from lower EBITDA in Q1 of 2022 and higher costs not related to the current operations, which were mitigated by lower financial expenses and higher tax recovery. Cash flow from operating activities generated $12.4 million in the first quarter of 2022, compared to 5.4 in the equivalent quarter of last year. Lower working capital requirements combined with the collection of a settlement of a tax assessment and higher collection of customer accounts on a year-over-year basis. Cash on end at the end of the quarter represented 3.8 million with 49 million of available borrowing capacity on our credit facility. As at March 19, 2022, our net debt amounted to 39 million, down from 48.4 million at the end of fiscal 2021, resulting from the reimbursement of 7.8 million of our credit facility in the quarter. Our financial leverage ratio stands at 1.6 times versus 1.9 times at the end of fiscal 2021. We expect that the pandemic and the associated labor shortage and supply chain disruption will continue to have somewhat of an impact on our results. As we stand today, the government of Quebec has rolled back its dine-in restriction. Restaurants are allowed to operate at full capacity. As we have demonstrated these last two years, we remain dedicated to maintaining a prudent approach to managing our cost structure in line with demand and protecting our financial situation. I would now like to turn the call over to the operator for the Q&A period.