ACQ AutoCanada Inc

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• • Revenue was $1,539.3 million as compared to $1,342.4 million in the prior year, an increase of 14.7%
  • Total vehicles¹ sold of 24,796 units, an increase of 1,382 units or 5.9%
  • Used to new retail units ratio¹ increased to 1.74 from 1.55
  • Finance, insurance and other gross profit was $83.3 million, an increase of $4.6 million or 5.8%
  • Parts, service and collision repair gross profit was $93.9 million, an increase of $15.4 million or 19.7%
  • Net income for the period was $8.4 million versus $4.3 million in the prior year
  • Adjusted EBITDA² was $45.0 million versus $62.2 million in the prior year, a decrease of $(17.2) million
  • • Adjusted EBITDA margin² was 2.9% versus 4.6% in the prior year, a decrease of (1.7) percentage points
  • Diluted earnings per share was $0.32, an increase of $0.22 from $0.10 in the prior year

EDMONTON, AB, May 3, 2023 /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 March 31, 2023.

"We are pleased with the steady growth achieved in our first quarter 2023 operating results as compared to the same period last year, which was characterized by record industry profitability driven by light vehicle supply constraints coupled with very strong consumer demand. In contrast, market dynamics during the first quarter of this year favored lower price point vehicles, with higher interest rates influencing consumer preferences. Despite this challenge, our team held firm new light vehicle market share gains and increased the ratio of used to new retail units which allowed us to leverage our best-in-class F&I and parts, service, and collision repair operations," said Paul Antony, Executive Chairman of AutoCanada. "In addition, our acquisitions have made strong contributions to our performance, and have surpassed our expectations.

"Looking ahead, I continue to be excited about AutoCanada's future. We are confident in our ability to navigate the ever-changing landscape of the automotive industry, thanks to our comprehensive business model, strong balance sheet, and the resiliency we've built into our platform. We remain well positioned to drive value for our shareholders and stakeholders through our many growth opportunities."

First Quarter Key Highlights and Recent Developments

Net income for the period was $8.4 million as compared to $4.3 million in Q1 2022. Diluted earnings per share was $0.32, an increase of $0.22 from $0.10 in the prior year.

Adjusted EBITDA² for the period was $45.0 million as compared to $62.2 million in Q1 2022. Adjusted EBITDA margin² of 2.9% compares to 4.6% in the prior year, a decrease of (1.7) percentage points ("ppts"). This decrease is largely driven by the current economic uncertainty resulting in compressed new and used vehicle gross profit, limited new vehicle inventory availability, and the increase of $12.4 million in floorplan financing costs as a result of higher interest rates.

Gross profit increased by 3.1% to $255.0 million. The decreases in new and used vehicle gross profit, caused by current economic headwinds, was largely offset by the increases of finance, insurance and other ("F&I") and parts, service and collision repair ("PS&CR") arising from recent acquisitions and increased used vehicle sales volumes.

Gross profit percentage¹ was 16.6% in the quarter as compared to 18.4% in the prior year. This decrease was largely driven by the current macro environment. While used retail vehicle gross profit percentage¹ declined, used retail vehicle¹ sales volumes increased by 1,218 units, up 8.7%, to 15,290 units, and contributed to the consolidated used to new retail units ratio¹ moving to 1.74 from 1.55. Higher used vehicle sales volumes also contributed to our strong F&I and PS&CR gross profit performance.

Operating expenses before depreciation¹ increased by $16.4 million largely driven by acquisitions. Operating expenses before depreciation¹ as a percentage of gross profit¹ increased by 4.2 ppts to 77.6% and was largely due to compressed gross profit and higher operating expenses.

Free cash flow² on a trailing twelve month ("TTM") basis was $180.7 million at Q1 2023 as compared to $93.6 million in Q1 2022 with the increase in free cash flow² driven primarily by improvements in working capital.

Canadian Operations Highlights

Our F&I and PS&CR segments, driven by 14.4% increase in used retail vehicle¹ unit sales, were key drivers of the 5.7% increase in total gross profit. F&I gross profit increased by $7.7 million or 11.9% to $71.9 million and PS&CR gross profit increased by $13.6 million or 19.8% to $82.4 million as compared to prior year.

Refer to Section 5 Acquisitions, Divestitures, and Other Recent Developments of the MD&A for acquisitions included in Q1 2023 results.

For the three-month period ended March 31, 2023:

• Revenue was $1,340.3 million, an increase of 18.5%
• Used retail vehicles¹ sold increased by 1,649 units or 14.4%
• Used to new retail units ratio¹ increased to 1.72 from 1.50
• • TTM used to new retail ratio¹ improved to 1.73 at Q1 2023 as compared to 1.48 at Q1 2022
• F&I gross profit per retail unit average¹ increased to $3,473, up 3.1% or $105 per unit
• Net income for the period was $12.4 million, up from a net loss of $(1.0) million in 2022
• Adjusted EBITDA² decreased (16.5)% to $44.6 million, a decrease of $(8.8) million
• • Adjusted EBITDA margin² was 3.3% as compared to 4.7% in the prior year, a decrease of (1.4) ppts

U.S. Operations Highlights

Our decrease in total gross profit by (11.1)% to $34.6 million was largely driven by the current macro economic environment and resulting decrease in total retail vehicles sold and lower selling prices. The resulting decrease in new vehicle and F&I gross profit is partially offset by an increase in used vehicle and PS&CR gross profit.

• Revenue was $199.1 million, a decrease of (5.8)%, from $211.4 million
• Used retail vehicles¹ sold decreased by (431) units or (16.5)%
• Used to new retail units ratio¹ increased to 1.87 from 1.83
• • TTM used to new retail ratio improved to 2.31 at Q1 2023 as compared to 1.32 at Q1 2022
• F&I gross profit per retail unit average¹ remained strong at $3,400 per unit, down (5.1)% or $(183) per unit
• PS&CR gross profit increased by $1.8 million, an increase of 19.0%
• Net (loss) for the period decreased by $(9.3) million to $(4.0) million, from $5.3 million
• Adjusted EBITDA² was $0.5 million as compared to $8.8 million, a decrease of $(8.3) million
• • Adjusted EBITDA margin² was 0.2% as compared to 4.2% in the prior year, a decrease of (4.0) ppts

Same Store Metrics - Canadian Operations

Our total gross profit of $181.4 million continues to be driven by our strong F&I and PS&CR performance.

Refer to Section 19 Same Store Results Data of the MD&A for the definition of same store and further information.

• Revenue increased to $1,114.3 million, an increase of 11.7%
• Gross profit decreased by $(4.0) million or (2.2)%
• Used retail vehicles¹ sold increased by 3.0%
• Used to new retail units ratio¹ increased to 1.64 from 1.56
• F&I gross profit increased to $61.7 million as compared to $58.8 million in the prior year, an increase of 4.8%
• • F&I gross profit per retail unit average¹ increased to $3,739, up 3.8% or $136 per unit; eighteenth consecutive quarter of year-over-year growth
• PS&CR gross profit increased to $64.7 million, an increase of 7.0%
• • PS&CR gross profit percentage¹ increased to 54.0% as compared to 52.0% in the prior year

Financing and Investing Activities and Other Recent Developments

Acquisitions and Other Recent Developments

The Company completed the following transactions in Q1 2023.

• On February 23, 2023, the Company acquired 100% of the shares of 5121175 Manitoba Ltd. ("DCCHail"), a paintless dent repair service provider operating throughout western Canada.
• On March 31, 2023, the Company announced the continuation of Kijiji's role as the Company's preferred online marketplace partner in Canada, as well as the integration of consumer solutions developed by the Company's Used Digital Division on Kijiji, including a solution to offer F&I products to Kijiji users.

Subsequent to March 31, 2023, the Company completed the following transactions:

• On April 17, 2023, the Company acquired substantially all of the assets of Premier Chevrolet Cadillac Buick GMC dealership and collision centre located in Windsor, Ontario.
• On May 1, 2023, the Company acquired 100% of the shares of London Auto Collision Limited ("London Auto Collision"), a collision centre located in London, Ontario.

Credit Facility Amendments

• On January 30, 2023, Standard & Poor's Ratings Services ("S&P") issued a research update where the Issuer Credit Rating remained unchanged at 'B+'.
• On February 3, 2023, the Company amended and extended its existing credit facility to increase total aggregate bank facilities to $1,610 million. This included increasing the revolving credit limit to $375 million from $275 million and the maturity date was extended to April 14, 2026.

First Quarter Financial Information

The following table summarizes the Company's performance for the quarter:

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 and Management's Discussion and Analysis for the quarter ended March 31, 2023, which can be found on the Company's website at www.autocan.ca or on www.sedar.com.

NON-GAAP AND OTHER FINANCIAL 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 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, and free cash flow 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. 

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);
• 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 believes adjusted EBITDA 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 believes adjusted EBITDA margin, 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.

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 certain 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 certain capital expenditure (not including acquisitions of dealerships and dealership facilities).

NON-GAAP AND OTHER FINANCIAL MEASURES RECONCILIATIONS

Adjusted EBITDA and Segmented Adjusted EBITDA

The following table illustrates the adjusted EBITDA and segmented adjusted EBITDA for the three-month period ended March 31, over the last two years of operations:

Quarter-to-Date Adjusted EBITDA Margin

The following table illustrates adjusted EBITDA margin for the three-month periods ended March 31, over the last two years of operations:

Free Cash Flow

The following table illustrates free cash flow for the last eight consecutive quarters.

Conference Call

A conference call to discuss the results for the three months ended March 31, 2023 will be held on May 4, 2023 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/2023-q1-conference-call/

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 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. In addition, AutoCanada's Canadian Operations segment currently operates 3 used vehicle dealerships and 1 used vehicle auction business supporting the Used Digital Retail Division, 12 RightRide division locations, and 11 stand-alone collision centres within our group of 27 collision centres. In 2022, our dealerships sold approximately 100,000 vehicles and processed over 900,000 service and collision repair orders¹ in our 1,367 service bays generating revenue in excess of $6 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", 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.