- Revenue was $1,686.0 million as
compared to $1,281.1 million in the
prior year, an increase of 32% and the highest second quarter
revenue reported in the Company's history
- Net income for the period was $39.1
million, which includes $10.0
million of incremental inventory writedowns, versus net
income of $37.7 million in the prior
year
- Adjusted EBITDA1 was $75.6
million versus $70.5 million
in the prior year, an increase of 7.2%; normalized increase of
11.9% as compared to prior year normalized adjusted
EBITDA1 of $67.5
million
-
- Adjusted EBITDA margin1 was 4.5% versus the
normalized adjusted EBITDA margin1 of 5.3% in the prior
year, a decrease of (0.8) percentage points
- Diluted earnings per share was $1.33, an increase of $0.10 from $1.23 in
the prior year
- Indebtedness of $375.0 million at
the end of Q2 2022 compares to $358.5
million at the end of Q1 2022
- Net indebtedness1 of $294.1
million at the end of Q2 2022 compares to $248.8 million at the end of Q1 2022
EDMONTON, AB, Aug. 10,
2022 /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 June 30, 2022.
"Our positive momentum continued in the second quarter where our
team delivered yet another record quarter with exceptional
performance across our operations," said Paul Antony, Executive Chairman of
AutoCanada. "Strong results in Q2 reflect the ongoing
sustainability of our business model, as well as our ability to
continue navigating a range of industry challenges, including OEM
production delays and inventory constraints. I am immeasurably
proud of what we have built and our platform's ability to thrive in
a variety of market conditions and drive industry-leading
performance.
"This strength allowed us to continue to advance our acquisition
strategy with the recent addition of Burwell Auto Body and
Kelleher Ford, further expanding our
national collision centre footprint and our dealership platform
across Canada. We remain well
positioned to continue to execute on our acquisition pipeline in
the coming quarters with a number of dealerships and collision
centres being evaluated.
"Looking forward to the remainder of 2022, we will continue to
build on our strong momentum and focus on our strategic growth
pillars to deliver best in class performance and enhance
shareholder returns. We also expect to see continued realization of
synergies from our acquisitions which will further drive our
Adjusted EBITDA performance."
Second Quarter Key Highlights and Recent Developments
The Company set a second quarter record as revenue reached
$1,686.0 million compared to
$1,281.1 million in the prior year,
an increase of 31.6%. Results were driven by continued strong
performance across all areas of our complete business model, in
particular our finance and insurance ("F&I"), parts, service
and collision repair ("PS&CR") business operations, continued
improvements from our U.S. Operations, and contributions from our
acquisitions.
Net income for the period was $39.1
million, which includes an incremental charge of
$10.0 million in our Canadian
Operations for the writedown of used vehicle inventory to net
realizable value, as compared to $37.7
million in Q2 2021. Diluted earnings per share was
$1.33, an increase of $0.10 from $1.23 in
the prior year.
Adjusted EBITDA1 for the period was $75.6 million as compared to $70.5 million reported in Q2 2021, an improvement
of 7.2%. Prior year results include $3.0
million of government assistance related to COVID. Excluding
these typically non-recurring income items in the prior year,
adjusted EBITDA1 of $75.6
million compares to normalized adjusted EBITDA1
of $67.5 million in the prior year, a
normalized improvement of 11.9%. Adjusted EBITDA margin1
of 4.5% compares to 5.5% in the prior year, a decrease of (1.0)
percentage points ("ppts"), and a decrease of (0.8) ppts as
compared to normalized adjusted EBITDA margin1 of 5.3%
in the prior year.
Gross profit increased by $61.4
million to $279.3 million, an
increase of 28.2%, as compared to prior year. This increase was
largely driven by the increases of $30.7
million from F&I and $22.6
million from PS&CR. F&I gross profit per retail unit
average2 increased to $3,458, up 24.7% or $684 per unit. Gross profit percentage was 16.6%
in the quarter and was impacted by the incremental $10.0 million writedown of used vehicle inventory
to net realizable value; this compares to 17.0% in the prior year.
Used retail vehicles2 sales increased by 4,469 units, up
33.7%, to 17,740, and contributed to the consolidated used to new
retail units ratio2 moving to 1.80 from 1.31. Used
vehicle sales volume contributed to our strong F&I and
PS&CR gross profit performance.
Our U.S. Operations continue to demonstrate strong growth and
contributed $42.9 million of gross
profit, an increase of $13.0 million
or 43.6% as compared to prior year. This improvement in gross
profit was propelled by gains from F&I and PS&CR, resulting
in a gross profit percentage of 17.3%.
Floorplan financing costs increased by $2.5 million, or 70%, to $5.9 million as compared to prior year. The
increase is attributable to the combination of rising interest
rates and an increase in our used vehicle inventory position. While
rising interest rates are expected to impact customer
affordability, we consider the availability of vehicle inventory to
remain the most significant challenge to sales growth.
Additionally, some of the direct impacts of rising interest rates
may be offset by vehicle financing products which provide
flexibility in financing terms, inclusive of incentives and term
extensions. Overall, we currently do not expect interest rates to
impact the pace of new and used vehicle sales due to strong levels
of demand relative to limited supply. Management continues to
monitor the macro environment and will adjust F&I product
offerings and other aspects of the business, where necessary, to
meet customer needs.
We continue to manage our new vehicle inventory as the chip
shortage remains an issue and continues to impact the supply of new
vehicle inventory. While we have seen positive indicators and noted
gradual improvements in both the availability of inventory and
product allocations, we are not anticipating a return to "normalcy"
in inventory levels until late 2023 to 2024. Compensating for
constrained new vehicle supply, we more than doubled our used
vehicle inventory position to $699.0
million as at June 30, 2022 as compared to $309.8 million in Q2 2021. Based on our current
used vehicle inventory composition and market conditions,
management determined that $10.0 million writedown of incremental used
vehicle inventory was required to calibrate our cost of used
vehicle inventory to the changing macro environment. We will
continue to assess the net realizable value of our inventory in the
quarters ahead and actively manage our inventory position to ensure
it remains appropriate to meet current market demand.
Net indebtedness1 increased by $45.3 million from March
31, 2022 to $294.1 million at
the end of Q2 2022. This increase is primarily driven by the
repurchase and cancellation of $25.4
million of shares under the authorized Normal Course Issuer
Bid ("NCIB"), the acquisitions of Porsche Centre London and Audi
Windsor dealerships, and the Burwell Auto Body collision centre.
Free cash flow1 on a trailing twelve month ("TTM") basis
was $89.1 million at Q2 2022 as
compared to $159.9 million in Q2
2021; the decline in free cash flow1 between years was
driven primarily by reduced government assistance in 2021,
increased cash taxes, stock based compensation related cash
payments, and changes in working capital. Additionally, our net
indebtedness leverage ratio1 of 1.3x remained well below
our target range at the end of Q2 2022, as compared to 0.1x in Q2
2021.
Had all of the acquisitions, completed as of Q2 2022, occurred
at July 1, 2021, consolidated
pro forma net income would have been $155.3
million for the TTM ended June 30,
2022, as compared to consolidated pro forma net income of
$174.8 million for the year ended
December 31, 2021. Pro forma
normalized adjusted EBITDA1 would be $286.9 million for the TTM ended June 30, 2022, as compared to pro forma
normalized adjusted EBITDA1 of $266.4 million for the year ended December 31, 2021.
We have established an acquisition pipeline, with dealerships
and collision centres representing in excess of $125 million in annual revenue currently being
evaluated. We are at varying stages of the acquisition process with
these targets, ranging from signed letters of intent to signed
purchase agreements, with the potential deals remaining subject to
due diligence, OEM approvals, and other standard closing
conditions. We remain well-positioned to continue to execute on our
acquisition strategy in the coming quarters.
Our performance, both in Canada
and U.S. Operations, continues our trend of sustainable improvement
and demonstrates the efficacy of our complete business model and
strategic initiatives. We remain aware that uncertainty continues
to exist in the macroeconomic environment given the ongoing
challenges associated with the lingering effects of the global
pandemic, inflation, rising interest rates, and the Russia-Ukraine war. Uncertainties may include
potential economic recessions or downturns, continued disruptions
to the global automotive manufacturing supply chain, and other
general economic conditions resulting in reduced demand for vehicle
sales and service. We will continue to remain proactive and
vigilant in assessing the impacts on our organization and remain
committed to optimizing and building stability and resiliency into
our business model to ensure we are able to drive industry-leading
performance regardless of changing market condition.
Consolidated AutoCanada Highlights
ANOTHER RECORD SETTING SECOND QUARTER
AutoCanada delivered another record setting second quarter.
Refer to Section 5 Acquisitions, Divestitures, Relocations and
Real Estate of the MD&A for acquisitions included in Q2 2022
results.
For the three-month period ended June 30,
2022:
- Revenue was $1,686.0 million, an
increase of $405.0 million or
31.6%
- Total vehicles2 sold were 28,115, an increase of
4,162 units or 17.4%
-
- Used retail vehicles2 sold increased by 4,469 or
33.7%
- Net income for the period was $39.1
million (or $1.40 per basic
share) versus $37.7 million (or
$1.23 per diluted share), which
includes $10.0 million of incremental
inventory writedowns in Q2 2022
- Adjusted EBITDA1, which includes $10.0 million of incremental inventory
writedowns, increased by 7.2% to $75.6
million, an increase of $5.1
million
-
- Adjusted EBITDA1 increased by 11.9% over prior year
normalized adjusted EBITDA1 of $67.5 million, an increase of $8.0 million
- Adjusted EBITDA1 on a trailing twelve month basis
was $271.9 million
- Net indebtedness1 of $294.1
million reflected an increase of $45.3 million from Q1 2022.
Canadian Operations Highlights
TOTAL GROSS PROFIT INCREASED BY 26%
Our F&I and PS&CR segments were key drivers of the
record performance in Q2 2022. F&I gross profit per retail unit
average increased to $3,349, up 17.2%
or $491 per unit. PS&CR gross
profit increased by $17.7 million or
29.3% to $78.2 million.
Unless stated otherwise, all results for acquired businesses are
included in all Canadian references in the MD&A.
For the three-month period ended June 30,
2022:
- Revenue was $1,437.9 million, an
increase of 32.0%
- Used retail unit2 sales increased by 3,017 or
26.3%
-
- Average TTM Canadian used retail unit sales per dealership per
month, excluding Used Digital Retail Division
dealerships2, improved to 60, as compared to 57 in the
prior year
- Used to new retail units ratio2 increased to 1.69
from 1.48
-
- TTM used to new retail ratio2 improved to 1.56 at Q2
2022 as compared to 1.13 at Q2 2021
- F&I gross profit per retail unit average2
increased to $3,349, up 17.2% or
$491 per unit
- Net income for the period was $31.9
million, which includes $10.0
million of incremental inventory writedowns, down (3.1)%
from a net income of $33.0 million in
2021
- Adjusted EBITDA1 increased by 6.4% to $65.4 million, an increase of $3.9 million
-
- Adjusted EBITDA1 increased by 9.3% over prior year
normalized adjusted EBITDA1 of $59.9 million
- Adjusted EBITDA margin1 was 4.6% as compared to
normalized adjusted EBITDA margin1 of 5.5% in the prior
year, a decrease of (0.9) ppts
U.S. Operations Highlights
USED RETAIL VEHICLES SOLD INCREASED BY
81%
U.S. Operations continues to improve, as demonstrated by the
fifth consecutive quarter of year-over year growth in adjusted
EBITDA1. This growth was driven by improvements across
all aspects of the business and resulted in an increase in gross
profit percentage by 1.7 ppts to 17.3% and a 10.3% increase in
total retail unit2 sales.
- Revenue was $248.1 million, an
increase of 29.5%, from $191.6
million
- Used retail vehicles2 sold increased by 1,452 units
or 81%
- F&I gross profit per retail unit average2
increased to $4,005 per unit, up
68.2% or $1,624 per unit
- Net income for the period increased by $2.4 million to $7.1
million from $4.7 million
-
- Net income on a trailing twelve month basis was $24.5 million
- Adjusted EBITDA1 was $10.1
million as compared to $9.0
million, an increase of $1.1
million
-
- Adjusted EBITDA1 increased by $2.5 million as compared to normalized adjusted
EBITDA1 of $7.7 million
for the prior year
- Adjusted EBITDA1 on a trailing twelve month basis
was $37.1 million
Same Store Metrics - Canadian Operations
F&I GROSS PROFIT PER RETAIL UNIT AVERAGE
INCREASED TO $3,683, UP 25% OR
$741 PER UNIT
The continued optimization of the Company's complete business
model is highlighted by the year-over-year 10.3% improvement in
gross profit, which collectively totaled $201.5 million. PS&CR performance has
improved as a result of the continued recovery in kilometres
driven, implementation of Business Development Centre, operational
process improvements, and optimization of the PS&CR pricing
strategy to maintain margins within the current macro economic
conditions..
Refer to Section 19 Same Store Results Data of the MD&A
for the definition of same store and further information.
- Revenue increased to $1,214.5
million, an increase of 14.2%
- Gross profit increased by $18.8
million or 10.3%
- Used to new retail units ratio2 increased to 1.59
from 1.37
-
- Used retail unit sales2 increased by 7.3%, an
increase of 772 units
- For the fifteenth consecutive quarter of year-over-year growth,
F&I gross profit per retail unit average2 increased
to $3,683, up 25.2% or $741 per unit; F&I gross profit increased to
$68.2 million as compared to
$54.0 million in the prior year, an
increase of 26.2%
- PS&CR gross profit increased to $64.6 million, an increase of 13.7%
-
- PS&CR gross profit percentage2 increased to
57.2% as compared to 55.5% in the prior year
Financing and Investing Activities and Other Recent
Developments
ACQUISITION PIPELINE SUPPORTED BY HEALTHY
BALANCE SHEET AND LIQUIDITY STRUCTURE
Net indebtedness1 of $294.1
million resulted in a net indebtedness leverage
ratio1 of 1.3x. Financing and investing activities
included the following:
Acquisitions
- The Company completed $78.8
million of acquisitions in Q2 2022
- On May 2, 2022, the Company
acquired substantially all of the assets, including the underlying
real estate, used in or relating to the Audi Windsor and Porsche
Centre London dealerships, located in Windsor and London,
Ontario, respectively. The acquisition further establishes
our presence in the province of Ontario, increasing both brand diversity and
luxury mix within our portfolio.
- On June 30, 2022, the Company
acquired 100% of the shares in Burwell Auto Body Ltd., a
luxury-brand focused collision centre. The acquisition expands our
collision centre capacity, and allows the Company to leverage
existing dealerships in Ontario.
- On August 2, 2022, the Company
acquired 100% of the shares of Kelleher Ford Dealership and
Collision Centre. The acquisition supports management's strategic
objectives of further establishing the Company's presence in the
province of Manitoba.
Non-Recourse Mortgage Financing
- On June 22 and June 30, 2022, the Company executed $32.2 million of non-recourse mortgage financings
with the Bank of Nova Scotia for
previously purchased properties. The non-recourse mortgages will
fund land value and construction costs associated with the
development of two dealerships in Maple
Ridge, BC, and real estate value for two dealerships in
Ontario. The underlying
real estate is pledged as collateral on the non-recourse mortgage
in the amount of the loan. The credit facility allows for up to
$100 million of non-recourse mortgage
financing. The non-recourse mortgage liability is not considered a
liability for purposes of calculating our credit facility financial
covenants.
Share Purchases
- The Company completed its normal course issuer bid on
May 19, 2022, purchasing and
cancelling 1,730,321 shares for an aggregate purchase price of
$56.6 million.
- On June 28, 2022, the Company
announced a Substantial Issuer Bid ("SIB") offer to purchase up to
$100 million in value of its
outstanding common shares at a price range of $22 to $25 per
share. The offer was set to expire on August
4, 2022.
- On August 2, 2022, the Company
announced an expiration date extension and a revised price range
for the SIB. The SIB's price range was revised from $22 to $25 per
share to $25 to $28 per share, and the expiration date was
revised from August 4, 2022 to
August 15, 2022.
Second Quarter Financial Information
The following table summarizes the Company's performance for the
quarter:
|
|
|
Three Months Ended
June 30
|
Consolidated
Operational Data
|
2022
|
2021
|
%
Change
|
Revenue
|
1,686,026
|
1,281,055
|
31.6 %
|
Gross
profit
|
279,278
|
217,841
|
28.2 %
|
Gross profit
%
|
16.6 %
|
17.0 %
|
(0.4) %
|
Operating
expenses
|
212,709
|
154,773
|
37.4 %
|
Operating
profit
|
69,954
|
66,153
|
5.7 %
|
Net income for the
period
|
39,058
|
37,698
|
3.6 %
|
Basic net income per
share attributable to AutoCanada shareholders
|
1.40
|
1.33
|
5.3 %
|
Diluted net income per
share attributable to AutoCanada shareholders
|
1.33
|
1.23
|
8.1 %
|
Adjusted
EBITDA1
|
75,561
|
70,491
|
7.2 %
|
|
|
|
|
New retail
vehicles2 sold (units)
|
9,878
|
10,107
|
(2.3) %
|
New fleet
vehicles2 sold (units)
|
497
|
575
|
(13.6) %
|
Total new
vehicles2 sold (units)
|
10,375
|
10,682
|
(2.9) %
|
Used
retail vehicles2 sold (units)
|
17,740
|
13,271
|
33.7 %
|
Total
vehicles2 sold
|
28,115
|
23,953
|
17.4 %
|
Same store
new retail vehicles2 sold (units)
|
7,139
|
7,763
|
(8.0) %
|
Same store
new fleet vehicles2 sold (units)
|
440
|
575
|
(23.5) %
|
Same store
used retail vehicles2 sold (units)
|
11,371
|
10,599
|
7.3 %
|
Same store
total vehicles2 sold
|
18,950
|
18,937
|
0.1 %
|
Same
store2 revenue
|
1,214,485
|
1,063,275
|
14.2 %
|
Same
store2 gross profit
|
201,493
|
182,716
|
10.3 %
|
Same
store2 gross profit %
|
16.6 %
|
17.2 %
|
(0.6) %
|
1
|
See "NON-GAAP AND OTHER
FINANCIAL MEASURES" below.
|
2
|
This press release
contains "SUPPLEMENTARY FINANCIAL MEASURES". Section 15. NON-GAAP
AND OTHER FINANCIAL MEASURES of the Company's Management's
Discussion & Analysis for the three month period ended June 30,
2022 ("MD&A") is hereby incorporated by reference for further
information regarding the composition of these measures (accessible
through the SEDAR website at www.sedar.com).
|
SELECTED QUARTERLY FINANCIAL INFORMATION
The following table shows the unaudited results of the Company
for each of the eight most recently completed quarters. The results
of operations for these periods are not necessarily indicative of
the results of operations to be expected in any given comparable
period.
|
MD&A
Footnote
Reference3
|
Q2
2022
|
Q1
2022
|
Q4
2021
|
Q3
2021
REVISED
|
Q2
2021
REVISED
|
Q1
2021
REVISED
|
Q4
2020
|
Q3
2020
|
Income Statement
Data
|
4
|
|
|
|
|
|
|
|
|
New vehicles
4
|
7
|
583,870
|
511,195
|
467,085
|
498,142
|
547,593
|
451,061
|
466,468
|
544,415
|
Used vehicles
4
|
7
|
840,998
|
595,514
|
524,043
|
518,791
|
539,785
|
354,922
|
257,301
|
309,193
|
Parts, service and
collision repair 4
|
7
|
160,307
|
152,009
|
136,800
|
116,953
|
122,459
|
108,427
|
105,362
|
111,739
|
Finance, insurance and
other 4
|
7
|
100,851
|
83,720
|
67,854
|
72,868
|
71,218
|
55,414
|
46,990
|
51,753
|
Revenue
|
|
1,686,026
|
1,342,438
|
1,195,782
|
1,206,754
|
1,281,055
|
969,824
|
876,121
|
1,017,100
|
New vehicles
4
|
7
|
58,950
|
53,384
|
50,632
|
46,525
|
44,619
|
34,639
|
31,199
|
42,230
|
Used vehicles
4
|
7
|
34,125
|
36,772
|
38,118
|
39,669
|
40,269
|
23,206
|
19,787
|
29,819
|
Parts, service and
collision repair 4
|
7
|
90,713
|
78,431
|
75,917
|
64,748
|
68,115
|
57,874
|
58,109
|
59,056
|
Finance, insurance and
other 4
|
7
|
95,490
|
78,752
|
63,847
|
69,250
|
64,838
|
51,917
|
43,642
|
48,307
|
Gross
Profit
|
|
279,278
|
247,339
|
228,514
|
220,192
|
217,841
|
167,636
|
152,737
|
179,412
|
Gross profit
%
|
|
16.6 %
|
18.4 %
|
19.1 %
|
18.2 %
|
17.0 %
|
17.3 %
|
17.4 %
|
17.6 %
|
Operating
expenses
|
|
212,709
|
193,646
|
170,008
|
159,880
|
154,773
|
127,948
|
119,442
|
125,785
|
Operating expenses as a
% of gross
profit
|
|
76.2 %
|
78.3 %
|
74.4 %
|
72.6 %
|
71.0 %
|
76.3 %
|
78.2 %
|
70.1 %
|
Operating
profit
|
|
69,954
|
56,690
|
99,410
|
62,841
|
66,153
|
41,664
|
46,664
|
56,884
|
Recovery of
non-financial assets
|
|
—
|
—
|
(39,846)
|
—
|
—
|
—
|
(11,248)
|
—
|
Net income
|
|
39,058
|
4,322
|
69,398
|
38,769
|
37,698
|
21,334
|
24,320
|
35,962
|
Basic net income per
share
attributable to AutoCanada
shareholders
|
|
1.40
|
0.11
|
2.54
|
1.37
|
1.33
|
0.77
|
0.87
|
1.29
|
Diluted net income per
share
attributable to AutoCanada
shareholders
|
|
1.33
|
0.10
|
2.38
|
1.27
|
1.23
|
0.71
|
0.81
|
1.23
|
Dividends declared per
share
|
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
Adjusted EBITDA
1
|
2
|
75,561
|
62,196
|
65,873
|
68,265
|
70,491
|
47,234
|
40,472
|
61,054
|
Free cash flow
1
|
2
|
63,318
|
5,852
|
7,603
|
12,372
|
67,803
|
19,391
|
19,240
|
53,444
|
|
|
|
|
|
|
|
|
|
|
Operating
Data
|
4
|
|
|
|
|
|
|
|
|
New retail
vehicles2 sold
|
3
|
9,878
|
9,052
|
8,204
|
9,255
|
10,107
|
8,233
|
8,623
|
10,750
|
New fleet
vehicles2 sold
|
3
|
497
|
290
|
199
|
358
|
575
|
740
|
964
|
582
|
Total new
vehicles2 sold
|
3
|
10,375
|
9,342
|
8,403
|
9,613
|
10,682
|
8,973
|
9,587
|
11,332
|
Used retail
vehicles2 sold
|
3
|
17,740
|
14,072
|
11,893
|
13,831
|
13,271
|
9,734
|
7,389
|
8,836
|
Total
vehicles2 sold
|
3
|
28,115
|
23,414
|
20,296
|
23,444
|
23,953
|
18,707
|
16,976
|
20,168
|
# of service and
collision repair
orders2 completed
|
3, 5
|
261,671
|
221,632
|
232,373
|
199,870
|
214,149
|
182,869
|
203,086
|
195,004
|
# of dealerships at
period end
|
6
|
82
|
80
|
80
|
68
|
67
|
67
|
67
|
62
|
# of same store
dealerships
|
1
|
49
|
49
|
49
|
49
|
49
|
49
|
47
|
47
|
# of service bays at
period end
|
|
1,322
|
1,293
|
1,303
|
1,108
|
1,098
|
1,098
|
1,098
|
1,039
|
Same stores2
revenue growth
|
1
|
14.2 %
|
17.2 %
|
14.1 %
|
15.0 %
|
54.2 %
|
27.8 %
|
6.3 %
|
(1.1) %
|
Same
stores2 gross profit growth
|
1
|
10.3 %
|
23.2 %
|
29.4 %
|
18.6 %
|
102.5 %
|
35.0 %
|
7.7 %
|
17.1 %
|
1
|
See "NON-GAAP AND OTHER
FINANCIAL MEASURES" below.
|
2
|
This press release
contains "SUPPLEMENTARY FINANCIAL MEASURES". Section 15. NON-GAAP
AND OTHER FINANCIAL MEASURES of the Company's Management's
Discussion & Analysis for the three month period ended June 30,
2022 ("MD&A") is hereby incorporated by reference for further
information regarding the composition of these measures (accessible
through the SEDAR website at www.sedar.com).
|
3
|
See the Company's
MD&A for the quarter ended June 30, 2022 for complete footnote
disclosures.
|
4
|
In Q4 2021, it was
determined there were Revenues and Cost of sales accounts
incorrectly classified between revenue streams in the first three
quarters of 2021 within the U.S. Operations segment. As a result,
the classification of these accounts has been corrected and we have
revised the Q1, Q2, and Q3 2021 amounts. This reclassification had
no impact on total gross profit.
|
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
Consolidated Financial Statements and Management's Discussion and
Analysis for the quarter ended June 30, 2022, which can be
found on the Company's website at www.autocan.ca or on
www.sedar.com.
NON-GAAP MEASURES
This press release contains certain financial measures that do
not have any standardized meaning prescribed by Canadian 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 earnings (loss) or to cash provided by (used in) operating,
investing, financing activities, cash and cash equivalents, and
indebtedness determined in accordance with Canadian GAAP, as
indicators of our performance. We provide these additional non-GAAP
measures, capital management measures, and supplementary financial
measures to assist investors in determining our 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, adjusted EBITDA margin, normalized adjusted
EBITDA, normalized adjusted EBITDA margin, income statement impacts
and adjusted EBITDA on a pre-IFRS 16 basis, adjusted EBITDA margin
on a pre-IFRS 16 basis, pro forma adjusted EBITDA, pro forma
normalized adjusted EBITDA, free cash flow, net indebtedness, and
net indebtedness leverage ratio 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,
of its cash flows from operating, investing and financing
activities or as a measure of its 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.
It should be noted that certain of the financial measures
described below include pro forma items estimating the impact of
the acquisitions if they had occurred on the first day of the
relevant period, or as of a specified date. Readers should
understand that these estimates were determined by management in
good faith and are not indicative of what the historical results of
the businesses acquired in the acquisitions actually were for the
relevant period, or what those results would have been if the
acquisitions had occurred on the dates indicated, or what they will
be for any future period. As a result, the pro forma financial
measures may not be indicative of the Company's financial position
that would have prevailed, or operating results that would have
been obtained, if the transactions had taken place on the dates
indicated or of the financial position or operating results which
may be obtained in the future. These pro forma financial measures
are not a forecast or projection of future results. The actual
financial position and results of operations of the Company for any
period following the closing of the acquisitions will vary from the
amounts set forth following pro forma financial measures, and such
variation may be material.
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 a part of the Used Digital Retail Division);
- Non-cash charges (such as impairment, recoveries, gains or
losses on free-standing 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 wholesale fraud and settlement income).
The Company believes adjusted EBITDA provides improved
continuity with respect to the comparison of our operating
performance over a period of time.
Normalized Adjusted EBITDA
With the onset of COVID-19 during the second quarter of 2020,
the impact of COVID-19 related government restrictions resulted in
charges that are one-time in nature, and related government
programs resulted in subsidies that are non-recurring in the
future.
Normalized adjusted EBITDA is an indicator of a company's
operating performance over a period of time and ability to incur
and service debt, normalized for charges that are non-recurring in
nature related to the pandemic such as:
- CEWS income expected to recur until the Company is no longer
eligible for the subsidy;
- CERS expected to recur until the Company is no longer eligible
for the subsidy; and
- One-time forgiveness of Small Business Association PPP
loans.
The Company believes normalized adjusted EBITDA provides
improved continuity with respect to the comparison of our operating
performance normalized for impacts related to the COVID-19
pandemic. Refer to the COVID-19 impacts section of Note 4 of the
Interim Consolidated Financial Statements for the six-months ended
June 30, 2022 for further
details.
Pro Forma Adjusted EBITDA and Pro Forma Normalized Adjusted
EBITDA
The Company believes pro forma adjusted EBITDA and pro forma
normalized adjusted EBITDA provides improved understanding of the
progress of our acquisition strategy as if the acquisitions had
occurred at the beginning of the period. Pro forma adjusted EBITDA
and pro forma normalized adjusted EBITDA includes management's
estimate of the net income generated by our acquisitions prior to
interest expense (other than interest expense on floorplan
financing), income taxes, depreciation, and amortization, assuming
acquisitions in the year had occurred on the first day of the 12
month period ended June 30, 2022,
prior to any synergies, pursuant to the terms of the credit
facilities. Pro forma adjustments estimated by management were
derived from dealership financial statements. The Company's blended
rate of Canadian corporate tax of 25.5% was applied to pro forma
adjustments where applicable.
Refer to the Company's Management Discussion & Analysis for
the year ended December 31, 2021 for
the reconciliation of the pro forma normalized adjusted EBITDA for
the year ended December 31, 2021.
Adjusted EBITDA Margin, Normalized Adjusted EBITDA Margin,
and Adjusted EBITDA Margin on a Pre-IFRS 16 Basis
Adjusted EBITDA margin is an indicator of a company's operating
performance specifically in relation to our revenue performance.
Normalized adjusted EBITDA margin is an indicator of a company's
operating performance specifically in relation to our revenue
performance, normalized for government programs subsidies that are
non-recurring in nature related to the pandemic such as:
- CEWS income expected to recur until the Company is no longer
eligible for the subsidy;
- CERS expected to recur until the Company is no longer eligible
for the subsidy; and
- One-time forgiveness of Small Business Association PPP
loans.
The Company believes adjusted EBITDA margin, normalized adjusted
EBITDA margin and adjusted EBITDA margin on a pre-IFRS 16 basis
provides improved continuity with respect to the comparison of our
operating performance with retaining and growing profitability as
our revenue and scale increases over a period of time.
Income Statement Impacts and Adjusted EBITDA on a Pre-IFRS 16
basis
The Company adopted IFRS 16 on January 1,
2019. On adoption of IFRS 16, the Company recognized lease
liabilities in relation to leases, which had previously been
classified as 'operating leases' under the principles of IAS 17
Leases. These liabilities were measured at the present value of the
remaining lease payments, discounted using the lessee's incremental
borrowing rate.There are also corresponding income statement
impacts to net income and other comprehensive income.
The Company believes adjusted EBITDA on a pre-IFRS 16 basis
provides improved continuity for purposes of comparing to our
historical operating performance prior to fiscal year 2019. Our
Credit Facility financial covenants are calculated and presented on
a pre-IFRS 16 basis. In addition, the net indebtedness leverage
ratio is calculated on a pre-IFRS 16 basis.
Adjusted EBITDA on a pre-IFRS 16 basis is calculated as adjusted
EBITDA less the rental expense, fair market value rent adjustment,
and step lease rent adjustment eliminated from the adoption of IFRS
16 lease liabilities accounting standards.
Free Cash Flow
Free cash flow is a measure used by Management to evaluate the
Company's performance. While the closest Canadian GAAP measure is
cash provided by operating activities, free cash flow is considered
relevant because it provides an indication of how much cash
generated by operations is available after capital expenditures. It
shall be noted that although we consider this measure to be free
cash flow, financial and non-financial covenants in our credit
facilities and dealer agreements may restrict cash from being
available for distributions, re-investment in the Company,
potential acquisitions, or other purposes. Investors should be
cautioned that free cash flow may not actually be available for
such purposes. References to "Free cash flow" are to cash provided
by (used in) operating activities (including the net change in
non-cash working capital balances) less capital expenditure (not
including acquisitions of dealerships and dealership
facilities).
Net Indebtedness Leverage Ratio
Net indebtedness leverage ratio is a measure used by
management to evaluate the liquidity of the Company.
The Company believes presenting the net indebtedness leverage
ratio on a pre-IFRS 16 basis provides improved continuity for
purposes of comparing to our historical operating performance prior
to fiscal year 2019 and remains relevant while our Credit Facility
financial covenants continues to be calculated and presented on a
pre-IFRS 16 basis. Net indebtedness leverage ratio is calculated as
net indebtedness compared to Adjusted EBITDA pre-IFRS 16 on a TTM
basis.
We list and define "CAPITAL MANAGEMENT MEASURES" below:
Net Indebtedness
Net indebtedness is used by management to evaluate the
liquidity of the Company.
Net indebtedness is calculated as indebtedness, net of
unamortized deferred financing costs, adding back embedded
derivative asset, and less cash and cash equivalents.
NON-GAAP AND OTHER FINANCIAL MEASURES RECONCILIATIONS
Adjusted EBITDA and Normalized Adjusted EBITDA
The following table illustrates adjusted EBITDA and normalized
adjusted EBITDA, for the three-month period ended June 30, over the last two years of
operations:
|
2022
|
2021
|
Period from April 1
to June 30
|
|
|
Net income for the
period
|
39,058
|
37,698
|
Add back:
|
|
|
Income tax
expense
|
9,685
|
13,932
|
Depreciation of
property and equipment
|
5,077
|
4,267
|
Interest on long-term
indebtedness
|
6,610
|
5,485
|
Depreciation of right
of use assets
|
7,561
|
6,147
|
Lease liability
interest
|
6,946
|
5,333
|
|
74,937
|
72,862
|
Add back:
|
|
|
Loss on extinguishment
of debt
|
—
|
1,128
|
Unrealized fair value
changes in derivative instruments
|
(182)
|
50
|
Amortization of loss
on terminated hedges
|
817
|
817
|
Unrealized foreign
exchange losses
|
84
|
298
|
Gain on disposal of
assets
|
(95)
|
(20)
|
Adjusted
EBITDA
|
75,561
|
70,491
|
Normalizing
items:
|
|
|
Less:
|
|
|
Canada Emergency Wage
Subsidy
|
—
|
(1,487)
|
Canada Emergency Rent
Subsidy
|
—
|
(136)
|
Forgiveness of PPP
loans
|
—
|
(1,330)
|
Normalized Adjusted
EBITDA
|
75,561
|
67,538
|
Segmented Adjusted EBITDA and Segmented Normalized
Adjusted EBITDA
The following table illustrates the segmented adjusted EBITDA
and normalized adjusted EBITDA, for the three-month period ended
June 30, over the last two years of
operations:
|
Three Months Ended
June 30, 2022
|
|
Three Months Ended
June 30, 2021
|
|
Canada
|
U.S.
|
Total
|
|
Canada
|
U.S.
|
Total
|
Period from April 1
to June 30
|
|
|
|
|
|
|
|
Net income for the
period
|
31,938
|
7,120
|
39,058
|
|
32,968
|
4,730
|
37,698
|
Add back:
|
|
|
|
|
|
|
|
Income tax
expense
|
9,454
|
231
|
9,685
|
|
13,932
|
—
|
13,932
|
Depreciation of
property and equipment
|
4,609
|
468
|
5,077
|
|
3,972
|
295
|
4,267
|
Interest on long-term
indebtedness
|
5,831
|
779
|
6,610
|
|
3,009
|
2,476
|
5,485
|
Depreciation of right
of use assets
|
6,858
|
703
|
7,561
|
|
5,519
|
628
|
6,147
|
Lease liability
interest
|
6,130
|
816
|
6,946
|
|
4,469
|
864
|
5,333
|
|
64,820
|
10,117
|
74,937
|
|
63,869
|
8,993
|
72,862
|
Add back:
|
|
|
|
|
|
|
|
Loss on extinguishment
of debt
|
—
|
—
|
—
|
|
1,128
|
—
|
1,128
|
Unrealized fair value
changes in derivative instruments
|
(182)
|
—
|
(182)
|
|
50
|
—
|
50
|
Amortization of loss
on terminated hedges
|
817
|
—
|
817
|
|
817
|
—
|
817
|
Unrealized foreign
exchange losses
|
84
|
—
|
84
|
|
298
|
—
|
298
|
Unrealized fair value
changes on embedded derivative
|
—
|
—
|
—
|
|
(4,644)
|
—
|
(4,644)
|
Gain on disposal of
assets
|
(95)
|
—
|
(95)
|
|
(20)
|
—
|
(20)
|
Adjusted
EBITDA
|
65,444
|
10,117
|
75,561
|
|
61,498
|
8,993
|
70,491
|
Normalizing
Items:
|
|
|
|
|
|
|
|
Less:
|
|
|
|
|
|
|
|
Canada Emergency Wage
Subsidy
|
—
|
—
|
—
|
|
(1,487)
|
—
|
(1,487)
|
Canada Emergency Rent
Subsidy
|
—
|
—
|
—
|
|
(136)
|
—
|
(136)
|
Forgiveness of PPP
loans
|
—
|
—
|
—
|
|
—
|
(1,330)
|
(1,330)
|
Normalized Adjusted
EBITDA
|
65,444
|
10,117
|
75,561
|
|
59,875
|
7,663
|
67,538
|
Pro Forma Adjusted EBITDA and Pro Forma Normalized
Adjusted EBITDA Reconciliation
The following table illustrates pro forma adjusted EBITDA and
pro forma normalized adjusted EBITDA for the trailing twelve month
period ended June 30, over the last
two years of operations:
|
2022
|
2021
|
Period from
July 1 to June 30
|
|
|
Net income for the
period
|
151,547
|
123,328
|
Add back:
|
|
|
Income tax
expense
|
42,091
|
35,302
|
Depreciation of
property and equipment
|
18,768
|
18,247
|
Interest on long-term
indebtedness
|
25,520
|
22,086
|
Depreciation of right
of use assets
|
28,921
|
26,592
|
Lease liability
interest
|
26,325
|
25,140
|
|
293,172
|
250,695
|
Add back:
|
|
|
Recoveries of
non-financial assets, net
|
(39,846)
|
(11,248)
|
Share-based
compensation (Used Digital Retail Division)
|
—
|
435
|
Loss (gain) on
redemption liabilities
|
14,116
|
(762)
|
Loss on extinguishment
of debt
|
9,860
|
1,128
|
Unrealized fair value
changes in derivative instruments
|
(12,981)
|
(3,469)
|
Amortization of loss
on terminated hedges
|
3,268
|
3,268
|
Unrealized foreign
exchange (gains) losses
|
(424)
|
221
|
Loss on extinguishment
of embedded derivative
|
29,306
|
—
|
Loss on termination of
lease, net
|
427
|
—
|
Unrealized fair value
changes on embedded derivative
|
(24,662)
|
(4,644)
|
Gain on disposal of
assets
|
(341)
|
(1,608)
|
Adjusted
EBITDA
|
271,895
|
234,016
|
Normalizing
items:
|
|
|
Less:
|
|
|
Canada Emergency Wage
Subsidy
|
—
|
(2,901)
|
Canada Emergency Rent
Subsidy
|
—
|
(200)
|
Forgiveness of PPP
loans
|
—
|
(5,398)
|
Normalized Adjusted
EBITDA
|
271,895
|
225,517
|
Pro forma items had
the acquisitions occurred on July 1:
|
|
|
Net income for the
period
|
3,725
|
4,014
|
Add back:
|
|
|
Income tax
expense
|
1,202
|
1,296
|
Depreciation of
property and equipment
|
1,106
|
992
|
Interest on long-term
indebtedness
|
5,307
|
3,631
|
Depreciation of right
of use assets
|
1,356
|
1,868
|
Lease liability
interest
|
2,272
|
2,964
|
Pro Forma Adjusted
EBITDA
|
286,863
|
248,781
|
Pro Forma Normalized
Adjusted EBITDA
|
286,863
|
240,282
|
Quarter-to-Date Adjusted EBITDA Margin
The following table illustrates adjusted EBITDA margin for the
three-month periods ended June 30,
over the last two years of operations:
|
2022
|
2021
|
Period from April 1
to June 30
|
|
|
Adjusted
EBITDA
|
75,561
|
70,491
|
Revenue
|
1,686,026
|
1,281,055
|
Adjusted EBITDA
Margin
|
4.5 %
|
5.5 %
|
Quarter-to-Date Normalized Adjusted EBITDA
Margin
The following table illustrates normalized adjusted EBITDA
margin for the three-month periods ended June 30, over the last two years of
operations:
|
2022
|
2021
|
Period from April 1
to June 30
|
|
|
Normalized Adjusted
EBITDA
|
75,561
|
67,538
|
Revenue
|
1,686,026
|
1,281,055
|
Normalized Adjusted
EBITDA Margin
|
4.5 %
|
5.3 %
|
Quarter-to-Date Adjusted EBITDA Margin on a Pre-IFRS 16
basis
The following table illustrates adjusted EBITDA margin on a
pre-IFRS 16 basis for the three-month periods ended June 30, over the last two years of
operations:
|
2022
|
2021
|
Period from April 1
to June 30
|
|
|
Adjusted EBITDA on a
pre-IFRS 16 basis
|
62,083
|
59,600
|
Revenue
|
1,686,026
|
1,281,055
|
Adjusted EBITDA
Margin on a Pre-IFRS 16 basis
|
3.7 %
|
4.7 %
|
Quarter-to-Date Adjusted EBITDA on a Pre-IFRS 16 Basis
Reconciliation
The following table illustrates segmented adjusted EBITDA on a
pre-IFRS 16 basis, for the three-month periods ended June 30, over the last two years of
operations:
|
Three Months Ended
June 30, 2022
|
|
Three Months Ended
June 30, 2021
|
|
Canada
|
U.S.
|
Total
|
|
Canada
|
U.S.
|
Total
|
Adjusted
EBITDA
|
65,444
|
10,117
|
75,561
|
|
61,498
|
8,993
|
70,491
|
Rental
expense
|
(11,811)
|
(2,224)
|
(14,035)
|
|
(9,742)
|
(2,116)
|
(11,858)
|
FMV rent
adjustment
|
—
|
1,044
|
1,044
|
|
—
|
1,039
|
1,039
|
Step lease
adjustment
|
(372)
|
(115)
|
(487)
|
|
(185)
|
113
|
(72)
|
Adjusted EBITDA on
a pre-IFRS 16 basis
|
53,261
|
8,822
|
62,083
|
|
51,571
|
8,029
|
59,600
|
Free Cash Flow
The following table illustrates free cash flow for the last
eight consecutive quarters.
|
Q2
2022
|
Q1
2022
|
Q4
2021
|
Q3
2021
|
Q2
2021
|
Q1
2021
|
Q4
2020
|
Q3
2020
|
Cash provided by
operating activities
|
64,935
|
7,279
|
10,153
|
13,721
|
68,604
|
20,506
|
20,447
|
54,366
|
Deduct:
|
|
|
|
|
|
|
|
|
Purchase of non-growth
property and equipment
|
(1,617)
|
(1,427)
|
(2,550)
|
(1,349)
|
(801)
|
(1,115)
|
(1,207)
|
(922)
|
Free cash
flow
|
63,318
|
5,852
|
7,603
|
12,372
|
67,803
|
19,391
|
19,240
|
53,444
|
Free cash flow -
TTM
|
89,145
|
93,630
|
107,169
|
118,806
|
159,878
|
144,632
|
131,396
|
177,981
|
Net Indebtedness and Net Indebtedness Leverage Ratio
Reconciliation
The following table illustrates the Company's net indebtedness
and net indebtedness leverage ratio as at June 30, 2022 and
March 31, 2022:
|
June 30,
2022
$
|
March 31,
2022
$
|
Syndicated Credit
Facility - Revolving Credit
|
(1,292)
|
13,886
|
Senior unsecured notes
(including embedded derivative asset)
|
344,053
|
344,120
|
Non-recourse mortgages
and other debt
|
32,280
|
501
|
Total indebtedness for
net indebtedness purpose
|
375,041
|
358,507
|
Cash and cash
equivalents
|
(80,991)
|
(109,753)
|
Net
indebtedness
|
294,050
|
248,754
|
Adjusted EBITDA
pre-IFRS 16 - trailing twelve months
|
222,163
|
219,680
|
Net indebtedness
leverage ratio
|
1.3x
|
1.1x
|
Conference Call
A conference call to discuss the results for the three months
ended June 30, 2022 will be held on August 11, 2022 at
9:00am Mountain (11:00am 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/2022-q2-conference-call/
About AutoCanada
AutoCanada is a leading North American multi-location automobile
dealership group currently operating 81 franchised dealerships,
comprised of 28 brands, in eight provinces in Canada as well as a group in Illinois, USA. AutoCanada currently sells
Chrysler, Dodge, Jeep, Ram, FIAT, Alfa Romeo, Chevrolet, GMC,
Buick, Cadillac, Ford, Infiniti,
Nissan, Hyundai, Subaru, Audi, Volkswagen, Kia, Mazda,
Mercedes-Benz, BMW, MINI, Volvo, Toyota, Lincoln, Acura, Honda and Porsche branded
vehicles. Additionally, the Company's Canadian Operations segment
currently operates 2 used vehicle dealerships supporting the Used
Digital Retail Division, the RightRide division operates 10
locations, and 5 stand-alone collision centres (within our group of
20 collision centres). In 2021, our dealerships sold approximately
86,000 vehicles and processed over 800,000 service and collision
repair orders in our 1,303 service bays generating revenue in
excess of $4 billion.
Additional information about AutoCanada Inc. is available at
www.sedar.com and the Company's website at www.autocan.ca.
Forward Looking Statements
Certain statements contained in this press release are
forward-looking statements and information (collectively
"forward-looking statements", including "with respect to", "among
other things", "future performance", "expense reductions" and the
"Go Forward Plan"), within the meaning of the applicable Canadian
securities legislation. We hereby provide cautionary statements
identifying important factors that could cause our 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) 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.
Accordingly, these factors could cause actual results or
outcomes to differ materially from those expressed in the
forward-looking statements. Therefore, any such forward-looking
statements are qualified in their entirety by reference to the
factors discussed throughout this press release.
The Company's Annual Information Form and other documents filed
with securities regulatory authorities (accessible through the
SEDAR website at www.sedar.com) describe the risks, material
assumptions and other factors that could influence actual results
and which are incorporated herein by reference.
Further, any forward-looking statement speaks only as of the
date on which such statement is made, and, except as required by
applicable law, we undertake no obligation to update any
forward-looking statement to reflect events or circumstances after
the date on which such statement is made or to reflect the
occurrence of unanticipated events. New factors emerge from time to
time, and it is not possible for management to predict all of such
factors and to assess in advance the impact of each such factor on
our business or the extent to which any factor, or combination of
factors, may cause actual results to differ materially from those
contained in any forward-looking statement.
Additional Information
Additional information about AutoCanada is available at the
Company's website at www.autocan.ca and www.sedar.com.
SOURCE AutoCanada Inc.