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    ACQ   CA05277B2093

AUTOCANADA INC.

(ACQ)
  Report
Delayed Toronto Stock Exchange  -  04:00:00 2023-02-07 pm EST
30.10 CAD   -1.28%
02/06AutoCanada Extends Amended Credit Facility
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02/06Autocanada announces credit facility extension and upsizing to $1.6 billion
AQ
2022TSX futures up on higher commodity prices, U.S. inflation data awaited
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AUTOCANADA REPORTS RECORD THIRD QUARTER RESULTS

11/09/2022 | 07:30pm EST
  • Revenue was $1,623.9 million as compared to $1,206.8 million in the prior year, an increase of 34.6%
  • Net income for the period was $32.9 million versus net income of $38.8 million in the prior year
  • Adjusted EBITDA1 was $76.4 million versus $68.3 million in the prior year, an increase of 11.9%
    • Adjusted EBITDA margin1 was 4.7% versus the adjusted EBITDA margin1 of 5.7% in the prior year, a decrease of (1.0) percentage points
  • Diluted earnings per share was $1.16, a decrease of $(0.11) from $1.27 in the prior year
  • Indebtedness of $460.3 million at the end of Q3 2022 compares to $375.0 million at the end of Q2 2022
  • Net indebtedness1 of $350.8 million at the end of Q3 2022 compares to $294.1 million at the end of Q2 2022

EDMONTON, AB, Nov. 9, 2022 /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 September 30, 2022.

"Results achieved in the third quarter of 2022 demonstrate the ongoing strength of our business model, where our team once again delivered a record quarter with exceptional performance across our operations," said Paul Antony, Executive Chairman of AutoCanada.  "Our performance continues the trend of sustainable improvement and reflects our ability to continue navigating a range of industry challenges, including OEM production delays and inventory constraints. I continue to be immeasurably proud of what we've built and our platform's proven ability to thrive in a variety of market conditions and to drive resiliency and stability.

"This strength has allowed us to focus on advancing our acquisition strategy as evidenced with the recent acquisitions of Kelleher Ford Dealership and Collision Centre, Velocity Auto Body, Auto Gallery of Winnipeg, Kavia Auto Body, North Toronto Auction and Excellence Auto. These acquisitions further expand our dealership network, our used digital retail initiative and our national collision centre footprint across Canada.  Our M&A pipeline remains strong with a number of dealerships and collision centres representing in excess of $250 million in annual revenue currently being evaluated.

"As we look ahead, AutoCanada is very well positioned to continue to build on our strong momentum and execute on our strategic pillars to deliver industry-leading performance and enhance shareholder returns. With respect to our capital allocation priorities, we will remain disciplined in the management of our balance sheet and debt levels as we continue to pursue our organic and inorganic growth strategies."

The Company also announced today the planned retirement of Mike Borys from the role of Chief Financial Officer. A search process for his successor has commenced. Mike will continue as Chief Financial Officer until a successor is in place to ensure a seamless transition of responsibilities.

"On behalf of all of us at AutoCanada, I want to thank Mike for his leadership and dedication to the Company," said Mr. Antony. "I am beyond grateful to Mike for all the contributions he has made to AutoCanada, particularly the outstanding work he has done to strengthen our financial position. We wish him well when he embarks on his next phase. We also sincerely appreciate Mike's full support of the transition to his successor."

"I would like to thank the outstanding team at AutoCanada that I have had the privilege of working with," said Mr. Borys. "I am very proud of the accomplishments AutoCanada has achieved and I have every confidence that the Company will continue to execute against a solid business strategy supported by an excellent leadership team."

Third Quarter Key Highlights and Recent Developments

The Company set a third quarter record as revenue reached $1,623.9 million compared to $1,206.8 million in the prior year, an increase of 34.6%. Results were driven by continued strong performance across all areas of our complete business model, in particular our finance and insurance ("F&I"), parts, service and collision repair ("PS&CR") business operations, continued improvements from our U.S. Operations, and contributions from our acquisitions.

Net income for the period was $32.9 million as compared to $38.8 million in Q3 2021. The $(5.9) million decrease in net income as compared to the prior year is largely driven by an increase of $8.5 million in finance costs and $5.2 million in income taxes, offset by an increase of $6.5 million in operating profit as compared to prior year. Diluted earnings per share was $1.16, a decrease of $(0.11) from $1.27 in the prior year.

Adjusted EBITDA1 for the period was $76.4 million as compared to $68.3 million in Q3 2021, an improvement of 11.9%. Adjusted EBITDA margin1 of 4.7% compares to 5.7% in the prior year, a decrease of (1.0) percentage points ("ppts"). This decrease is largely driven by compressed used vehicle gross profit percentage, increased operating expenses before depreciation as a percentage of gross profit, and increased floorplan financing costs.

Gross profit increased by $53.4 million to $273.6 million, an increase of 24.3%, as compared to prior year. This increase was largely driven by the increases of $24.3 million from F&I and $24.0 million from PS&CR. F&I gross profit per retail unit average2 increased to $3,521, up 17.4% or $521 per unit. Gross profit percentage2 was 16.8% in the quarter as compared to 18.2% in the prior year. This decrease is largely driven by a compression of used vehicle gross profit percentage2, as a result of current used vehicle macro environment. As part of our complete business model, while used retail vehicle gross profit percentage2 weakened, used retail vehicles sales increased by 3,550 units, up 25.7%, to 17,381, and contributed to the consolidated used to new retail units ratio2 moving to 1.89 from 1.49. Used vehicle sales volume also contributed to our strong F&I and PS&CR gross profit performance.

Our U.S. Operations continue to demonstrate strong growth and contributed $40.1 million of gross profit, an increase of $7.5 million or 23.2% as compared to prior year. This improvement in gross profit was primarily driven  by F&I and PS&CR performance.

Operating expenses before depreciation as a percentage of gross profit2 increased by 3.3 ppts to 71.1%. The increase is  largely due to increased M&A activity and related costs, inclusive of the expansion of an acquisition and integration team, and increased head count to facilitate organizational growth.

Floorplan financing costs increased by $6.1 million, or 241%, to $8.7 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. Overall, we currently do not expect interest rates to impact the pace of new and used vehicle sales due to strong levels of demand relative to limited supply. 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 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. As a result of the incremental used vehicle writedown taken in Q2 2022, we were able to more effectively sell through our used vehicle inventory position by (15.7)%, as compared to Q2 2022. No incremental used vehicle writedown to net realizable value was recognized in Q3 2022.

Net indebtedness1 increased by $56.8 million from June 30 2022 to $350.8 million at the end of Q3 2022. This increase is primarily driven by the purchase and cancellation of $(32.5) million of shares under a Substantial Issuer Bid ("SIB"), the acquisitions of multiple dealerships and collision centres, including Kelleher Ford Dealership and Collision Centre, Velocity Auto Body Inc. collision centre, Auto Gallery of Winnipeg Inc. used vehicle dealership, and North Toronto Auction, a fee-based used vehicle auction business. Free cash flow1 on a trailing twelve month ("TTM") basis was $112.1 million at Q3 2022 as compared to $118.8 million in Q3 2021; the decrease in free cash flow between years was driven primarily by reduced government assistance, increased cash taxes, stock based compensation related cash payments, and changes in working capital. Additionally, our net indebtedness leverage ratio1 of 1.5x remained well below our target range at the end of Q3 2022, as compared to 0.2x in Q3 2021.

Had all of the acquisitions, completed as of Q3 2022, occurred at October 1, 2021, pro forma net income would have been $146.8 million for the TTM ended September 30, 2022, as compared to pro forma net income of $174.8 million for the year ended December 31, 2021. Pro forma normalized adjusted EBITDA1 would be $289.9 million for the TTM ended September 30, 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 $250 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, technical recession, and the Russia-Ukraine war. 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 condition.

Consolidated AutoCanada Highlights

ANOTHER RECORD SETTING THIRD QUARTER

For the three-month period ended September 30, 2022:

  • Revenue was $1,623.9 million, an increase of $417.2 million or 34.6%
  • Total vehicles2 sold were 27,000, an increase of 3,556 units or 15.2%
    • Used retail vehicles2 sold increased by 3,550 or 25.7%
  • Net income for the period was $32.9 million (or $1.16 per diluted share) versus $38.8 million (or $1.27 per diluted share)
  • Adjusted EBITDA1 increased by 11.9% to $76.4 million, an increase of $8.1 million
    • Adjusted EBITDA1 on a TTM basis was $280.0 million as compared to 226.5 million in the prior year
  • Net indebtedness1 of $350.8 million reflected an increase of $56.8 million from Q2 2022
  • Net indebtedness leverage ratio1 of 1.5x at the end of Q3 2022, as compared to 1.3x in Q2 2022

Refer to Section 5 Acquisitions, Divestitures, Relocations and Real Estate of the MD&A for acquisitions included in Q3 2022 results.

Canadian Operations Highlights

TOTAL GROSS PROFIT INCREASED BY 24%

Our F&I and PS&CR segments were key drivers of the record performance in Q3 2022. F&I gross profit increased by $19.0 million or 32.8% to $76.9 million and PS&CR gross profit increased by $19.0 million or 33.1% to $76.5 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 September 30, 2022:

  • Revenue was $1,388.0 million, an increase of 36.3%
  • Used retail unit2 sales increased by 3,030 or 26.4%
    • Average TTM Canadian used retail unit sales per dealership per month, excluding Used Digital Retail Division dealerships2, improved to 61, as compared to 59 in the prior year
  • Used to new retail units ratio2 increased to 1.84 from 1.48
    • According to DesRosiers Automotive Consultants ("DesRosiers"), our performance places us well ahead of our peers as historical Canadian market used to new retail unit ratio was 0.68 in 2021
    • TTM used to new retail ratio2 improved to 1.63 at Q3 2022 as compared to 1.30 at Q3 2021
  • F&I gross profit per retail unit average2 increased to $3,431, up 14.1% or $425 per unit
  • Net income for the period was $30.3 million, down (10.5)% from a net income of $33.8 million in 2021
  • Adjusted EBITDA1 increased by 11.1% to $67.6 million, an increase of $6.7 million
    • Adjusted EBITDA margin1 was 4.9% as compared to adjusted EBITDA margin1 of 6.0% in the prior year, a decrease of (1.1) ppts driven primarily by compressed used vehicle gross profit percentage, increased operating expenses before depreciation as a percentage of gross profit, and increased floorplan financing costs

U.S. Operations Highlights

USED RETAIL VEHICLES SOLD INCREASED BY 22%

U.S. Operations continues to improve, as demonstrated by the sixth consecutive quarter of year-over year growth in adjusted EBITDA1. This growth was driven by improvements across all aspects of the business, including an 8.5% increase in total retail unit2 sales and a 22.2% increase in used retail vehicles2.

  • Revenue was $235.9 million, an increase of 25.3%, from $188.3 million
  • Used retail vehicles2 sold increased by 520 units or 22.2%
  • F&I gross profit per retail unit average2 increased to $4,009 per unit, up 35.0% or $1,038 per unit
  • Net income for the period decreased by $(2.3) million to $2.6 million from $4.9 million
    • Net income on a TTM basis was $22.2 million as compared to $8.9 million in the prior year
  • Adjusted EBITDA1 was $8.8 million as compared to $7.4 million, an increase of $1.4 million
    • Adjusted EBITDA1 on a TTM basis was $38.5 million as compared to $21.7 million in the prior year

Same Store Metrics - Canadian Operations

F&I GROSS PROFIT PER RETAIL UNIT AVERAGE INCREASED TO $3,796, UP 21% OR $657 PER UNIT

The continued optimization of the Company's complete business model is highlighted by the year-over-year 8.7% improvement in gross profit, which collectively totaled $197.0 million..

Refer to Section 19 Same Store Results Data of the MD&A for the definition of same store and further information.

  • Revenue increased to $1,147.9 million, an increase of 17.6%
  • Gross profit increased by $15.7 million or 8.7%
  • Used to new retail units ratio2 increased to 1.75 from 1.29
    • Used retail unit sales2 increased by 12.0%, an increase of 1,202 units
  • F&I gross profit per retail unit average2 increased to $3,796, up 20.9% or $657 per unit; F&I gross profit increased to $66.9 million as compared to $55.9 million in the prior year, an increase of 19.8%
  • PS&CR gross profit increased to $60.6 million, an increase of 11.3%
  • PS&CR gross profit percentage2 decreased to 55.1% as compared to 55.7% in the prior year

Financing and Investing Activities and Other Recent Developments

ACQUISITION PIPELINE SUPPORTED BY HEALTHY BALANCE SHEET AND LIQUIDITY STRUCTURE

Net indebtedness1 of $350.8 million resulted in a net indebtedness leverage ratio1 of 1.5x. Financing and investing activities included the following:

Acquisitions

The Company completed $45.2 million of acquisitions in Q3 2022, and $124.1 million year-to-date. The acquisitions support management's strategic objectives of expanding the Company's presence across Canada and operational capacity.

  • On August 2, 2022, the Company acquired 100% of the shares of Kelleher Ford Dealership and Collision Centre ("Kelleher Ford"), a new and used vehicle Ford dealership and collision centre in Brandon, Manitoba.
  • On August 12, 2022, the Company acquired 100% of the shares of Velocity Auto Body Inc. ("Velocity Autobody"), a luxury-brand focused collision centre in Markham, Ontario.
  • On September 22, 2022, the Company acquired 100% of the shares of Auto Gallery of Winnipeg Inc. ("Auto Gallery of Winnipeg"), an independent used vehicle dealership in Winnipeg, Manitoba.
  • On September 28, 2022, the Company acquired 100% of the shares of Northern Auto Auctions of Canada Inc. ("North Toronto Auction"), an entity that operates the North Toronto Auction, a fee-based used vehicle auction business, serving dealers and consumers, located in Innisfil, Ontario.
  • 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 4, 2022, the Company acquired 100% of the shares of Excellence Auto Collision Limited ("Excellence Auto Collision"), two collision centres located in Scarborough, Ontario and Toronto, Ontario.

Share Purchases

  • On August 15, 2022, the Company completed a SIB, by way of a modified Dutch auction, to purchase, for cancellation, the common shares of the Company (the "Shares", or, the "Offer"). The Company purchased and cancelled 1,159,707 Shares at a purchase price of $28.00 per share under the Offer, representing an aggregate purchase price $32.5 million, which represents 4.37% of the total issued and outstanding Shares of the Company before giving effect to the Offer.
  • On November 9, 2022, the Company announced a SIB offer to purchase, for cancellation, up to $50 million in value of its outstanding common shares at a price range of $25 to $28 per share. The offer is set to expire on December 16, 2022.

Third Quarter Financial Information

The following table summarizes the Company's performance for the quarter:


Three Months Ended September 30

Consolidated Operational Data

2022

2021

% Change

Revenue

1,623,949

1,206,754

34.6 %

Gross profit

273,634

220,192

24.3 %

Gross profit %

16.8 %

18.2 %

(1.4) %

Operating expenses

207,266

159,880

29.6 %

Operating profit

69,303

62,841

10.3 %

Net income for the period

32,870

38,769

(15.2) %

Basic net income per share attributable to AutoCanada shareholders

1.22

1.37

(10.9) %

Diluted net income per share attributable to AutoCanada shareholders

1.16

1.27

(8.7) %

   Adjusted EBITDA1

76,374

68,265

11.9 %





Basic weighted average number of shares outstanding

25,876,198

27,483,596

(5.8) %

Diluted weighted average number of shares outstanding

27,177,819

29,599,494

(8.2) %

Common shares outstanding as at quarter-end date

25,402,988

27,493,016

(7.6) %





   New retail vehicles2 sold (units)

9,186

9,255

(0.7) %

   New fleet vehicles2 sold (units)

433

358

20.9 %

   Total new vehicles2 sold (units)

9,619

9,613

0.1 %

   Used retail vehicles2 sold (units)

17,381

13,831

25.7 %

   Total vehicles2 sold

27,000

23,444

15.2 %

   Same store new retail vehicles2 sold (units)

6,400

7,771

(17.6) %

   Same store new fleet vehicles2 sold (units)

386

358

7.8 %

   Same store used retail vehicles2 sold (units)

11,228

10,026

12.0 %

   Same store total vehicles2 sold

18,014

18,155

(0.8) %

   Same store2 revenue

1,147,921

976,454

17.6 %

   Same store2 gross profit

197,003

181,291

8.7 %

   Same store2 gross profit %

17.2 %

18.6 %

(1.4) %

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 September 30, 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).

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

Q3

2022

Q2

2022

Q1

2022

Q4

2021

Q3

2021

REVISED

Q2

2021

REVISED

Q1

2021

REVISED

Q4
2020

Income Statement Data

4









New vehicles 4

6

557,492

583,870

511,195

467,085

498,142

547,593

451,061

466,468

Used vehicles 4

6

807,236

840,998

595,514

524,043

518,791

539,785

354,922

257,301

Parts, service and collision repair 4

6

161,805

160,307

152,009

136,800

116,953

122,459

108,427

105,362

Finance, insurance and other 4

6

97,416

100,851

83,720

67,854

72,868

71,218

55,414

46,990

Revenue


1,623,949

1,686,026

1,342,438

1,195,782

1,206,754

1,281,055

969,824

876,121

New vehicles 4

6

58,760

58,950

53,384

50,632

46,525

44,619

34,639

31,199

Used vehicles 4

6

32,627

34,125

36,772

38,118

39,669

40,269

23,206

19,787

Parts, service and collision repair 4

6

88,707

90,713

78,431

75,917

64,748

68,115

57,874

58,109

Finance, insurance and other 4

6

93,540

95,490

78,752

63,847

69,250

64,838

51,917

43,642

Gross Profit


273,634

279,278

247,339

228,514

220,192

217,841

167,636

152,737

Gross profit %


16.8 %

16.6 %

18.4 %

19.1 %

18.2 %

17.0 %

17.3 %

17.4 %

Operating expenses


207,266

212,709

193,646

170,008

159,880

154,773

127,948

119,442

Operating expenses as a % of gross profit


75.7 %

76.2 %

78.3 %

74.4 %

72.6 %

71.0 %

76.3 %

78.2 %

Operating profit


69,303

69,954

56,690

99,410

62,841

66,153

41,664

46,664

Recovery of non-financial assets


(39,846)

(11,248)

Net income


32,870

39,058

4,322

69,398

38,769

37,698

21,334

24,320

Basic net income per share attributable to AutoCanada shareholders


1.22

1.40

0.11

2.54

1.37

1.33

0.77

0.87

Diluted net income per share attributable to AutoCanada shareholders


1.16

1.33

0.10

2.38

1.27

1.23

0.71

0.81

Dividends declared per share


  Adjusted EBITDA 1

2

76,374

75,561

62,196

65,873

68,265

70,491

47,234

40,472

  Free cash flow 1

2

35,319

63,318

5,852

7,603

12,372

67,803

19,391

19,240











Operating Data

4









  New retail vehicles2 sold

3

9,186

9,878

9,052

8,204

9,255

10,107

8,233

8,623

  New fleet vehicles2 sold

3

433

497

290

199

358

575

740

964

  Total new vehicles2 sold

3

9,619

10,375

9,342

8,403

9,613

10,682

8,973

9,587

  Used retail vehicles2 sold

3

17,381

17,740

14,072

11,893

13,831

13,271

9,734

7,389

Total vehicles2 sold

3

27,000

28,115

23,414

20,296

23,444

23,953

18,707

16,976

# of service and collision repair orders2 completed

3

241,907

261,671

221,632

232,373

199,870

214,149

182,869

203,086

# of dealerships at period end

5

85

82

80

80

68

67

67

67

# of same store dealerships

1

49

49

49

49

49

49

49

47

# of service bays at period end


1,331

1,322

1,293

1,303

1,108

1,098

1,098

1,098

Same stores2 revenue growth

1

17.6 %

14.2 %

17.2 %

14.1 %

15.0 %

54.2 %

27.8 %

6.3 %

Same stores2 gross profit growth

1

8.7 %

10.3 %

23.2 %

29.4 %

18.6 %

102.5 %

35.0 %

7.7 %

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 September 30, 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 ended September 30, 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 quarter ended September 30, 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 net income, pro forma normalized adjusted EBITDA, 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; and
  • One-time forgiveness of Small Business Association 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. Refer to the COVID-19 impacts section of Note 4 of the Interim Consolidated Financial Statements for the nine-months ended September 30, 2022 for further details.

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 12 month period ended September 30, 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 Company's Management Discussion & Analysis for the year ended December 31, 2021 for the reconciliation of the pro forma normalized adjusted EBITDA for the year ended December 31, 2021.

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 12 month period ended September 30, 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.

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.

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 and Normalized Adjusted EBITDA

The following table illustrates adjusted EBITDA and normalized adjusted EBITDA, for the three-month period ended September 30, over the last two years of operations:


2022

2021

Period from July 1 to September 30



Net income for the period

32,870

38,769

Add back:



Income tax expense

13,608

8,406

Depreciation of property and equipment

5,371

4,121

Interest on long-term indebtedness

7,436

5,591

Depreciation of right of use assets

7,463

6,464

Lease liability interest

7,227

5,487


73,975

68,838

Add back:



Unrealized fair value changes in derivative instruments

1,152

(2,151)

Amortization of loss on terminated hedges

817

817

Unrealized foreign exchange gains

(121)

(265)

Loss on termination of lease, net

919

Unrealized fair value changes on embedded derivative

116

Loss (gain) on disposal of assets

551

(9)

Adjusted EBITDA

76,374

68,265

Normalized Adjusted EBITDA

76,374

68,265


Segmented Adjusted EBITDA and Segmented Normalized Adjusted EBITDA

The following table illustrates the segmented adjusted EBITDA and normalized adjusted EBITDA, for the three-month period ended September 30, over the last two years of operations:


Three Months Ended September 30, 2022


Three Months Ended September 30, 2021


Canada

U.S.

Total


Canada

U.S.

Total

Period from July 1 to September 30








Net income for the period

30,288

2,582

32,870


33,839

4,930

38,769

Add back:








Income tax expense

10,941

2,667

13,608


8,406

8,406

Depreciation of property and equipment

4,958

413

5,371


3,811

310

4,121

Interest on long-term indebtedness

5,887

1,549

7,436


4,979

612

5,591

Depreciation of right of use assets

6,758

705

7,463


5,767

697

6,464

Lease liability interest

6,344

883

7,227


4,618

869

5,487


65,176

8,799

73,975


61,420

7,418

68,838

Add back:








Unrealized fair value changes in derivative instruments

1,152

1,152


(2,151)

(2,151)

Amortization of loss on terminated hedges

817

817


817

817

Unrealized foreign exchange gains

(121)

(121)


(265)

(265)

Loss on termination of lease, net


919

919

Unrealized fair value changes on embedded derivative


116

116

Loss (gain) on disposal of assets

551

551


(9)

(9)

Adjusted EBITDA

67,575

8,799

76,374


60,847

7,418

68,265

Normalized Adjusted EBITDA

67,575

8,799

76,374


60,847

7,418

68,265


Pro Forma Adjusted EBITDA and Pro Forma Normalized Adjusted EBITDA Reconciliation

The following table illustrates pro forma adjusted EBITDA and pro forma normalized adjusted EBITDA for the trailing twelve month period ended September 30, over the last two years of operations:


2022

2021

Period from October 1 to September 30



Net income for the period

145,648

122,121

Add back:



Income tax expense

47,293

37,588

Depreciation of property and equipment

20,018

17,265

Interest on long-term indebtedness

27,365

19,703

Depreciation of right of use assets

29,920

24,992

Lease liability interest

28,065

21,798


298,309

243,467

Add back:



Recoveries of non-financial assets, net

(39,846)

(11,248)

Share-based compensation (Used Digital Retail Division)

435

Loss (gain) on redemption liabilities

14,116

(2,108)

Loss on extinguishment of debt

9,860

1,128

Unrealized fair value changes in derivative instruments

(9,678)

(5,861)

Amortization of loss on terminated hedges

3,268

3,268

Unrealized foreign exchange (gains) losses

(280)

532

Loss on extinguishment of embedded derivative

29,306

(Gain) loss on termination of lease, net

(492)

919

Unrealized fair value changes on embedded derivative

(24,778)

(4,528)

Loss on disposal of assets

219

458

Adjusted EBITDA

280,004

226,462

Normalizing items:



Add back:



Inventory write-down

1,841

One-time employee recognition payments

309

Operational incentive payments

851

Less:



Canada Emergency Wage Subsidy

(7,177)

Canada Emergency Rent Subsidy

(536)

Forgiveness of PPP loans

(6,728)

Normalized Adjusted EBITDA

280,004

215,022

Pro forma items had the acquisitions occurred on October 1:



Net income for the period

1,103

3,585

Add back:



Income tax expense

378

1,227

Depreciation of property and equipment

820

1,011

Interest on long-term indebtedness

4,907

4,604

Depreciation of right of use assets

1,029

1,945

Lease liability interest

1,670

3,050

Pro Forma Adjusted EBITDA

289,911

241,884

Pro Forma Normalized Adjusted EBITDA

289,911

230,444

Pro Forma Net Income

146,751

125,706


Quarter-to-Date Adjusted EBITDA Margin

The following table illustrates adjusted EBITDA margin for the three-month periods ended September 30, over the last two years of operations:


2022

2021

Period from July 1 to September 30



Adjusted EBITDA

76,374

68,265

Revenue

1,623,949

1,206,754

Adjusted EBITDA Margin

4.7 %

5.7 %


Free Cash Flow

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


Q3  2022

Q2 2022

Q1 2022

Q4 2021

Q3 2021

Q2 2021

Q1 2021

Q4 2020

Cash provided by operating activities 

37,662

64,935

7,279

10,153

13,721

68,604

20,506

20,447

Deduct:









Purchase of non-growth property and equipment

(2,343)

(1,617)

(1,427)

(2,550)

(1,349)

(801)

(1,115)

(1,207)

Free cash flow

35,319

63,318

5,852

7,603

12,372

67,803

19,391

19,240

Free cash flow - TTM

112,092

89,145

93,630

107,169

118,806

159,878

144,632

131,396


Net Indebtedness and Net Indebtedness Leverage Ratio Reconciliation

The following table illustrates the Company's net indebtedness and net indebtedness leverage ratio as at September 30, 2022 and December 31, 2021:


September 30, 2022

$

December 31, 2021

$

Syndicated Credit Facility - revolving credit

83,615

63,842

Senior unsecured notes (including embedded derivative asset)

344,277

221,965

Non-recourse mortgages and other debt

32,426

101

Total indebtedness

460,318

285,908

Add back:



Embedded derivative asset

29,306

Total indebtedness for net indebtedness purpose

460,318

315,214

Cash and cash equivalents

(109,478)

(102,480)

Net indebtedness

350,840

212,734

Adjusted EBITDA - pre-IFRS 16 - trailing twelve months

227,852

206,584

Net indebtedness leverage ratio

1.5x

1.0x


Conference Call

A conference call to discuss the results for the three months ended September 30, 2022 will be held on November 10, 2022 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-q3-conference-call/

About AutoCanada

AutoCanada is a leading North American multi-location automobile dealership group currently operating 81 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 9 stand-alone collision centres within our group of 24 collision centres. In 2021, our dealerships sold approximately 86,000 vehicles and processed over 800,000 service and collision repair orders in our 1,303 service bays generating revenue in excess of $4 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.

© Canada Newswire, source Canada Newswire English

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Financials
Sales 2022 6 091 M 4 532 M 4 532 M
Net income 2022 104 M 77,1 M 77,1 M
Net Debt 2022 819 M 609 M 609 M
P/E ratio 2022 8,29x
Yield 2022 -
Capitalization 706 M 525 M 525 M
EV / Sales 2022 0,25x
EV / Sales 2023 0,22x
Nbr of Employees 2 550
Free-Float 95,6%
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Number of Analysts 9
Last Close Price 30,10 CAD
Average target price 39,65 CAD
Spread / Average Target 31,7%
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Managers and Directors
Michael A. Borys Chief Financial Officer
Paul W. Antony Director
Jeffrey Thorpe President-Canadian Operations
Dennis Stephan DesRosiers Independent Director
Barry Lee James Independent Director
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