ACQ AutoCanada Inc

• Revenue was $1,756.3 million as compared to $1,686.0 million in the prior year, an increase of 4.2%
• Total retail vehicles¹ sold of 28,479 units, an increase of 861 units or 3.1%
• • Used to new retail units ratio¹ was 1.53 compared to 1.80
• Gross profit was $318.7 million as compared to $279.3 in the prior year, an increase of 14.1%
• Operating expenses before depreciation as a percentage of gross profit¹ decreased to 67.4% from 71.7%
• Net income for the period was $45.2 million versus $39.1 million in the prior year
• Adjusted EBITDA² was $94.1 million versus $75.6 million in the prior year, an increase of $18.5 million
• • Adjusted EBITDA margin² was 5.4% versus 4.5% in the prior year, an increase of 0.9 percentage points
• Diluted earnings per share was $1.75, an increase of $0.42 from $1.33 in the prior year

EDMONTON, AB, Aug. 10, 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 June 30, 2023.

"AutoCanada's strong second quarter results were fueled by the team's focus on operational initiatives, supported by higher new retail vehicle sales volumes as new car inventories replenish. This, coupled with pent up demand for vehicles following the pandemic, has resulted in higher vehicle prices and GPUs. We continued to grow used car volumes in Canada, selling 670 more used vehicles with 25 fewer days of supply, compared to the same period last year. Our parts, service and collision repair operations had robust performance, due to initiatives to increase service bay occupancy combined with the contribution from recent acquisitions, and an older carpark which is requiring more frequent and higher cost service to stay on the road," said Paul Antony, Executive Chairman of AutoCanada.

"Notably, our Same Store Finance and Insurance gross profit per retail unit marked its nineteenth consecutive quarter of year-over-year growth. The quarter's trend of continuous improvements led to record-breaking performance in May and June 2023 across various segments, and we are well-positioned to capitalize on our numerous growth opportunities."

"Our solid Q2 2023 results were accompanied by a significant achievement – the release of AutoCanada's inaugural Environment, Social and Governance ("ESG") Report. This comprehensive report reflects our dedication to responsible practices and showcases our commitment to transparency and sustainable value creation for our stakeholders and the communities we serve."

We invite all interested parties to explore AutoCanada's inaugural ESG Report at the following link: AutoCanada's 2023 ESG Report

Second Quarter Key Highlights and Recent Developments

Consolidated gross profit increased by 14.1% to $318.7 million, with gross profit percentage¹ increasing by 1.5 percentage points ("ppts") to 18.1% in the quarter as compared to 16.6% in the prior year. The primary drivers of the increase in gross profit were higher new retail vehicles¹ sales volume (by 14.0%) as new car inventories continue to recover; used retail vehicle gross profit per retail unit¹ increasing to $2,333 per retail unit, an increase of $759 per retail unit or 48.2% from the prior year, strong performance in parts, service and collision repair ("PS&CR") and contributions from recent acquisitions. Higher total retail vehicle sales volumes also contributed to our strong finance, insurance and other ("F&I"), and PS&CR gross profit performance. In particular, our same store F&I gross profit per retail unit average¹ increased, for the nineteenth consecutive quarter of year-over-year growth, to $3,772 per unit.

Operating expenses before depreciation¹ increased by $14.4 million due primarily to acquisitions. Normalized operating expenses before depreciation as a percentage of gross profit² decreased by (3.9) ppts to 66.8% as a result of higher gross profits and focus on operating initiatives.

Floorplan financing costs increased by $9.6 million as a result of the higher interest rates partially offset by interest rate swaps in place. In response to rising interest rates, management has actively managed our used vehicle inventory to reduce both excess inventory and floorplan financing costs while supporting vehicle sales. Used vehicle inventories decreased by $(232.5) million (or (33)%) to $466.5 million compared to the prior year, while used retail vehicle unit sales only decreased by (518) units or (2.9)% from the prior year, ensuring inventory is optimized for both consumer preferences and current market demands.

Net income for the period was $45.2 million as compared to $39.1 million in Q2 2022. The Q2 2022 net income  included a used vehicle inventory writedown that was $7.0 million higher than in 2023. Diluted earnings per share was $1.75, an increase of $0.42 from $1.33 in the prior year.

Adjusted EBITDA² for the period was $94.1 million as compared to $75.6 million in Q2 2022. Adjusted EBITDA margin² was 5.4% compared to 4.5% in the prior year, an increase of 0.9 ppts. This increase was driven by strong performance as noted across multiple areas of our business, and a $7.0 million reduction in the used vehicle inventory provision, offset by an increase of $9.6 million in floorplan financing costs as a result of higher interest rates.

Free cash flow² on a trailing twelve month ("TTM") basis was $166.5 million at Q2 2023 as compared to $89.1 million in Q2 2022 with the increase in free cash flow driven primarily by recent acquisitions, improved operating performance and higher working capital.

Canadian Operations Highlights

Overall, gross profits increased by $43.1 million or 18.2% to $279.5 million as compared to prior year as a result of new acquisitions and the 8.7% increase in total retail vehicle unit sales, which also contributed to an increase in other areas of the business, including PS&CR and F&I. The strong Q2 2023 results reflected a trend of continuous improvements in operating results during the quarter to a record May and June 2023 in several segments.

Refer to Section 5 Acquisitions, Divestitures, and Other Recent Developments of the MD&A for acquisitions included in Q2 2023 results.

For the three-month period ended June 30, 2023:

• Revenue was $1,548.6 million, an increase of 7.7%
• • New retail vehicles¹ sold increased 1,334 units or 15.6%
  • Used retail vehicles¹ sold increased by 670 units or 4.6%
  • Used to new retail units ratio¹ was 1.53 compared to 1.69
  • Used retail vehicle gross profit per retail unit¹ increased to $2,320, up 35.0% or $601 per unit
• PS&CR gross profit increased by $18.2 million, an increase of 23.3%
• F&I gross profit per retail unit average¹ increased to $3,410 per unit, up 1.8% or $60 per unit
• Net income for the period was $45.7 million, up from $31.9 million in 2022
• Adjusted EBITDA² increased 36.2% to $89.2 million, an increase of $23.7 million
• • Adjusted EBITDA margin² was 5.8% as compared to 4.6% in the prior year, an increase of 1.2 ppts

U.S. Operations Highlights

Total gross profit decreased by (8.5)% to $39.3 million and was largely driven by the current macroeconomic environment resulting in fewer total retail vehicles sold and lower F&I gross profit, partially offset by an increase in used vehicle and PS&CR gross profit. As new vehicle inventories continued to recover during the quarter, this resulted in lower selling prices for new vehicles compared to the prior year.

• Revenue was $207.6 million, a decrease of (16.3)%, from $248.1 million
• • New retail vehicles¹ sold increased 45 units or 3.4%
  • Used retail vehicles¹ sold decreased by (1,188) units or (36.6)%
  • Used to new retail units ratio¹ was 1.51 compared to 2.47
  • Used retail vehicle gross profit per retail unit¹ increased to $2,435, up 161.7% or $1,505 per unit
• PS&CR gross profit increased by $2.0 million, an increase of 16.4%
• F&I gross profit per retail unit average¹ decreased to $3,794 per unit, down (5.2)% or $(210) per unit
• Net (loss) income for the period decreased to $(0.4) million, from $7.1 million
• Adjusted EBITDA² was $4.9 million as compared to $10.1 million, a decrease of $(5.2) million
• • Adjusted EBITDA margin² was 2.4% as compared to 4.1% in the prior year, a decrease of (1.7) ppts

Same Store Metrics - Canadian Operations

Gross profit increased by 6.9% as a result of strong performance from all areas of the business, particularly PS&CR department.

Refer to Section 18 Same Store Results Data of the MD&A for the definition of same store and further information.

• Revenue decreased to $1,224.1 million, a decrease of (1.8)%
• • New retail vehicles¹ sold increased by 303 units or 4.2%
  • Used retail vehicles¹ sold decreased by (524) units or (4.3)%
  • Used to new retail units ratio¹ was 1.56 compared to 1.70
  • Used retail vehicle gross profit per retail unit¹ increased to $2,213 per unit, up 10.7% or $213 per unit
• PS&CR gross profit increased by $9.0 million to $73.7 million, an increase of 13.8%
• • Improvements in PS&CR was due to increased customer spending per repair order¹ along with increased warranty repairs
• F&I gross profit increased by $2.6 million to $71.8 million, an increase of 3.8%
• • F&I gross profit per retail unit average¹ increased to $3,772, up 5.0% or $179 per unit; the nineteenth consecutive quarter of year-over-year growth

Financing and Investing Activities and Other Recent Developments

Acquisitions and Other Recent Developments

During the quarter:

• 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.
• On June 26, 2023, Standard & Poor's Ratings Services ("S&P") issued a research update where the Company's Credit Rating remained unchanged at 'B+'.

Second 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 June 30, 2023, 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 June 30, 2023 and the three-month period ended June 30, 2022, unless otherwise indicated.

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, free cash flow, normalized operating expenses before depreciation, and normalized operating expenses before depreciation as a percentage of gross profit 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 expenditures (not including growth capital expenditures, acquisitions of dealerships and dealership facilities).

Normalized Operating Expenses Before Depreciation

Normalized operating expenses before depreciation is an indicator of a company's operating expense before depreciation over a period of time, normalized for the following items:

• Transaction costs related to acquisitions, dispositions, and open points; and
• Share-based compensation expense.

The Company believes normalized operating expenses before depreciation provides a comparison of our operating expense normalized for impacts that are not indicative of the Company's operating expenses over time. Note the current definition of normalized operating expenses before depreciation differs from previous definitions.

Normalized Operating Expenses Before Depreciation as a Percentage of Gross Profit

Normalized operating expenses before depreciation as a percentage of gross profit is an indicator of a company's normalized operating expenses before depreciation over a period of time in relation to gross profit.

The Company believes normalized operating expenses before depreciation as a percentage of gross profit provides a comparison of our operating performance normalized for impacts that are not indicative of the Company's operating expenses over time.

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 June 30, 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 June 30, over the last two years of operations:

Free Cash Flow

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

Normalized Operating Expenses Before Depreciation and Normalized Operating Expenses Before Depreciation as a Percentage of Gross Profit

The following table illustrates segmented normalized operating expenses before depreciation and normalized operating expenses before depreciation as a percentage of gross profit, for the three-month periods ended June 30, over the last two years of operations:

Conference Call

A conference call to discuss the results for the three months ended June 30, 2023 will be held on August 10, 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-q2-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 orders in our 1,367 service bays generating revenue in excess of $6 billion.

Additional information about AutoCanada Inc. is available at www.sedarplus.ca 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.sedarplus.ca) 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.sedarplus.ca.

SOURCE AutoCanada Inc.