ACQ AutoCanada Inc

• Revenue was $1,627.9 million as compared to $1,657.4 million in the prior year, a decrease of $(29.6) million
• Net income for the period was $7.1 million as compared to $22.8 million in the prior year, a decrease of $(15.7) million
• Diluted earnings per share was $0.25 as compared to $0.81 in the prior year
• Adjusted EBITDA¹ was $53.2 million as compared to $66.7 million in the prior year, a decrease of $(13.5) million

EDMONTON, AB, Nov. 13, 2024  /CNW/ - AutoCanada Inc. ("AutoCanada" or the "Company") (TSX: ACQ), a multi-location North American automobile dealership group, today reported its financial results for the three-month period ended September 30, 2024.

Paul Antony, Executive Chairman, stated, "In the third quarter of 2024, our Canadian operations continued to experience softening market conditions, with affordability pressures influencing consumer behavior and weighing on both gross profit per unit and demand for finance and insurance products. Meanwhile, our U.S. operations continued to face challenges."

"In response to these market dynamics, we have advanced our strategic realignment. This quarter, we completed the sale of two Canadian Stellantis dealerships, streamlined our RightRide operations by closing seven underperforming locations, and refocused remaining stores on tailored credit solutions for credit-challenged customers. In September, we also heightened restrictions on discretionary spending, paused acquisitions, and suspended share buybacks to prioritize core operations and efficient capital allocation."

"These actions support our goals to enhance profitability, reduce leverage, and build a foundation for sustainable growth. Following the third quarter, we launched our transformation plan alongside Bain & Company with four pilot dealerships in Western Canada. While it is early in the transformation process, we expect to achieve $100 million in annualized run-rate operational expense savings by the end of 2025."

Paul Antony concluded, "I want to extend my sincere gratitude to our dedicated employees and OEM partners for their resilience and continued support. Together, we are building a stronger foundation for AutoCanada's future."

Third Quarter Key Highlights and Recent Developments

Consolidated revenue decreased due to weaker performance across used vehicle and F&I operations.

Consolidated gross profit decreased due to declining new vehicle gross profit per retail unit² seen industry wide, continued negative pressure from structural issues in our U.S. Operations, and declining used vehicle sales, all resulting in lower contributions from F&I operations, partially offset by positive contributions from P&S and collision operations, and recent acquisitions.

Operating expenses before depreciation² declined due to lower variable employee costs as a result of weaker gross profit and greater restrictions on hiring and discretionary spend.

Floorplan financing expenses increased as a result of increased new inventory levels partially offset by lower used vehicle inventory levels and decreasing interest rates.

Net income for the period decreased as a result of lower gross profits and higher floorplan financing expenses as discussed above.

Adjusted EBITDA¹ for the period and adjusted EBITDA margin¹ decreased primarily as a result of lower gross profits and higher floorplan financing expenses as discussed above.

Canadian Operations Highlights

Revenue and gross profit decreased due to weaker performance across new vehicle, used vehicle, and F&I operations, partially offset by positive contributions from P&S and collision operations, and recent acquisitions.

New vehicle gross profit per retail unit² decreased as new vehicle market normalizes and inventory supply increased.

Used vehicle gross profit per retail unit² decreased as a result of current used vehicle market dynamics resulting in the prioritization of lower priced vehicles and lower used retail vehicles² sold.

F&I gross profit per retail unit average² decreased slightly as the continued high interest rate environment has shifted payment mix towards more cash, Original Equipment Manufacturers ("OEM") finance, and lease transactions and away from more profitable bank finance deals. This negative pressure has been partially offset with higher product penetrations on all deal types.

Growth in collision gross profit was largely driven by strong customer demand from increased insurance referrals and additional OEM certifications.

Adjusted EBITDA¹ declined due to the reasons stated above combined with higher floorplan financing expenses.

U.S. Operations Highlights

Revenue declined largely due to lower used retail vehicle² sales. Gross profit declined due to weaker new vehicles, used vehicles and F&I performance, including an increase in the used vehicle inventory writedown recognized into cost of sales. Used vehicle performance was negatively impacted by market dynamics that made sourcing optimal used vehicle inventory more challenging. P&S gross profit increased due to the successful implementation of a pricing initiative, including the creation of a parts pricing matrix and updating of warranty labour rates and pricing.

Net income decreased due to lower gross profits as noted above and higher financing costs.

Adjusted EBITDA¹ declined due to lower gross profits and higher floorplan financing costs as noted above.

Collision Operations Highlights

Collision revenue and gross profit increased reflecting contributions from increased insurance referrals and strong customer demand supported by additional OEM certifications.

Collision gross profit percentage² increased due to continued negotiation of parts discount agreements with our vendors, improved parts procurement practices to obtain the best discounts on OEM parts, and implementation of the collision playbook and training process to increase capacity and productivity during the quarter.

Same store² revenue, gross profit, and gross profit percentage² increased for the reasons noted above.

Adjusted EBITDA¹ increased due to higher gross profits as noted above.

Other Recent Developments

During the quarter:

• For the period from July 1 to August 14, 2024, the Company repurchased and cancelled 117,700 shares for an average price of $18.86 under its Normal Course Issuer Bid ("NCIB") and automatic share purchase plan ("ASPP") for consideration of $2.2 million. On August 15, 2024, the ASPP was terminated early in accordance with its terms.
• On July 30, 2024, S&P Global Ratings ("S&P") issued a research update where the Company's Credit Rating was reaffirmed at 'B+' and outlook was revised from 'Stable' to' Negative'.
• AutoCanada identified a cybersecurity incident on August 11, 2024 that impacted its internal information technology ("IT") systems. This incident has been contained and remediation and investigation efforts are ongoing.
• On September 10, 2024, the Company completed the strategic divestiture of two Stellantis stores located in Ponoka, Alberta and Airdrie, Alberta.
• On September 24, 2024, the Company announced the restructuring of its RightRide operations, including the closure of several underperforming RightRide locations.
• On September 27, 2024, the Company announced an amendment to its senior credit facility that offers additional covenant headroom for the period from September 30, 2024 to September 30, 2025.

Conference Call

A conference call to discuss the results for the three months ended September 30, 2024 will be held on November 13, 2024 at 4:00 pm Mountain (6:00 pm Eastern). To participate in the conference call, please dial 1-888-664-6392 approximately 10 minutes prior to the call.

This conference call will also be webcast live over the internet and can be accessed by all interested parties at the following URL: https://investors.autocan.ca/event/2024-q3-conference-call/

MD&A and Financial Statements

Information included in this press release is a summary of results. It should be read in conjunction with AutoCanada's Interim Consolidated Financial Statements ("Interim Financial Statements") and Management's Discussion and Analysis ("MD&A") for the three-month period and nine-month period ended September 30, 2024, which can be found on the Company's website at www.autocan.ca or on www.sedarplus.ca.

All comparisons presented in this press release are between the three-month period ended September 30, 2024 and the three-month period ended September 30, 2023, unless otherwise indicated. Results are reported in Canadian dollars and have been rounded to the nearest thousand dollars, unless otherwise stated.

Condensed Interim Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)
(in thousands of Canadian dollars except for share and per share amounts)

The accompanying notes are an integral part of these condensed interim consolidated financial statements and can be found on the Company's website at www.autocan.ca or on www.sedarplus.ca.

 Condensed Interim Consolidated Statements of Financial Position

(Unaudited)
(in thousands of Canadian dollars)

The accompanying notes are an integral part of these condensed interim consolidated financial statements and can be found on the Company's website at www.autocan.ca or on www.sedarplus.ca.

Condensed Interim Consolidated Statements of Cash Flows

(Unaudited)
(in thousands of Canadian dollars)

The accompanying notes are an integral part of these condensed interim consolidated financial statements and can be found on the Company's website at www.autocan.ca or on www.sedarplus.ca.

NON-GAAP AND OTHER FINANCIAL MEASURES

This press release contains certain financial measures that do not have any standardized meaning prescribed by GAAP. Therefore, these financial measures may not be comparable to similar measures presented by other issuers. Investors are cautioned these measures should not be construed as an alternative to net income (loss) or to cash provided by (used in) operating, investing, financing activities, cash, and indebtedness determined in accordance with GAAP, as indicators of our performance. We provide these additional non-GAAP measures ("Non-GAAP Measures"), capital management measures, and supplementary financial measures to assist investors in determining the Company's ability to generate earnings and cash provided by (used in) operating activities and to provide additional information on how these cash resources are used.

Adjusted EBITDA and adjusted EBITDA margin are not earnings measures recognized by GAAP and do not have standardized meanings prescribed by GAAP. Investors are cautioned that these Non-GAAP Measures should not replace net earnings or loss (as determined in accordance with GAAP) as an indicator of the Company's performance, cash flows from operating, investing and financing activities or as a measure of liquidity and cash flows. The Company's methods of calculating referenced Non-GAAP Measures may differ from the methods used by other issuers. Therefore, these measures may not be comparable to similar measures presented by other issuers.

We list and define these "NON-GAAP MEASURES" below:

Adjusted EBITDA

Adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) is an indicator of a company's operating performance over a period of time and ability to incur and service debt. Adjusted EBITDA provides an indication of the results generated by our principal business activities prior to:

• Interest expense (other than interest expense on floorplan financing), income taxes, depreciation, and amortization;
• Charges that introduce volatility unrelated to operating performance by virtue of the impact of external factors (such as share-based compensation amounts attributed to certain equity issuances as part of the Used Digital Division);
• Non-cash charges (such as impairment, recoveries, gains or losses on derivatives, revaluation of contingent consideration and revaluation of redemption liabilities);
• Charges outside the normal course of business (such as restructuring, gains and losses on dealership divestitures, and real estate transactions); and
• Charges that are non-recurring in nature (such as provisions for settlement income).

The Company considers this measure meaningful as it provides improved continuity with respect to the comparison of our operating performance over a period of time.

Adjusted EBITDA Margin

Adjusted EBITDA margin is an indicator of a company's operating performance specifically in relation to our revenue performance.

The Company considers this measure meaningful as it provides improved continuity with respect to the comparison of our operating performance with retaining and growing profitability as our revenue and scale changes over a period of time.

NON-GAAP AND OTHER FINANCIAL MEASURES RECONCILIATIONS

Adjusted EBITDA and Segmented Adjusted EBITDA

The following table illustrates segmented adjusted EBITDA for the three-month periods ended September 30:

The following table illustrates collision adjusted EBITDA for the three-month periods ended September 30:

Adjusted EBITDA Margin

The following table illustrates segmented adjusted EBITDA margin for the three-month periods ended September 30:

Forward Looking Statements

Certain statements contained in this press release are forward-looking statements and information (collectively "forward-looking statements"), within the meaning of the applicable Canadian securities legislation. We hereby provide cautionary statements identifying important factors that could cause actual results to differ materially from those projected in these forward-looking statements. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions, or future events or performance (often, but not always, through the use of words or phrases such as "will likely result", "are expected to", "will continue", "is anticipated", "projection", "vision", "goals", "objective", "target", "schedules", "outlook", "anticipate", "expect", "estimate", "could", "should", "plan", "seek", "may", "intend", "likely", "will", "believe", "shall" and similar expressions) and the financial outlook with respect to the transformation plan are not historical facts and are forward-looking and may involve estimates and assumptions and are subject to risks, uncertainties and other factors some of which are beyond our control and difficult to predict.

Forward-looking statements and financial outlook in this press release include: AutoCanada's future financial position and expected run-rate operational expense savings from the transformation plan.

Forward-looking statements and financial outlook provide information about management's expectations and plans for the future and may not be appropriate for other purposes. Forward looking statements and financial outlook are based on various assumptions, and expectations that AutoCanada believes are reasonable in the circumstances. No assurance can be given that these assumptions and expectations will prove correct. Those assumptions and expectations are based on information currently available to AutoCanada, including information obtained from third-party consultants and other third-party sources, and the historic performance of AutoCanada's businesses. AutoCanada cautions that the assumptions used to prepare such forward-looking statements and financial outlook, including AutoCanada's expected run-rate operational expense savings through the transformation plan, could prove to be incorrect or inaccurate.

This financial outlook is disclosed to assist current and future shareholders to evaluate the effectiveness of AutoCanada's transformation plan and readers are cautioned that it may not be suitable for any other purpose.

The expected run-rate operational expense savings are based on the assumptions that staffing optimization, improved store efficiencies and productivity gains, and consolidation of operations will decrease labour and overhead costs. Additional key assumptions or risk factors with respect to achieving the operational expense savings include successful execution, no overruns in one-time restructuring costs incurred in connection with the transformation plan, economic stability, and other external factors. In addition to the significant assumptions referred to in this paragraph, refer to "Forwarding-Looking Statements" within Section 1 Reader Advisories and Forward-Looking Statements and Section 12 Risk Factors of the MD&A for a detailed review of significant business risks affecting AutoCanada.

In preparing the forward-looking statements and financial outlook, AutoCanada considered numerous economic, market and operational assumptions, including key assumptions listed under Section 3 Market and Financial Outlook of the MD&A.

The forward-looking statements and financial outlook are also subject to the risks and uncertainties set forth below. By their very nature, forward-looking statements involve numerous assumptions, risks and uncertainties, both general and specific. Should one or more of these risks and uncertainties materialize or should underlying assumptions prove incorrect, as many important factors are beyond our control, AutoCanada's actual performance and financial results may vary materially from those estimates and expectations contemplated, expressed or implied in the forward-looking statements. These risks and uncertainties include risks relating to failure to realize expected cost-savings, cost overruns in one-time restructuring expenses, compliance with laws and regulations, reduced customer demand, operational risks, force majeure, labour relations matters, our ability to access external sources of debt and equity capital, and the risks identified in (i) the MD&A under Section 12 Risk Factors and (ii) AutoCanada's most recent Annual Information Form for the year-ended December 31, 2023 (the "AIF"). The preceding list of assumptions, risks and uncertainties is not exhaustive.

Accordingly, these factors could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements and financial outlook. Therefore, any such forward-looking statements and financial outlook are qualified in their entirety by reference to the factors discussed throughout this press release and in the MD&A.

Details of the Company's material forward-looking statements are included in the Company's most recent AIF. The AIF and other documents filed with securities regulatory authorities (accessible through the SEDAR website (www.sedarplus.ca) describe the risks, material assumptions, and other factors that could influence actual results and which are incorporated herein by reference.

When relying on our forward-looking statements and financial outlook to make decisions with respect to AutoCanada, investors and others should carefully consider the preceding factors, other uncertainties and potential events. Any forward-looking statements and financial outlook are provided as of the date of this press release and, except as required by law, AutoCanada does not undertake to update or revise such statements to reflect new information, subsequent or otherwise. For the reasons set forth above, investors should not place undue reliance on forward-looking statements or financial outlook.

About AutoCanada

AutoCanada is a leading North American multi-location automobile dealership group currently operating 83 franchised dealerships, comprised of 28 brands, in eight provinces in Canada as well as a group in Illinois, USA. AutoCanada currently sells Acura, Alfa Romeo, Audi, BMW, Buick, Cadillac, Chevrolet, Chrysler, Dodge, FIAT, Ford, GMC, Honda, Hyundai, Infiniti, Jeep, Kia, Lincoln, Mazda, Mercedes-Benz, MINI, Nissan, Porsche, Ram, Subaru, Toyota, Volkswagen, and Volvo branded vehicles. In addition, AutoCanada's Canadian Operations segment currently operates 3 used vehicle dealerships and 1 used vehicle auction business supporting the Used Digital Division, 5 RightRide division locations, and 11 stand-alone collision centres within our group of 27 collision centres. In 2023, the Company generated revenue in excess of $6 billion and our dealerships sold over 100,000 retail vehicles.

Additional Information

Additional information about AutoCanada is available at the Company's website at www.autocan.ca and www.sedarplus.ca.

SOURCE AutoCanada Inc.