Colabor Group Inc.

Fourth-quarter consolidated sales from continuing operations increased 12.9% to $150.5 million. Distribution segment sales rose 19.8% to $103 million, and wholesale sales rose 5.6% to $62.1 million. Consolidated adjusted EBITDA from continuing operations was $7.1 million, or 4.7% of sales, compared with $7.5 million, or 5.6%, in Q4 2020. Net earnings from continuing operations were $5.3 million, up $0.6 million year over year, and net earnings were $5.1 million, or $0.05 per share, versus $0.8 million, or $0.01 per share. Full-year consolidated revenue grew 3.1% to $476 million. Cash flow from operating activities was $9 million, versus $13 million in Q4 2020. Net debt was $48.4 million at December 25, 2021, down from $52.1 million at the start of fiscal 2021 and $53.2 million at the end of Q3 2021; leverage was 1.9x versus 1.8x at fiscal 2020 year-end and 2.1x in Q3. Management did not give a numeric revenue or EPS outlook, but said 2022 priorities are to improve profitability, grow value-added specialty distribution and Western Quebec, pursue accretive M&A, and slightly increase capex if conditions warrant.

Louis Frenette said 2021 ended on a strong note despite tight COVID restrictions, labor shortages, and inflation, with the company benefiting from its diversification strategy and strategic plan execution. He highlighted a revamped private label lineup of more than 500 products, about 70% locally sourced, new compensation practices to improve hiring/retention, and operational improvements that created synergies. His tone was confident and constructive, emphasizing that Colabor is better positioned for restaurant and hospitality recovery and has room to pursue growth opportunities.

Pierre Blanchette emphasized that Q4 growth was helped by a less restrictive restaurant environment, but profitability was pressured by a $1.6 million reduction in subsidies, labor shortage costs, and a one-week strike at the levy distribution center. He noted adjusted EBITDA of $7.1 million (4.7% of sales), cash flow from operations of $9 million, and net debt of $48.4 million with leverage at 1.9x. He also said the Ontario tax assessment recovery was only partial and that the cash was received last week, and he expects capex to stay around normal levels, possibly rising slightly to support specialty divisions and efficiency improvements.

Analysts focused on what was driving Q4 revenue growth, how much came from pricing, and whether the Western Quebec initiative was material. Management said inflation was about 3.5% for fiscal 2021, that the Western Quebec plan is on track but still not very material, and that headcount will be added as volume thresholds are reached. Questions also addressed January closures in Quebec and the Ontario tax settlement; management said dining rooms were closed from December 31 to January 31 and reopened Feb. 1, and confirmed the Ontario recovery was partial and already received, while declining to disclose the amount.