ACQ AutoCanada Inc

• Revenue was $1,483.8 million as compared to $1,388.2 million in the prior year, an increase of 6.9%
• Net (loss) income for the period was $(22.6) million versus $14.8 million in the prior year, a decrease of (252.8)%
• Diluted earnings per share was $(0.81), a decrease of $(1.33) from $0.52 in the prior year
• Consolidated ownership of the Used Digital Division, recognizing $36.7 million of share-based compensation expense and $1.8 million of related transaction costs in operating expenses, resulting in a $1.50 reduction to diluted earnings per share
• Adjusted EBITDA¹ was $46.4 million versus $51.0 million in the prior year, a decrease of $(4.6) million

EDMONTON, AB, March 7, 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 December 31, 2023.

"During the fourth quarter, AutoCanada experienced solid growth in new vehicle sales and a robust contribution from parts, service, and collision repair. These gains were tempered by a decrease in used vehicle sales, primarily in the U.S. market, as well as higher interest rates impacting floorplan, finance costs, and consumer preferences for affordable vehicles and minimal financing," said Paul Antony, AutoCanada's Executive Chair.

"Significant progress has been made on Project Elevate initiatives since its launch at the end of August, with key management changes announced in November 2023 allowing us to begin executing against this five-year strategic plan in earnest. To date this has included completing a U.S. restructuring, initiating best practice playbooks across several functions, implementing training programs, beginning corporate infrastructure modernization projects, and creating operating expense targets by brand, which are expected to be implemented in Canada this summer. This foundational work is critical to our core Project Elevate objectives which are to maximize gross profit, optimize our cost structure, and modernize our corporate infrastructure. I am very proud of the hard work and dedication of our team, who are doing an excellent job navigating challenging market conditions. I would like to thank our OEM partners for their continued support."

Fourth Quarter Key Highlights and Recent Developments

Consolidated revenue increased due to higher new vehicle sales, contributions from PS&CR and recent acquisitions offset by lower used vehicle sales in U.S. Operations. Growth in new vehicle revenue was driven primarily from higher new vehicle sales volumes and reflecting the continued recovery in new vehicle inventories. PS&CR revenue growth reflected continued strong demand, with aftermarket operations continuing to benefit from increased average age of vehicle that resulted from constrained new light vehicle supply during the pandemic.

Consolidated gross profit increased as a result of contributions from new vehicle sales, PS&CR operations and recent acquisitions.

Operating expenses increased primarily as a result of share-based compensation expenses related to the consolidation of ownership of Used Digital Division. Normalized operating expenses before depreciation¹, which excludes stock based compensation, transaction costs, and other non-recurring costs, increased as a result of recent acquisitions.

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

The net loss for the period resulted from higher gross profits and operating expenses for the reasons stated above, including share-based compensation expense related to the ownership consolidation of the Used Digital Division, combined with higher floorplan financing expenses.

Adjusted EBITDA¹ for the period and adjusted EBITDA margin¹ decreased primarily as result of higher operating expenses combined with increased flooring expenses.

Canadian Operations Highlights

Revenue increased as a result of contributions from new vehicle sales, higher PS&CR operating performance, and recent acquisitions, offset by declines in used vehicle revenues. Growth in new vehicle revenue was driven by higher new retail vehicle sales volumes and higher average selling prices. PS&CR gross profit increased as a result of strong customer demand for maintaining existing vehicles and recent acquisitions. F&I gross profit per retail unit average² decreased reflecting a growing proportion of retail vehicle sales being purchased without dealer financing, resulting in fewer opportunities to sell higher margin warranty and insurance products.

Adjusted EBITDA¹ was up due to contributions from stronger new vehicle sales and PS&CR operations, and recent acquisitions, partially offset by higher operating expenses and floorplan financing expenses.

U.S. Operations Highlights

Revenue and gross profit declined due to lower used vehicle sales and lower F&I performance offset by contributions from PS&CR operations and new vehicle sales. Used vehicle revenue declines reflect lower sales volumes which also impacted F&I through lower warranty and insurance sales. Used vehicle performance was negatively impacted by historical inventory procurement and management processes as well as market dynamics that made sourcing optimal used vehicle inventory more challenging. New vehicle sales volumes increased significantly offset by lower average selling prices as new inventory levels continued to normalize.

Adjusted EBITDA¹ declined due to lower used vehicle and F&I gross profit coupled with higher operating expenses and floorplan financing costs.

Other Recent Developments

During the quarter:

• On November 16, 2023, the Company announced that it had been awarded the rights to open a Porsche Classic & Service Centre (the "Centre") in Windsor, Ontario. The Centre will be the first Porsche Classic centre in Canada and will be a Genuine Porsche service and parts centre. It is expected to be completed in the fourth quarter of 2025.
• On November 17, 2023, the Company entered into a $25.0 million forward interest rate swap with a deferred start date of December 1, 2023 and fixed one-month Canadian Dollar Offered Rate ("CDOR") of 4.10%. The swap has an initial settlement date of December 1, 2026 and may be extended by the counterparty to December 1, 2028.
• On December 27, 2023, iA Financial Group ("iA") invested $25 million for a 10% common equity interest in AutoCanada's business unit that will sell finance, insurance and warranty products to buyers of private owner-sold vehicles on Kijiji's online marketplace ("Online C2C F&I Business"). The Company also purchased the 19.1% interest in its Used Digital Division from the Executive Chair of the Company and Other Sellers (collectively the "Minority Interest Holders") for $23.9 million in cash, funded from the proceeds of the iA investment and $7.5 million in share units issuable to the Executive Chair and issuance of performance share units ("PSUs") to the Other Sellers. The share units and PSUs will be settled through the delivery of AutoCanada shares acquired in the market. The Minority Interest Holders have agreed to use their after-tax cash proceeds to purchase AutoCanada shares in the market.

After the quarter:

• On February 1, 2024, the Company entered into a $75.0 million interest rate swap with a fixed one-month CDOR of 3.77%. The swap has an initial settlement date of February 1, 2027 and may be extended by the counterparty to February 1, 2029.
• On February 1, 2024, the Company completed the previously announced sale of two properties located in British Columbia and Alberta to CanadaOne Auto Group for cash consideration of $41.4 million plus customary closing adjustments. The land and buildings were presented on AutoCanada's balance sheet as assets held for sale as at December 31, 2023.
• On March 1, 2024, the newly built open point dealership, Maple Ridge GM, located in Maple Ridge, B.C., commenced operations. The dealership consists of a dealership and service facility with 14 service bays and is the Company's first GM dealership in the Metro Vancouver area.

Renewal of Normal Course Issuer Bid

AutoCanada announced today that it has received approval from the Toronto Stock Exchange ("TSX") for the renewal of its normal course issuer bid ("NCIB"). Pursuant to the NCIB, AutoCanada may purchase up to 1,329,106 common shares during the twelve-month period commencing March 11, 2024 and ending March 10, 2025 or such earlier date as the Company may complete its purchases under the NCIB.

The renewal of the NCIB follows on the conclusion of AutoCanada's previous NCIB that expired on December 27, 2023. From December 28, 2022 to December 27, 2023, no common shares were purchased under AutoCanada's previous NCIB.

The number of common shares authorized for purchase under the NCIB represents 10% of AutoCanada's public float as of March 4, 2024 (calculated in accordance with TSX rules). As at March 6, 2024, there were 23,611,175 common shares issued and outstanding. Purchases will be made through the facilities of the TSX and/or alternative Canadian trading systems at prevailing market prices in accordance with the rules and policies of the TSX and applicable securities laws. Daily repurchases will be limited to a maximum of 12,118 common shares, representing 25% of the average daily trading volume for the six months ended February 29, 2024, except where purchases are made in accordance with the "block purchase exception" of the TSX rules. All common shares purchased under the NCIB will be cancelled.

Although the Company has a present intention to acquire its common shares pursuant to the NCIB, the Company will not be obligated to make any purchases and purchases may be suspended by the Company at any time. The Company reserves the right to terminate the NCIB earlier if it feels it is appropriate to do so.

Conference Call

A conference call to discuss the results for the three months ended December 31, 2023 will be held on March 7, 2024 at 9:00 am Mountain (11:00 am 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-q4-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 Consolidated Financial Statements and Management's Discussion and Analysis for the year ended December 31, 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 December 31, 2023 and the three-month period ended December 31, 2022, unless otherwise indicated. Results are reported in Canadian dollars and have been rounded to the nearest thousand dollars, unless otherwise stated.

Consolidated Statements of Comprehensive Income
For the Years Ended
(in thousands of Canadian dollars except for share and per share amounts)

Consolidated Statements of Financial Position
(in thousands of Canadian dollars)

Consolidated Statements of Cash Flows
For the Years Ended
(in thousands of Canadian dollars)

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, adjusted EBITDA margin, and normalized operating expenses before depreciation 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 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.

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;
• Software implementation costs associated with the configuration or customization of software as a service arrangement; and
• Share-based compensation expense.

The Company believes normalized operating expenses before depreciation provides a comparison of our operating expense normalized for transactions 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.

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 December 31:

Adjusted EBITDA Margin

The following table illustrates adjusted EBITDA margin for the three-month period ended December 31:

Normalized Operating Expenses Before Depreciation

The following table illustrates segmented normalized operating expenses before depreciation for the three-month periods ended December 31:

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) 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.

Details of the Company's material forward-looking statements are included in the Company's most recent Annual Information Form for the year ended December 31, 2023 (the "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.

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 the 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.

About AutoCanada

AutoCanada is a leading North American multi-location automobile dealership group currently operating 84 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 Retail Division, 13 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.