ACQ AutoCanada Inc

• Revenue was $1,420.9 million as compared to $1,539.3 million in the prior year, a decrease of (7.7)%
• Net (loss) income for the period was $(2.4) million as compared to $8.4 million in the prior year, a decrease of (128.2)%
• Diluted earnings (loss) per share was $(0.10) as compared to $0.32 in the prior year
• Adjusted EBITDA¹ was $22.0 million versus $45.0 million in the prior year, a decrease of $(23.0) million

EDMONTON, AB, May 1, 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 March 31, 2024.

"During the first quarter, the trend of replenishing new light vehicle inventory, combined with consumer preference to buy affordable vehicles and minimize borrowing costs, resulted in continued normalization of total gross profit per new retail unit." said Paul Antony, AutoCanada's Executive Chair. "This combined with extremely cold weather impacting foot traffic in many of our Western Canadian stores, along with a shortage of quality, well priced used vehicles available to procure for our used division, culminated in challenging operational dynamics during the first quarter."

"Against this backdrop of difficult market conditions, AutoCanada remains focused on its strategies to outperform the broader market while protecting profitability and executing against Project Elevate initiatives. During the first quarter, we completed restructuring the US division and began implementing Canadian operating standards, which will have a positive impact in coming quarters. We also began the process to implement standard operating expense ratios by brand in Canada, which will benefit the Canadian operations later this fall and through the end of this year. These, along with our numerous Project Elevate initiatives to maximize gross profit, modernize our corporate infrastructure and optimize our cost structure, are the path to a lower cost and more profitable business in the future. I'd like to express my appreciation for the hard work and commitment of our employees and thank our OEM partners for their continued support."

Consolidated revenue decreased due to lower used retail vehicle² sales, and lower F&I revenues, partially offset by higher new vehicle sales, positive contributions from collision operations and recent acquisitions.

Consolidated gross profit decreased primarily due to lower used retail vehicle sales and lower contributions from F&I.

Normalized operating expenses before depreciation¹, which excludes share-based compensation, transaction costs, and other non-recurring costs, declined due to lower employee costs. Normalized operating expenses before depreciation as a percentage of gross profit¹ increased due to compressed gross profit.

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

Net loss for the period resulted from lower gross profits for the reasons stated above, an impairment charge in the current quarter for an asset held for sale, and higher floorplan financing expenses, partially offset by gains from the sale of two properties completed during the quarter.

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

Revenue and gross profit decreased as a result of lower used vehicle sales and F&I operations, partially offset by contributions from collision operations, new vehicle sales and recent acquisitions. Growth in collision gross profit was driven by strong customer demand, increased production capacity and acquisitions. Used vehicle gross profit per retail unit² increased due to a larger inventory writedown provision recognized in the prior year. F&I gross profit per retail unit average² decreased as a growing proportion of retail vehicle sales are being purchased without dealer financing, resulting in fewer opportunities to sell higher margin warranty and insurance products.

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

U.S. Operations Highlights

Revenue and gross profit declined due to lower used retail vehicle² sales and lower F&I performance, partially offset by contributions from P&S operations and new retail vehicle sales. Used vehicle performance was negatively impacted by market dynamics that made sourcing optimal used vehicle inventory more challenging. P&S gross profit increased due to the successful implementation of various initiatives to improve operational effectiveness.

Adjusted EBITDA¹ declined due to lower used vehicle gross profits and higher floorplan financing costs, partially offset by higher P&S gross profit.

Collision Centre Operations Highlights

Collision revenue, gross profit, and gross profit percentage² increased reflecting contributions from acquisitions and strong customer demand supported by increased Original Equipment Manufacturers ("OEM") certifications and insurance referrals.

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

Adjusted EBITDA¹ increased for the reasons noted above.

During the quarter:

• On February 1, 2024, the Company entered into a $75.0 million interest rate swap with a fixed one-month Canadian Dollar Offered Rate ("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 for cash consideration of $41.4 million plus customary closing adjustments. Refer to Section 5 Acquisitions, Divestitures, and Other Recent Developments for additional information.
• 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.
• On March 7, 2024, the Company announced that it had 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. For the period ended March 31, 2024, the Company has repurchased and cancelled 78,688 common shares for an average price of $24.67 and total cash consideration of approximately $1.9 million.
• On March 27, 2024, in connection with its previously announced NCIB, AutoCanada received approval from the TSX to implement an automatic share purchase plan ("ASPP") with its designated broker. The ASPP will terminate on March 10, 2025, unless terminated earlier in accordance with its terms.

After the quarter:

• For the period from April 1, 2024 to May 1, 2024, under the NCIB and ASPP, the Company has repurchased and cancelled 78,000 common shares for an average price of $24.53 and total cash consideration of approximately $1.9 million.
• On April 22, 2024, the Company entered into the fourth amended and restated credit agreement ("New Credit Facility") with the existing lending syndicate. The New Credit Facility includes the following:
  • Extend the maturity date to April 22, 2027 to maintain a three-year term;
  • Creation of a new $25 million capital expenditure term facility, and a corresponding $25 million accordion facility, to support the anticipated leasehold spending in the coming quarters;
  • Total aggregate bank facilities increased from $1.610 billion to $1.635 billion, with no changes to the revolving, wholesale flooring, and wholesale leasing facilities;
  • Enhancements to the Company's ability to floor a higher proportion of used vehicles;
  • Transition from CDOR to Canadian Overnight Repo Rate Average ("CORRA"); and
  • Certain administrative changes.
• On May 1, 2024, the Company completed the sale of specific land and building in Alberta for cash consideration of $10.0 million plus closing adjustments resulting in a gain of $3.4 million. The land and buildings were presented as held for sale in the Interim Financial Statements.

A conference call to discuss the results for the three months ended March 31, 2024 will be held on May 2, 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/2024-q1-conference-call/

Information included in this press release is a summary of results. It should be read in conjunction with AutoCanada's Interim Consolidated Financial Statements ("Interim Financial Statements") and Management's Discussion and Analysis ("MD&A") for the three-month period ended March 31, 2024, which can be found on the Company's website at www.autocan.ca or on www.sedarplus.ca.

All comparisons presented in this press release are between the three-month period ended March 31, 2024 and the three-month period ended March 31, 2023, unless otherwise indicated. Results are reported in Canadian dollars and have been rounded to the nearest thousand dollars, unless otherwise stated.

Condensed Interim Consolidated Statements of Comprehensive (Loss) Income
(Unaudited)
(in thousands of Canadian dollars except for share and per share amounts)

Condensed Interim Consolidated Statements of Financial Position
(Unaudited)
(in thousands of Canadian dollars)

Condensed Interim Consolidated Statements of Cash Flows
(Unaudited)
(in thousands of Canadian dollars)

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, 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, 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;
• Restructuring charges relate to non-recurring organizational changes to improve the Company's profitability and overall efficiency; 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.

Normalized Operating Expenses Before Depreciation as a Percentage of Gross Profit

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

The Company believes this measure provides a comparison of our operating performance normalized for transactions that are not indicative of the Company's operating expenses over time.

Adjusted EBITDA and Segmented Adjusted EBITDA

The following table illustrates segmented adjusted EBITDA for the three-month period ended March 31:

The following table illustrates collision adjusted EBITDA for the three-month periods ended March 31:

Adjusted EBITDA Margin

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

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 March 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.

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 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 $1 billion and our dealerships sold over 100,000 retail vehicles.

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

SOURCE AutoCanada Inc.