Univar Solutions Reports Strong 2022 Third Quarter Financial Results and Affirms Mid-Point of Full-Year 2022 Guidance; Announces $200 Million Accelerated Share Repurchase and Additional $1 Billion Share Repurchase Authorization

DOWNERS GROVE, Ill., Nov. 1, 2022 /PRNewswire/ -- Univar Solutions Inc. (NYSE:UNVR) ("Univar Solutions" or "the Company"), a leading global solutions provider to users of specialty ingredients and chemicals, today announced financial results for the third quarter ended September 30, 2022.

Third Quarter 2022 Highlights

• Strong net income of $130.0 million was 54.0 percent higher than the $84.4 million reported in the prior-year third quarter. Adjusted net income⁽¹⁾ of $141.1 million compared to $106.3 million in the prior-year third quarter.
• Earnings per diluted share improved to $0.78 compared to $0.49 per diluted share in the prior-year third quarter. Adjusted earnings per diluted share⁽¹⁾ increased to $0.84 from $0.62 in the prior-year third quarter.
• Strong Adjusted EBITDA⁽¹⁾ was $259.6 million compared to $210.9 million in the prior-year third quarter. Adjusted EBITDA margin⁽¹⁾ of 8.7 percent improved from 8.5 percent in the prior-year third quarter.
• Net cash provided by operating activities increased to $257.0 million from $123.7 million in the prior- year third quarter.
• Leverage ratio⁽¹⁾ was 2.1x at September 30, 2022, compared to 2.2x at June 30, 2022.
• Executed $100 million of share repurchases during the third quarter.
• Full-year Adjusted EBITDA⁽¹⁾ guidance is in the range of $1,050 million to $1,070 million.

"Over the past three years, we have transformed this company into a reliable solutions provider while also driving impressive financial results through the value we create for both our customers and suppliers," said David Jukes, president, and chief executive officer. "Regardless of the conditions or environment, we have continued to put the customer at the centre of all we do whilst improving and strengthening our operations, especially in North America. This gives us confidence in our ability to navigate whatever market conditions lie ahead. We remain focused on delivering on our business strategy, leveraging our global strength in Ingredients and Specialties, and our strong position in North America. We also are focused on executing a capital allocation strategy that is balanced between investments in global growth and share repurchases, all with the goal of enhancing long-term shareholder value. The additional $1 billion share repurchase authorization announced today is a direct result of our confidence to continue to deliver strong net free cash flow."

Company Performance

Univar Solutions operating performance results are described below and, unless otherwise indicated, compare third quarter 2022 results with third quarter 2021 results.

Consolidated Results

Univar Solutions reported net sales of $3.0 billion, an increase of 19.9 percent on a reported basis and 24.9 percent on a constant currency basis⁽¹⁾ compared to the prior-year third quarter. Higher sales were attributable to our pricing discipline in inflationary markets and market share gains.

Gross profit (exclusive of depreciation) of $706.1 million increased 14.6 percent on a reported basis and 18.9 percent on a constant currency basis⁽¹⁾. Higher gross profit was driven primarily by our pricing discipline in inflationary markets, operational execution, and market share gains, partially offset by higher input cost inflation. Gross margin decreased 110 basis points to 23.7 percent compared to the prior-year third quarter, primarily due to higher input cost inflation, partially offset by our pricing discipline in inflationary markets.

Net income was $130.0 million, or $0.78 per diluted share, compared to net income of $84.4 million, or $0.49 per diluted share, in the prior-year third quarter. The increase was primarily due to higher gross profit (exclusive of depreciation), partially offset by higher outbound freight and handling, Warehousing, Selling and Administrative (WS&A) costs, and taxes.   

Adjusted earnings per diluted share⁽¹⁾ of $0.84 in the quarter increased from $0.62 in the prior-year third quarter primarily due to higher net income.

Adjusted EBITDA⁽¹⁾ of $259.6 million increased $48.7 million, or 23.1 percent, compared to the prior-year third quarter, or an increase of 28.1 percent on a constant currency basis⁽¹⁾. The increase was driven primarily by higher gross profit, partially offset by higher outbound freight and handling, as well as higher WS&A costs.

Net cash provided by operating activities increased to $257.0 million from $123.7 million in the third quarter last year, primarily driven by net working capital improvements and higher net income.

Liquidity was $1,077.3 million as of September 30, 2022, inclusive of $276.3 million of cash on hand and availability under committed, asset-based credit facilities.

Segment Results

USA: 

• USA external sales increased 25.0 percent during the quarter, primarily due to our pricing discipline in inflationary markets and market share gains.
• Gross profit (exclusive of depreciation) increased by 19.3 percent, primarily driven by our pricing discipline in inflationary markets, operational execution and market share gains, partially offset by input cost inflation. Gross margin decreased 120 basis points to 24.2 percent, primarily driven by input cost inflation, partially offset by our pricing discipline in inflationary markets.
• Adjusted EBITDA⁽¹⁾ increased 30.2 percent to $182.5 million, primarily driven by higher gross profit, partially offset by higher outbound freight and handling as well as WS&A costs. The increase in WS&A was primarily due to higher operating costs and variable compensation. Adjusted EBITDA margin⁽¹⁾ increased by 30 basis points to 9.0 percent, reflecting the business operating leverage.

EMEA: 

• EMEA external sales increased 1.3 percent, or 24.3 percent on a constant currency basis⁽¹⁾. The increase was primarily due to our pricing discipline in inflationary markets and market share gains.
• Gross profit (exclusive of depreciation) decreased 5.5 percent on a reported basis. On a constant currency basis⁽¹⁾, gross profit increased 15.6 percent, primarily driven by our pricing discipline in inflationary markets, operational execution and market share gains, partially offset by input cost inflation. Gross margin decreased 150 basis points to 22.0 percent, driven by input cost inflation, partially offset by our pricing discipline in inflationary markets.
• Adjusted EBITDA⁽¹⁾ increased 1.7 percent to $35.0 million on a reported basis, or 28.5 percent on a constant currency basis⁽¹⁾, compared to the prior-year third quarter. On a constant currency basis⁽¹⁾, this increase was primarily driven by higher gross profit. Adjusted EBITDA margin⁽¹⁾ remained flat at 7.2 percent, primarily due to lower gross margin, offset by the business operating leverage.

CANADA: 

• Canada external sales increased by 22.7 percent, or 27.4 percent on a constant currency basis⁽¹⁾, primarily due to our pricing discipline in inflationary markets and market share gains.
• Gross profit (exclusive of depreciation) increased by 14.4 percent, or 18.8 percent on a constant currency basis⁽¹⁾. The increase was driven primarily by our pricing discipline in inflationary markets, operational execution and market share gains, partially offset by input cost inflation. Gross margin decreased 170 basis points to 23.7 percent, primarily driven by input cost inflation, partially offset by our pricing discipline in inflationary markets.
• Adjusted EBITDA⁽¹⁾ increased 16.3 percent to $27.9 million, or 20.4 percent on a constant currency basis⁽¹⁾ compared to the prior year. The increase in Adjusted EBITDA⁽¹⁾ was primarily due to higher gross profit, partially offset by higher WS&A costs, which was impacted by higher operating costs and variable compensation. Adjusted EBITDA margin⁽¹⁾ decreased by 50 basis points to 10.2 percent, primarily due to lower gross margin, partially offset by the business operating leverage.

LATAM: 

• LATAM external sales increased by 20.5 percent, or 22.1 percent on a constant currency basis⁽¹⁾, largely due to our pricing discipline in inflationary markets and the Sweetmix acquisition.
• Gross profit (exclusive of depreciation) increased by 23.9 percent, or 25.3 percent on a constant currency basis⁽¹⁾, primarily due to our pricing discipline in inflationary markets and the Sweetmix acquisition, partially offset by input cost inflation. Gross margin increased 50 basis points to 21.8 percent, primarily driven by our pricing discipline in inflationary markets, partially offset by input cost inflation.
• Adjusted EBITDA⁽¹⁾ increased 10.2 percent to $17.3 million on a reported basis, or 11.5 percent on a constant currency basis⁽¹⁾. Adjusted EBITDA⁽¹⁾ increased primarily due to higher gross profit, partially offset by higher WS&A costs given increased corporate cost allocation as a result of the SAP implementation and higher operating costs. Adjusted EBITDA margin⁽¹⁾ decreased 80 basis points to 8.6 percent, primarily due to higher WS&A costs.

Outlook

The Company expects Adjusted EBITDA⁽¹⁾ to be between $180 million and $200 million for the fourth quarter of 2022 as compared to $207.1 million for the fourth quarter of 2021. For full-year 2022, the Company expects Adjusted EBITDA⁽¹⁾ in a range of $1,050 million to $1,070 million, as compared to $797.7 million for full-year 2021. Our forecast reflects anticipated continued strong operational execution, continued market share growth and disciplined cost management. Net Free Cash Flow⁽¹⁾ for full-year 2022 is expected to be approximately $400 million.

The Company provided the following objectives through 2025 and expects to deliver:

• Adjusted EBITDA⁽¹⁾ margins of greater than 9 percent
• 2025 Adjusted EPS⁽²⁾ greater than $4.50
• 50 percent Net Free Cash Flow⁽¹⁾ conversion
• Deliver greater than 20 percent Return on Invested Capital (ROIC)⁽¹⁾
• Maintain leverage ratio between 2.0x and 2.5x
• Continued pursuit of accretive strategic M&A opportunities
• Average annual capital return to shareholders of ~50 percent of Adjusted Net Income⁽¹⁾

The majority of the Company's debt obligations mature in 2026 and beyond. The Company is in full compliance with the covenants under its credit agreements as of September 30, 2022.

Share Repurchase Authorization

The Board of Directors ("Board") has approved an increase in the amount of authorized purchases under the Company's existing share repurchase program by $1 billion. The Company also has entered into an accelerated share repurchase ("ASR") agreement with Goldman Sachs & Co. LLC ("Goldman") as part of the upsized repurchase program. Under the terms of the ASR, the Company has agreed to repurchase an aggregate of $200 million of its common stock from Goldman, with an initial share delivery equal to approximately 75% of the notional value of the ASR, based on current market prices. The final number of shares to be repurchased under the ASR will be based on a discount to the average of the daily volume-weighted average stock prices for Rule 10b-18 eligible transactions in Univar Solutions common stock during the term of the ASR. Purchases under the ASR are expected to be completed prior to the end of Q1 2023. The additional Board authorization, together with the remaining $245 million available at September 30, 2022 under the initial authorization in November of 2021, provides the Company with $1.245 billion available to be used for the $200 million ASR and future buyback activity through October 2026.

Under the share repurchase program, the Company may purchase shares from time to time at the discretion of management through open market purchases, privately negotiated transactions, block trades, accelerated or other structured share repurchase programs, or other means. The manner, timing, pricing and amount of any share repurchase transactions will be based upon a variety of factors, including market conditions, applicable legal requirements and alternative opportunities that the Company may have for the use or investment of capital.

Conference Call and Webcast Details

The Company will host a webcast with investors to discuss third quarter 2022 results at 8:30 a.m. ET on November 2, 2022, which can be accessed on the Investor Relations section of its website at http://investors.univarsolutions.com. After the live webcast, a replay of the webcast will be available on the same website until November 2, 2024. 

About Univar Solutions

Univar Solutions (NYSE:UNVR) is a leading global specialty chemical and ingredient distributor representing a premier portfolio from the world's leading producers. With the industry's largest private transportation fleet and technical sales force, unparalleled logistics know-how, deep market and regulatory knowledge, formulation and recipe development, and leading digital tools, the Company is well-positioned to offer tailored solutions and value-added services to a wide range of markets, industries, and applications. While fulfilling its purpose to help keep communities healthy, fed, clean and safe, Univar Solutions is committed to helping customers and suppliers innovate and focus on Growing Together. Learn more at www.univarsolutions.com.

Use of Non-GAAP Measures

In this press release, the Company's financial results are provided both in accordance with accounting principles generally accepted in the United States of America (GAAP) and using certain Non-GAAP financial measures. In particular, the Company presents the Non-GAAP financial measures of gross profit (exclusive of depreciation), gross margin (defined as gross profit (exclusive of depreciation) divided by net sales on a consolidated basis and by external sales on a segment level, as applicable), delivered gross profit (defined as gross profit (exclusive of depreciation) less outbound freight and handling), Adjusted EBITDA, Adjusted EBITDA margin (defined as Adjusted EBITDA divided by net sales on a consolidated basis and by external sales on a segment level, as applicable), Adjusted net income, Adjusted earnings per diluted share, leverage ratio, net free cash flow, ROIC (defined as the last twelve months ("LTM") Adjusted Net Income divided by Net Assets Deployed) and results on a constant currency basis. The Non-GAAP financial measures are included as a complement to results provided in accordance with GAAP because management believes these Non-GAAP financial measures help investors' ability to analyze underlying trends in the Company's business, evaluate its performance relative to other companies in its industry and provide useful information to both management and investors by excluding certain items that may not be indicative of the Company's core operating results. Additionally, the Company has used, and may continue to use, Adjusted EBITDA and Adjusted earnings per diluted share in setting performance incentive targets to more closely align management compensation with operational performance.

The Company evaluates its results of operations on both an as reported and a constant currency basis. The constant currency presentation is a Non-GAAP financial measure, which excludes the impact of fluctuations in foreign currency exchange rates. The Company believes providing information on a constant currency basis provides valuable supplemental information regarding its results of operations, consistent with how it evaluates its performance. The Company calculates constant currency percentages and other information by converting its financial results in local currency for a period using the average exchange rate for the prior period to which it is comparing.

The Non-GAAP financial measures noted above are not calculated in accordance with GAAP and should not be considered a substitute for any other measure of financial performance presented in accordance with GAAP. Additionally, other companies may calculate Adjusted EBITDA and other such metrics differently than the Company does, limiting their usefulness as comparative measures. For further information related to the Company's use of Non-GAAP financial measures, and reconciliations to the most directly comparable GAAP measures, see the schedules attached hereto.

Forward-Looking Statements

This press release includes certain statements relating to future events and our intentions, beliefs, expectations, and outlook for the future, which are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended, including, without limitation, statements regarding, the Company's anticipated future results and financial performance, liquidity position and cash flows, actions regarding expense control and cost reductions, capital expenditures, market opportunities, capital allocation strategy, and other statements regarding the Company's commitments to its objectives through 2025 and other initiatives. Forward-looking statements are subject to known and unknown risks and uncertainties, many of which may be beyond the Company's control. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the expectations and assumptions. A detailed discussion of these factors and uncertainties is contained in the Company's filings with the Securities and Exchange Commission. Potential factors that could affect such forward-looking statements include, among others: general economic conditions, particularly fluctuations in industrial production and consumption and the timing and extent of economic downturns increased competitive pressures, including as a result of competitor consolidation; potential supply chain disruptions; significant changes in the pricing, demand and availability of chemicals; our indebtedness, the restrictions imposed by, and costs associated with, our debt instruments, and our ability to obtain additional financing; the broad spectrum of laws and regulations that we are subject to, including extensive environmental, health and safety laws and regulations and changes in tax laws; potential cybersecurity incidents, including security breaches; an inability to generate sufficient working capital; transportation related challenges, including increases in transportation and fuel costs, changes in our relationship with third party transportation providers, and ability to attract and retain qualified drivers; accidents, safety failures, environmental damage, product quality issues; delivery failures or hazards and risks related to our operations and the hazardous materials we handle, potential inability to obtain adequate insurance coverage; ongoing litigation, potential product liability claims and recalls, and other environmental, legal and regulatory risks; challenges associated with international operations; exposure to interest rate and currency fluctuations;  possible impairment of goodwill and intangible assets; the ongoing and evolving COVID-19 pandemic, including impacts on the global economy, our employees, customers, vendors and suppliers, and our business, results of operation and financial condition; significant changes in the business strategies of producers or in the operations of our customers; an inability to integrate the business and systems of  companies we acquire, including failure to realize the anticipated benefits of such acquisitions; negative developments affecting our pension plans and multi-employer pensions; labor disruptions associated with the unionized portion of our workforce; our ability to attract or retain a qualified and diverse workforce; our ability to execute on our strategies related to environmental, social, and governance matters, and achieve related expectations may be impacted as a result of evolving regulatory and other standards, processes, and assumptions, the pace of scientific and technological developments, increased costs and the availability of requisite financing and changes in carbon markets; and the other factors described in the Company's Annual Report on Form 10-K for the year ended December 31, 2021, as well as other filings with the Securities and Exchange Commission. We caution you that the forward-looking information presented in this press release is not a guarantee of future events or results, and that actual events or results may differ materially from those made in or suggested by the forward-looking information contained in this press release. In addition, forward-looking statements generally can be identified by the use of forward-looking terminology such as "may," "plan," "seek, "will," "expect," "intend," "estimate," "anticipate," "believe" or "continue" or the negative thereof or variations thereon or similar terminology. Any forward-looking information presented herein is made only as of the date of this press release, and the Company does not undertake any obligation to update or revise any forward-looking information to reflect changes in assumptions, the occurrence of unanticipated events, or otherwise, except as required by law.

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