GCL Colabor Group Inc

Colabor Group Inc. (TSX: GCL) (“Colabor” or the “Company”) reports its results for the fourth quarter ended December 31, 2022.

Fourth Quarter 2022 Financial Highlights:

• Sales increased by 28.0% to $193.2 million, compared to $151.0 million for the corresponding period of 2021;
• Net earnings from continuing operations were $1.7 million compared to $5.3 million for the corresponding period of 2021 resulting mainly from the non-recurring gain of $4.0 million not related to current operations in the prior year;
• Adjusted EBITDA(1) increased by 39.2% to $9.9 million from $7.1 million for the corresponding period of 2021 and increase in adjusted EBITDA(1) margin to 5.1% of sales compared to 4.7% of sales during the corresponding period of 2021. Those increases are mainly explained by an improvement of gross margin, mitigated by increase in labor costs and other supply chain costs and investments to expand our territory;
• Cash flow from operating activities decreased to $(0.7) million compared to $9.0 million for the fourth quarter of 2021, resulting from a higher utilization of working capital(4) given the resumption of restaurant activities since February 2022; and
• On September 29th, 2022, conclusion of a new lease to move our head office and warehouse located in Boucherville by the end of 2023. Located in the Saint-Bruno Industrial Ecopark, this new building's goal is to obtain LEED and Net Zero Carbon certifications, will be better adapted to our needs and will allow us to deploy our strategic plan.

Fiscal 2022 Financial Highlights:

• Consolidated sales amounted to $574.1 million, up 20.3% compared to fiscal year 2021;
• Net earnings from continuing operations decreased to $4.6 million compared to $8.3 million for fiscal year 2021, resulting primarily from a non-recurring gain of $3.8 million not related to current operations in the prior year, higher depreciation and amortization expenses, mitigated by the increase of the adjusted EBITDA(1) and lower financial expenses;
• Adjusted EBITDA(1) increased to $29.1 million or 5.1% of sales compared to $25.4 million or 5.3% of sales for the fiscal year 2021. Excluding the impact of subsidies obtained of $2.6 million in 2021, the adjusted EBITDA(1) margin would have been 5.1% in 2022 and 4.8% in 2021;
• Cash flow generated by operating activities up to $19.3 million compared to $18.8 million in 2021 due to lower utilization of working capital(4);
• Net debt(2) decreased to $47.8 million, compared to $48.4 million as at December 25, 2021. The leverage ratio(3) is 1.6x as at December 31, 2022, compared to 1.9x in 2021; and
• Completion of the acquisition of Le Groupe Resto-Achats Inc. and acquisition of certain assets in the Laurentides and Outaouais territories, marking the first milestones of the non-organic growth strategy of distribution activities in the province.

Table of fourth quarter and fiscal 2022 Financial Highlights:

Financial highlights	17 weeks		16 weeks		53 weeks		52 weeks
(in thousands of dollars, except percentages, per share data and financial leverage ratio)	2022		2021		2022		2021
	$		$		$		$
Sales from continuing operations	193,246		151,014		574,071		477,004
Adjusted EBITDA(1)	9,855		7,080		29,068		25,420
Adjusted EBITDA(1) margin (%)	5.1		4.7		5.1		5.3
Net earnings from continuing operations	1,682		5,336		4,551		8,253
Net earnings	1,263		5,139		4,065		7,842
Per share - basic and diluted ($)	0.01		0.05		0.04		0.08
Cash flow from operating activities	(663	)	9,035		19,299		18,752
Financial position					As at		As at
					December 31,		December 25,
					2022		2021
Net debt(2)					47,764		48,366
Financial leverage ratio(3)					1.6	x	1.9	x

(1)	Non-IFRS measure. Refer to the table Reconciliation of Net Earnings to adjusted EBITDA in MD&A section 6 "Non-IFRS Performance Measures". Adjusted EBITDA corresponds to net operating earnings before costs (income) not related to current operations, depreciation and amortization and expenses for stock-based compensation plan.
(2)	Non-IFRS measure. Refer to MD&A section 6 "Non-IFRS Performance Measures". Net debt corresponds to bank indebtedness, current portion of long-term debt and long-term debt, net of cash.
(3)	Financial leverage ratio is an indicator of the Company's ability to service its long-term debt. It is defined as net debt / adjusted EBITDA for the last four quarters. Refer to MD&A section 6 "Non-IFRS Performance Measures".
(4)	Working capital is a non-IFRS performance measure. Working capital is an indicator of the Company's ability to hedge its current liabilities with its current assets. Refer to MD&A section 3.2 "Financial Position" for detailed calculation.

“Fourth quarter results show that the new management team is on the way to complete the transformation of Colabor's business. Revenues were up for a 7th consecutive quarter, showing a growth of 28.0%, while our adjusted EBITDA(1) increased by 39.2%. The strategic management of our product and customer mix has allowed us to offset the increase in labor costs, inputs and investments in our growth. So we close the year of 2022 on strong basis,” said Mr. Frenette, President and Chief Executive Officer of Colabor.

“Strong cash flows from our operating activities in 2022 allowed us to invest in growth while reducing our debt level. We thus start 2023 with the financial resources and a solid balance sheet allowing us to achieve our ambitions.,” added Pierre Blanchette, Senior Vice-President and Chief Financial Officer.

Results for the Fourth Quarter of 2022

Consolidated sales for the fourth quarter amounted to $193.2 million compared to $151.0 million during the corresponding quarter of 2021, an increase of 28.0%. Sales for the Distribution segment increased by 28.9%, explained by a volume increase of our customer base, the additional week of the fourth quarter of 2022, the impact of inflation and the acquisition of assets in the Laurentians and Outaouais regions. Wholesale segment sales increased by 16.8% explained by the impact of inflation and the additional week in the fourth quarter of 2022.

Adjusted EBITDA(1) from continuing activities was $9.9 million or 5.1% of sales from continuing activities compared to $7.1 million or 4.7% during 2021. These variations are mainly explained by the increase in sales and an improvement of gross margin, mitigated by increase in labor costs and other supply chain costs and investments to expand our territory and our investments for the repositioning of our private brand.

Net earnings from continuing operations were $1.7 million, down from $5.3 million for the corresponding quarter of the previous year, resulting essentially from the non-recurring gain of $4.0 million not related to current operations in the previous fiscal year, higher depreciation and amortization expenses, financial and income tax expenses, mitigated by an increase of the adjusted EBITDA(1) as explained previously.

Net earnings for the fourth quarter were $1.3 million, compared to $5.1 million for the corresponding period of 2021 and are primarily explained by the facts described above.

Results for Fiscal Year 2022

Cumulative consolidated sales amounted to $574.1 million compared to $477.0 million in fiscal year 2021, an increase of 20.3%, of which 21.5% from the Distribution segment and 14.3% from the Wholesale segment.

Adjusted EBITDA(1) from continuing operations reached $29.1 million or 5.1% of sales from continuing operations compared to $25.4 million or 5.3% in 2021. These variations are mainly due to an increase in sales and gross margin from a better mix of products and customers, mitigated by a decrease in subsidies obtained of $2.6 million. Excluding the impact of subsidies obtained, the adjusted EBITDA margin(1) would have been 5.1% in 2022 and 4.8% in 2021.

Net earnings from continuing operations was $4.6 million, down from $8.3 million in last fiscal year. The variation is explained by the non-recurring gain of $3.8 million not related to current operations in the previous fiscal year, higher depreciation and amortization and income tax expenses, mitigated by lower financial expenses and an increase of the adjusted EBITDA(1) as explained previously.

Cash Flow and Financial Position

Cash flows from operating activities reached $19.3 million for fiscal year 2022, compared to $18.8 million for fiscal year 2021. This increase is mainly due to lower utilization of working capital(4) and higher adjusted EBITDA(1), mitigated by a decrease of income not related to current operations. The lower utilization of working capital(4) is explained by the receipt of the non-recurring gain which was receivable as at December 25, 2021 and a higher collection of receivables in 2022, mitigated by the timing of supplier payments.

As at December 31, 2022, the Company's working capital(4) was $48.8 million, up from $40.8 million at the end of the fiscal year 2021. This variation is explained by the increase in sales during the fourth quarter of 2022 compared to the corresponding quarter of 2021.

As at December 31, 2022, the Company's net debt(2) was down to $47.8 million, compared to $48.4 million at the end of the fiscal year 2021. This decrease is resulting from credit facility repayments. Despite closing two acquisitions in 2022, the Company was able to reduce its level of debt.

Outlook

“I am very proud of the profitable growth achieved in 2022 and we look forward to building on this momentum in 2023. Our priorities remain the acceleration of growth and the continuous improvement of our activities and processes. The move of our head office and warehouse located in Boucherville to a new site at the end of 2023 will allow our distribution segment to extend its footprint to nearly 90.0% of Quebec's foodservice customers, a considerable increase from our current reach of 30.0%. This project is highly strategic for Colabor. It will also allow us to offer a stimulating work environment for our employees, eco-responsible and to serve more effectively our growing clientele in the west of the province,” commented Louis Frenette.

“We believe that an increased reach in Quebec will allow us to gradually penetrate the independent channel market in a more competitive manner. To this end, we are starting the year with the recent conclusion of two supply contracts with this niche. Starting in the first quarter, we will supply a full-service restaurants chain operating 38 establishments across the province as well as a group operating approximately 200 food counters located in retail locations. We start the year with pride and enthusiasm,” concluded Louis Frenette.

Non-IFRS Performance Measures

The information provided in this release includes non-IFRS performance measures, notably adjusted earnings before financial expenses, depreciation and amortization and income taxes ("Adjusted EBITDA")(1). As these concepts are not defined by IFRS, they may not be comparable to those of other companies. Refer to Section 6 "Non-IFRS Performance Measures" in the Management's Discussion and Analysis.

Reconciliation of Net Earnings to Adjusted EBITDA(1)	17 weeks		16 weeks		53 weeks		52 weeks
(in thousands of dollars)	2022		2021		2022		2021
	$		$		$		$
Net earnings from continuing operations	1,682		5,336		4,551		8,253
Income taxes	686		(19	)	1,826		1,435
Financial expenses	1,750		1,286		4,780		5,109
Operating earnings	4,118		6,603		11,157		14,797
Expenses for stock-based compensation plan	162		155		475		303
Costs (income) not related to current operations	107		(3,998	)	1,354		(3,768	)
Depreciation and amortization	5,468		4,320		16,082		14,088
Adjusted EBITDA(1)	9,855		7,080		29,068		25,420

Additional Information

The Management Discussion and Analysis and the consolidated financial statements of the Company are available on SEDAR (www.sedar.com). Additional information, including the annual information form, about Colabor Group Inc. can also be found on SEDAR and on the Company’s website at www.colabor.com.

Forward-Looking Statements

This press release contains certain forward-looking statements as defined under applicable securities law. Forward-looking information may relate to Colabor's future outlook and anticipated events, business, operations, financial performance, financial condition or results and, in some cases, can be identified by terminology such as "may"; "will"; "should"; "expect"; "plan"; "anticipate"; "believe"; "intend"; "estimate"; "predict"; "potential"; "continue"; "foresee"; "ensure" or other similar expressions concerning matters that are not historical facts. Particularly, statements regarding the Company’s financial guidelines, future operating results and economic performance, objectives and strategies are forward-looking statements. These statements are based on certain factors and assumptions including expected growth, results of operations, performance and business prospects and opportunities, which Colabor believes are reasonable as of the current date. Refer in particular to section 2.3 "Development Strategies and Outlook" of the Company's MD&A. While Management considers these assumptions to be reasonable based on information currently available to the Company, they may prove to be incorrect. Forward-looking information is also subject to certain factors, including risks and uncertainties that could cause actual results to differ materially from what Colabor currently expects. For more exhaustive information on these risks and uncertainties, the reader should refer to section 9 "Risks and Uncertainties" of the Company's MD&A. These factors, which include the risks related to the pandemic of Covid-19 and the different underlying variants ("pandemic") as well as the possible impacts on consumers and the economy, are not intended to represent a complete list of the factors that could affect Colabor and future events and results may vary significantly from what Management currently foresees. The reader should not place undue importance on forward-looking information contained in this press release, information representing Colabor's expectations as of the date of this press release (or as of the date they are otherwise stated to be made) and are subject to change after such date. While Management may elect to do so, the Company is under no obligation (and expressly disclaims any such obligation) and does not undertake to update or alter this information at any particular time, whether as a result of new information, future events or otherwise, except as required by law.

Conference Call

Colabor will hold a conference call to discuss these results on Thursday, March 2nd, 2023, beginning at 9:30 a.m. Eastern time. Interested parties can join the call by dialing 1-888-390-0549 (from anywhere in North America) or 1-416-764-8682. If you are unable to participate, you can listen to a recording by dialing 1-888-390-0541 or 1-416-764-8677 and entering the code 293401# on your telephone keypad. The recording will be available from 1:30 p.m. on Thursday, March 2nd, 2023, until 11:59 p.m. on March 9th, 2023.

You can also use the QuickConnect link: https://bit.ly/3kZrN77. This new link allows any participant to access the conference call by clicking on the URL link and enter their name and phone number.

Those wishing to join the webcast can do so by clicking on the following link: http://www.colabor.com/en/investisseurs/evenements-et-presentations/

About Colabor

Colabor is a distributor and wholesaler of food and related products serving the hotel, restaurant and institutional markets or "HRI" in Quebec and in the Atlantic provinces, as well as the retail market. Within its two operating segments, Colabor offers specialty food products such as meat, fresh fish and seafood, as well as food and related products through its Broadline activities.

Further information:

Pierre BlanchetteSenior Vice President and Chief Financial OfficerColabor Group IncTel.: 450-449-4911 extension 1308investors@colabor.com

Danielle Ste-MarieSte-Marie Strategy and Communications Inc.Investor RelationsTel.: 450-449-0026 extension 1180