Colabor Group Inc.

Good morning, ladies and gentlemen, and welcome to Colabor's second quarter 2022 results conference call. At this time, all lines are in a listen-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 need assistance, please press star zero for the operator. This call is being recorded on Friday, July 22, 2022. Before we turn 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 Investors section under Events and Presentation at www.colabor.com. Furthermore, risks are discussed throughout the most recent MD&A under the heading Risks. I would now like to turn the conference over to Luis Renet, President and CEO of Colabor Group. Please go ahead, sir.

Thank you, Joanna. Good morning, everyone, and welcome to Colabor Group's 2022 Second Quarter Result Conference Call. This is Louis Frenette, President and Chief Executive Officer. Last evening, we released our earnings results for the 12- and 24-week period ended June 11, 2022. The press release and disclosure documents can be found on our website and at cdar.com. Joining me today on this call is Pierre Blanchet, our Chief Financial Officer. who, following my initial remark, will provide an overview of our financial results. I am very happy with our second quarter results. They represent a fifth consecutive quarter of revenue growth and one of our better quarters in a long time. I believe this once again demonstrates the resiliency of our business model and the benefits of our growth and profitability plans. In the second quarter, consolidated revenues grew by 27.4% from the easing of restrictions in the restaurant channel, our ability to pass through food inflation, and from the contribution of our recent acquisition. Our consistent and dedicated efforts to enhance our customer and product mix supported gross margin improvement of 8.3% to 18.3% of sales. Adjusted EBITDA also grew to 5.8% of sales, representing a 16% improvement when removing the $1.2 million received in subsidies during the equivalent quarter of last year. Furthermore, we maintain a very conservative leverage ratio of 1.8 times at the end of Q2 and down from 1.9 at the end of the previous fiscal year. As discussed in this previous call, given our strong financial position and the ongoing recovery of the restaurant industry, we have reinstated our non-organic growth strategy earlier in the quarter. Both business acquired in April are performing well and contributed as expected to our top and bottom line this quarter. On the organic side, we remain dedicated to profitably growing our distribution business and developing new territories. We continue to work on repositioning and promoting our private label brand, increasing specialty distribution of fish and meat products, and improving our category management practices. In the context of rising inflation, there are many levers that we are pulling that are helping us manage its effect on our bottom line. First, our business model allows us to pass through food cost inflation. And second, we are paying special attention to proactively manage rising input costs, primarily on labor and fuel, to mitigate their effect on our bottom line. Given the industry-wide labor shortage, we are also working on various operational improvements to help us stay ahead of the curve. We are continuously looking at how we operate and finding ways to improve our efficiencies and continue to nurture our employer brand to help us attract and retain the best talent. We are entering the second half of 2022 in a good position. Our product mix continues to improve. Our distribution network is growing. We have further organic and non-organic growth opportunities, and we are building a more efficient business while investing for the future. I also believe that our diversified customer base within the restaurant and institutional channel remains a key attribute of our resiliency going forward. Yeah, with this, I'll turn the call over to you.

Thank you, Louis, and good morning, everyone. I am pleased to be here today to discuss our key financial results for the second quarter of 2022. Second quarter consolidated sales were up 27.4% to 138 million. Sales in the distribution segment increased by 27.7% to 93.6 million. Strong growth results mainly from the easing of restriction in the restaurant channel. Price increases reflecting food inflation passed through of 11% and customer list acquired in the Ottaway and Laurentian regions. Sales in the wholesale segment increased by 23.1% to 56.3 million. Again, this results primarily from a less restrictive operating environment in the restaurant channel, food inflation and customer gains. Consolidated adjusted EBD from continuing operation reached 8 million or 5.8% of sales compared to 6.7 million or 6.2% in the second quarter of last year. As Louis mentioned in his open remarks, adjusting for subsidies received last year Adjusted EBITDA in Q2 2022 grew 16% from 5% in Q2 2021. Growing sales volume, improving gross margin on the heels of a better product and customer mix helps mitigate growing input costs. Net earnings were in line with last year at $1.7 million or $0.02 per share. Cash flow from operating activities required $1.2 million in the second quarter compared with the use of cash of $2.9 million in the equivalent quarter of last year. Improving use of cash from operation results primarily from seasonal working capital requirements and higher adjusted EBITDA. Cash on end at the end of the quarter represented $2 million with a $43 million of available borrowing capacity on our credit facility. As of June 11, 2022, our net debt amounted to $46.1 million, down from $48.4 million at the end of fiscal 2021. Our financial leverage ratio stands at 1.8 versus 1.9 times at the end of fiscal 2021. I would now like to turn the call over to the operator for the Q&A period.