AUTOCANADA REPORTS FOURTH QUARTER 2022 RESULTS

• Revenue was $1,388.2 million as compared to $1,195.8 million in the prior year, an increase of 16.1%
• Net income for the period was $14.8 million versus $69.4 million in the prior year
• Adjusted EBITDA¹ was $50.7 million versus $65.9 million in the prior year, a decrease of $(15.2) million
• Current year results include an incremental used vehicle writedown provision of $(12.4) million and an increase in floorplan financing costs of $(13.3) million
• Adjusted EBITDA margin¹ was 3.6% versus 5.5% in the prior year, a decrease of (1.9) percentage points
• Diluted earnings per share was $0.52, a decrease of $(1.86) from $2.38 in the prior year
• A Substantial Issuer Bid was completed to purchase and cancel 1,851,851 common shares at a purchase price of $27.00 per share, representing an aggregate purchase price of $50.0 million in Q4 2022
• For the year ended December 31, 2022, including two Substantial Issuer Bids and the Normal Course Issuer Bid, a total of 4,741,879 common shares were purchased and cancelled for total consideration of $139.1 million
• Indebtedness of $555.1 million at the end of Q4 2022 compares to $285.9 million at the end of Q4 2021
• Net indebtedness¹ of $446.8 million at the end of Q4 2022 compares to $212.7 million at the end of Q4 2021

EDMONTON, AB, March 1, 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 and twelve month period ended December 31, 2022.

"AutoCanada's finish to the year with record fourth quarter revenue and strong same store performance is a testament to the high-level focus the entire organization placed on our strategic objectives, not only in the quarter but over the full year," said Paul Antony, Executive Chairman of AutoCanada.  "I am very proud of the results our team achieved to maximize our complete business model, particularly our continued focus on growing our used to new retail units ratio which gave us the opportunity to leverage our best in class F&I and parts, service and collision repair business operations. Contributions from acquisitions also supported our performance and have exceeded expectations."

"I remain excited about what the future holds for AutoCanada. We are confident in our ability to navigate the evolving landscape of the automotive industry given our complete business model, our strong balance sheet and the resiliency we've built into our platform and remain well positioned to drive value for our shareholders and stakeholders through our many growth opportunities."

In addition, effective February 27, 2023, Mike Borys has retired from the role of Chief Financial Officer. Azim Lalani will be appointed as AutoCanada's new Chief Financial Officer in March 2023.

2022 Fourth Quarter Key Highlights and Recent Developments

All comparisons presented below are between the three-month period ended December 31, 2022 and the three-month period ended December 31, 2021, unless otherwise indicated.

Executive Overview

The business model continued to perform in the fourth quarter. Results in the quarter were being impacted by fluctuations in used vehicle pricing that necessitated the incremental used vehicle writedown provision and by the increase in floorplan costs. Our finance and insurance ("F&I") and parts, service and collision repair ("PS&CR") business operations were strong contributors to performance in the quarter, supported by strong used retail volume. Acquisitions have also been a positive contributor to results and have exceeded Year 1 pro forma targets to date.

Net income for the period was $14.8 million as compared to $69.4 million in Q4 2021. Diluted earnings per share was $0.52, a decrease of $(1.86) from $2.38 in the prior year.

Adjusted EBITDA¹ for the period was $50.7 million as compared to $65.9 million in Q4 2021. Adjusted EBITDA margin¹ of 3.6% compares to 5.5% in the prior year, a decrease of (1.9) percentage points ("ppts"). This decrease is largely driven by the noted $(12.4) million incremental used vehicle writedown provision, adjusting used vehicle inventory to net realizable value, and the year-over-year increase of $(13.3) million in floorplan financing costs.

Gross profit increased by $14.1 million to $242.6 million, an increase of 6.2%, as compared to prior year. This increase was largely driven by the increases of $17.1 million from F&I and $19.7 million from PS&CR. This continued improvement in our F&I and PS&CR gross profit is representative of our continued optimization and refinement of business processes and integration of acquisitions to date.

Gross profit percentage² was 17.5% in the quarter as compared to 19.1% in the prior year. This decrease is largely driven by the current used vehicle macro environment, resulting in both a compression of used vehicle gross profit percentage² and the incremental used vehicle writedown provision. While used retail vehicle² gross profit percentage² weakened, used retail vehicle² sales increased by 2,525 units, up 21.2%, to 14,418 units, and contributed to the consolidated used to new retail units ratio² moving to 1.78 from 1.45. Used vehicle sales volume also contributed to our strong F&I and PS&CR gross profit performance.

Our U.S. Operations contributed $34.3 million of gross profit, a decrease of $(4.9) million or (12.4)% as compared to prior year. This decrease in gross profit was primarily driven by compression of new and used vehicle gross profit percentage² and $(3.3) million of incremental used vehicle writedown provision taken in the quarter. Used retail vehicles² sales increased 26.0% as compared to the prior year and supports both the increases in F&I gross profit by $2.7 million, or 22.2%, and PS&CR gross profit by $4.5 million, or 48.8%.

Operating expenses before depreciation as a percentage of gross profit² increased by 6.6 ppts to 75.7%. The increase is largely due to the noted compressed gross profit and increased operating expenses before depreciation².  Operating expenses before deprecation² increased by $25.7 million and is largely driven by acquisitions and related costs, and increased head count to facilitate organizational growth.

Floorplan financing costs increased by $(13.3) million, or 564%, to $15.7 million as compared to prior year. The increase is attributable to the combination of rising interest rates and an increase in our used vehicle inventory position. While rising interest rates are expected to impact customer affordability, we consider the availability of vehicle inventory to remain the most significant challenge to sales growth. Additionally, some of the direct impacts of rising interest rates may be offset by vehicle financing products which provide flexibility in financing terms, inclusive of incentives and term extensions. Management continues to monitor the macro environment and will adjust F&I product offerings and other aspects of the business, where necessary, to meet customer needs.

We continue to actively manage our vehicle inventory as the chip shortage remains an issue and continues to impact the supply of new vehicle inventory. While we have seen positive indicators and noted gradual improvements in both the availability of inventory and product allocations, we are not anticipating a return to "normalcy" in new vehicle inventory levels until late 2023 to 2024. Compensating for constrained new vehicle supply, we have managed our used vehicle inventory position to meet current market demands.

Net indebtedness¹ increased by $96.0 million from September 30 2022 to $446.8 million at the end of Q4 2022. This increase is primarily driven by the purchase and cancellation of $(50.0) million of common shares under a Substantial Issuer Bid ("SIB"), and $54.6 million of acquisitions, including Kavia Auto Body Inc., Excellence Auto Collision Limited, and Sterling Honda. Free cash flow¹ on a trailing twelve month ("TTM") basis was $136.7 million at Q4 2022 as compared to $107.2 million in Q4 2021; the increase in free cash flow¹ between years was driven primarily by reduced stock based compensation related cash payments and improvements in working capital. Additionally, our net indebtedness leverage ratio¹ of 2.1x remained well below our target range at the end of Q4 2022, as compared to 0.2x in Q4 2021.

Had all of the acquisitions, completed as of Q4 2022, occurred at January 1, 2022, pro forma net income¹ would have been $91.6 million for the TTM ended December 31, 2022, as compared to pro forma net income¹ of $174.8 million for the year ended December 31, 2021. Pro forma normalized adjusted EBITDA¹ would be $274.7 million for the TTM ended December 31, 2022, as compared to pro forma normalized adjusted EBITDA¹ of $266.4 million for the year ended December 31, 2021.

We have established an acquisition pipeline, with dealerships and collision centres representing in excess of $395 million in annual revenue currently being evaluated. We are at varying stages of the acquisition process with these targets, ranging from signed letters of intent to signed purchase agreements, with the potential deals remaining subject to due diligence, OEM approvals, and other standard closing conditions. We remain well-positioned to continue to execute on our acquisition strategy in the coming quarters.

Our performance, both in Canada and U.S. Operations, continues our trend of sustainable improvement and demonstrates the efficacy of our complete business model and strategic initiatives. We remain aware that uncertainty continues to exist in the macroeconomic environment given the ongoing challenges associated with the lingering effects of the global pandemic, inflation, rising interest rates, and the ongoing Ukraine conflict. Uncertainties may include potential economic recessions or downturns, continued disruptions to the global automotive manufacturing supply chain, and other general economic conditions resulting in reduced demand for vehicle sales and service. We will continue to remain proactive and vigilant in assessing the impacts on our organization and remain committed to optimizing and building stability and resiliency into our business model to ensure we are able to drive industry-leading performance regardless of changing market conditions.

Consolidated AutoCanada Highlights

TOTAL VEHICLES² SOLD INCREASED BY 14%

For the three-month period ended December 31, 2022:

• Revenue was $1,388.2 million, an increase of $192.4 million or 16.1%
• Total vehicles² sold were 23,190, an increase of 2,894 units or 14.3%
• Used retail vehicles² sold increased by 2,525 or 21.2%
• Net income was $14.8 million (or $0.52 per diluted share) versus $69.4 million (or $2.38 per diluted share)
• Adjusted EBITDA¹ decreased by (23.1)% to $50.7 million, a decrease of $(15.2) million
• Current year results include an incremental used vehicle writedown provision of $(12.4) million and an increase in floorplan financing costs of $(13.3) million
• Adjusted EBITDA¹ on a TTM basis was $264.8 million as compared to $251.9 million in the prior year
• Net indebtedness¹ of $446.8 million reflected an increase of $96.0 million from the end of Q3 2022
• Net indebtedness leverage ratio¹ of 2.1x at the end of Q4 2022, as compared to 1.5x in Q3 2022

Canadian Operations Highlights

TOTAL GROSS PROFIT INCREASED BY 10%

Our F&I and PS&CR segments, driven by 20.2% increase in used retail unit sales, were key drivers of the 10.0% increase in total gross profit. F&I gross profit increased by $14.4 million or 27.9% to $65.9 million and PS&CR gross profit increased by $15.3 million or 22.9% to $82.0 million as compared to prior year.

Unless stated otherwise, all results for acquired businesses are included in all Canadian references in the press release.

For the three-month period ended December 31, 2022:

• Revenue was $1,172.7 million, an increase of 17.4%
• Used retail unit² sales increased by 1,962 or 20.2%
• Average TTM Canadian used retail unit sales per dealership per month, excluding Used Digital Retail Division dealerships², improved to 63, as compared to 52 in the prior year
• Used to new retail units ratio² increased to 1.64 from 1.45
• TTM used to new retail ratio² improved to 1.67 at Q4 2022 as compared to 1.43 at Q4 2021
• F&I gross profit per retail unit average² increased to $3,503, up 11.9% or $373 per unit
• Net income was $15.0 million, down (75.8)% from a net income of $62.3 million in 2021
• Adjusted EBITDA¹ decreased by (17.2)% to $45.7 million, a decrease of $(9.5) million
• Current year results include the incremental used vehicle writedown provision of $(9.1) million
• Adjusted EBITDA margin¹ was 3.9% as compared to 5.5% in the prior year, a decrease of (1.6) ppts driven primarily by the incremental used vehicle writedown provision and increased floorplan financing costs

U.S. Operations Highlights

USED RETAIL VEHICLES SOLD INCREASED BY 26%

Used retail vehicle unit sales increased by 26.0%. Our F&I and PS&CR departments continue to offset the compressed new and used vehicle gross profit percentage².

• Revenue was $215.5 million, an increase of 9.4%, from $197.0 million
• Used retail vehicles² sold increased by 26.0%
• F&I gross profit per retail unit average² increased to $4,064 per unit, up 20.0% or $677 per unit
• Net income decreased by $(7.4) million to $(0.2) million from $7.1 million
• Net income on a TTM basis was $14.8 million as compared to $17.1 million in the prior year
• Adjusted EBITDA¹ was $5.0 million as compared to $10.7 million, a decrease of $(5.7) million
• Current year results include an incremental used vehicle writedown provision of $(3.3) million
• Adjusted EBITDA¹ on a TTM basis was $32.8 million as compared to $31.2 million in the prior year

Same Store Metrics - Canadian Operations

USED RETAIL VEHICLES² SOLD INCREASED BY 7.6%

The continued optimization of the Company's complete business model is highlighted by the growth in same store used retail vehicle² sales. Our total gross profit of $165.8 million continues to be driven by our strong F&I and PS&CR performance and included an incremental same store used vehicle writedown provision of $(6.2) million.

Refer to Section 20 Same Store Results Data of the MD&A for the definition of same store and further information.

• Revenue increased to $943.8 million, an increase of 2.2%
• Gross profit decreased by $(9.9) million or (5.7)%
• Used to new retail units ratio² increased to 1.55 from 1.29
• Used retail vehicles² sold increased by 7.6%, an increase of 628 units
• F&I gross profit per retail unit average² increased to $3,844, up 16.1% or $532 per unit; F&I gross profit increased to $56.1 million as compared to $48.4 million in the prior year, an increase of 15.8%
• PS&CR gross profit increased to $64.6 million, an increase of 7.2%
• PS&CR gross profit percentage² increased to 57.7% as compared to 56.0% in the prior year

Financing and Investing Activities and Other Recent Developments

AMENDED CREDIT FACILITY AGREEMENT EXTENDED TO APRIL 15, 2026

Net indebtedness¹ of $446.8 million resulted in a net indebtedness leverage ratio¹ of 2.1x. Financing and investing activities included the following:

Acquisitions

The Company completed $54.6 million of acquisitions in Q4 2022 and $178.7 million for the year. The acquisitions support management's strategic objectives of expanding our presence across Canada and operational capacity.

• On October 27, 2022, the Company acquired 100% of the shares of Kavia Auto Body Inc. ("Kavia Auto Body"), a collision centre located in Saskatoon, Saskatchewan.
• On November 7, 2022, the Company acquired 100% of the shares of Excellence Auto Collision Limited ("Excellence Auto Collision"), an entity that operates two luxury-brand focused collision centres (Excellence Auto Collision Silver Star and Excellence Auto Collision Midwest) located in Scarborough, Ontario and Toronto, Ontario.
• On December 1, 2022, the Company acquired substantially all of the assets to be used in the operations of Sterling Honda, a Honda dealership in Hamilton, Ontario.
• On February 27, 2023, the Company acquired 100% of the shares of 5121175 Manitoba Ltd. ("DCCHail"), a paintless dent repair entity, located in Calgary, Alberta. DCC Hail operates with a national presence and specializes in the insurance claim management process and repair of hail damaged vehicles.

Share Purchases

• On December 16, 2022, the Company completed a SIB, by way of a modified Dutch auction, to purchase, for cancellation, the common shares of the Company (the "Second Offer"). The Company purchased and cancelled 1,851,851 common shares at a purchase price of $27.00 per share under the Offer, representing an aggregate purchase price $50.0 million, which represents 7.29% of the total issued and outstanding Shares of the Company before giving effect to the Second Offer.
• For the year ended December 31, 2022, a total of 4,741,879 common shares were purchased and cancelled for total consideration of $139.1 million, net of transaction costs.

Credit Facility Amendments

• On December 12, 2022, the Company executed the accordion feature to increase the revolving credit limit by $50 million to $275 million from $225 million and amended our existing credit facility for administrative changes.
• On January 30, 2023, Standard & Poor's Ratings Services ("S&P") issued a research update where our Issuer Credit Rating remains unchanged at 'B+'.
• On February 3, 2023, the Company amended and extended our existing credit facility to increase our total aggregate bank facilities to $1.6 billion. This included increasing our revolving credit limit to $375 million from $275 million. We maintained a three-year tenor by extending the maturity date to April 15, 2026.

1	See "NON-GAAP AND OTHER FINANCIAL MEASURES" below.
2	This press release contains "SUPPLEMENTARY FINANCIAL MEASURES". Section 15. NON-GAAP AND OTHER FINANCIAL MEASURES of the Company's Management's Discussion & Analysis for the three month period ended December 31, 2022 ("MD&A") is hereby incorporated by reference for further information regarding the composition of these measures (accessible through the SEDAR website at www.sedar.com).

Fourth Quarter Financial Information

The following table summarizes the Company's results for the quarter and year ended December 31, 2022:

	Three Months Ended December 31			Year Ended December 31
Consolidated Operational Data	2022	2021	% Change	2022	2021	% Change
Revenue	1,388,206	1,195,782	16.1 %	6,040,619	4,653,415	29.8 %
Gross profit	242,622	228,514	6.2 %	1,042,873	834,183	25.0 %
Gross profit %	17.5 %	19.1 %	-1.6 ppts	17.3 %	17.9 %	-0.6 ppts
Operating expenses	197,397	170,008	16.1 %	811,018	612,609	32.4 %
Operating profit	58,604	99,410	(41.0) %	254,551	270,068	(5.7) %
Net income for the period	14,810	69,398	(78.7) %	91,060	167,199	(45.5) %
Basic net income per share attributable to AutoCanada shareholders	0.55	2.54	(78.3) %	3.28	5.98	(45.2) %
Diluted net income per share attributable to AutoCanada shareholders	0.52	2.38	(78.2) %	3.03	5.60	(45.9) %
Adjusted EBITDA 1	50,669	65,873	(23.1) %	264,800	251,863	5.1 %
New retail vehicles2 sold (units)	8,100	8,204	(1.3) %	36,216	35,799	1.2 %
New fleet vehicles2 sold (units)	672	199	237.7 %	1,892	1,872	1.1 %
Total new vehicles2 sold (units)	8,772	8,403	4.4 %	38,108	37,671	1.2 %
Used retail vehicles2 sold (units)	14,418	11,893	21.2 %	63,611	48,729	30.5 %
Total vehicles2 sold	23,190	20,296	14.3 %	101,719	86,400	17.7 %
Same store new retail vehicles2 sold (units)	5,714	6,380	(10.4) %	25,636	28,762	(10.9) %
Same store new fleet vehicles2 sold (units)	625	192	225.5 %	1,715	1,864	(8.0) %
Same store used retail vehicles2 sold (units)	8,876	8,248	7.6 %	40,736	37,035	10.0 %
Same store total vehicles2 sold	15,215	14,820	2.7 %	68,087	67,661	0.6 %
Same store2 revenue	943,849	923,341	2.2 %	4,281,582	3,808,650	12.4 %
Same store2 gross profit	165,804	175,749	(5.7) %	746,401	689,709	8.2 %
Same store2 gross profit %	17.6 %	19.0 %	(1.4) %	17.4 %	18.1 %	(0.7) %

1    See "NON-GAAP AND OTHER FINANCIAL MEASURES" below.

2     This press release contains "SUPPLEMENTARY FINANCIAL MEASURES". Section 15. NON-GAAP AND OTHER FINANCIAL MEASURES of the Company's Management's Discussion & Analysis for the three month period ended December 31, 2022 ("MD&A") is hereby incorporated by reference for further information regarding the composition of these measures (accessible through the SEDAR website at www.sedar.com).

3     See the Company's MD&A for the quarter and year ended December 31, 2022 for complete footnote disclosures.

4     In Q4 2021, it was determined there were Revenues and Cost of sales accounts incorrectly classified between revenue streams in the first three quarters of 2021 within the U.S. Operations segment. As a result, the classification of these accounts has been corrected and we have revised the Q1, Q2, and Q3 2021 amounts. This reclassification had no impact on total gross profit.

SELECTED QUARTERLY FINANCIAL INFORMATION

The following table shows the unaudited results of the Company for each of the eight most recently completed quarters. The results of operations for these periods are not necessarily indicative of the results of operations to be expected in any given comparable period.

	MD&A Footnote Reference3	Q4 2022	Q3 2022	Q2 2022	Q1 2022	Q4 2021	Q3 2021 REVISED	Q2 2021 REVISED	Q1 2021 REVISED
Income Statement Data	5
New vehicles 4	6	508,008	557,492	583,870	511,195	467,085	498,142	547,593	451,061
Used vehicles 4	6	626,397	807,236	840,998	595,514	524,043	518,791	539,785	354,922
Parts, service and collision repair 4	6	168,544	161,805	160,307	152,009	136,800	116,953	122,459	108,427
Finance, insurance and other 4	6	85,257	97,416	100,851	83,720	67,854	72,868	71,218	55,414
Revenue		1,388,206	1,623,949	1,686,026	1,342,438	1,195,782	1,206,754	1,281,055	969,824
New vehicles 4	6	48,218	58,760	58,950	53,384	50,632	46,525	44,619	34,639
Used vehicles 4	6	17,775	32,627	34,125	36,772	38,118	39,669	40,269	23,206
Parts, service and collision repair 4	6	95,661	88,707	90,713	78,431	75,917	64,748	68,115	57,874
Finance, insurance and other 4	6	80,968	93,540	95,490	78,752	63,847	69,250	64,838	51,917
Gross Profit		242,622	273,634	279,278	247,339	228,514	220,192	217,841	167,636
Gross profit %		17.5 %	16.8 %	16.6 %	18.4 %	19.1 %	18.2 %	17.0 %	17.3 %
Operating expenses		197,397	207,266	212,709	193,646	170,008	159,880	154,773	127,948
Operating expenses as a % of gross profit		81.4 %	75.7 %	76.2 %	78.3 %	74.4 %	72.6 %	71.0 %	76.3 %
Operating profit		58,604	69,303	69,954	56,690	99,410	62,841	66,153	41,664
Recovery of non-financial assets		(8,691)	—	—	—	(39,846)	—	—	—
Net income		14,810	32,870	39,058	4,322	69,398	38,769	37,698	21,334
Basic net income per share attributable to AutoCanada shareholders		0.55	1.22	1.40	0.11	2.54	1.37	1.33	0.77
Diluted net income per share attributable to AutoCanada shareholders		0.52	1.16	1.33	0.10	2.38	1.27	1.23	0.71
Dividends declared per share		—	—	—	—	—	—	—	—
Adjusted EBITDA 1	3	50,669	76,374	75,561	62,196	65,873	68,265	70,491	47,234
Free cash flow 1	3	32,177	35,319	63,318	5,852	7,603	12,372	67,803	19,391
Operating Data	5
New retail vehicles2  sold	4	8,100	9,186	9,878	9,052	8,204	9,255	10,107	8,233
New fleet vehicles2 sold	4	672	433	497	290	199	358	575	740
Total new vehicles2 sold	4	8,772	9,619	10,375	9,342	8,403	9,613	10,682	8,973
Used retail vehicles2 sold	4	14,418	17,381	17,740	14,072	11,893	13,831	13,271	9,734
Total vehicles sold2	4	23,190	27,000	28,115	23,414	20,296	23,444	23,953	18,707
# of service and collision repair orders completed2	4	263,796	241,907	261,671	221,632	232,373	199,870	214,149	182,869
# of dealerships at period end	1	86	85	82	80	80	68	67	67
# of same store dealerships	1, 2	49	49	49	49	49	49	49	49
# of service bays at period end		1,367	1,331	1,322	1,293	1,303	1,108	1,098	1,098
Same store2 revenue growth	2	2.2 %	17.6 %	14.2 %	17.2 %	14.1 %	15 %	54.2 %	27.8 %
Same store2 gross profit    growth	2	(5.7) %	8.7 %	10.3 %	23.2 %	29.4 %	18.6 %	102.5 %	35.0 %

1    See "NON-GAAP AND OTHER FINANCIAL MEASURES" below. 2     This press release contains "SUPPLEMENTARY FINANCIAL MEASURES". Section 15. NON-GAAP AND OTHER FINANCIAL MEASURES of the Company's Management's Discussion & Analysis for the three month period ended December 31, 2022 ("MD&A") is hereby incorporated by reference for further information regarding the composition of these measures (accessible through the SEDAR website at www.sedar.com). 3     See the Company's MD&A for the quarter and year ended December 31, 2022 for complete footnote disclosures. 4     In Q4 2021, it was determined there were Revenues and Cost of sales accounts incorrectly classified between revenue streams in the first three quarters of 2021 within the U.S. Operations segment. As a result, the classification of these accounts has been corrected and we have revised the Q1, Q2, and Q3 2021 amounts. This reclassification had no impact on total gross profit.

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, 2022, 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 cash equivalents, 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, normalized adjusted EBITDA, income statement impacts and adjusted EBITDA on a pre-IFRS 16 basis, pro forma adjusted EBITDA, pro forma normalized adjusted EBITDA, pro forma net income, free cash flow, net indebtedness, and net indebtedness leverage ratio 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.

It should be noted that certain of the financial measures described below include pro forma items estimating the impact of the acquisitions if they had occurred on the first day of the relevant period, or as of a specified date. Readers should understand that these estimates were determined by management in good faith and are not indicative of what the historical results of the businesses acquired in the acquisitions actually were for the relevant period, or what those results would have been if the acquisitions had occurred on the dates indicated, or what they will be for any future period. As a result, the pro forma financial measures may not be indicative of the Company's financial position that would have prevailed, or operating results that would have been obtained, if the transactions had taken place on the dates indicated or of the financial position or operating results which may be obtained in the future. These pro forma financial measures are not a forecast or projection of future results. The actual financial position and results of operations of the Company for any period following the closing of the acquisitions will vary from the amounts set forth following pro forma financial measures, and such variation may be material.

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 a part of the Used Digital Retail Division);
• Non-cash charges (such as impairment, recoveries, gains or losses on free-standing 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 wholesale fraud and settlement income).

The Company believes adjusted EBITDA provides improved continuity with respect to the comparison of our operating performance over a period of time.

Normalized Adjusted EBITDA

With the onset of COVID-19 during the second quarter of 2020, the impact of COVID-19 related government restrictions resulted in charges that are one-time in nature, and related government programs resulted in subsidies that are non-recurring in the future.

Normalized adjusted EBITDA is an indicator of a company's operating performance over a period of time and ability to incur and service debt, normalized for charges that are non-recurring in nature related to the pandemic such as:

• Canada Emergency Wage Subsidy ("CEWS") income, expected to recur until the Company is no longer eligible for the subsidy;
• Canada Emergency Rent Subsidy ("CERS"), expected to recur until the Company is no longer eligible for the subsidy;
• One-time forgiveness of Small Business Association Paycheck Protection Program ("PPP") loans;

The Company believes normalized adjusted EBITDA provides improved continuity with respect to the comparison of our operating performance normalized for impacts related to the COVID-19 pandemic.

Pro Forma Adjusted EBITDA and Pro Forma Normalized Adjusted EBITDA

The Company believes pro forma adjusted EBITDA and pro forma normalized adjusted EBITDA provides improved understanding of the progress of our acquisition strategy as if the acquisitions had occurred at the beginning of the period. Pro forma adjusted EBITDA and pro forma normalized adjusted EBITDA includes management's estimate of the net income generated by our acquisitions prior to interest expense (other than interest expense on floorplan financing), income taxes, depreciation, and amortization, assuming acquisitions in the year had occurred on the first day of the year ended December 31, 2022 prior to any synergies, pursuant to the terms of the credit facilities. Pro forma adjustments estimated by management were derived from dealership financial statements. The Company's blended rate of Canadian corporate tax of 25.5% was applied to pro forma adjustments where applicable.

Refer to the Notes to the Consolidated Financial Statements for the year ended December 31, 2022 and Section 5, Acquisitions, Divestitures, Relocations, and Real Estate of the Company's MD&A for further details.

Pro Forma Net Income

The Company believes pro forma net income provides improved understanding of the progress of our acquisition strategy as if the acquisitions had occurred at the beginning of the period. Pro forma net income includes management's estimate of the net income generated by our acquisitions, assuming acquisitions in the year had occurred on the first day of the year ended December 31, 2022, prior to any synergies, pursuant to the terms of the credit facilities. Pro forma adjustments estimated by management were derived from dealership financial statements. The Company's blended rate of Canadian corporate tax of 25.5% was applied to pro forma adjustments where applicable.

Refer to the Notes to the Consolidated Financial Statements for the year ended December 31, 2022 and Section 5, Acquisitions, Divestitures, Relocations, and Real Estate of the Company's MD&A for further details.

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.

Income Statement Impacts and Adjusted EBITDA on a Pre-IFRS 16 basis

The Company adopted IFRS 16 on January 1, 2019. On adoption of IFRS 16, the Company recognized lease liabilities in relation to leases, which had previously been classified as 'operating leases' under the principles of IAS 17 Leases. These liabilities were measured at the present value of the remaining lease payments, discounted using the lessee's incremental borrowing rate. There are also corresponding income statement impacts to net income and other comprehensive income.

The Company believes adjusted EBITDA on a pre-IFRS 16 basis provides improved continuity for purposes of comparing to our historical operating performance prior to fiscal year 2019. Our Credit Facility financial covenants are calculated and presented on a pre-IFRS 16 basis. In addition, the net indebtedness leverage ratio is calculated on a pre-IFRS 16 basis.

Adjusted EBITDA on a pre-IFRS 16 basis is calculated as adjusted EBITDA less the rental expense, fair market value rent adjustment and step lease rent adjustment eliminated from the adoption of IFRS 16 lease liabilities accounting standards.

Refer to the Notes to the Consolidated Financial Statements for the year ended December 31, 2022 for further details.

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

Net Indebtedness Leverage Ratio

Net indebtedness leverage ratio is a measure used by management to evaluate the liquidity of the Company.

The Company believes presenting the net indebtedness leverage ratio on a pre-IFRS 16 basis provides improved continuity for purposes of comparing to our historical operating performance prior to fiscal year 2019 and remains relevant while our Credit Facility financial covenants continues to be calculated and presented on a pre-IFRS 16 basis. Net indebtedness leverage ratio is calculated as net indebtedness compared to Adjusted EBITDA pre-IFRS 16 on a TTM basis.

We list and define "CAPITAL MANAGEMENT MEASURES" below:

Net Indebtedness

Net indebtedness is used by management to evaluate the liquidity of the Company.

Net indebtedness is calculated as indebtedness, net of unamortized deferred financing costs, adding back embedded derivative asset, and less cash and cash equivalents.

NON-GAAP AND OTHER FINANCIAL MEASURES RECONCILIATIONS

Adjusted EBITDA, Normalized Adjusted EBITDA, Pro Forma Adjusted EBITDA, and Pro Forma Normalized Adjusted EBITDA Reconciliation

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

	2022	2021
Period from October 1 to December 31
Net income for the period	14,810	69,398
Add back:
Income tax expense	9,994	24,463
Depreciation of property and equipment	5,664	4,830
Interest on long-term indebtedness	8,121	6,161
Depreciation of right of use assets	8,326	7,465
Lease liability interest	8,283	6,520
	55,198	118,837
Add back:
Recoveries of non-financial assets, net	(8,691)	(39,846)
Share-based compensation (Used Digital Retail Division)	391	—
Loss on redemption liabilities	4,829	14,116
Unrealized fair value changes in derivative instruments	(2,496)	(2,853)
Amortization of loss on terminated hedges	817	817
Unrealized foreign exchange losses	497	25
Gain on termination of lease	—	(492)
Unrealized fair value changes on embedded derivative	—	(24,778)
Loss on disposal of assets, net	124	47
Adjusted EBITDA	50,669	65,873

The following table illustrates adjusted EBITDA, normalized adjusted EBITDA, pro forma adjusted EBITDA, and pro forma normalized adjusted EBITDA for the trailing twelve month period ended December 31, over the last two years of operations:

	2022	2021
Period from January 1 to December 31
Net income for the period	91,060	167,199
Add back:
Income tax expense	32,824	54,021
Depreciation of property and equipment	20,852	17,272
Interest on long-term indebtedness	29,325	21,900
Depreciation of right of use assets	30,781	26,420
Lease liability interest	29,828	23,062
	234,670	309,874
Add back:
Recoveries of non-financial assets, net	(8,691)	(39,846)
Share-based compensation (Used Digital Retail Division)	391	—
Loss on redemption liabilities	4,829	14,116
Loss on extinguishment of debt	9,860	1,128
Unrealized fair value changes in derivative instruments	(9,321)	(7,873)
Amortization of loss on terminated hedges	3,268	3,268
Unrealized foreign exchange losses	192	115
Loss on extinguishment of embedded derivative	29,306	—
Loss on termination of lease, net	—	427
Unrealized fair value changes on embedded derivative	—	(29,306)
Loss (gain) on disposal of assets	296	(40)
Adjusted EBITDA	264,800	251,863
Normalizing items:
Less:
Canada Emergency Wage Subsidy	—	(4,388)
Canada Emergency Rent Subsidy	—	(336)
Forgiveness of PPP loans	—	(6,728)
Normalized Adjusted EBITDA	264,800	240,411
Pro forma items had the acquisitions occurred on January 1:
Net income for the period	583	7,634
Add back:
Income tax expense	200	2,464
Depreciation of property and equipment	689	1,765
Interest on long-term indebtedness	5,058	5,698
Depreciation of right of use assets	1,185	3,224
Lease liability interest	2,207	5,235
Pro Forma Adjusted EBITDA	274,722	277,883
Pro Forma Normalized Adjusted EBITDA	274,722	266,431
Pro Forma Net Income	91,643	174,833

Segmented Adjusted EBITDA and Segmented Normalized Adjusted EBITDA

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

	Three Months Ended December 31, 2022				Three Months Ended December 31, 2021
	Canada	U.S.	Total		Canada	U.S.	Total
Period from October 1 to December 31
Net income (loss) for the period	15,043	(233)	14,810		62,253	7,145	69,398
Add back:
Income tax expense	9,908	86	9,994		24,144	319	24,463
Depreciation of property and equipment	5,168	496	5,664		4,467	363	4,830
Interest on long-term indebtedness	5,100	3,021	8,121		4,818	1,343	6,161
Depreciation of right of use assets	7,658	668	8,326		6,796	669	7,465
Lease liability interest	7,305	978	8,283		5,630	890	6,520
	50,182	5,016	55,198		108,108	10,729	118,837
Add back:
Recoveries of non-financial assets, net	(8,691)	—	(8,691)		(39,846)	—	(39,846)
Share-based compensation (Used Digital Retail Division)	391	—	391		—	—	—
Loss on redemption liabilities	4,829	—	4,829		14,116	—	14,116
Unrealized fair value changes in derivative instruments	(2,496)	—	(2,496)		(2,853)	—	(2,853)
Amortization of loss on terminated hedges	817	—	817		817	—	817
Unrealized foreign exchange losses	497	—	497		25	—	25
Gain on termination of lease	—	—	—		(492)	—	(492)
Unrealized fair value changes on embedded derivative	—	—	—		(24,778)	—	(24,778)
Loss on disposal of assets, net	124	—	124		47	—	47
Adjusted EBITDA	45,653	5,016	50,669		55,144	10,729	65,873

The following table illustrates segmented adjusted EBITDA and normalized adjusted EBITDA for the year ended December 31 for the last two years of operations:

	Year Ended December 31, 2022				Year Ended December 31, 2021
	Canada	U.S.	Total		Canada	U.S.	Total
Period from January 1 to December 31
Net income for the period	76,263	14,797	91,060		150,104	17,095	167,199
Add back:
Income tax expense	29,626	3,198	32,824		53,702	319	54,021
Depreciation of property and equipment	19,117	1,735	20,852		15,995	1,277	17,272
Interest on long-term indebtedness	22,605	6,720	29,325		15,631	6,269	21,900
Depreciation of right of use assets	28,033	2,748	30,781		23,759	2,661	26,420
Lease liability interest	26,271	3,557	29,828		19,503	3,559	23,062
	201,915	32,755	234,670		278,694	31,180	309,874
Add back:
Recoveries of non-financial assets, net	(8,691)	—	(8,691)		(39,846)	—	(39,846)
Share-based compensation (Used Digital Retail Division)	391	—	391		—	—	—
Loss on redemption liabilities	4,829	—	4,829		14,116	—	14,116
Loss on extinguishment of debt	9,860	—	9,860		1,128	—	1,128
Unrealized fair value changes in derivative instruments	(9,321)	—	(9,321)		(7,873)	—	(7,873)
Amortization of loss on terminated hedges	3,268	—	3,268		3,268	—	3,268
Unrealized foreign exchange losses	192	—	192		115	—	115
Loss on extinguishment of embedded derivative	29,306	—	29,306		—	—	—
Loss on termination of lease, net	—	—	—		427	—	427
Unrealized fair value changes on embedded derivative	—	—	—		(29,306)	—	(29,306)
Loss (gain) on disposal of assets, net	296	—	296		(40)	—	(40)
Adjusted EBITDA	232,045	32,755	264,800		220,683	31,180	251,863
Normalizing Items:
Less:
Canada Emergency Wage Subsidy	—	—	—		(4,388)	—	(4,388)
Canada Emergency Rent Subsidy	—	—	—		(336)	—	(336)
Forgiveness of PPP loans	—	—	—		—	(6,728)	(6,728)
Normalized Adjusted EBITDA	232,045	32,755	264,800		215,959	24,452	240,411

Adjusted EBITDA Margin

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

	2022	2021
Period from October 1 to December 31
Adjusted EBITDA	50,669	65,873
Revenue	1,388,206	1,195,782
Adjusted EBITDA Margin	3.6 %	5.5 %

Free Cash Flow

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

	Q4 2022	Q3 2022	Q2 2022	Q1 2022	Q4 2021	Q3 2021	Q2 2021	Q1 2021
Cash provided by operating activities	38,099	37,662	64,935	7,279	10,153	13,721	68,604	20,506
Deduct:
Purchase of non-growth property and equipment	(5,922)	(2,343)	(1,617)	(1,427)	(2,550)	(1,349)	(801)	(1,115)
Free cash flow	32,177	35,319	63,318	5,852	7,603	12,372	67,803	19,391
Free cash flow - TTM	136,666	112,092	89,145	93,630	107,169	118,806	159,878	144,632

Net Indebtedness and Net Indebtedness Leverage Ratio Reconciliation

The following table illustrates the Company's net indebtedness and net indebtedness leverage ratio as at December 31, 2022 and December 31, 2021:

	December 31, 2022 $	December 31, 2021 $
Syndicated Credit Facility - revolving credit	178,588	63,842
Senior unsecured notes (including embedded derivative asset)	344,502	221,965
Mortgage and other debt	32,038	101
Total Indebtedness	555,128	285,908
Add back:
Embedded derivative asset	—	29,306
Total Indebtedness for net indebtedness purpose	555,128	315,214
Cash and cash equivalents	(108,301)	(102,480)
Net indebtedness	446,827	212,734
Adjusted EBITDA - pre-IFRS 16 - trailing twelve months	210,761	206,584
Net indebtedness leverage ratio	2.1x	1.0x

Conference Call

A conference call to discuss the results for the three months ended December 31, 2022 will be held on March 2, 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/2022-q4-conference-call/

About AutoCanada

AutoCanada is a leading North American multi-location automobile dealership group currently operating 82 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, 11 RightRide division locations, and 10 stand-alone collision centres within our group of 25 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.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", including "with respect to", "among other things", "future performance", "expense reductions" and the "Go Forward Plan"), 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.

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