Earnings Call: Q1 2019

May 2, 2019

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Conabo's First Quarter twenty nineteen Financial Results Conference Call. At this time, all participants are in a listen only mode. Following the presentation, we will conduct a question and answer session open to analysts only. Call. Before turning the meeting over to management, please be advised that this conference call will contain statements that are forward looking and subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated. I would like to remind everyone that this conference call is being recorded today, 05/02/2019. I will now turn the conference over to Leonet Etzegui, President and CEO. Please go ahead, sir. Good morning, everyone, and welcome to Colabor Group's twenty nineteen First Quarter Results Conference Call. This is Lionel Littegui, President and Chief Executive Officer. Earlier this morning, we issued our earnings press release. It can be found along with our financial statements and MD and A on our website and on SEDAR. Please note that the presentation is also available on our website at www.colabor.com in the Investors section under Events and Presentations. Our first quarter consolidated revenues were down 4.4%, resulting mainly from the loss of volume in Ontario coming from the historical loss of the supply agreement for Montana's BBT one bar effective April one of last year. This was mitigated by continued growth of our distribution activities in Quebec. Despite the decrease of sales year over year, our gross margin in dollars of sales improved by 2.5%. This comes from improvement in the mix of clients and products sold. Our Q1 EBITDA grew by $1,500,000 to reach $300,000 This comes from the cost rationalization plan, optimization of operation and from the increase in gross margin. Colabor ended the first quarter of twenty nineteen with a net loss of $2,800,000 an improvement from a net loss of $4,500,000 in the equivalent quarter of 2018. Compared with the equivalent quarter of last year, cash flow from operating activities remained stable and we reduced our total debt by $5,500,000 to $109,400,000 Our total debt to trailing adjusted EBITDA ratio now stand at 5.5 times, which is down sequentially from the fourth quarter of twenty eighteen when the ratio stood at 5.8 times. By removing the debentures, its ratio stand at three times versus 3.1 times at the end of twenty eighteen. '20 '18 was a year of transition and 2019 is a year of transformation. We implemented several initiatives to reverse the trend of the previous years. We remain focused on three pillars. These are to expand our broad line activities, integrate and optimize our business units and reduce our level of debt. Our team is motivated and dedicated to pursue this direction and is working actively to create value for our shareholders. We are focusing more on our core business, made important organizational changes and are managing our bottom line and cash flow very closely. Also, we are happy to welcome Pierre Gagne, who will join us on May 27 as our new CFO. This concludes my review of our financial results. Operator, I would now like to open the call for questions. Certainly. Your first question comes from the line of Derek Lessard from TD Securities. Please go ahead. Yes, good morning, everybody. Lionel, I was just wondering if you can maybe talk to the gross, what was behind your gross margin improvement in the quarter. I mean, you pointed to favorable customer and product mix. Just wondering if you could maybe talk give me a little bit more details on that? Yes. As I told you during the previous quarters, we many initiatives were about optimization of our operation, which means more discipline the way we operate and also more discipline on the go to market. So I think that we are very focused about delivering a high level of service to our customers. But in the meantime, we were efficient to make sure that we have the relevant density on our trucks. We're respecting the right numbers of drop per customers. So all that kind of discipline allowed us to be more effective regarding operations. So where do you think like if you're looking at your timeline and where do you think you are? And are you still in the early in the early, I guess, days of the transformation? And I guess, when do you expect that you would you're going to get to a level that's acceptable to yourself? Okay. Well, to be honest, let's say that for me, 2018 was the main objective was to get back to stability, okay, to stabilize things, to because we were facing some issues. So stabilization was the first step. Then I need to have solid basis to bring back some growth. So at the moment, it's just the first quarter of twenty nineteen. So to be completely transparent, I'm not happy with results, okay? Just the beginning. But let's say that it's positive for the first quarter and I'm expected to get more improvement to bring back Collabour on track of success. Okay. So you talked about the stabilization of the business in 2018. Do you think you achieved that? Yes, it has been done in both Ontario and Quebec. Okay. And maybe one final question for me and that's on I was just wondering about I mean you just announced the new CFO. So I was wondering if you had if you're able to provide what his background is and maybe what he brings to the what you think he brings to the table? Okay. So the name of the CFO is Pierre Gagne. He has an extensive experience in public company, in M and A. Let's say that he I have an amazing fit with the individual regarding the fact that he's very close to operation, which is fit with the type of leadership we want to have at Colabor now. I think that it's his experience more than thirty years in companies just like FLS Transport, GDi or Cogeco is going to be a huge added value for us regarding optimization of our financing, any type of M and A activities. And more than that, if you want to take the right decision regarding operation, you need to get the right information. Yes. So he's coming from an operational background? Exactly. Okay. All right. That's it for me. Thanks for taking my questions. Thank you, Derek. There are no further questions at this time. Mr. Ettedgui, I turn the call back over to you for closing remarks. Yes. Thank you, operator, and thanks, Derek, for your questions. It has been a little over one year since I joined Colabor. After a year of transition, we are now starting to transform our business. I would like to reiterate that our team is dedicated to improve shareholder value by focusing on our three pillars: Broadline distribution, sales and operational activities, integration and optimization of our business units, reduce our debt. This concludes our call for the first quarter of twenty nineteen. Thank you for joining us, and I look forward to meeting some of you at our annual general meeting of shareholders, which we are holding shortly after this call at our Boucherville Distribution Center and head Office. And for those who cannot attend, I look forward to discussing our progress at our next conference call to discuss our twenty nineteen second quarter results in July. Have a nice day. Thank you. This concludes today's conference call. You may now disconnect.