Mr. Paul Antony reports

AUTOCANADA ANNOUNCES FIRST QUARTER RESULTS

AutoCanada Inc. has released 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 U.S. 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 [original equipment manufacturer] partners for their continued support."

Consolidated revenue decreased due to lower used retail vehicle sales, and lower F&I (finance, insurance and other) 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 depreciation, 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 profit increased due to compressed gross profit.

Floor plan 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 floor plan financing expenses, partially offset by gains from the sale of two properties completed during the quarter.

Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) for the period, and adjusted EBITDA margin, decreased primarily as a result of lower gross profits combined with higher floor plan financing expenses.

Canadian operations highlights

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 unit increased due to a larger inventory writedown provision recognized in the prior year. F&I gross profit per retail unit average 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 EBITDA declined due to the reasons stated above, combined with higher floor plan financing expenses.

United States operations highlights

Revenue and gross profit declined due to lower used retail vehicle sales and lower F&I performance, partially offset by contributions from P&S (parts and service) 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 EBITDA declined due to lower used vehicle gross profits and higher floor plan financing costs, partially offset by higher P&S gross profit.

Collision centre operations highlights

Collision revenue, gross profit and gross profit percentage increased, reflecting contributions from acquisitions and strong customer demand, supported by increased original equipment manufacturers certifications and insurance referrals.

Same store revenue, gross profit and gross profit percentage increased for the reasons noted herein.

Adjusted EBITDA increased for the reasons noted herein.

Other recent developments

During the quarter:

• On Feb. 1, 2024, the company entered into a $75-million interest rate swap with a fixed one-month Canadian dollar offered rate (CDOR) of 3.77 per cent. The swap has an initial settlement date of Feb. 1, 2027, and may be extended by the counterparty to Feb. 1, 2029.
• On Feb. 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.
• 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 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 12-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 $1.61-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-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.

Conference call

A conference call to discuss the results for the three months ended March 31, 2024, will be held on May 2, 2024, at 9 a.m. Mountain Time (11 a.m. Eastern Time). 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 company's website.

Management's discussion and analysis (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 three-month period ended March 31, 2024, which can be found on the company's website or on SEDAR+.

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 rounded to the nearest thousand dollars, unless otherwise stated.

About AutoCanada Inc.

AutoCanada is a leading North American multilocation automobile dealership group currently operating 84 franchised dealerships, comprising 28 brands, in eight provinces in Canada as well as a group in Illinois, United States. 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 three used vehicle dealerships and one used vehicle auction business supporting the used digital retail division; 13 RightRide division locations; and 11 stand-alone collision centres within its group of 27 collision centres. In 2023, the company generated revenue in excess of $1-billion and its dealerships sold over 100,000 retail vehicles.

We seek Safe Harbor.