Good morning, ladies and gentlemen, and welcome to the Indigo Books & Music Inc. FY 2022 Q3 Analyst Conference Call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. At any time during this call you require immediate assistance, press star zero for the operator. This call is being recorded on Friday, February 11th, 2022. I would now like to turn the conference over to Mr. Craig Loudon. Please go ahead. Good morning, and thank you for joining us to review Indigo's fiscal 2022 third quarter results. My name is Craig Loudon and I'm the Chief Financial Officer. Joining us from Indigo today is the Chief Executive Officer, Heather Reisman. Preparing the materials for this conference call, we issued a press release yesterday, which can be found at indigo.ca and on SEDAR. The conference call will be recorded and archived in the investor relations section of the Indigo website. A playback of the call will also be available by telephone until 11:59 P.M. Eastern time on February 18th, 2022. This conference call may contain forward-looking statements. To the extent that it does, we refer you to our cautionary statement regarding forward-looking statements in the press release and the MD&A related to this quarter. I'd now like to turn the call over to Heather Reisman. Good morning, everyone, and thank you for joining us. Our strong sales performance with our print and general merchandise businesses both in growth mode delivered another quarter of revenues that exceeded both last year and pre-pandemic levels. Specifically, sales were CAD 430.7 million. This represents a CAD 65.3 million or 17.9% increase over last year, and a CAD 47 million or 12.2% increase over fiscal 2020. Growth in our core print business is being driven by a renewed interest in reading and the popularity of reading on social media. This latter phenomenon, which is still gaining in strength, has been strengthening the Indigo brand with a key demographic. On the general merchandise side, our lifestyle and kids businesses both delivered strong results, further insulating our overall business from being dependent on the existence of any one blockbuster book to make our season. This sales growth was delivered despite an endlessly disruptive set of pandemic conditions. The Omicron variant upended the recovery in retail, which had begun earlier in the fall. It brought another round of severe capacity restrictions in key markets, which blunted the incredible momentum we experienced in the first two months of the quarter. Most significantly, it impacted us in the critical days leading up to and including December 24th, when our stores are typically chock-a-block and customers are concerned with ensuring product is in hand for Christmas morning. While Craig will provide a detailed financial perspective, we are pleased to deliver an adjusted EBITDA of CAD 52 million, despite heightened freight and logistic costs and minimal external COVID-19 support. These results are a testament to our meaningfully curated product assortment and strengthened operating model, which included greater sell-through of full price goods and of course, the dedicated efforts of our exceptional teams. We are energized by the strength of our business and look forward to moving past this pandemic when we can fully realize our growth potential. I will now pass it over to Craig. Thank you, Heather. The results we are discussing are for the 13-week ended January 1st, 2022. Comparative figures reference the 13-week ended December 26th, 2020. We generated revenue of CAD 430.7 million, an increase of CAD 65.3 million or 17.9% from the third quarter last year. The company experienced growth across its print and general merchandise businesses. As Heather discussed, the print business benefited from a resurgence in reading. The company's position as Canada's leading bookseller, combined with the effective mitigation of distribution delays experienced by the publishing industry, resulted in its ability to capitalize on the elevated demand, notably introducing the Indigo brand to a younger demographic. Its proprietary brands and strategic inventory buys meaningfully contributed to the growth of the general merchandise business. As a result of social distancing and government-mandated capacity constraints in stores, we believe that comparable sales are not currently meaningful to evaluate performance. Instead, we focused on total revenue as discussed, as well as omnichannel fulfillment trends. The retail channel, which is inclusive of orders fulfilled through omnichannel store pickup, increased by CAD 67.7 million or 29.4% to CAD 298.1 million for the 13-week period ended January 1st, 2022. Retail revenue growth was driven by high conversion and full price sell-through. While pandemic conditions softened and the company's retail network performed stronger than in the same period last year, the emergence of the Omicron variant hampered the network's full recovery. Online channel revenue decreased by CAD 2.5 million or 2.8% to CAD 122.0 million for the 13-week period ended January 1st, 2022. The slight moderation in demand reflects the rebound of retail as discussed. The online channel sustained sales levels at 86.3% above pre-COVID fiscal 2020 and continues to be central to the company's growth trajectory. Cost of sales increased by CAD 34.5 million to CAD 252.4 million for the 13-week period ended January 1st, 2022. Excluding the impact of online shipping costs, cost of sales increased by CAD 32.4 million to CAD 229.8 million for the period. As a percentage of total revenue, this represents a decrease to 53.4% compared to 54.0%. While this was driven by the retail channel rebound, which typically has a higher margin profile, the strength of the company's product assortment and a tighter promotional cadence delivered improvements in its merchandise margin. Notably, these improvements more than offset the adverse impacts of higher inbound freight costs triggered by global supply chain constraints. To provide further context, in the quarter, pressures from the global supply chain cost the general merchandise business approximately 300 basis points in margin rate. Online shipping costs increased by CAD 2.1 million to CAD 22.6 million for the 13-week period ended January 1st, 2022, largely due to increased fuel costs and additional shipping costs incurred in response to the severe flooding experienced in British Columbia during the period. Overall, operating, selling, and administration costs increased by CAD 16.3 million to CAD 127.1 million for the period. Operating costs were offset by external COVID-19 support of CAD 1.2 million, markedly lower than the CAD 12.9 million the company was eligible for and recognized in net occupancy abatement and government rent and payroll subsidies in the prior year. Operating costs also increased from the return of higher sales volumes in the retail channel. Adjusted EBITDA improved by CAD 14.2 million to CAD 52.0 million for the thirteen-week period ended January 1st, 2022. Higher adjusted EBITDA was driven by strong sales and merchandise margin performance and achieved against lower external COVID-19 labor support and the corresponding increase in retail operating expenses. Company recognized net earnings of CAD 45.1 million for the 13-week period ended January 1st, 2022, or CAD 1.62 net earnings per common share, compared to net earnings of CAD 30.7 million or CAD 1.11 net earnings per common share for the same period last year, an improvement of CAD 14.4 million. With no outstanding debt and cash of CAD 189.9 million, the company is well-positioned to see through the remaining COVID-19 uncertainty and the execution of a post-pandemic growth strategy. At this point, we would like to open the call for any questions. Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. If you have a question, please press star followed by one on your touchtone phone. You will hear a three-tone prompt acknowledging your request, and your question will be pulled in the order they are received. If you wish to withdraw from the queue, please press star followed by two. If you're on a speakerphone, please lift your handset before pressing any keys. Your first question comes from David McFadgen with Cormark Securities. Please go ahead. Oh, hi. Thank you. Yeah, just a couple of questions. I was wondering, can you tell us how many days in the quarter were impacted by COVID lockdowns? Sure. I can give you the dates. This is Craig. David, it varied by geography, but in Alberta, we were down to only 33% capacity from October 26th, onwards. In Quebec, we were down to, like, 30% capacity from December 16th, and then in Ontario, 50% capacity from December 17th. I will say in Ontario, I would say a week before the restrictions went in place, you could see consumer behavior change drastically. I think the measures were announced, but didn't go into place for a week. Even a week before they went into place, traffic dropped considerably. Okay. Do you guys, I mean, you must have some idea what that cost you in terms of revenue. Could you comment about that? Yeah. Go ahead, Craig. Go ahead, Craig. Yeah, I mean, we, you know, early in the quarter, David, we were exceeding our expectations. In terms of what were our expectations in retail, we had hoped to achieve probably at least another CAD 30 million in that channel in the quarter. It's a little bit of a guessing game, but if that gives you any sense. Okay. You realize it has two impacts. It has three impacts. I think this point is valuable that based on the momentum in October and November, had that momentum continued, it would have been at least, Craig. I think Craig would say at least what you're saying. I agree with you in any case, but I just think it's important to point out that it has a couple of different impacts, not just retail sales, but when you push to online, you have to ramp up all the delivery costs that Craig notes in his comments earlier in the call. The other factor is in the last week or the last 10 days, but particularly the last week when online can no longer pick up, then you have the, you know, store shipping impact. Yeah. Okay. It's a sales and a cost impact. Right. There's a few dynamics. Yeah, yeah. Okay. Just looking at the online revenue, you know, I saw it was down. It's like technically down because, you know, the prior year benefiting from COVID and all the lockdowns there. I mean, I'm just trying to get a handle on, you know, what online revenue looks like going forward, assuming everything opens back up and kind of get back to normal. Any help there would be helpful. Yeah. I think you should keep in mind that our view, and I think most people's view is that the pandemic has fundamentally changed people's behavior. I think it's fair to say we are optimistic. Our online is doing extraordinarily well, and we are optimistic that retail will grow. We're optimistic because our feeling that retail will come back more and more to pre-pandemic levels, but the online channel will continue to be very strong. We picked up a lot of new to online. Over the course of these two years, we picked up a lot of new to online shoppers, new to us and maybe new to online in total. We're feeling positive about the opportunity in online, and it's running way over pre-pandemic levels. Way over. Right. What's given, you know, Heather confidence in that is certainly, David, in the summer and the early fall when- Exactly. Things were more wide open and people were more mobile, we did see retail, you know, in line with the pre-pandemic levels. But online is still holding up. You know, we've seen that demonstrated now. Do consumers change a little bit in the next two years? I mean, you know, no one has a crystal ball, but that's why we have confidence. Okay. Craig, you talked about heightened freight and logistics costs. Do you expect these to ease off anytime soon? Or as we all know, the inflationary pressures and supply chain problems and stuff, or is this gonna be the way it is for a little while? Well, it will be this way for a little while. The question is, what is a little while? We're not seeing them back off yet. In fact, I would say they're at the highest level they've been in the pandemic. I mean, you know, ocean containers that you know used to cost CAD 2,000 to North America are running CAD 25,000 right now. But you know, over time, that's gotta adjust. You know, egregious rates like that bring on capacity, so it will adjust over time. I think you probably noticed, you know, from materials that you know that did cost us CAD 6.9 million in the quarter. So, you know, we expect that to equalize somewhat over time, but not immediately. Mm-hmm. Okay. You know, assuming the world gets back to normal, everything's opened up at 100%, you know, you guys have done a pretty good job at reducing your cost structure. Do you think you can hold it here, or is there gonna be more investments to gain in the cost structure? Or just trying to assess what the ultimate possibility is for the business when things totally open up. Yeah. I think so. I can go first. We can definitely hold it, David. I think what is encouraging is, you know, we see a future with both channels, you know, firing on all cylinders. You know, pre-pandemic, we had a very strong retail network, and we believe we'll get back there. Our online business was a little smaller. You know, frankly, when it wasn't Black Friday, the rest of the year, there was a lot of fixed costs that weren't necessarily well leveraged. I think now with the scale in the online channel, and we see even further growth there that, you know, as a percent of sales over time, those operating costs should come down. Certainly hold, and we believe there's opportunity to come down a little further. Not in dollar terms, but as a percent of sales. I was just looking back at, you know, your results over, say, the last five years or so, and you hit a high water mark in the quarter ending December 2017, where you did about CAD 63 million-CAD 64 million of EBITDA. I'm just wondering, do you think you can hit that high water mark or even surpass it now, just I'm assuming we get back to normal and everything opens up 100%, do you think you can hit that level again? Yes. We think we can hit that. Now, I don't want to set your expectations that's gonna happen this year because when we look at you know the traffic is still following a pattern of you know what it reduced due to Omicron. That has not come back yet. I think we'll probably be starting next year still a bit behind in that sense. We don't see the freight problem equalizing yet. I think we're still gonna have some headwinds here. We definitely see getting back to those levels of EBITDA, yes. The question is just on timing. Again, I didn't think this time last year we'd still be sitting here talking about COVID. Really we need, you know, both channels firing on all cylinders and to be out of this before that happens. Yeah. Okay. Just thinking about, you know, post-COVID era, if you're gonna make some investments in the business, would they be retail driven, online driven, a combination? Maybe you can just give us an idea of what you're thinking longer term. We have a couple things on the plan. We're definitely gonna continue to invest in digital because we see it as a huge opportunity. We have some further plans for our stores, but we have a quite a thoughtful way of approaching that based on learnings from the last couple of years. We will make the appropriate capital investments. We have a really thoughtful plan on them, and we're feeling pretty positive about the return on capital plan for the next couple of years. You know, as you're talking about an investment in retail, you're not gonna do anything like what you did a couple of years ago. No, no, we don't have to. Yeah, you don't. Yeah. We don't have to. I'll stress, we don't have to, and secondly, we remain a really desired brand by retailers, and we're being encouraged to. In the places we wanna stay, we're probably being encouraged to stay, but we're being offered renovation funds that we require for the most part. Okay. That's fine. Okay. That's it for me. Thank you. Thank you. You always do. Anybody else? There are no further questions at this time. Please proceed. Okay. Thank you. Thank you for your time and attention today. We appreciate you calling in and look forward to reconnecting on a quarterly basis. Our fourth quarter results will be announced on or around June 3rd. Thank you again for your support, and have a great day. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines. Have a great day. Thank you. Bye.